Full article reprinted from "The Pink Sheet" January 27, 2009
Drug companies will continue to scale back funds for televised ads in 2009, largely in order to save money, but also because they are increasingly sensitive to public perception at a time when consumers are struggling financially. Read more here...
Full article reprinted from "The Pink Sheet" January 27, 2009
Drug companies will continue to scale back funds for televised ads in 2009, largely in order to save money, but also because they are increasingly sensitive to public perception at a time when consumers are struggling financially.
Spending on television DTC branded and unbranded ad campaigns rose only slightly for the first nine months of 2008 compared to the first nine months of 2007, totaling $2.2 billion and $2.1 billion, respectively, according to TNS data. These figures are down from a 2006 peak in TV spending (see chart: "1Pharma Spend On TV Ads"). This year, firms are expected to spend less on brand-specific DTC, and to direct more funds to awareness and educational campaigns.
Being able to afford drugs remains a top concern for consumers and firms are finding this difficult to ignore, marketing consultants say. "To have ostentatious DTC spending on TV campaigns is out of sync to where consumers are; 40 million decided not to fill a prescription last year because of cost," said Meredith Abreu Ressi, VP of Research, Manhattan Research.
Because of the economy, some firms are cutting back DTC budgets regardless of whether they see a positive return on investment, said Ken Freirich, VP at Health Monitor Network, a group that provides marketing platforms and patient education.
"If a company spends $100 million on a TV [ad campaign], that contributes to the negative attention people have toward pharma companies," Freirich said. "That companies are starting to shift dollars online is old news; the new news is that pharma is being more sensitive to their company perceptions."
Additionally, a relatively static pipeline, coupled with looming patent expirations this year, means firms will have fewer opportunities for product launch campaigns, forcing companies to focus on disease awareness.
The industry's step back from more aggressive DTC spending was highlighted earlier this month, when GlaxoSmithKline CEO Andrew Witty said in widely publicized comments that the firm is decreasing DTC TV campaigns for specific brands and focusing on ads that spread awareness about conditions seldom discussed, such as sexually transmitted diseases. "GlaxoSmithKline is the best example recently of where we think the trend is going," Ressi said.
Older ads that focus on patients who are seemingly satisfied after treatment with a specific brand, provide few incentives for viewers to seek out more information (3"The Pink Sheet," May 5, 2008, p. 27). That this model is no longer sparking the product uptake it once did is evident in the slow decline in broadcast ad spend.
This means the ads that firms do produce now will more actively push viewers to search and gather information on their own. Marketing consulting firms, such as MediaSpace Solutions and Copernicus, say creating ads that educate viewers about a health condition, and not just a drug, more effectively encourage them to visit other sources, such as the Web sites that appear in TV ads.
DTC TV Campaigns Are Still Crucial
Television, however, remains the medium that enables firms to reach the broadest audience quickly. "Everybody is scaling back a little, but I have not been to a meeting where anyone has said we're eliminating broadcast" advertising, said Deborah Armstrong, VP marketing MediaSpace Solutions.
The argument in support of DTC is complicated because return on investment is difficult to measure for television. Firms usually survey consumers and track physician dialogue about drug ads to measure overall effect, although this does not pin down which commercials drive a campaign.
Because of the pressure to be more efficient and the lack of reliable ROI figures, firms are increasingly cautious in launching DTC campaigns. Of those begun in a given year, about one-third are profitable, one-third break even and one-third lose money, said Chuck Sakany, VP client relationships, Copernicus.
Still, "if firms don't get these decisions right, they don't just lose the money invested, but they lose the opportunity the brand might have held," Sakany said.
New approaches to DTC are needed largely because emerging technologies constantly alter how consumers gather information. Knowing more about consumer behavior allows companies to capitalize on individual searches.
What Consumers Want
To find out what makes consumers tick, MediaSpace is working with drug companies, including GSK and Pfizer, on a study to measure viewer perception of DTC campaigns. Expected to start later this year, the study will look at how consumers recall information and search for more, Armstrong said.
Many questions still remain unanswered about consumer behavior, such as whether affordability tactics, like coupons or co-pay reductions, can bolster the effectiveness of ads. "Every other industry knows the value of sales or coupons. ... Even last year, coupons were the number one thing consumers were looking for," Ressi said, noting that pharma may take the hint and include more discounted drug offers in TV campaigns this year. Armstrong, however, said coupons are not likely to influence how consumers process information, and so may not be included in broadcast campaigns.
The way consumers watch TV also is evolving, which firms need to consider when they are determining how best to grab viewers. "In the past year, less than half of consumers are watching TV live and over half are doing time-delayed or 'on-demand' time programming," Ressi said.
Connecting TV Viewers To The Internet
Running ads in "on-demand" programs or in television shows downloaded from the Internet are some ways companies can begin to think about ad placement and the viewers they strive to reach.
Firms seem to be taking notice that consumers respond more effectively to information they seek out on their own, rather than that delivered directly from the company. But, "companies need to drive awareness to get people to search ... and need to look at how people are getting to search," Armstrong said.
Should companies succeed in directing viewers to online communities or educational sites, they could learn more about the consumers seeking information for various products and health conditions. The Internet enables companies to track, for example, where people researching a specific disease are clustered geographically. This in turn can lead to more targeted ad campaigns.
A greater push to lead consumers to online resources will likely press companies to develop more efficient tools to measure ROI, which even online remains a gray area.
Still, companies must determine the best advertising approach for their products. There is little dispute about the value of providing links to Internet sites in TV ads given that the average age of U.S. adults looking online for health information increases each year, according to Manhattan Research. Emphysema patients, for example, are not typically active online users, mostly due to their age demographic, but once they are introduced to Internet health communities, interest peaks, Ressi noted.
Another trend is that firms are looking to bulk up budgets for creative spending in efforts to change consumer perceptions of big pharma, said Armstrong. One major drug company is asking each of its brand advertising teams to contribute funds to a corporate campaign meant to inform consumers about the research and making of prescription drugs, she added. "Will the company be spending less money? No. Will each brand have a smaller budget because they contributed funding to the program to give consumers a better sense of research? Yes."
- Carlene Olsen
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