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July 2009
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  Effectiveness and Efficiency in Health Care Marketing Research – Where Do We Find It?As pressures for profitability rise in the pharmaceutical industry, everyone involved in marketing or marketing research functions, including those employed by companies and those working for the agencies that service them, must focus with laser-like intensity on providing effectiveness, i.e., on producing results that make a difference, and efficiency, i.e., at doing so at the lowest cost possible. In this “Vanderveer’s Views,” I would like to offer examples of how and how not to achieve these outcomes. Not Several years ago, an industry trend began that gave me a very cold chill indeed. First one company, and then a few others, conducted “reverse auctions” on the Internet to determine what marketing research agencies would get their business. If you are not familiar with the process, a reverse auction asks each pre-vetted potential supplier of marketing research services to submit the hourly rate that it would charge for a number of different levels of professional personnel. These rates are then posted on a Web site, and at the appointed time all the agencies are given the opportunity to see the position in which their initial quotation puts them among competitors in terms of cost-effectiveness (read cheap!), and to submit new (read lower!) bids until they are satisfied with their position. Various rules were put into place as to what percentage of business of the company sponsoring the auction would go to what number of the cheapest vendors, and at the end of the hour, or whatever time period was set aside for the auction, the die was cast in terms of which provider(s) would enjoy how much largesse for the coming year. Mercifully, this practice did not spread across the entire industry, or remain in place for very long, since it suffers from a number of serious flaws. For example, this process puts the procurement department, which historically had no involvement in marketing research whatsoever, almost entirely in charge of vendor selection. While it is true that marketing researchers did get to select, as bidders, those marketing research agencies they would consider acceptable, they often did not get much say in terms of the order of preference in which they viewed the competitors, the situations in which they would and would not use them and the particular personnel with whom they had had good and bad experiences. Additionally, the reverse auction process assumes parity of titles at various companies, e.g., that a “project director” at one company has the same responsibilities, experience and qualifications as a project director at another company. Such parity, in fact, seldom exists within companies, let alone between companies, and thus is a bad assumption with which to start a pricing process. Most telling, perhaps, is the realization that up against the impact marketing research can have on the profitability of a huge pharmaceutical company, relatively minute differences in billable rates really don’t matter at all. Because of the recognition of these and other flaws, the reverse auction process has largely disappeared over the past several years. But just when I thought I would never encounter one again, a reverse auction was held last week by a major pharmaceutical company, and GfK Healthcare was one of some 20 participating organizations. Hopefully, this is not a sign that this multiply flawed process is about to return. Marketing research is not a commodity that can be purchased by the pound, and should not be treated as such. How In comparison with the “what not to do” discussion above, we should examine what the industry is increasingly getting right in the “to do” department. More specifically, both sides of the marketing research table are now more closely examining the most cost-effective research protocols to utilize to obtain data, and are no longer purchasing studies based on the fact that they always did before or because they are using a new whiz-bang methodology. The best way I have found to look at this is in terms of actionability. This is hardly a new idea, but one that is increasingly important as marketing research budgets become tighter just as the need for solid marketing research information becomes more intense. Many examples of the increased focus on actionability can be cited. For instance, large and expensive physician segmentation studies, which typically produced results that were not actionable despite millions of dollars spent on multinational versions thereof, have now been largely discontinued as standard projects for any pharmaceutical product being introduced. Similarly, as pharmaceutical companies cut back significantly on the size of their sales forces, many are understandably also cutting back significantly on the investment in their sales force effectiveness studies. Although of significant initial interest to the pharmaceutical industry, the purchase of longitudinal, de-identified patient level data has not become routine, with actionability vs. cost being the deciding factor here. In fact, the routine purchase of any database is coming under careful scrutiny. Relatedly, pharmaceutical companies are increasingly making carefully thought out decisions as to which of their information needs can be most cost-effectively satisfied by syndicated or multi-client products, and which should be met through the conduct of proprietary research. Falling into the former category, for example, are some of the projects conducted by GfK Healthcare involving thousands of patients with a particular condition. The advantages to purchasing data drawn from this study, rather than conducting similar research on a proprietary basis, include not only substantially lower cost, but also trends that can be derived by comparing the most recent wave of the study with data collected in previous waves. Other times that we see pharmaceutical marketing researchers purchasing multi-client studies are when issues are being studied, such as managed care, in which there are not only cost advantages to purchasing participation in such projects, but also the advantages of having experts in that particular area developing the questionnaire, analyzing the data and drawing informed conclusions, and making appropriate recommendations. The purchasing and nature of proprietary research is also changing. Played to the tune of the old Harry Chapin song, “All My Life’s a Circle,” we are seeing clients going to proprietary research as a money-saving move in situations in which they would historically have relied on multi-client studies. The line of reasoning here is sound, in that clients report they would rather have research that specifically meets their research needs than a share in a project that is close but not specifically on target. Moreover, the increasing use of small-scale qualitative research to answer research questions, as well as the use of the Internet to provide quantitative data where telephone interviewing was once used, has narrowed the margin between the costs of proprietary and multi-client research. In Summary Hopefully, a review of the above discussion will provide the reader with the rather simple but, in these tough times, key message that we are trying to communicate. As one of our clients so eloquently commented, “I understand we’ve squeezed every nickel we can out of our agencies doing marketing research the old-fashioned way. Now, in order to get better value, we’re going to have to invent new ways to work together.” Well said! The way for pharmaceutical companies to increase the cost-effectiveness of their marketing research work is to forgo marketing research that is not actionable and to use the most appropriate format, be it multi-client or proprietary, for the projects that are conducted. Commoditizing marketing research by holding reverse auctions and giving the work to the lowest bidder is not the way to handle the conceptualization, collection, analysis and reporting of crucial information that can impact significantly on billions of dollars worth of product sales. 
Richard B. Vanderveer, Ph.D. CEO, GfK Healthcare 
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