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In the race to improve product performance, not enough attention is paid to 'who's actually going to switch?'
In today’s era of constrained healthcare costs, raising the financial performance of a pharma business is every senior executive’s wish. Improving the performance of products already in the market is a primary objective. This makes perfect sense. The value of an additional point of growth or margin from a typical pharmaceutical product is substantial, as are the health benefits of ensuring that patients are on the right medicines for the right amount of time.
Pharmaceutical companies that want to outperform on this priority should add something else to their agenda: identifying and acting on “headroom,” which is the part of the market they don’t have, minus the part they will never get. The key to assessing headroom is understanding which customers have a high propensity for switching their behavior. The key to realizing headroom is knowing which tactics are most likely to result in the desired switching behavior. It’s a simple concept, but it delivers top-line and bottom-line results, even in tough times. Every time we’ve applied it with our clients, including pharmaceutical companies, we have identified and acted on a significant upside: either untapped, accessible pockets of revenue or costs that can be surgically removed (or redeployed) because the client is trying to impact customer behaviors that are unlikely to change.
Consider this example: The makers of a seasonal-use drug identified the Northeast as the largest regional market based on population and incidence, and were focused on getting the millions of adults who suffered from the affliction to see their primary care doctor. Although this represented a big opportunity, it turned out that these individuals also had an ingrained “just tough it out” attitude about treating this condition and, therefore, a low propensity for changing their behavior. However, patients in other regions, particularly the South, showed a high propensity to seek drug treatment once they learned a prescription could help. Doctors in the South also showed a high propensity for treating patients with prescription pharmaceuticals. Additionally, mothers showed a high propensity for seeking treatment for their children, indicating the particular importance of pediatricians to the drug’s growth potential.
The headroom, it became clear, was not in adult patients and primary care physicians in the Northeast, despite the size of this market on paper. Rather, it resided with mothers and pediatricians in other regions. Armed with these insights about headroom, the manufacturer redesigned its marketing program, expanded its life-cycle planning (more pediatric indications), and redeployed the sales force. Within one year, these changes resulted in a 2.5x increase in the number of annual prescriptions per pediatrician, a 50% increase in annual prescriptions from family practitioners, and a substantial improvement in the productivity of marketing investments.
The simplicity of the headroom concept may lull marketers into thinking they are doing it already. Answering the following four questions can help you determine the degree to which your organization is truly taking full advantage of it:
There is no question that “maximizing in-market products” is a strategic imperative, now and over time. Equally without question is the value of headroom in delivering meaningful results from this imperative. Pharma companies looking for an edge should ensure that their agenda includes building the capabilities and tools to embed the concept of headroom throughout the commercial organization.
ABOUT THE AUTHORS
Greg Rotz is a partner and leads the North American Life Sciences sector at Booz & Company. Valentin Recker is a senior associate at the firm.