Pharma Industry: Patents call the shots?

The underlying idea behind granting patents is to encourage pharma innovators to advance the state of technology, and increase the development of better formulations. According to the UN definition, a patent is a legally enforceable right granted by countrys government to its inventor.

Patent Law represents one branch of a larger universe known as intellectual property rights. Patent offers exclusivity covers to many pharma companies and they have literally built and empire out of their patented discoveries. So wonder what is going to happen after the patents of Pharma giants expire?

I am eagerly waiting for 2011...as it will represent the beginning of the end for some of the industry leaders in Pharma sector.Maximum number of innovator molecules are going off patent between 2012-2018. Its going to be a splendid display of shifting loyalties, division of market share and dwindling prices.

The veterans of the industry still have some time to fine tune their strategies and decide on the way ahead. Some of the options are:

1.)Price reduction of your current offering

2.)Launching a fighter brand before your patent wears off, and then tackling the competition head on with price wars.

3.)Authorized Generics/Co-optition

Lets see how each of these options can misfire and what are the learnings that we can have from them.

1.)Price Reduction: Premium offered by your brand will wear off, customer perceptions may change which might increase switching. Patent may go off only in certain geographies, hence this strategy cannot be evenly executed which might lead to inter-geo exports, black marketing and price confusion.

2.)Fighter Brand:

Here s a case which demonstrates how an MNC(Merck) was not adaptive enough and how its fighter brand strategy backfired miserably:

Merck's blockbuster drug Zocor was going off patent in Germany. Zocor—a statin used to treat high cholesterol—had been a major cash cow for Merck, but after the patent expired, generic drugs would offer identical efficacy would be made avialable for as little as 30% of Zocor's price!

The obvious strategic response was a price reduction, but for Merck that was not an option, because it would have encouraged parallel exports of Zocor from Germany to EU markets where patent protection still existed.

Instead, Merck decided to launch a fighter brand called Zocor MSD. It rolled out the fighter brand four months before the patent expiration to give it some time to cannibalize Zocor’s customers, who would then, Merck hoped, remain loyal when generics invaded the market(obvious mistake). Because Merck was competing with only itself during this initial stage of Zocor MSD’s launch, the fighter brand was priced just slightly less than the original premium brand(there should have been a significant price-value erosion to make a difference and change people's preferences). Once generics entered the market, the new brand’s price dropped to 90% of Zocor’s.

Within three months of its launch, Zocor MSD had missed its modest sales goals by 50%. More than 30 generics would divided the lion’s share of the category among themselves. Merck’s desire to protect its profits for as long as possible had prevented it from launching a brand priced low enough to seriously compete with the generics.

Even when Merck realized it had set the wrong initial price, it was incapable of quick course correction. As a blue-chip multinational, it lacked the competencies to win the kind of price war it was entering. Merck was used to maintaining prices for long periods of time and altering them only after much consultation and reflection(Typical of any MNC). Its generic competitors, accustomed to competing on price, obviously benefited. With losses mounting fast, Merck withdrew all marketing support from Zocor

3.)Striking strategic alliances with low cost manufacturers and opting for co-opetition.

This I believe, is one of the most sound policies that neither calls for the efforts required to launch a fighter brand nor pushes the competition to go crazy on price wars. One can strike a strategic price alliance with one of the local generic manufacturers and control the price at a certain point(still a little above the generic drug providers).It calls for shifting and creating a relatively new category, called "authorized generics". Essentially, the original manufacturer licenses exact copies of its branded drug to a generic manufacturer, allowing it to hang onto some of the generic revenues.

This approach also appeals to those patients who feel most comfortable with a name they know. The premium drug manufacturer can retain its brand name and positioning and let the price go down.This way it can fight with other generics on price, saves its brand name and also expect very limited erosion of loyalties.

So,lets wait and see how "molecular" strategies shape Pharma industry in times to come!

Economist's Advertising Strategy 2009- Going the Typo Way!!!

The Economist, the brand that comes with the promise of 'Interpret the world', is out with its next campaign that surely needs some serious interpretation on its part.

The Economist had launched its first ever campaign for the sub-continent in early 2008,(have written about the same in my previous post) wherein the brand used the print and outdoor media and then followed it up with a similar version on TV as well. It communicated its India specific positioning of 'Interpret the world' through a series of alphabet based creatives, which gave the reader a surprising and unique interpretation of regular terms.

Now, continuing its drive to spread awareness about the brand, it has launched yet another OOH (out of home) and digital based campaign that makes an interesting use of typography to drive home the message.

Team: AOR- O&M India.

Campaign- The campaign comprises six creatives, each highlighting recent events from different countries. At first glance, it appears to be something written in a foreign language. Only after a closer look, one can comprehend the message, which is actually written in English. The headline also tells a relevant international story. (have uploaded 4 ads...chk thm out)

So for example, if one sees the Tibetian hoarding, at first glance it looks like something written in Tibetan. But a closer look reveals a headline written in English that reads - 'Journalists stopped by Great Wall of Tibet'. The innuendo here points towards the internal turmoil that has been tearing apart the 'Roof of the World.'

Objective of the campaign- spreading awareness was a key necessity. Research conducted by the brand showed that there exists a top level of the consumer section which knows and follows the brand. The next level, though a little aware about it, neither indulges in the brand nor tries hard to find out more. Next to it is the lowest level, which is completely clueless about the brand.


Rationale behind the campaign-

1.)The campaign functions on two levels. First, it arouses and intrigues the consumer and then leaves him asking for a solution. This is where the engagement with the brand takes place and consumer learns more about it. The headline is an entry point, from which the consumer probes further and actually ends up reading the real story! I am not sure about this!

2.) Relevance of global events is absent in India due to geographic seperation and happenings around the world are not read or discussed as they are not directly related to peoples own lives. Hence, the campaign accomplishes dual goals – to make 'foreign' events relevant and to keep the advertising as close and true to the product promise as possible.

The brand, which is famous for its obsession with copy-centric ads and innovative ways of execution since the 1980's, has always emphasised the OOH and direct media specifically. However, it indulges in print, too, from time to time. Suprio Guha Thakurta, managing director, The Economist Group, India attributes this specific way of advertising to London-The seat of the Economist brand.Also concentrating on OOH & Digital proves to be less costly.

Recepie for Disaster- If one goes by the thumb rule of outdoor ads (according to which a person spends only three to four seconds on a hoarding while he drives past it), the use of complex typography can prove to be a disaster!

Rule Breakers- The Economist as a brand has been engaging in path breaking advertising over the years and for this campaign, they have broken yet another rule of the medium.


Digital Campaign- the brand has also opted for digital as a medium. The digital campaign, too, uses a similar strategy of intrigue leading the reader into the story. Apart from spreading awareness, digital campaign has the responsibility to ensure sampling activity.

High Hopes- The campaign hopes that once the reader has got the lead, he can easily visit the brand’s website and read the whole story. How many of us actually remember stuff like this? We read something somewhere and actually come home and google about it! My bet is rather few! The online campaign has been spread out on popular websites such as Rediff.com and Yahoo.com, apart from other horizontals.

VERDICT-

My VERDICT is, the campaign is good, very creative (now thats what expected outta O&M Afterall!!!) But,the idea (of clever typography)seems a tad bit far-fetched for OOH medium. It still suits print meduim to an extent, where the consumer can actually ponder over it (Read:engagement...sigh!this jargon)Advertising on OOH medium has to be smart, quick, crisp and immediately understandable. I think they did quite well with the previous campaign.

Also London being the hot bed for this sort of originality should not warrant the use of similar campaign in India. The reason being, in London, a thumping majority of the communication happens in English, this kinda campaigm will clearly stick out over there and be registered. In a place like India, where there are 19 strongly followed regional languages, people in the Metros(thats where are ads are currently fighting for eye balls)are used to seeing advertisements and hoarding in regional languages. One might just miss out on this one my mistaking the "clever typo" for some regional text. So much for the "Cleverness". To be blatantly honest, i too thought that the ads were in some language alien to me, and i was not at all appealed by them. The very reason that I studied them further and am actually writing about it is becuase of my devilish curiosity!!!

So I think O&M guys should follow the K.I.S.S. rule...(for the uninitiated...KISS= Keep It Simple, Stupid)

The Economist - Mktg & Advtg Strategy

Running Period: 1Year and still counting.
Advertising agency: O&M, India
Key Person: Sumanto Chattopadhyay


Critical Elements of the Campaign:

1.)Iconic Campaign with a sharp departure from earlier tried and tested campaigns.
2.)The entire campaign sported the colours that The Economist ‘owned.’
3.)No Special price offered in conjunction with the campaign
4.)Cost-effective communication.

What did The Economist expect to achieve through their advertising and marketing strategy?

The primary objective: raise the awareness levels in Mumbai, Bangalore and New Delhi and the National Capital Region.

The secondary objectives:

1.)Increase sampling
2.)Increase subscriptions and
3.)To reduce the cost per acquisition of the subscriptions.

Focus on: Subscription sales, newsstand sales and advertising sales.
Broad definition of The Economist’s reader: Age 35+, male, living in a metro – and not restricted, as one might feel, to corporate top management. We have fashion designers, copywriters, project managers, MBA students. All Ideas people

Nature of Campaign: The awareness was created largely through their disruptive A-Z campaign.

Step1: Mobile updates channel - A first in The Economist world.

Objective: Sampling of content

Methodology: Everyday a message is sent out at 11:00 am to the channel members. The message is either a summary of the Leaders in the current week’s issue, or a snippet of a couple of interesting stories. Directing the person to read the entire story by picking up a copy from the newsstand, or visiting www.economist.com or even m.economist.com (which has been launched recently).

Launched: 4 months back

Result: 35,000 members registered on it. These members were potential people who would try/sample the product.

Barriers to Trial: High Price Point.

Single most effective source of subscriptions: was through www.economist.com.

Insight: People who sampled content online were most likely to subscribe to the newspaper. Hence, a lot of our subscription effort was needed to get people to sample and in generating trials.

The Way Ahead:

Step2: Driving traffic to www.economist.com through online campaigns and previously established mobile channel
Step 3: Introducing a trial pack @ Rs. 1100 for 12 weeks
Step 4: Partnerships such as Jet Airways, ICICI Bank Credit Cards, Deutsche Bank, etc. In all these partnerships, exclusive offers to their customers, with benefits which were linked back to the partner brand (for example, a Jet Privilege member who bought a subscription to The Economist was given Jet Miles).
Step 5: Using the Internet as a sales channel- Online databases and sending out Electronic DMs to them. (CPAs being much lower than other channels)

The Number Game: (Refer to Graphs)

Advertising growth: Impressive 73%.(The South Asia pages have seen as many as 25 new advertisers, including Oberoi Hotels, Kotak, Coca Cola and Edelweiss)

Average monthly Sale: In February 2008, the average monthly sale was 16620 and, in February 2009 the figure submitted to the ABC is 23183!

The growth is despite the fact that, unlike a lot of publications targeting the same reader, The Economist has an audited circulation figure that pales in comparison to those of Indian publications.
It is the area of growth in subscription and newsstand sales which is a final testament to the effectiveness of the marketing strategy.
(The projected 2008-09 average circulation is 19% higher than the corresponding figure for 2007-08).

February 09 figures:

Circulation when compared to February 08 show a growth of 39%
Subscriptions show a growth of 26% and
News stand sales show a healthy 15% increase.

Not a bad end-of-the-year report card.

Launch of TVCs: The 6 TVCs created and produced by O&M cost merely Rs. 14 lakhs.

Bravo!

Costs per acquisition down
Healthy increase in advertising sales
Newsstand sales and subscriptions
Absolute budget that is almost miserly.

With uncertainty being the only certainty in this year, The Economist should be high on every decision maker’s reading list.

With the foundation for growth in place, The Economist’s financials for India should be an interesting to follow.