Companies are investing heavily in promotional activities, but can they really be sure they are spending their money as effectively as possible? Are they allocating the right amount to the right brand at the right time? This was one of the key questions raised by Nina Felton of IMS Consulting, UK, in her presentation on measuring return on investment (ROI) at the recent Marketing ROI for Pharma conference in Amsterdam.
Why measure?
Nina began by reviewing the reasons behind the need to maximise ROI - the slow-down in growth to less than double digits in the top 10 markets world-wide; the fact that sales and marketing represents the major proportion of pharma company spend; the tens of thousands of reps who are involved in product promotion (the majority of whom are concentrated in just two therapy areas); and the significant cutback in available detailing time with physicians.
Times are clearly tough and senior management has to achieve more with less to stay ahead of the competition. The ‘hit and hope’ mentality no longer holds good: spend will be scrutinised and ROI measured – right across the product lifecycle.
The issues
Against this background, Nina considered the practical issues that companies need to address:
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How much should we spend on promotion to launch our new product?
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How much do we need to spend to achieve business targets?
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Given our budget, what can we expect to achieve?
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How should our budget be allocated across different forms of promotion?
Some of the basic rules for any ROI analysis include ensuring that all data is sufficiently granular and robust to measure the identified parameters, and gaining agreement throughout the company on the objectives that need to be achieved. Put bluntly, you should plan it and do it – just because you can’t measure ROI perfectly doesn’t mean you shouldn’t try measuring it at all.
One of the major issues in measuring ROI is being sure that the element in question can be isolated in a way that makes the impact of the promotional activity being measured quite clear. Any model that is set up needs to ensure that the relative impact and value of each element of the promotional mix is disentangled, identified and quantified.
A process for successful measurement
With this in mind, Nina took delegates through the five steps of the Promo.Cast process – a practical tool for performing “what if” scenarios – to illustrate how various promotional alternatives for a soon-to-be-launched product can be simulated or optimal resource allocation achieved for in-cycle brands. Essentially the Promo.Cast approach uses econometric and dynamic modelling to identify the value that a range of promotional activities has contributed to a brand’s revenue over a period of time based on historical prescribing.
Examples of the Promo.Mix and Promo.Message elements of ROI measurement also illustrated the need to measure at the right time. It is important to address the period of influence of any promotional element - when and how it truly impacts on the target audience. There is little point, for example, in measuring too soon before its impact has peaked.
The range of practical case studies that Nina presented provided significant clarity on the process and brought home the benefits of setting up a truly effective system for measuring ROI, even down to the level of assessing the effect of a differentiated promotional mix for the various target segments identified by a company. The extent to which this was appreciated was apparent in repeated references to Nina’s examples throughout the remainder of the conference, and underscored by the conference chairman as he stressed the excellence of data interpretation provided by IMS.
For more information on maximising ROI, please contact Nina Felton, Country Principal, IMS Consulting, UK at IMS or call +44 207 393 5757.