Study: Pharmaceutical Firms Plan More DM Spending
Such growth, while not dramatic, will come despite government regulations and public perception, the second annual DTC Industry Checkup showed.
"This change presents a growth opportunity for agencies well-versed in integrated solutions, particularly direct response, as well as organizations who serve as the central operations platform for direct marketing program implementation," said Paul Buta, chief operating and privacy officer at Optas, Woburn, MA.
Eighty-eight percent of the respondents expect their direct-to-consumer spending to rise or stay the same. One-third expect an increase of 5 percent or more.
More than 30 percent believe that spending on DTC marketing should increase, particularly for e-mail, direct mail and brand Web site communications. And 33 percent agree that broadcast and mass media advertising should get less. Not surprisingly, 98 percent said more money is needed for direct communications.
Conducted online in the fall, the survey had 30 percent agency respondents, 28 percent manufacturers, 20 percent assorted suppliers, 19 percent consultants and 3 percent software firms. A total of 146 executives participated.
The survey also disclosed the hurdles faced by DTC marketers, chiefly government regulations on privacy and telemarketing as well as the lack of measurement tools for consumer programs.
Other issues that bedeviled DTC marketers were declining effectiveness in their marketing -- retention and compliance are weak spots -- and consumer backlash driven by media coverage. Then there are internal issues like budgets and constraints and the lack of new products.
Still, it is clear from the survey that direct marketing may gain ground soon at the expense of general brand-based advertising. Forty-nine percent of respondents predicted a drop in national television spending.
"Traditional DTC involved mostly mass media and was primarily used for acquisition," Buta said. "However, mass media is rapidly losing impact due to glut in the market, and return on investment is declining."
DM typically has accounted for a small percentage of ad spending by pharmaceutical companies. Optas, whose database marketing platform is used by Schering Plough, BD, Wyeth's RX and OTC divisions and Biogen, finds that few firms spend more than 10 percent of their marketing budgets on direct channels.
Moreover, a Forrester Research survey in December 2002 of 20 senior marketing executives in pharmaceuticals found that only 30 percent of them had deployed a campaign management solution. However, three-quarters of them said targeting and personalization would play a bigger role in consumer drug marketing in the years ahead.
Perhaps the marketers remain inhibited by the pro-consumer legislation of the past few years. But then, they already are used to a highly regulated marketing environment.
The anti-spam measures, for example, already are mostly addressed by other healthcare regulations like HIPPA and the Texas Medical Privacy Act. What the new federal CAN-SPAM law has done is override the patchwork of inconsistent state spam laws that threatened e-mail marketing.
"However, pharmaceutical companies do need to implement new operational procedures to comply with the law," Buta said. "Specifically, few marketing organizations have a consistent system to support opt-in and opt-out across multiple channels and multiple brands."
That said, pharmaceutical marketers and their vendors work hard to comply with privacy requirements, as much to build trusted relationships as for legal compliance. Albeit, marketers are a bit risk-averse in relationship marketing because of the uncertainty over the risks of non-compliance.
Aware of this Catch-22, suppliers develop tools to help. Optas claims to have built safety nets into its tool so the marketer is not exposed to individually identifiable patient information and yet is able to run targeted campaigns.
"Pharmaceutical marketers need to build ROI measures into all of their marketing programs to truly uncover the best media mix," Buta said. "Mass media, while fun and creative, does not always work as hard or deliver the same return that a more integrated approach can take.
"The challenge at hand," he said, "is to find the right mix that moves the acquisition needle, hard to do well with direct alone, and maintains persistency and compliance, which can only be done well with direct response."