Rejiggering the Marketing Mix a la Merck

Adam Schechter, the president of Merck US Human Health, made this statement a few weeks ago at the Goldman Sachs healthcare conference:

"Industry must embrace new ways of engaging physicians on their terms."

[See his presentation here.]

In that presentation, Schechter then went on to show some data that demonstrate the problem with pharma’s current model of engaging physicians (see figure below).

As the Verispan promotional audit data show (click on figure to enlarge and read), pharmaceutical companies spend a disproportionate amount of their promotional budgets on face-to-face detailing. The $11.2 billion does not even include the cost of samples! In contrast, the amount spent on ePromotion is minuscule.

And what does pharma get for this? Less and less.

For every 100 sales rep visits to physician offices, only 56 actually see the physician and of these 27 merely drop off samples without talking to the physician. Schecter claims that when reps actually get to talk to physicians, the call only lasts 4.6 minutes on average, but I have seen much lower estimates – even as low as 2.5 minutes!

Merck to Slash Field Force?
Given these statistics, Schechter said Merck is on course to significantly reduce its promotional spend by 2010 and estimates it will cut its field force spending by 9% in 2007 (see figure at left; which shows that the field force bar is lower in 2007 than in 2005.).

Ed Silverman at Pharmalot, looking at this chart, came to the same conclusion (see "Merck Will Reorganize Marketing This Week").

According to PharmExec.com, however, "Merck spokeswoman Amy Rose wasn't having any of it [talk about a 9% reduction in detailing]."

"This is not a head-count reduction," said Rose. "Our new model calls for an increased use of technology [and metrics], and it is much more customer-focused."

If the recent iPhone craze proves anything, customer focus means including more technology-based channels in the marketing mix.

While pharma is focused on face-to-face selling, physicians – like other consumers – are changing their media habits as illustrated in this Google chart.
Consumers are spending more and more time online and less and less time reading, listening to the radio, or watching TV. Media spending by all advertisers – not just pharma – needs to shift to new channels that consumers are using and, according to Google, this shift is overdue.

Engaging Customers on Their Terms
Schecter and other pharma business leaders are shifting and fully intend to leverage innovation and technology. This shift will add a new dimension to pharmaceutical advertising: Engagement.

Reach and Frequency are the traditional factors used to measure marketing effectiveness and ROI. Reach is how many "eyeballs" see your promotional message and frequency is how often they see it.

Technology adds another dimension to the analysis: Engagement, which also encompasses depth. Certainly, pharmaceutical products demand communications that offer engagement and depth much more so that packaged goods for example. Several advertising associations are working to develop a new metric to measure engagement.

This sounds exactly what Merck's Schechter had in mind when he talked about embracing new ways to engage physicians.

The most effective way of engaging physicians and consumers using innovative technology is through Web 2.0 social networking tools. But, as I pointed out many times in posts to this blog (see, for example, "YouPharma(tm): A Brave New World of Marketing?"), the pharmaceutical industry so far has a poor track record when it comes to using these tools effectively. And, like any powerful tool, when used improperly, Web 2.0 tools can be "risky."

Back in 2006, Pharma Marketing News hosted a reader survey to predict future trends in the pharmaceutical marketing mix (see survey summary here).

The survey asked readers for their opinions regarding the impact and risk of several physician marketing channels. They were also asked how they saw the mix shifting in the next few years.

When evaluating impact, I asked respondents to think of reach, credibility, and content richness as important factors -- the greater these attributes, the greater will be the impact. Risk factors, on the other hand, include potential to cause customer dissatisfaction or push back, increased regulation, negative publicity, etc. If marketers should avoid the channel, then risk would be high.

The results of the survey can be plotted in graphical form:


Let's focus on traditional face-to-face promotion (rep) and eDetailing or epromotion.

While face-to-face promotion has a very high impact potential it is also risky and is becoming even more risky, according to survey respondents. [Risky because of increasing physician push back, denying reps access to physicians, and state laws attempting to limit access to physicians by sales reps.]

This is what the downward red arrow is showing. In fact, the tip of the arrow is where this channel may be at today!

eDetailing or ePromotion also has high impact. At the time this survey was run, eDetailing was thought to be as “risky” as face-to-face selling, but now it has the potential at least of being LESS risky and MORE impactful than traditional sales reps.

Will Other Pharma Companies Embrace Merck's Mix?
Hopefully, Merck's rejiggering of its marketing mix towards new technology will become the standard by which other pharmaceutical companies evaluate their own marketing plans. Or maybe, Merck has a unique product mix for which technology is better suited to promote. In that case, we may not see other pharma companies follow Merck.

Other Posts About Merck's Plan to Rejigger Itself

• Merck to Shed Fat, But Not in Sales & Marketing
• Out with the Bad, In with the Good

Pharma Marketing News Reprints and Supplements

• ePharma Marketing
• Increase Physician Access and Detailing Effectiveness
• eDetailing
• YouPharma: New Rules for Pharma Marketing and Social Media
• e-Inertia Plagues the Pharma Industry