Vibrant display

If there is one thing that the world of pharma has learned about the art of selling over-the-counter (OTC) products, it is that it should be regarded as an entirely different kettle of fish.

Whereas prescription-only medicines (POM) often thrive on factors such as doctors' signatures, medical symposia, key opinion leader development and patent protection, on the face of it OTCs would appear to enjoy a much clearer ride to pharmacy shelves.

Or do they? Marketing OTCs is no easy game and many a marketer in consumer healthcare would argue that attaining success is just as difficult, if not more so, for them as it is for their POM counterparts. The end objective may be the same (selling as many packs as possible), but the rules of the game certainly are not.

Often viewed as an aggressive, difficult and challenging market, OTC comprises growing and shrinking categories, several of which are sensitive to `slow' winter seasons.

According to the latest Proprietary Association of Great Britain (PAGB) figures, the value of the UK OTC market at retail selling prices in 2004 was a little more than £2bn, representing an increase of just £17.5m on 2003.

While pain relief, skincare, respiratory and VMS (vitamins, minerals and supplements) account for around three quarters of retail sales, most of the current growth in the market can be seen in the much smaller categories, such as nicotine replacement therapy, medicated mouth products and sleeping aids.

The OTC market is not an easy one to be in at the moment, but there are clearly opportunities out there, with strong government support for self care, new contracts for pharmacists and doctors that emphasise self care, and growing health awareness amongst consumers as three obvious helpful factors, says PAGB commercial affairs director, Mike Owen. It's still an exciting market with lots of potential for the future.

Such optimism is reinforced by recent UK government moves to shift OTC medicines more towards the centre of a refocus on self-medication. Legislative changes have been designed to speed up POM-OTC switches and enable a wider range of formerly prescription-only drugs to be made available for retail sale.

Despite the fact that major retailers are happy to continue to exert downward pressure on OTC prices, consumer healthcare divisions have not failed to see the huge potential for new brand development in the sector, as more and more products are delisted from prescription status and new categories are developed.

There has also been a certain amount of deregulation in terms of advertising. In June 2004, regulations to remove restrictions on advertising certain OTC medicines to the public were laid in Parliament. Following widespread consultation, advertising restrictions were removed for conditions such as rheumatic and serious eye or ear disorders.

One such example of the relaxation in rules has been the launch of the world's first OTC statin, Johnson & Johnson and MSD's Zocor Heart Pro (simvastatin), to treat people at moderate risk of coronary heart disease. Some promotion of the product has been allowed, according to the Medicines and Healthcare products Regulatory Agency (MHRA), to help inform [those] who might benefit from the use of the medicine.

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What distinguishes OTC marketing from prescription marketing? One major indicator is in its name: consumer healthcare. The OTC market is very much consumer research-led and OTC marketing teams are constantly having to analyse consumer needs, how people buy products and what is unmet in their array of wants.

OTC marketing is all about fulfilling unmet needs or existing needs better, which means you've not only got product satisfaction research to do but you also have to spend a lot of money on media if you're a major brand, says strategic OTC marketing consultant, James Dudley. That requires considerable strategic planning to ensure you've got the right media, and that your messages are working.

In a market where the generic competition consists largely of private label brands, it soon becomes clear that effective branding is of paramount importance. Dudley points to the oral analgesics market as one where 40 per cent of volume and 25 per cent of value is made up of private label brands.

It's a major market with few big names and lots of private label brands, he explains. At one end you have the products which are heavily branded, go through constant brand renewal programmes, look for line extensions and category stretching, and are the ones that are holding market share and growing.

Then, at the other end of the market, private label products predominate. It's the products that fall between the two that find it difficult. If you have a weak brand or undifferentiated product forms then things will get tough. The benchmark for success is to look for those key brands that manage to fulfil consumer demand and consumer need, and position themselves strongly in the market, going through a constant programme of innovation and renewal, Dudley notes.

Independent pharma consultant, Roger Watson, agrees that it is excellent branding which effectively singles out a great OTC campaign from the rest of the crowd: It's important because you're dealing with products which are off-patent, and good branding will ensure that customers remain loyal to the brand and are prepared to pay more than for generics.

However, Watson is not convinced that great OTC branding has actually been achieved on these shores and suggests that it has been done better in other countries.  He cites the historical example of Panadol in Australia, where the drug managed to grab a huge share of the non-prescription paracetamol market, despite its premium price.

Another crucial factor in marketing OTCs is the management of distribution channels. As Watson points out, while prescription medicines can, to some extent, rely on pull from the medical community to get packs on pharmacy shelves, OTC medicines have to be actively pushed.

If a customer goes into a pharmacy or a supermarket and the product isn't there on the shelf waiting for them, then the sale is immediately lost, he says.

Getting that presence is not easy as it's a very competitive market and there are usually two parts to achieving it. Firstly, there is a need for discounts, bonuses or some kind of sweetener at launch. Secondly, we're finding increasingly that the larger pharmacy chains won't stock products that aren't being rigorously promoted and so, just like supermarkets, they will take an interest in companies' promotional activities.

The big retail players such as Boots, Sainsbury's, Tesco and Lloyds, are setting the agenda when it comes to the art of OTC distribution. Dudley says that in order to manage their dealings effectively with these large outlets, which are in essence the major buyers, companies have to formulate very strong and dedicated major account management teams who can also do category management.

A major supermarket will most likely only stock its shelves with four or five major brand analgesics plus its own private label, he adds. If you happen to be brand number six, then that's a big chunk of your market lost and a big opportunity missed.

super buying power

In a nutshell, companies can ignore at their peril the way OTC distribution channels are shaping up. This is because while it may seem a sensible idea to specialise purely in supplying the private pharmacies, and automatically foregoing the need for sophisticated category management and major account management (and all of the extra expenses these will incur), the stark warning sign on the horizon is that the independent sector is diminishing rapidly.

This will also entail consolidation of the manufacturing base, with the major buyers aiming to strengthen their buying positions by looking for one supplier to provide all of their private label products, as opposed to a myriad of small factories.

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The prognosis for the next five years is that the strong differentiated brands that innovate will grow, while those that are undifferentiated, don't innovate and don't brand themselves will be part of the generics sector of the market, Dudley notes. Whether they call themselves brands or not, they will in effect merely be equivalent to private labels. What do consumer healthcare divisions have to do to make sure they squeeze maximum value out of their brands? The answer lies in rolling out a multi-channel campaign directed at both the medical community and consumers. Key influencers such as doctors and pharmacists need to be brought on board, not only to avoid them rubbishing your product but more importantly, to ensure that they adopt it into their armatorium, says Dudley.

He gives the example of GlaxoSmithKline's nicotine replacement treatment, NiQuitin, as a launch which totally revived the NRT market in the UK. Their pharmacy training programme was probably one of the best I've seen in terms of teaching pharmacy staff how to give informative advice on giving up smoking, he says. At the same time, GSK was able to run a very effective PR campaign aligned with a massive consumer advertising campaign. The market went from one which had been ticking along quite nicely, with Nicotinel and Nicorette fighting it out at the top, to one that basically exploded with growth more or less overnight.

The figures bear this out - in 2000, the UK NRT market was worth £58m before leaping to around £88m. Dudley points to a long list of considerations which companies must take into account when embarking on an OTC launch. Firstly, he says, they must fully understand the opportunity and make doubly sure that their offer is meeting demand, as opposed to creating the mirage of a demand that doesn't actually exist.

It's not about convincing a GP that your particular form of therapy is going to be superior to other treatments on the market, he states. When it comes to OTC marketing, you have to be able to find a relationship between the consumers' n*eeds and the perception of what you're offering. Product positioning planning is also important if you want to see where you are on competitors' maps. If you're about to go head-to-head with a major competitor, you have to come at it with strength, and play your competitive advantages to the full.

Yet, the key to success is product differentiation, he insists. The easiest trap an OTC product manager can fall into is thinking that other people's good ideas can be adapted to serve their own campaigns. It's not a great situation when you end up with one or two companies leading the market and everybody else pitching in with their own versions, rather than coming back with their own unique propositions, he says.

Singled out
The future outlook for the UK OTC sector is solid if unspectacular, but one thing is certain - it's going to be a survival of the fittest and the winners will be those OTC brands that can prove they are in it for the long haul. The consolidation of retailers has put a lot of power in their hands to squeeze margins and it won't be an easy market to compete in, says Watson. There's great potential for brand development but you've got to work hard at it.

The Author
Gareth Carpenter is a freelance healthcare journalist