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Redefining sales & marketing return on investment (ROI) in pharma

Dr R B Smarta
Wednesday, September 24, 2008, 08:00 Hrs  [IST]

There is a fundamental principle in management especially in marketing, what gets measured is done. In fact, same principle is true when it comes to marketing results. You get what you measure. So if you are not measuring results of your investment in marketing in terms of current and future, then perhaps you are investing blindly.

As you know global pharmaceutical environment is turbulent, and as a result, what used to work to create industry wide growth of 20 per cent no longer does. The resulting bottom line return for brands is in decline as market growth slows in the major pharmaceutical markets and this inevitably leads to marketing budget cuts. The only way for a brand to grow effectively and cost-effectively is to improve the bottom line effectiveness of each marketing spend. Pharmaceutical marketers are under even more pressure to get more bang for their buck from their marketing spend, and be able to justify it.

How do we successfully measure our individual marketing activities' bottom line return, and prove it to the chief financial officer (CFO)? How do we prove exactly which marketing components are really growing our bottom line? How do we know what aspects need to be changed and how to grow the bottom line by a specific amount?

All over the world, it has been seen that instead of ROI, ROMI (Return On Marketing Investment) is used. Basically, ROMI addresses the question of making choices regarding the allocation of resources. Promotion and brand portfolio requires resources to build brand assets. Brands are usually evaluated and are capable of generating funds for the company. As we know brands add value to marketing activities.

Standardised ROMI matrixes are absolutely essential for pharmaceutical companies. Many high potential and heritage brands, products never receive even essential marketing investment unless compelled. As a result, no measurable impact can be generated. In comparison to many industries the kind of promotional percentage spent in pharma industry on returns sometimes results into net losses. In pharmaceuticals, we are engaged in field force arms race which is different from other industries to generate and fulfil the demand.

While conducting ROMI, best practices are emerging in pharma industry all over the world. The models which are available align themselves to strategic goals and activities which support those goals. Similarly, drivers of ROMI directly connect to bottom line measures. Soft ROI such as customer appreciation, awareness intention etc is difficult to measure but not impossible to quantify in ROMI framework.

ROMI challenges
In totality ROMI captures the impact of marketing programme on external market dynamics. There are many challenges for measuring ROMI in a global environment. India is not an exception. All over the world inclusive of India you find following challenges to measure ROMI:

" Management's failure to recognize the need
" Number of products on promotion with a span of few minutes of in-clinic performance
" Multiple events: A promotional chain makes it difficult to isolate the contributions of single effort
" Objectivity of profiling, targeting, inputs and results
" Variable accountability: Accurate knowledge of the causal relationship on incremental activity in prescribers clinic
" Causal relationship establishment of prescriptions
" Getting enough data: Setting up of testing to measure against controls
" Lack of industry standards/approaches on how to measure or build measurement
" Limited budget and resources
" Creating the will (internally) to do it.

Techniques & tools for ROMI
●Campaign measurers
●Marketing mix analytics using historical data
●Marketing mix analytics using analogue data
●Internal marketing database tracking combined with analytics
●Predictive analytics using validated current market perception data
●Physician detailing effect
●Brand optimisers

In India, we need to consider SAMROI (Sales & Marketing Return On Investment).

SAMROI and its future
Sales & Marketing ROI is a mix of quantitative and qualitative measures as many aspects affect returns such as vacant territory management, reach of untapped markets, field force strategy, secondary sales, expiries, bonus offers, commercial deals, competitive tactics in the territory potential of key customers, new drivers, barriers etc.

To ensure that you can still measure returns, need to define returns on what? On territory? Or on doctor? or on MR?

Let's get a few components of SAMROI.

Return on field force implementation
All these studies provide an objective analysis at the inputs and optimisation of inputs. As we involve filed force to implement these marketing activities, we need to standardise the process of "call", "repeat call", major calls, minor calls, profiling, targeting and measuring output per physician under clinical performance, their standard and motivation of field force with prioritisation of objective of each sale needs to be defined.

These qualitative dimensions will strengthen implementation. Besides, sales force activities, CRM activities are in high demand in India. In order to derive good results from CRM following steps need to be followed.

Return on CRM
We need to make sure that sales staffs are accurately tracking each actual sale in CRM system, by converting opportunities into closed orders, with accurate order values.
In addition to normal CRM entries, make sure your CRM has standard fields to capture the following data:
●Lead source ●Campaign ●Market segment ●Sales Region ●Win /Loss ●Reasons for Win / Loss ●Competitor

Return of promotion
It is important to ensure that return on promotional expenses are planned/measured and controlled on time to time basis.

Return of field force efficiency
Field force efficiency is becoming an important issue which directly affects the structure, cost of structure, cost of attrition, designing of territory, productivity of each territory and hence per person productivity needs to be planned, measured and ensured that the growth is kept in view.

It's a Herculean task, yet it needs to be taken up on the front deck than to keep it in back burner and work on budgets. If not done, it may be a perpetual way to remain non-quantified to measure the return on sales & marketing investment.

(The author is founder and managing director of Interlink - A business consulting firm in pharma & healthcare industry based in Mumbai. Email: smarta@interlinkconsultancy.com)


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