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Putting Promotion in Perspective: Part II--Timing, Mix, and Impact
Decision Resources, Inc., Sep 2005, Pages: 17
Controversy surrounds direct-to-consumer (DTC) advertising, the segment of promotional activity that we focus on in Part II of 'Putting Promotion in Perspective,' in which we expand our analysis of the issues outlined in Part I. We discuss several recently launched products whose promotional mix contains DTC advertising and consider how the mix might change in the future. To assist promotional decision making, we offer a three-tier method for characterizing new drugs and determining their promotional requirements. Because return on investment (ROI) in promotional activity, particularly ROI on specific components of that activity, is somewhat difficult to measure, we provide a model for measuring ROI in DTC advertising through the use of epidemiology data, sales data, and analysis of primary patient research. In addition, we provide insight from patients on the types of information they most value from pharmaceutical companies.
Business Implications
- The annual U.S. promotion of drugs can be divided into three tiers of activity: (1) high (> $200 million), (2) moderate ($75-200 million), and (3) low (< $75 million) activity. Products within each tier tend to show specific characteristics. An analysis of promotional spend activity relative to sales across the three tiers shows a distinct pattern of spend for products in each tier. When launching new products, pharmaceutical companies can position them in one of the three tiers by mapping their characteristics to those of each tier and estimating the level of promotional activity required based on the dynamics of the tier and projected U.S. sales.
- Analysis of the promotional mix shows that products in each tier respond variously to promotion through the different channels. Tier 1 products typically respond well to DTC advertising, whereas tier 2 and 3 products may not benefit as highly from DTC advertising but do benefit from journal advertising. A good understanding of the characteristics of new drugs and the marketplace they enter can help inform decisions on the correct promotional mix for maximizing ROI.
- DTC advertising can be a powerful and effective way to help drive sales. Close examination of the ROI associated with DTC advertisements can provide a useful measure of the effectiveness of DTC advertising campaigns.
- Pharmaceutical companies are beginning to rethink the channels they use. Targeted print and other media advertisements will
become increasingly attractive, not only to cost-conscious brand managers but also to companies hoping to demonstrate to physicians and the public their commitment to patient safety and education. This approach is in tune with what patients want.
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