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Marketing for maximum ROI impact

Published on 01/11/07 at 09:58am

From the amount of lip service the pharma industry pays to marketing effectiveness, you might be excused for thinking it is already firmly entrenched in the industry. However, in reality, marketing decisions are seldom driven from hard numbers and robust strategic thinking.

A client recently encapsulated this very well saying, perhaps slightly cynically, that "all too often, we base spending decisions on a set formula or what we did last year, plus or minus a bit in light of any change in our given budget". Needless to say, this is not marketing effectiveness and, what's more, we all know it isn't, but the excuse is "we don't have time to do it properly".

The pharma industry certainly does not lack the brains to put marketing effectiveness into practice, but it lacks the tools and internal structures to make it easier and more time-efficient to carry out marketing effectively, rather than ineffectively.  

One of the most talked about aspects of marketing effectiveness in an increasingly lean pharmaceutical industry is return on investment (ROI) marketing. We can all relate to the old adage that Lord Leverhulme is credited with saying "I know that about half of my marketing budget works the only problem is I don't know which half". This statement is certainly just as true now, many decades later, as it was then, back in the 19th century.

So, if everyone is talking about ROI marketing, why are so few of us actually putting it into practice?  The six key questions that seem to prevent ROI marketing being effectively implemented are:

* How do I measure what matters?

* How do I know what type of activities are likely to be worthwhile?  How can I assess an activity with no track record?

* How can I compare activities impacting over different time periods?

* How can I assess 'softer' activities that have a less direct impact on sales?

* How can we measure and forecast ROI across the organisation?

Each of these key issues needs to be dealt with if we want to put effective ROI into marketing without simply paying lip service to it.

Measuring what matters

Measuring what matters can be challenging.  Einstein summed this up brilliantly when he was involved in studying the depths of space and was told about a new technology that could measure the levels of interference in space. In reply, he commented: "Not everything that can be measured necessarily matters and not everything that matters can necessarily be measured."

This is a problem we, as marketers, face.  We can get a great deal of IMS market level data; however, we might actually need data from different segments specifically important to us that IMS doesnt measure directly  or it could be that there are softer variables that we want to measure which you can't capture from 50,000 feet.

It is also often difficult to measure at a top level the historical correlation between spending on an activity and sales, because there is too much background noise. Instead, by looking at the patient flow at the levels that ultimately drive the sales forecast, we can draw a more specific correlation with less background noise. To do this, we zoom in on a specific level within a patient flow-driven forecast where the impact of an activity can be felt.

For example, if we tried to correlate the impact on sales of spending money on KOLs to encourage GPs to prescribe glitazones sooner, the impact would be unlikely to appear significant at a brand share level because, the company may have been losing brand share or value per prescription at the same time. However, if you looked at the percentage of GPs prescribing glitazones before SUs, it would be far more likely to be traceable. The approach, therefore, provides us with a way of accurately measuring the direct impact of activities on sales.

Opportunities for growth

If you want to make money, activities should be born out of identified opportunities to drive sales and/or profit. Far too often, ROI analysis is about testing returns on ill- conceived activities that are not the best opportunities to make money because they were not derived from where the opportunity to make money existed.

Activities should live and die based on your strategic focus. ROI marketing is not just about evaluating the ROI on what you are planning to do anyway. It is about planning what you are going to do based on where the opportunities for high returns are in the market and then filter down the scope of potential activities to identify the optimal promotional mix.

The process must start with the strategic focus so we can know what is worth measuring and, thus, which activities are worthwhile. This can often be done by assessing bottlenecks in your patient flow. You need to look at where there are opportunities for growth within the patient flow, identify the key strategic levers (KSL) in the patient flow and then identify what is required to achieve them. For example, if in the patient flow for type II diabetes, as a glitazone manufacturer, we are trying to increase the proportion of glitazones prescribed, we may identify that the KSL for achieving this is for GPs to prescribe glitazones sooner in the treatment pathway. When you have identified what is required you need to put in place a way to measure success often referred to as a key performance indicator (KPI). This is about using proxies for the KSL to capture the impact that our activities could have on that KSL and, as a result, sales.

In the glitazone example, the KPI might be as simple as the proportion of GPs who would be willing to prescribe glitazones first-line or before sulphonylurea.  

Once a KPI is in place for a KSL, it is much easier to measure the impact of activities on sales. This approach provides an overall structure to stimulate thinking on what kind of activities are going to be relevant and how we can pre-assess what impact they could have on sales. This will then allow you to project the future return on your marketing investment and thereby optimise your marketing campaigns.

Forecasting ROI

With forecasting, we often become dependent on analogues (e.g. past products with similar characteristics); however, this can be quite limiting when you are dealing with a new class of products or a new type of activity where there is no obvious history or guide to an activity's expected ROI.

Here, we have to look for fresh market insight into the probable impact of an activity on a key strategic lever. Customers' stated propensity to change in light of an activity is a good starting point, but this will often need to be followed-up by a more discreet approach such as choice-based, conjoint analysis, where customers are asked to choose between different product and service packages made up of the benefits of the different activities you have proposed.

The key to comparing the value of different activities over time is knowing for each activity:

* when to measure it

* the indicators to suggest it is on track (KPIs)

* the value of money today versus the value tomorrow for the company

If we have a view on these three points we can then validate them using historical data to build a model to project forward the impact of activities. If our objective (KSL) was to increase the proportion of PCPs prescribing glitazones before SUs then we might wish to compare the returns on two activities; namely having more reps and KOL sponsorship at conferences. The KPIs can then be validated using historical data to assess how good an indicator they are of what will happen to the KSL. The activities that could be relevant to the KSL can then be thought through and assessed for their impact against the selected KPIs.

Regression analysis is an ideal way to assess the level of impact activities of the same type have had on the KPI and sales in the past. However, if you are data-poor, you may just want to use a benchmark to ensure you are not way out in your expectations.  note that the analogue used for the benchmark could be your brand in other markets or comparable brands.

The value of 'softer' activities

The problem of less tangible 'softer' activities is very much the same as the problem with knowing when an activity impacts. The financial impact of softer activities is simply less direct but it is still intrinsically there. We, therefore, need to think through the string of knock-on effects and identify the KPIs along the way that can be measured.

You may take the view that due to the ABPI you do not want to restrict spending on these based on ROI, but would instead like to know how the money that is spent could go further. So, the return may not be financially linked, but monitoring it will drive the money to be spent more wisely for the benefit of all concerned. Either way it is still about 'optimising investment effectiveness'.

ROI needs to be compared across the organisation to enable you to allocate budgets optimally. Without a consistent approach to estimating ROI, you are comparing apples with pears and, as a result, resources cannot be allocated in a way which is in the best interests of the company. The result is a story which is far too familiar with many marketers where budgets are set in stone, even if a strong business case exists for further investment, or where those who whinge loudest get most.

A consistent and robust approach to ROI monitoring and forecasting also allows you to make meaningful comparisons across different types of marketing activity, and to assess the strategic and financial returns of individual elements of the marketing mix.

This, in turn, enables you to establish a mechanism for predicting the likely outcome of your marketing activity and provides a means of validating your assumptions about just how any element of that activity will potentially impact on sales.

Taken together, monitoring your activities and forecasting their future impact enables you to develop a balanced campaign. The use of key performance indicators (KPIs) then allows you to link marketing activities directly to the levers of growth that drive the financial performance of your business.

Most importantly, once these systems are in place to monitor and evaluate the effectiveness of your marketing strategy and the tools developed to forecast the potential return on your marketing investment, this will give senior management the confidence to support your brand with the right resources at the right time. It will also give you the means of identifying what really works and what does not, ensuring you have sufficient funds for those things that really matter.


Alex Blyth is a Senior Consultant at The MSI Consultancy's Marketing Sciences Department. Email:; or visit

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