Presentation by Richard C. Anderson, Chairman and CEO, Promotional Economics Institute: "The Economics of Promotion: Understanding & Projecting the Impact of Promotion"
2. Presented to: Association of Medical Media January 21, 2010 Presented by: Richard C. (Dick) Anderson Promotional Economics Institute Williamsburg, Virginia (757) 565-2671
3. Background 35+ years of strategic and tactical promotional research Have worked within both the mail house and publishing environment, and studied Detailing reach and frequency patterns for many different Pharmaceutical Houses Have developed a method to analyze and project the impact of a fully integrated Promotional campaign Professional career, for the last 35+ years, has been focused on understanding the role of promotion, each of the promotional forms/channels and how they come together to create a successful campaign Have completed several hundred integrated promotional studies, covering 1,000’s of products
4. What Do we want to accomplish today? First, acquire a better understanding of the sequence of events that lead to promotional impact Second, develop an understanding of the role of each promotional form within this sequence Third, how to use this knowledge to better understand the role of promotional mix And, finally, develop an understanding of the role of Competitive Environment
5. Starting Point Promotion is an Investment, NOT an Expense! Promotional Theory does not change from one Therapeutic Class to another Marketing Theory does not change from one Therapeutic Class to another So what does change? Competitive Environment Changes Marketing Environment Promotional Environment Product Environment Disease Environment
6. Questions to Consider What drives product growth? Promotion or Product Benefits? What is the role of promotion? What is the role of promotional mix? How do promotional forms work together … interactions? Does journal advertising work? What is the role of journal advertising? Does detailing work? What is the role of detailing? Does XXX Work? What is the role of XXX. How does promotion manifest its impact?
7. Can you Project promotional impact? I CAN and HAVE … and, normally, will be within ¼ to ½ of 1 percent Patently Absurd you say, no one can predict the impact of promotion … and you are right if you continued to think in traditional patterns! Let’s start with one very widely held belief … promotion drives sales / market share! NO … at least NOT DIRECTLY Promotion drives Instability, which drives Accountability, Acceleration, Velocity, Momentum and final Sales and/or Share!
8. Key to success Understand the sequence of events that take you from Promotional Program Construction to the Ultimate Impact of that campaign Understand the role of each Promotional Form … how and where it manifests its impact, and how product Momentum is created and maintained If a promotional form appears not to be working, find out why! BECAUSE ALL PROMOTIONAL FORMS CAN AND DO WORK THOUGHOUT THE PRODUCT’S LIFE CYCLE . THAT IS IF THEY: CONTAIN A GOOD MESSAGE ARE CORRECTLY STRUCTURED STRATEGICLY AND TACTICALLY, AND ARE BUDGETED CORRECTLY!
9. Misleading Questions & statements Is my campaign increasing sales? Wrong question. Should be … is my campaign increasing sales profitably and/or optimally? Does Journal Advertising work? This question/statement never ceases to amaze me. Of course Journal Advertising works! That is, if you do it CORRECTLY … good ad, budgeted properly and balanced with the rest of the campaign. Does Detailing work? This is a more legitimate question than the prior question! Of course Detailing works! But, does it work Profitably throughout the product life cycle? What is the MARGINAL ROI of the 3rd detail versus the 100th detail? What about other modalities? Same profitability concepts apply and same interactive relationships apply
10. Traditional thought process Promotional Campaign If this is what your client believes, no wonder you can not create an “Optimal” campaign and project its impact! Sorry, but the real world is a lot more complex than the above picture!
11. Key Terms and Concepts INSTABILITY … the change in any element from one month to the next … NRxs, share, details, pages, etc ACCOUNTABILITY … What percent of the Instability did you cause, take-up and/or account for CONCENTRATION … A measure of uniformity NRxs, Market Share, Number of Details, Pages, PME events, Sampling, etc., etc LOCATION … position within the concentration curve DOMINANCE … measure dealing with ability to dominant products with smaller shares BASIC ECONOMIC THEORY Multiplier Effect … a feedback loop that generates more impact Acceleration Principle … rate of change drive change VELOCITY … first derivative or first difference … period to period change ACCELERATION … second derivative or second difference … period to period change in the period to period change (basically, the change in Velocity Momentum … function of Velocity and Mass … mass equating to share, NRxs, number of details, pages, samples, etc., etc.
12. Aggregated Promotion (all Products) Market Acceleration: NRx Growth Market Velocity: NRx Growth Market Market Impact: NRx Instability Share Instability Market Momentum: NRx Growth Market NRx’s NRx Accountability Share Acceleration Product Promotion Product Share Accountability Share Velocity Share Momentum Market Share Promotional Impact & Interaction This thought process lays a strong economic & necessary foundation for understanding the role of the various promotional forms and the ultimate impact of the campaign
13. How do the modalities fit in this model? What is the role of Detailing? What is the role of Sampling? What is the role of CME? What is the role Mail? What is the role of Journal Advertising? What is the role of “E-What ever”? What is the role of Diffusion Theory? What does it take to both CREATE and CONVERT Instability?
14. The Importance of Understanding the Impact of Promotion on Acceleration and Velocity Predictability
15. Why study this impACT? Advantages of understanding the functional relationship between promotional structure and Acceleration and Velocity Predictability Profit… as it relates to share gain and/or lack of share loss Negative Acceleration vs. Positive Relationship between Acceleration and Velocity
18. The Path to Success As shown earlier, the first job of promotion is to CREATE Instability and/or Accountability Once this is achieved, the same strategy / message / tactics must CONVERT that Instability into growth for your product This growth dynamic manifests itself in the concepts of Acceleration … which leads to Velocity … which leads to Momentum … which leads to Share and NRxs This entire sequence is a function of the product’s quality, it’s campaign and the full Competitive Environment
19. Who/What drives what? Which Promotional forms drive Instability? Which Promotional forms drive Accountability? Which Promotional forms drive Acceleration? Which Promotional forms drive Velocity? Which Promotional forms drive Momentum? How do Promotional forms interact? Why is this understanding Important?
20. Traditional View – no Interactions Detailing CME DTC Sampling Social Networking Professional Print Online
21. InteractionsThe Real World of campaign impact … base forms Detailing Sampling CME Advertising It is the Integration and Interactions of all campaign elements/modalities that drive impact!
22. Role of each promotional form Role of Promotional Form Minor ……………………………………..…………………………… Major 1 2 3 4 5 6 7 8 9 10 Instability Accountability Acceleration Velocity Momentum Detailing Sampling Professional Print Physicians Meeting & Events Direct to Consumer Prescription Pads On-Line 10 10 8 7 6 3 3 5 7 8 9* 7* 3* 2* 1* 10 7 5 3 2 * = Short term
23. Competitive environment Marketing Environment Promotional Environment Product Environment Your Campaign must work within this Competitive Environment Disease Environment
26. 26 I M P A C T 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 -3 -2 -1 0 Number of Months Impact of Promotional ChangeTiming to 90% Manifestation PME DETAILING PAGES 90% What is the speed of impact of other promotional forms?
27. 27 Samples Impact Details t time The Real World of Promotion Impact of Detailing vs. Sampling Impact of most promotional forms diminish as product ages Sampling is the only form impacted minimally by age or time Question: At what point, in the product life cycle, does the sample become the driver of the Detailing and Sampling combination?
28. 28 Typical History 18-24 Months Launch Level Call Report Data 65-70% 20-35% Audits 100*(Audit/Actual) = % Pick-up time The Real World of PromotionActual versus Audited Data Audited details are projected from a physician sample Actual details (calls) are recorded and reported by the sales representatives Physician recall of a sales call declines as the product ages Question: If two products each show 20,000 details/month, are they spending the same on Detailing?
29. 29 Market Share + - Audited Detailing The Real World of PromotionMathematical Relationships What is the functional relationship between audited promotion data and market share? Market Share increasing over time Detailing and other audited promotion declining over time
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32. Case StudyEstablished Product Crowded set (40+ products) Mature product (7+ years old) New claim – 18 months earlier Promoted new claim through DTC print – 18 months Professional target: FPs, GPs, IMs, & one Specialty Consumer target: Specified Sub-Group Considering a Multi-Million dollar television campaign History:Sales force reduction 3-years earlier History:NO faith in professional print
33. Case StudyClient’s Questions Should DTC television campaign be implemented? Planned start is July – is this justifiable? What is our promotional ROI likely to be? How do we insure success? How should our professional campaign be structured? Do we need to alter our current professional promotional mix? Justify all projections and predictions!
44. Understanding & Employing the Concepts discussed today Concepts discussed today require learning and application experience While the real power of this approach rests in developing the full system of simultaneous equations, the working experience needs to be acquired first This can be accomplished with an Excel Worksheet that sequentially develops each of the measures
47. The Simple World of Promotion Detailing Mail Sampling Market Share New Prescriptions Advertising DTC Dinner Meetings Etc., etc., etc.
48. The Real World of Promotion Marketing Environment Promotional Environment A C C O U N T A B I L I T Y Instability Detailing Sampling Product Environment NRx’s & Share Mail Velocity Advertising Acceleration DTC Disease Environment
50. Summary of Research and Concepts All promotional forms work Each form plays a specific set of roles in the campaign Promotional Theory and Marketing Theory DO NOTchange between therapeutic classes The sequence events of between program design, implementation and ultimate impact are important The power of a campaign lays in the interactions and efficiencies of the integrated campaign, NOT the individual elements Finally, your campaign must work in the Competitive Environment in which you are competing … and this environment changes between classes and within a class over time
51. “The best way to predict the future, is to create it” “Models are meant to be used, NOT BELIEVED” Thank You!
