Marketing effectiveness: cloudy thinking won’t cut it
pharmafile | July 15, 2008 | Feature | Sales and Marketing |Â Â effectiveness, marketingÂ
Over recent years the pharmaceutical industry has been unable to escape the mantra of return on investment (ROI). Investment in just about everything – from R&D to clinical trials to sales force effectiveness – is being scrutinised, with 'marketing effectiveness' measurement and monitoring being thoroughly challenged.
But when it comes to ROI on marketing spend, the truth is that the marketers have struggled to find a way to measure all of it. Parts of the promotional mix that are more closely linked to sales (e.g. sales force effectiveness) are easier to measure if we look at inputs and potentially have very tangible outputs, albeit that the link between them may not be direct. This is not always the case with marketing (depending on what the objective is), at least in pure financial (revenue) terms. And that's what many people think of when they try to measure ROI: the balance sheet.
Perhaps when big blockbuster products were turning in so much income, a little wastage, or a lack of expenditure accountability, in the marketing department wasn't so important, especially in the days when the markets were more defined and accessible – and hence the marketing job was arguably easier.
Even if this was true, the pressure to deliver more for less is certainly pronounced and to achieve this, knowing what is working and what isn't is more important than ever. We may smile at the old quote attributed to Lord Leverhulme: "Half the money I spend on advertising is wasted; the trouble is I don't know which half." But increasingly pharma marketers are being called on to have a better insight than that.
Many marketers are still struggling to link measurement of the less tangible elements of the marketing mix, such as changing perceptions, awareness or interest levels, to actual return. But I believe passionately that we have to find ways to robustly measure what we are achieving, if we are to maximise the effectiveness of marketing in our industry.
This is a call to all people in the industry, not just marketers. Marketers should have high expectations of the agencies they commission whether for medical educational, PR, market research, advertising, communication or even consultancy services! Any proposed project or activity should have clearly defined objectives and metrics that enable demonstrable alignment to what will drive future growth.
Measurement is not simply about comparing marketing spend to sales: the correlation is not that simple. Which is why some pharma marketers end up giving up and simply accepting sub-standard anecdotal 'hunches' that they are doing the right thing. These days that is not an option – it's too important to take that tack!
Yes, it is sometimes difficult, and challenging, to relate sales to certain specific marketing activities, especially market shaping and market access activities, but it is important that as marketers we do it to ensure we demonstrate the value that 'marketing' can add in a predominantly sales-driven culture.
To measure marketing effort effectively you need to understand where you are impacting on the patient flow, you need to know what success actually looks like, plus where you are trying to move customers from and to.
Using the patient flow enables marketers to measure effectiveness using an appropriate combination of qualitatively researched performance measures, as well as regression-based sales analysis and benchmarking measures. The patient flow is the link point enabling marketers to connect qualitative key performance indicators (KPIs) to the ultimate goal – financial return.
Past performance might not indicate future success
You should be cautious about relying purely on past sales performance as a measure. Looking back, you can make correlations between marketing activity and sales, and from extrapolate to the future. But marketing activity doesn't necessarily translate straight into sales, and it's certainly not exclusively about direct sales effort – factors such as increasing the number of patients available for treatment or increased diagnosis also come into play.
To do this effectively requires above all an understanding of where in the patient flow you need to be concentrating your marketing activity, where the critical barriers are, and what success actually looks like. It's no good simply saying that the finishing line is increased sales, and therefore marketing success can only be measured using that criterion. True, all successful marketing should contribute to commercial success, but often that end result is too far removed from the specific marketing goal to be the only valid metric.
Take as an example a patient consulting their GP with obesity. Your marketing aim may be simply to drive more diagnoses (knowing that if you get this right the patient is more likely to end up on your treatment). The starting point will be to understand the barriers which are preventing this happening (through insightful market research).
Perhaps the big barrier is that the healthcare professional (HCP) feels it's more of a lifestyle problem, or the patient doesn't realise that they have a medical condition. Identifying the barriers will flush out who needs to be influenced, and what changes in their behaviours must happen to drive success which will in turn inform appropriate decisions about the marketing mix.
Driving those changes in behaviour is the objective of any marketing activity, and therefore we should be identifying clear KPIs which can then be measured. Although in this case you will be hoping that increased diagnosis will lead to increased prescribing, and hence increased sales of your brand, that is a few stages removed and we need to ensure that we have markers or measures in place to highlight what success initially looks like, e.g. a mixture of awareness of obesity as a true medical condition and increased diagnosis.
Whilst getting the methodology of measurement right, there must also of course be an understanding of what it is that is being measured. Perhaps the biggest error that is made in the pharma industry is either to look too generally at the whole market, and thus miss effects which are happening in specific parts of it – or to get the segmentation hopelessly wrong.
Segmenting customers
Segmentation is something we talk about a lot. If we have truly challenged ourselves to go that step further in terms of segmentation: looking into customer goals, beliefs and attitudes, then equally we should spend the time ensuring we measure our marketing effectiveness by segment. This requires two key things. Markers so we can clearly identify one segment from another and then also a separate review of the stages of the patient flow for each target segment. Once we have done this we will be able to find our segments and understand the differences in terms of growth levers and barriers that need to be removed through our marketing activities.
Considering the basis of segmentation, as groups of customers with distinct, different needs, we must account for this in reviewing marketing effectiveness. Even where segments are well-defined, too often measurement of marketing success is based across the whole market, and not on the segments of the market which could – with the right messaging – make the biggest difference. Therefore, let's ensure we have identified differences in the patient flow by segment, helping us understand the critical barriers to success and highlight the levers of growth. This allows us to ensure marketing effort is measurable, aligned to qualitative and quantitative measures and is segment specific.
If we have decided to launch a particular brand into a specific segment, with similar needs and consistent messages, then we need to focus our measurement on only those segments, not the market as a whole.
Use the data
So is it that the industry is not gathering enough data to be able to make meaningful assessments of marketing effectiveness or are we simply not making good use of the data we have?
An often used excuse for the shortage of marketing effectiveness in pharma is the relative difficulty of gathering data compared with the FMCG world. But whilst certain aspects of marketing are more difficult to measure than others, this is no different for FMCG than for pharma. Yes, it's difficult to access the end-user in pharma, but we have much to learn from the techniques used by FMCG. And in fact in my experience there is less readily available data in FMCG.
The challenge for FMCG is the same – to work out which elements of the marketing mix will provide the best return on investment. There is no reason why we cannot commission more market research with our customers to get a better understanding of where we are having the most impact, and then utilise these insights to inform and improve what we do moving forward.
Actually, most pharma companies I know are awash with data which could be used better with the correct tools and processes to ensure that we measure our effectiveness. If the data is not there, then challenge yourself – and your agencies – to understand what data you need, and look at approaches you can take to accurately measure marketing success. This won't always be about demand or sales.
Those increasingly sophisticated metrics tools which are commonplace in FMCG are now finding their way into pharma. We are now using bespoke tools which have been developed specifically to meet the individual challenges of measuring pharma marketing effectiveness.
However you express it, the days of 'digital hydrometry' (i.e. finger in the air) are gone. Financial management and profitability are rapidly becoming a major part of the marketer's daily workload.
What if it were your company?
A simple way to start marketing effectiveness is to imagine that it is your own business and your own money that you are investing. Marketers need to pay more attention to measuring their effectiveness – not just to be better marketers, but to understand what success looks like, and to gain competitive advantage. Would you really spend money on that programme if it was your business or are there better ways of achieving the goal?
I believe a cultural shift is required in understanding what is meant by the term ROI. It's not just about increasing sales (at least not in the direct sense); it can be about a whole plethora of success measures, whether it's awareness, perception, driving diagnosis or adoption of a particular technique.
The ultimate challenge we face as pharma marketers is to pick the right growth levers. Of course the ultimate goal is towards increasing sales and profits. But to measure marketing effectiveness properly, we need robust qualitative markers to show that we are going in the right direction.
That's not about suffocating creativity or innovation, but rather about informing it, improving it and knowing when it has achieved your objectives.
Box: Four key steps to marketing effectiveness
1. Understand what you are trying to achieve, who are you trying to influence, what are the ways of influencing and what are the different ways – qualitative and quantitative – of measuring this.
2. Measure appropriately, using innovative KPIs where required. Measure what we are trying to achieve, whether it's market research, omnibus surveys or something else. If your objectives are S.M.A.R.T., then the measurement becomes easier.
3. Interpret what the measurement is telling you – what are the key insights/benchmarks, either internal or external. This needs to be an ongoing process, which feeds back into increasing your understanding and the quality of your measurement.
4. Implement improved marketing activities and refine marketing effectiveness measures as you understand more and more about what is driving return.
Jon Bircher is a senior consultant at The MSI Consultancy. He can be contacted via e-mail at: jbircher@msi.co.uk
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