The Economics of Promotion
UNDERSTANDING & PROJECTING THE IMPACT OF
PROMOTION
WHAT IS MY BACKGROUND
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Education
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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
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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,
WHAT IS MY BACKGROUND (CONTINUED)
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Professional
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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
WHAT IS MY BACKGROUND (CONTINUED)
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Promotional Research
 Studied
several hundred Pharmaceutical Mail campaigns
 Studied all aspects of Detailing for many Pharmaceutical
companies
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Reach
Frequency
Multiple Sales Forces
 Studied
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Single page through multi-page units
Single and Multiple Insertions
 Studied
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all aspects of Journal Advertising
many levels of PME /CME
Dinner meetings
Small and Large Groups
Convention/Conference meetings
Etc., etc., etc.
WHAT IS MY BACKGROUND (CONTINUED)
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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 100’s
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.
PRESENTATION RECIPIENTS IN CANADA
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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
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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
CAN YOU PROJECT PROMOTIONAL IMPACT?
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I HAVE … and, normally, will be within ¼ to ½ of
1 percent
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Patently Absurd you say, no one can predict the
impact of promotion … and you are right if you
continued to think in traditional patterns!
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Let’s start with one very widely held belief …
Promotion directly drives sales / market share!
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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!
QUESTIONS TO CONSIDER
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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?
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
graph!
REAL ROLE/PATH OF PROMOTIONAL IMPACT
Promotional
Campaign
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
Market
Instability
Product
NRx’s
And
Share
Product
Accountability
Product
Acceleration
Product
Momentum
Product
Velocity
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?
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WHO/WHAT DRIVES WHAT?
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?
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THE PATH TO SUCCESS
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 product’s quality
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INTERACTIONS – TRADITIONAL VIEW
Detailing
CME
Sampling
Advertising
INTERACTIONS – THE REAL WORLD OF IMPACT
Detailing
Sampling
CME
Advertising
It is the Integration and Interactions of all campaign
elements/modalities that drive impact!
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
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 PRODUCT’S LIFE!
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FALSE / MISLEADING QUESTIONS & STATEMENTS
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Is my campaign increasing sales?
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Does Journal Advertising work?
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Wrong question. Should be … is my campaign increasing
sales profitably and/or optimally?
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?
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Same profitability concepts apply and same interactive
relationships apply
ROLE OF EACH PROMOTIONAL MODALITY
Do you remember?
Detailing …
 Sampling …
 CME / PME …
 Mail …
 Journal Advertising …
 DTC / DTP …
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Strong
ROLE OF EACH PROMOTIONAL MODALITY
Detailing
New Product
CME/PME
Create Instability
New Product
Journal Advertising
New Product
Sampling
None
New Product
None
Convert Instability
Strong
After 1,000+ Promotional Studies
RESEARCH FINDINGS
CONCERNING PROMOTIONAL IMPACT
21
IMPACT OF PROMOTIONAL CHANGE
TIMING TO 90% MANIFESTATION
PME
DETAILING
PAGES
I M P A C T
90%
-3 -2 -1
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Number of Months
22
THE REAL WORLD OF PROMOTION
IMPACT OF DETAILING VS. SAMPLING
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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?
Impact
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Samples
Details
t
time
23
THE REAL WORLD OF PROMOTION
ACTUAL VERSUS AUDITED DATA
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18-24 Months
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Launch
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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?
Level
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Typical History
65-70%
Call Report Data
20-35%
Audits
100*(Audit/Actual) = % Pick-up
time
24
THE REAL WORLD OF PROMOTION
ACTUAL VERSUS AUDITED DATA
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Typical History
100*(Audit/Actual) = % Pick-up
18-24 Months
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Launch
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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?
Level
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Audited/Census
Pages-per-month
Actual Pages
time
But, this does not mean that the value is the same over time.
THE REAL WORLD OF PROMOTION
MATHEMATICAL RELATIONSHIPS
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What is the functional relationship between audited
promotion data and market share?
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Market Share increasing over time
Detailing and other audited promotion declining over time
Market Share
+
-
Audited Detailing
25
THE IMPACT OF PRODUCT AGEING
MATHEMATICAL RELATIONSHIPS
What is the functional relationship between Promotional
Impact and Product age?
Sampling
Relative Impact
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Detailing
Advertising
CME/PME
DTC
Product Age
Time
What are the implications of this on one’s ability to model promotional impact
• Census vs. recall vs. age on impact
• Recall vs. impact
26
EXAMPLE
CASE STUDY
CASE STUDY
ESTABLISHED PRODUCT
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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
CASE STUDY
CLIENT’S QUESTIONS
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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!
CASE STUDY
ESTABLISHED PRODUCT
Recommendations
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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.
Case Study:
New Prescriptions/ROI Forecast
600,000
Forecast - Base
550,000
Forecast - Campaign
Actual
New Prescriptions
500,000
450,000
400,000
350,000
300,000
250,000
New Campaign Starts
200,000
Projections
t+32
t+30
t+28
t+26
t+24
t+22
t+20
t+18
t+16
t+14
t+12
t+10
t+8
t+6
t+4
t+2
t
t-2
t-4
t-6
t-8
t-10
t-12
150,000
UNDERSTANDING & EMPLOYING THE CONCEPTS
DISCUSSED TODAY
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
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EXCEL WORKSHEET
Prod1
Prod2
Prod3
Base
NRxs
Share
NRx Instab
Share Instab
NRx Acct
NRxs
&
Share
Share Acct
NRxs
&
Share
Concentration
NRxs
&
Share
Velocity
Acceleration
Momentum
Summary
PROMOTIONAL
ENVIRONMENT
THE SIMPLE WORLD OF PROMOTION
Detailing
Mail
Sampling
Advertising
DTC
Dinner Meetings
Etc., etc., etc.
Market
New
Prescriptions
Share
THE REAL WORLD OF PROMOTION
Marketing Environment
Promotional Environment
Detailing
Product
Environment
Advertising
Mail
Sampling
DTC
Disease
Environment
A
C
Instability C
O
U
N
T
Velocity
A
B
I
L
AccelerationI
T
Y
NRx’s
&
Share
“The best way to predict the future, is
to create it”
“Models are meant to be used,
NOT BELIEVED”
THANK YOU!