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The Economics of Promotion. Education Associated Arts Degree in Pre-Engineering Bachelors Degree in Business & Applied Mathematics Masters Degree in Business.

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Presentation on theme: "The Economics of Promotion. Education Associated Arts Degree in Pre-Engineering Bachelors Degree in Business & Applied Mathematics Masters Degree in Business."— Presentation transcript:

1 The Economics of Promotion

2 Education Associated Arts Degree in Pre-Engineering Bachelors Degree in Business & Applied Mathematics Masters Degree in Business & Applied Statistics PhD (ABD) in Business and Applied Economics, with a Statistics Major Professorial Professor/Instructor … Statistics, Marketing, Computer Simulation, Marketing Research at California State University (San Luis Obispo, California), University of Montana, New Jersey Institute of Technology, Farleigh Dickinson University,

3 Professional Researched the value of R&D support given by The National Institutes of Health and The National Science Foundation, and evaluated research findings/reports Started and sold several research businesses Strong background in all areas of pharmaceutical promotionStrong background in a host of Therapeutic areas Created & implemented the analytic methodology that permits the analysis and projection of impact of a fully integrated promotional campaign … studied the fully integrated promotional campaigns of over a thousand different pharmaceutical products Professional career, for the last 35+ years, has focused on understanding the role of promotion, each of the promotional modalities and how they come together to create a campaign work

4 Promotional Research Studied several hundred Pharmaceutical Mail campaigns Studied all aspects of Detailing for many Pharmaceutical companies Reach Frequency Multiple Sales Forces Studied all aspects of Journal Advertising Single page through multi-page units Single and Multiple Insertions Studied many levels of PME /CME Dinner meetings Small and Large Groups Convention/Conference meetings Etc., etc., etc.

5 Promotional Research (continued) I have built proprietary promotional models for many different pharmaceutical companies in the US The basis of the research finds its roots in solid Economic Theory, Various aspects of Physics, Marketing and Promotional Theory, and Finance and Investment Theory(s). The approach has proven to be highly accurate across 100s of products and many therapeutic classes Have completed several hundred integrated promotional studies, covering over a 1,000 products One has to keep in mind that Marketing Theory and Promotional Theory DO NOT change from one therapeutic class to another. What does change is the competitive Environment.

6 Merck … Directors and entire marketing team Novartis … VP of Marketing, Analytics, and Senior Members of Brand teams BMS … VP of Marketing and all members of Brand Teams Abbott … Directors and Product Managers Pfizer … VP of Marketing, Product Managers from Primary Care Sanofi … VP of Marketing, VP of Finance and all Product Managers Boehringer Ingelheim … VP Marketing and all Product Managers Novo Nordisk … Director Marketing and all Product Managers Amgen … Business Unit Managers and Product Managers Have done projects with most of the above Pharmaceutical Companies in the US and a few in Canada

7 I 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! Lets start with one very widely held belief … Promotion directly drives sales / market share! I hope before you leave today, that I have planted some doubt in your mind concerning this idea … because, I DO NOT believe it does!

8 What drives product growth? What is the role of promotion? What is the role of promotional mix? How do promotional work together … interactions? Does journal advertising work? What is the role of journal advertising? Does detailing work? What is the role of detailing? Etc., etc., etc. How does promotion manifest its impact?

9 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 graph!

10 Promotional Campaign Market Instability Product Accountability Product Acceleration Product Velocity Product Momentum Product NRxs And Share This thought process lays a strong economic & necessary foundation for understanding the role of the various promotional modalities and the ultimate impact of the campaign

11 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?

12 Which modality(s) drive Instability? Which modality(s) drive Accountability? Which modality(s) drive Acceleration? Which modality(s) drive Velocity? Which modality(s) drive Momentum? How do modalities interact? Why is this understanding Important?

13 The first job of promotion is to CREATE Instability Once this is achieved, the same strategy / message / tactics must CONVERT that Instability to growth for your product This growth dynamic manifests itself in the concepts of Acceleration and Velocity Finally, positive Momentum must be achieved and maintained … which, of course, is a function of both the campaign and the products quality

14 Detailing Sampling CME Advertising

15 Detailing Sampling CME Advertising It is the Integration and Interactions of all campaign elements/modalities that drive impact!

16 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 Modality, how and where it manifests its impact, and how product Momentum is created and maintained If a Modality appears not to be working, find out why! BECAUSE ALL PROMOTIONAL FORMS DO WORK THOUGHOUT THE PRODUCTS LIFE!

17 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 properly … good ad, budgeted properly and balanced with the rest of the campaign. Balance referring to many different concepts revolving around the creation and conversion of Instability What about other modalities? Same profitability concepts apply and same interactive relationships apply

18 Detailing … Sampling … CME / PME … Mail … Journal Advertising … DTC / DTP … Do you remember?

19 Create Instability Convert Instability None Strong Detailing New Product Journal Advertising New Product Sampling New Product CME/PME New Product

20 After 1,000+ Promotional Studies

21 21 I M P A C T Number of Months 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 -3 -2 -1 0 PME DETAILING PAGES 90%

22 22 Impact of most promotional modalities diminish as product ages Sampling is the only modality impacted minimally by age or time Question: At what point in the product life cycle does the sample become the driver of Detailing and Sampling Impact? time Impact Samples Details t

23 23 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? time Level Call Report Data Audits Typical History 100*(Audit/Actual) = % Pick-up 65-70% 20-35% Launch 18-24 Months

24 24 Audited journal Ads are usually a function of a census Actual units are recorded and reported by visually checking all journals Physician recall is not needed Question: If two products each show 30 pages of advertising per month, are they spending the same on Journal Advertising? time Level Audited/Census Pages-per-month Actual Pages Typical History 100*(Audit/Actual) = % Pick-up Launch 18-24 Months But, this does not mean that the value is the same over time.

25 25 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 Market Share Audited Detailing + -

26 26 What is the functional relationship between Promotional Impact and Product age? Time Product Age Relative Impact DetailingAdvertisingCME/PMEDTC Sampling What are the implications of this on ones ability to model promotional impact Census vs. recall vs. age on impact Recall vs. impact


28 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

29 Should we implement this DTC television campaign? Planned start is July 1998 – 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!

30 Delay start of DTC Television for six months. Get professional up to speed first! Add 2xx++ Salespeople before DTC start. Increase professional advertising by $1,400,000. Keep sampling in step with detailing. Increase Primary Care activity. Recommendations

31 Case Study: New Prescriptions/ROI Forecast Projections New Campaign Starts

32 Concepts discussed today require learning and working with a set of new measures While the real power of this approach rests in developing the full system of simultaneous equations, a good starting point is in the development and use of all appropriate measures This can be accomplished with an Excel Worksheet that sequentially develops each of the measures

33 Prod1 Prod2 Prod3 BaseNRxsShareNRx InstabShare InstabNRx AcctShare Acct Concentration Velocity AccelerationMomentumSummary NRxs & Share NRxs & Share NRxs & Share


35 NewPrescriptions MarketShare Detailing Sampling Advertising DTC Mail Dinner Meetings Etc., etc., etc.

36 Marketing Environment Promotional Environment ProductEnvironment DiseaseEnvironment Instability Velocity Acceleration ACCOUNTABILITY DTC Detailing Sampling Mail Advertising NRxs&Share

37 THANK YOU! The best way to predict the future, is to create it Models are meant to be used, NOT BELIEVED

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