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Time for new measures

If marketing's ultimate aim is to create shareholder value, there is no room for a glaring gap between what is driven and what is measured

At the heart of every business lies the strategy, the engine that ensures objectives are met; if the aim of marketing is to drive the creation of shareholder value, then we need to be deliberate with our strategy and its effectiveness.

Strategy is the universally accepted difference between success and failure and, given the similarities between pharma firms' value propositions, effective measurement is a key differentiator; it is so critical to eventual business outcomes that we should measure it continuously.

Most business principles concerning measurement are built on famous sayings, like what gets measured gets done and no measurement, no control, no improvement. Yet, how does all this reflect within the pharmaceutical industry?

There is, at present, a glaring gap between what marketers purport to drive and what they measure. Today's environment is typified by customer fragmentation, and regional variation demands a change in the way we think about measurement. Closing the marketing-measurement gap will mean effective measurement, control and improved results.

Strategy in action
It's apparent that there are a number of commonalities between strategies - once you get past all the jargon, they are all trying to drive the same things: branding, segmentation and relationship marketing. These are all deployed to achieve the same results (ie, generating more new scripts or increasing duration of product use by patients).

There are approximately 40,000 GPs in the UK, however, rarely would you come across a marketing team that actively engages with them all. Most marketers accept that their strategy is focused on a particular segment, or segments, of the market, albeit with varying approaches to divide up the market.

The key to any strategy is the customer and their needs. The purpose of profiling, segmentation and messaging is to enable marketers to focus their efforts and activities on the most appropriate customer groups. Since these customers are chosen at the time of strategy development, it makes sense for these definitions not to be forgotten when the impact of the strategy is being measured.

All things are not equal
All scripts are not the same; like customers, there are specific scripts in which an organisation is most interested. A brand's total sales comprise sales from business done yesterday and today; however, in most cases, strategy is concerned with business conducted today and tomorrow.

Repeat business represents a large chunk of most brands' sales, which means that the battle ground for strategy is the 10 to 15 per cent of the market (dynamic market) that is accessible. The dynamic market represents new prescriptions, switches (to and from) and add-ins, which make up the tangible opportunities.

The large pool of repeat prescriptions is largely inaccessible unless the patient, or their doctor, becomes dissatisfied, at which point they are reintroduced into the dynamic part of the market.

Poor tolerability is just one thing that will lead to a patient returning to their doctor to discuss other treatment options.

It is for this very reason - that all patients are different, as indeed are doctors - that marketers need to ensure physicians are aware of alternative treatments in a particular therapeutic area. Age, gender, geography and disease type are some of the criteria used to distinguish between patient types.

So, we have specific actions (new, switch, etc...) being driven by customers you want to reach (segments) to impact the end users (patient groups). The component of strategy is clear!

Yet, when we review the way strategic effectiveness is measured and controlled, we find that companies are recording measurements based on the total population, rather than the specific audience they are trying to reach. The result is that strategic choices designed to drive product messages are not measured in the customer groups in which they are deployed.

This is all the more compelling when considered against the wealth of knowledge expounding the link between measurement and improvement.

James Harrington, author of several books about improving business performance, writes: `Measurement is the first step that leads to control and eventually to improvement. If you can't measure something, you can't understand it. If you can't understand it, you can't control it. If you can't control it, you can't improve it.'

Why is this so critical? Given the furore over return on investment (RoI), using an effective measurement process offers an ideal opportunity to measure, control and improve performance. Without this, trying to improve RoI is like chasing shadows, and yet we see that currently there is a detachment between actions and measurement in marketing.

Closing the gap will unveil opportunities to optimise performance, resulting in a closed loop aligning pharma's activities to GPs' decision-making processes, impacting positively on patients.

This degree of rigour is often seen as superfluous, but without this level of precision, actions and measurements can often be disconnected. Measuring the impact of your activities within your target segment precisely is paramount. Turning around strategy that has gone off track is like trying to turn an oil tanker around, and it's a thankless task.

lessons from other industries
When we consider how other industries measure and optimise their strategies, one player that stands out is Tesco, which employs a loyalty card to collate information at the point of transaction.

These are data on customers that drive segment-specific strategies, which are measured at the same level at which the strategy is deployed.

For Tesco, understanding the impact of strategy requires insight into specific activities around specific customers for specific outcomes. In short, it measures what it drives! Today, it is known as a world leader because it applies science to its business model. Point-of-transaction information has revolutionised its business.

Vodafone followed a similar path, using segment-specific information to develop strategies that were optimised through an iterative measurement process.

The question is: how can all this be transferred to practices in the pharma industry?

Naturally, there are questions about industry context: what of pharma's uniqueness and its lack of data? Do these explain the differences between industries? I think not!

Pharma, though unique in its make-up, is now beginning to succumb to the same pressures that have affected some other industries for decades. Government limits, pricing pressures, and dwindling pipelines, are starting to erode pharma's uniqueness, making the industry increasingly like others. Although a (perceived) lack of data bolstered the barrier to an effective measurement process, this has changed now that granular and robust data are available.

What appears to have been more of an issue is the culture that existed around the data made available historically. The change required is more than new data; what is needed is new thinking. There are examples where measurement of marketing effectiveness is based solely on GPs' perceptions.

On this note, I beg to differ with the notion that perception is reality! There is only one version of the truth; this is too important a subject to base on perception.

Best practice
For those late adopters of a more insightful approach to measurement, the financial cost may be great. One brand team improved RoI and sales on their brand through an effective measurement process. They measured percentage share of new prescriptions, switches and repeats on a segmental level. They had four segments, and their sales were growing fairly well.

However, segment-level analysis revealed an opportunity to drive RoI on the brand further still. Two of the four segments were underperforming, while the remaining two were significantly over performing; the overall result was a brand that appeared to be performing reasonably well. Hence, the brand team took corrective action against the two underperforming segments, resulting in significant growth.

National-level analysis would have masked the trends that are ultimately driving the market and would probably not have led to corrective action being taken in the underperforming segments. The potential of sub-national-level analysis is huge, be it for segments or to get a true understanding of geographical fragmentation. While measurement does not always produce such dramatic ends, these issues will be overlooked without it.

Consider the marketing theory of diffusion of innovation, which explains the speed of adoption for new products and attitudes of differing customer groups towards innovation. Previously, to understand the value of an early adopter, for example, would have meant understanding their total prescription value, which might not do justice to their true value.

Effective measurement means that the make-up of these customers' prescribing total can be understood, thereby facilitating differentiation. In-depth evaluation clarifies value and worth, empowering the decision-making process. Increased granularity in measurement is a key source of competitive advantage.

Know the influence
Given that the ultimate role of marketers is to create shareholder value, effective measurement processes are no longer optional. Future market share is the result of dynamic performance, therefore business plans that lack this level of rigour are simply rough estimates or `hope for the best' approaches; this perhaps goes a long way to explain the gaps often noted in current pharmaceutical marketing performance.

The idea is to apply the same scientific rigour that underpins the development of the product to the marketing of it.

The authors
Baba Awopetu is a senior lecturer at the Marketer's Forum (btawopetu@yahoo.co.uk) & Nina Felton is a Country Principal at IMS Health (nfelton@uk.imshealth.com)

2nd September 2008

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