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Benchmarking
promotion budget
The
tools to achieve success have undergone tremendous changes leaving
the marketing people in a dilemma of how much to spend and what
should be the benchmarking on promotion budget, states R K Srivastava
PROMOTING
a product in Indian pharma industry is a complex activity. Many
tools are required to get good success. Over the years, impact of
different tools has under gone changes. However, role of medical
representatives (MRs) has not changed. He continues to be the top
most influencing factor in getting business. Impact of different
tools over the last 15 years is given in Table I.
Therefore,
one of the major dilemmas faced by marketing people is how much
to spend and what should be the bench marking on promotion budget?
Recently,
a study was conducted among pharma marketing personnel to investigate
the promotion expenditures in the pharma industry. The objective
was to arrive at a benchmark, which can be of immense benefits to
all marketing personnel, as such industry data is not available
in India.
Around
40 personnel participated in this study. Details are given in table
II.
They
were product managers, group product managers and marketing managers.
Methodology:
Questionnaire technique was used to elucidate information. Seven
questionnaires were excluded due to tangent information provided
by them. It was one to one approach. The data was tabulated and
analysed.
This
study will give the following benefits to indian pharma industry.
a)
Gives direction to inputs
b)
Creates input bench marking and opens a dialogue for better understanding.
c)
Optimisation of resources.
Results:
Indian pharmaceutical companies believe in motivating doctors to
try out their products through sampling. Therefore, this is an important
input for Indian pharma industry unlike in abroad. Higher the turnover
lesser will be the per cent of samples. On an average for existing
product a MR in India gets about 800 - 2000 units of sample per
month, depending upon the product range. Therefore, sample budget
is quite high in many pharma companies. Their per cent becomes higher
where sales productivity is lower per man. The results of the study
are given in Table III.
Company
spendings
Samples
to doctors: 60 per cent of the companies are spending more than
5 per cent of the sales on giving samples to doctors. However, the
per cent comes down as sales or productivity per sales personnel
goes up. Therefore, sales productivity is the key factor to optimise
resources. Samples if given on the basis of productivity can lead
to saving and optimisation of resources. A greater accountability
should be inculcated among the field force. However, above data
will give some bench marking and help the companies to save resources.
Scheme
to retailer chemists & stockists: Yet, another major expenditure
in pharma marketing is scheme given to retailer chemists end stockists.
They play an important role in pharma marketing specially in segments
where ‘me-too’ products are more or degree of competition
is high or marketing personnel are weak.
Trade
scheme, oflate, has gained prominence due to cut-throat competition
and faulty marketing. Due to lack of brand building activities,
scheme is gaining importance in some companies. However, many companies
are having a second thought on such activities and relooking at
scheme cost. Hence, this data can be useful in optimising the resources.
(Table IV)
It
was heartening to note that 30 per cent of companies are not giving
any trade scheme at all. This is possible due to their product range,
unique product and competition level. Scheme cost is high 40 per
cent of the companies, 5 per cent or more than 5 per cent go in
for Trade Scheme. The silver lining is that 60 per cent of the companies
spend less than 3 per cent of sales on Trade Scheme. It also means
trade earns extra Rs 4516.6 crores at last year retail sales at
3 per cent besides getting their own margin. No wonder, many companies
are, today, cutting number of products on schemes and giving a second
look to brand building activities or bringing the concept of ROI.
The above data can be of great value in decision making process.
Gifts
to doctors & organising symposium/ clinical meets: Yet another
major promotion expenses are gift to doctors and organising symposium/
clinical meets. Gift is given to doctors to get a favour. However,
what is remarkable is 42 per cent of the companies spend upto 1
per cent on gifts while 60 per cent of the companies are spending
more than 1 per cent on symposium/ clinical meets.
Thus
trend is to become more scientific in selling products to doctors.
This is a healthy trend for pharma companies.
Gifts
can be of two type viz; a) Utility Value and b) On the desk reminder.
Utility
value gift unfortunately, is gaining importance. Infact, such type
of gifts are also misused by field personnel too. Study revealed
that such gift can influence the prescribing habits in ‘‘non
serious products’’. This is true all over the world. Therefore,
gifts form a special percentage of sales in sale promotion budget.
(Table V)
Thus,
67 per cent of the companies spend between 1-2 per cent on gift.
Thus, this can be a benchmark for any company. Companies with higher
per cent can take objective for reducing the per cent or vice versa.
Symposium/
clinical meets are getting importance in pharma promotion. This
scientific interaction between company and medical profession is
extremely useful provided such meetings are not ‘‘get
together’’. Its effectiveness can be enhanced if agenda
is interesting and proper fellowship is maintained.
Today,
many companies are planning such events. However, how much mileage
they get from such meetings need to be evaluated. 60 per cent of
the companies are spending (less than) 1 per cent of the sales on
symposium. This can be an eye-opener for small to medium sale companies.
It
is heartening to note that many companies who are not spending much
on
Trade
Scheme have diverted their expenditure to this aspect of promotion.
Promotion
has to be three to four folds. (See figure 1)
Depending
upon the company size and marketing capability, utilisation of such
activities are undertaken. Product incentive is an important tool
to motivate MRs/ manager to actively promote certain products. Many
times, new products, on special thrust or products not doing well
are taken for product incentive. Table VII gives the percentage
of expenditure on incentive.
It
was surprising to note that 10 per cent company do not believe in
product incentive. It is quite possible that the MRs are well taken
care of and number of new product introduction may be less.
Thus,
the above study gives an average insight into pharma spending. However,
such data is not disclosed. This bench marking data will be of great
value not only in evaluating the existing data but also in rethinking
to their approach in pharma marketing.
The
writer is a Mumbai based marketing
consultant Email: srivastava@vsnl.net
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