Headlines from DTC Insights

Tapping Into Channel Sales Data

You have to be a little bit jealous of those Internet advertisers. Run a campaign, get instantaneous feedback on results. Tweak a few words, run it again. Run different campaigns with different audiences.

You have to be a little bit jealous of those Internet advertisers. Run a campaign, get instantaneous feedback on results. Tweak a few words, run it again. Run different campaigns with different audiences.

You get the picture: keep testing, discover what works, and throw out the bad. No wonder the ROI on search advertising is so high.

Now, imagine if you had similar opportunities with a DTC campaign. At least for TV, you can find out pretty quickly who saw what ads. Unfortunately, you’ve had to wait a lot longer to find out what people actually did in response to those ads, because most pharmaceutical marketing departments rely on third-party prescription data to understand demand, which can take up to two months to be available.

With that amount of lag time, you have at best six opportunities a year to experiment with what works. If you received daily sales by retailer, SKU and location in the critical first few days and weeks of a new consumer advertising campaign or new-product launch, you could experiment a lot more. This means you’ve got more chance of finding the optimal messages and media for your products.

If you can sense demand sooner, you know what’s working sooner.

Recent research by the firm AMR Research revealed that life sciences executives believe the ability to respond to changes in demand will become the most important criteria for product supply success by 2012 and that the second-largest performance gap in product supply is seen as the ability to forecast demand.

“Life sciences companies have enjoyed decades of strong growth because of a range of effective new treatments for a variety of diseases,” Hussain Mooraj, AMR’s research director, life sciences, stated in a recent research report. “However, the potential for growth and profitability is now uncertain as the industry faces an unprecedented number of challenges and uncertainties. These hurdles include pricing pressures, the cost of new products, a heightened regulatory environment, and continual business integration as a result of a spate of mergers and acquisitions (M&As).”

As a consequence, marketers within life sciences companies are under more pressure to optimize the success of new product launches, DTC campaigns, detailing programs and other outreach programs.

In a 2007 industry-wide survey of 42 respondents from 30 life sciences companies conducted by Edge Dynamics, respondents said the ability to sense changes in demand sooner would deliver significant benefits: 56 percent believed this capability would improve new-product launches and 76 percent saw an opportunity for better forecast accuracy. Approximately three quarters of the 42 survey respondents, representing 30 companies, reported that it takes their organizations at least a week to sense changes in demand. This compares with other consumer-facing industries, such as consumer-packaged goods, where daily demand sensing is not unusual.

Looking at retail channel sales data

Traditionally, marketing organizations have relied on thirdparty prescription data to forecast consumer demand as well as monitor campaign performance. Familiarity with this data has created an intriguing love-hate relationship of trust and dissatisfaction. Because it has been the best source of data available on market-share and prescriptions, it has become the “source of truth” on what is happening. At the same time, most marketers express frustration about how long they have to wait for prescription data. It’s not unlikely for an experienced marketer, upon seeing a change in sales numbers, to question the accuracy of the data, or whether there may have been a distribution problem or a formulary change by a managed care organization.

Until recently, channel data was not of much interest to marketers. Channel sales were a poor predictor of product pullthrough, due to large inventory levels held by trading partners in the channel. However, this has changed dramatically over the past three years as wholesaler inventory levels have declined to an average of two to three weeks of supply. In addition, as a result of today’s distribution agreements, wholesalers have added detailed sales and returns data to the aggregate sales and inventory that were previously available, and the quality of this data has dramatically improved. Many wholesalers can now send this data daily, and almost all send it weekly.

Most pharmaceutical firms have purchased access to this detailed channel sales, inventory and activity data which is typically delivered by an electronic standard known as EDI – specifically, the EDI 852 Product Activity report and the EDI 867 Product Transfer and Resale report. The EDI 867 details invoice-level sales, transfer and returns transactions between the trading partner and each downstream entity – such as a hospital, clinic or chain-store pharmacy. When aggregated, this data provides a real-time, high-fidelity view into what has happened in the channel. While this channel information has been embraced by the operations organizations to help improve product availability, reduce stock-outs and expedites, and minimize returns, it is a relatively new resource for marketers. In fact, the survey found that only 24 percent of respondents in marketing-related functions were even aware that this real-time channel data exists.

Channel data can provide earlier insights into the effects of the following:

• Impact of formulary changes on demand
• Sales uptake as a result of direct-to-consumer campaigns in a particular product line, dosage or geography
• Identification of where specific detailing campaigns are performing best
• Performance of ongoing compliance and persistency campaigns
• Where and when influenza or other seasonal illness outbreaks are starting to occur

A new proposal to add market-share to the sales data promises to increase the EDI 867’s value even further. All of this makes today’s channel data an under-utilized goldmine of information for marketing teams seeking competitive advantage.

Improving ROI during product launch

A successful product introduction can immediately capture significant market share and potentially create a new category of treatment, which can translate into a growing revenue stream for many years. It has been estimated that for approximately every 1 percent gain in market share in the product’s first year, the yearly revenue increase over the patent-protected life of the product can increase by as much as 10 percent overall. With increasingly competitive markets, fewer new products, and the ever-growing presence of generics, marketers need to optimize the performance of each product launch.

Timely channel data greatly reduces time lags in adjusting to actual channel demand. In the left graph, Area A represents excess inventory in the channel before script data arrives, and Area B identifies the lost sales where demand has exceeded the forecast. The chart is hypothetical but it was created based on actual customer data.

However, for many marketers, the first numeric indication of downstream uptake of new products arrives as prescription data from third-party providers, weeks after the triggering events have occurred. In the critical first weeks of a product launch, marketing and brand managers often have little insight into the following:

• Re-ordering frequency by SKU at the dispenser
• Uptake by customer group and class of trade
• Relative success in different sales territories

Using the new EDI 867 data, timely and detailed channel sales information can be the foundation blocks for building better campaigns at lower cost. As product rolls out and channel data rolls in, brand managers can test and measure DTC campaigns concurrently. Rapid measurement of uptake based on dosage and package sizing can ensure that the product messaging is most relevant. And adjustments to the campaign based on initial performance can be implemented faster.

Leveraging channel data

Developing demand sensing and response capability is emerging as a top corporate objective for life sciences companies. Industry leaders have recognized that channel data can significantly improve demand sensing and response. It’s possible your trade or commercial operations department is already receiving this valuable EDI channel data.

The biggest barrier today is lack of awareness of how this real-time channel data can be leveraged within marketing to enhance campaign program effectiveness. The best place to start is to contact your in-house commercial operations or EDI services group to learn what’s available today. In addition, industry resources such as the HDMA as well as service providers can help you assess how channel data can help you monitor your marketing campaigns and provide the tools to help you leverage this data throughout the marketing organization.

Richard Prest is chief strategy officer at Edge Dynamics, where he is responsible for both evaluating and developing strategic opportunities. He provides strategic advice on channel management to pharmaceutical manufacturers and is actively involved in the development of industry standards. Prior to joining Edge, Prest was a director of product and services at Abilizer, a portal software and application service provider to Fortune 100 companies. Prest can be reached by e-mail at RPrest@edgedynamics.com.

Edge Dynamics is the pioneer and leading provider of dynamic demand management solutions to the life sciences industry. Used daily by five of the top 10 U.S. pharmaceutical manufacturers, Edge Dynamics’ on-premise and on-demand solutions enable manufacturers to sense channel demand, find business exceptions that matter, and optimize operational performance in real time.