Thursday, June 19, 2008

The alli lesson: Pharma marketing is not ready for transparency

According to the alliConnect Blog:
"In the marketing profession, change is a constant. At alliconnect, we've recently had a change in leadership.

"Founding alliconnect blogger, Steve Burton, recently resigned from his position as Vice President of Weight Control for GlaxoSmithKline Consumer Healthcare. Steve was instrumental to the creation of alliconnect blog and his blog entry on his oops experience is still one of the most visited posts to date."
IMHO, the resignation of Mr. Burton specifically signals the end of the alliConnect Blog -- or at least the transparency it has championed -- and may portend the retreat of pharma marketing away from Web 2.0 principles in general.

The sales of alli have not lived up to expectations and analysts suggest that all this "transparency" about diet and exercise as part of the treatment mix is just too hard for advertising to tackle.
"As a drug that should theoretically trigger huge sales, the preliminary figures are 'pretty underwhelming,' said Steve Brozak, an analyst with WBB Securities. The problem may be that the drug's marketing campaign stresses the need to transform eating and exercise habits for it to be effective, Brozak said. That's not easy to accomplish through advertising, he said." (see "Glaxo: 4M people tried diet drug since launch").
If DTC advertising is going to survive Congressional scrutiny, tackling life style issues has to be part of the message in all DTC ads -- which is one principle espoused by the DTC Guidelines that PhRMA promised some senators it would revise.

Just like America is getting ready to jettison its environmental principles in order to produce more oil, Glaxo is replacing an advocate of Web 2.0 and transparency in advertising in order to increase sales. Ie, good bye to alliConnect!

Speaking of sales, I cannot make the numbers work that were reported in the AP analyst story cited above. Maybe you can help me do the math.

The story says: "At the time of the drug's launch, the company estimated it would eventually sell between 5 million and 6 million kits annually, translating to at least $1.5 billion in annual retail sales."

To generate $1.5 billion in sales from 6 million kits means that each kit must cost $250. Yet the article also says "A 60-capsule kit costs about $50 while a 90-capsule pack costs about $60."

DOES NOT COMPUTE!

What About Marketing ROI?
If 4 million people bought the kit (as the article says) and paid $50 per kit, that adds up to $200 million in sales. GSK may have spent $150 million in advertising alli to achieve these sales. ROI? $1.33. Which is about average for DTC advertising.

8 comments:

  1. Anonymous4:03 PM

    Odd. Is Pharma just used to giant/huge ROI margins? As you said, the current margin - at the correct price - still gives them some good income.

    The weight loss sell... anytime you tell someone that they have to make huge lifestyle changes in addition to popping the pill... uhhh, yeah. Thats a very hard sell! :)

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  2. The reason for the sad state of Alli sales can be seen on any social media site: the nasty side effects of lose stools and "oily discharges". Who the hell wants that? We can't stay on a diet 24/7 and every now and again people will eat something they should not and that is when the side effects will kick in. Hell even one of the executives from GSK had written that he had to make an emergency stop after eating a cheeseburger. Who the hell wants to worry about that ?

    People want a magic pill that helps them lose weight while eating what they want to eat that is another reason for the poor Alli sales. I commend Mr Burton for starting this site but from failure will come success from someone who can see the potential of Web 2.0 and is not afraid to risk it.

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  3. It's hard to gild a turd!

    My guess - given ALLI trade price - is that the product is still in the red!!

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  4. Anonymous10:39 AM

    Perhaps when they said "kit" they meant starter kit. If you have that many starts and people refill 3 more times at $60 for 90 days when you get about the revenue they are talking.

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  5. Ah! That makes sense.

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  6. Anonymous11:59 AM

    Re: "Glaxo is replacing an advocate of Web 2.0 and transparency in advertising in order to increase sales. Ie, good bye to alliConnect!"

    Let me see if I get the logic of this post, because sales were down, alli is no longer going to be transparent, authentic, etc, so they fired Steve Burton, and are going to change their ways.

    Nice speculation, but I don't think it works that way. Steve B was probably let go for other reasons, and there is no reason to believe that anything that is being done that is Web2.0ish with alli is going to stop. The message board didn't go down, they said the alliconnect blog was going to continue just with new authors, and they are still running integrated campaigns with ties back to web.

    Looks like they are continuing the course, just with a new leader at the head.

    As for treatment effects, read the materials John...you can prevent treatment effects (and the need to carry those brown pants), if you just stick to the diet and the fat grams.

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  7. Not quite the logic I had in mind -- first, sales were not DOWN -- just not what they expected. Why was that? Well most people seem to think that being upfront about lifestyle changes and "treatment effects" -- the brainchild of the old guard and the charter of alliConnect -- was not doing the job of getting people to buy alli. So -- get rid of Steve Burton -- and, I speculate, his brainchild, alliConnect.

    Of course they are saying things will continue as is and "Transparency is important to our identity and it will to continue to be on alliconnect and throughout our communication." What else do you expect them to say? Didn't Bear sterns say there was no problem days before they failed?

    It seems to me that if a leader is summarily dismissed, the campaign he championed is soon to follow.

    Regarding the brown pants -- as I said, I am planning on trying alli and see if I have that problem.

    Have you tried alli? or are you making comments based on some kind of secondhand knowledge? or are you just confident that the alli marketing "materials" are to be taken at face value?

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  8. Anonymous10:00 AM

    Alli is just a really shitty product. How could GSK think this would go anywhere good? People aren't going to take a lifestyle drug that makes them crap their pants. Did thesee guys forget the Olestra disaster? People won't use a product that is likely to produce "oily discharge".

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