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Reality chasm

Taking a new look at ROI

If I were to tell you that I could offer a proven set of tools and techniques to assess and optimise your brand's marketing plan, increasing sales, by anything up to 50 per cent, within the same budget, what would your reaction be? You may be cynical at first, but if I proved that it works with successful case studies I would expect you to be beating a path to my door.

The problem is that in major pharmaceutical corporations, the culture which predominates is that of making decisions based on what I would term 'career returns on effort', rather than corporate return on investment. If these two concepts were aligned, and had similar outcomes, then this would be fine – but they are not. In the current climate where 'keeping up appearances' can be more important than delivering better results the two concepts are clearly opposed. It is a cultural issue and it needs to change if we are to remain competitive, in a marketplace where there are no longer any easy pickings, and seize the opportunities presented by evolving markets.

However, undertaking an analysis of your marketing plan to date may show that you have not been making your allocated budget work as hard as it could have for the brand. From a company point of view, that gives a useful starting-point for driving a better return for the investment in time, resources, people, effort and money poured into marketing.

Unfortunately too many marketers view this as exposing themselves to criticism, and would rather just keep making the same resource allocations with no questions asked maintaining the appearance of doing the right thing – because nobody is counting. How do we change this flawed culture?

The reality chasm
The big challenge in pharma marketing is that we do not have a history of 'tracking returns'. Most brand teams do not reliably record the real impact on sales of past campaigns, because nobody in a senior position is insisting they do. Consequently, we create a culture where it is acceptable not to worry about how robust newly-proposed marketing campaigns are – because nobody is going to check those either.

CEOs talk about continuing to drive shareholder value in tough times but for brand managers on the ground it can be a different story – spending what you feel makes sense and only facing awkward questions if sales plummet, or you go over budget. The result is a huge chasm between company image and internal reality.

If I were a shareholder I'd be outraged to discover that pharma marketers are not carrying out ROI analysis on their marketing plans as standard practice. There is, within pharma, what economists call a principal-agent information gap. Shareholders (the principal) do not ask about how decisions are made, and the company management (the agent) glosses over the disturbing reality that decisions in marketing are rarely based on delivering value – but rather on gut feeling and what is perceived to be good for careers. This needs resolving urgently.

In the long-run with this kind of decision-making we all lose. The days of plenty are long gone. If there ever was a time we could afford to be sloppy about how we spent our resources, that is no longer the case. Poor decisions fail to maximise company value for shareholders and also stifle employment, salaries and investment in R&D. If you want a successful and long-lived career in pharma you have to accept that what is good for shareholders is also good for employees. Techniques for assessing and maximising ROI are not to be feared, these are the only ways that pharma marketers can guarantee a future for themselves.

A culture of challenge
So what can be done to create a culture of challenge and constant improvement? As with any cultural change, it has to start with an adjustment of mentality. Even if you have the most suitable marketing plan now, you have to accept that nothing is optimal forever. If a brand manager has not recently changed what they do and where they are spending their resources, it is not because they are good at what they do – it is because they are oblivious to potential improvements.

Planning should improve the closer you get to the event. So if you cannot update your long-term strategy with annual (or more frequent) refinements to your tactics, you might as well live 10,000 feet up on a cloud.

Changing plans is vital
Recognition is needed that a combination of competitor response and customer fatigue means that you cannot keep doing and saying the same thing and expect the same results. Sooner or later it will stop working as well. It is vital that management instils the thinking that changing plans is not about admitting error, but constantly striving for improvement. Those who are doing things differently are the ones adding real value, not those who just carry on with what the previous brand managers put in place, and inherit their success – however limited that might be.

The second cultural shift has to be in recognising the value of business intelligence. How often have you seen brand managers bluffing their way through the need to build an evidence-based plan by suggesting that as ROI can't be correctly calculated it is not worth doing at all.

An imperfect world
An ROI-friendly culture has to recognise that in an imperfect world, a better result can be achieved with imperfect information than by acting in total ignorance. Resource decisions should be about the relative returns of one activity over another – provided that you have 90 per cent confidence that, at least, an activity is going to break even. If the expected returns of both activity A and activity B have a 25 per cent margin of error, but activity B suggests double the ROI of activity A, then you should spend twice as much on activity B than on activity A. Yet we commonly see marketers splitting their spending equally on A and B, which suggests either insufficient data or a lack of effort in calculating returns.

At the risk of sounding like Donald Rumsfeld, a brand manager who 'knows what they do not know' is better than a brand manager who 'does not know what they don't know', as the former can look to validate their judgement but the latter is doomed to ignorance. An ROI analysis of a brand can be undertaken relatively quickly when you are working with a brand manager who has the maturity and confidence to estimate what they do know and recognise what they do not know. The analyst is then able to work with business intelligence and use historical data to identify what has proven possible in the past in order to validate what is realistic to achieve in the future.

Real business intelligence
It is not an exaggeration to assert that the future survival, prosperity and growth of the pharma industry is dependent on creating and nurturing leaders who deliver ROI, but getting to this point requires a major cultural shift within organisations to recognise the value of applying rigorous ROI assessment techniques to marketing plans. The first step in this great leap forward is for brand teams to track the key performance indicators that are relevant to the area of opportunity they are focusing on, rather than trying to apply any business intelligence they may have to hand. I think we would all be happier for not seeing endless slides of strategically irrelevant graphs in marketing plans.

Pharma must recognise that ROI marketing can and does deliver a career return on effort by rewarding those who adopt an entrepreneurial attitude and who demonstrate better plans and optimised resource allocations. In this culture shareholders and marketers can enjoy tangible returns on their own investment of money and time respectively.

The Author:
Alex Blyth is a senior consultant with The MSI Consultancy
To comment on this article, email

23rd October 2008


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