Beyond the Patent: Extending the Life of Brands

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There is little doubt that these are unusually challenging times for the pharmaceutical industry. Few new blockbuster drugs are on the horizon, while many of the most profitable products on the market are facing imminent patent expiration. As profits diminish and company resources grow scarcer, marketing must compete for limited budgets with sales, R&D and other critical functions fighting for their piece of a shrinking budget pie. For marketing to keep its seat at the decision making table, it has to be more prepared than ever to prove its contribution to the company's long-term financial performance.

As they grapple with the growing need to be accountable for delivering ROI, it is essential for pharmaceutical marketers to understand the full implications of the past decade's great changes in the ways they sell and promote their products to both physicians and consumers. Senior managers who now move quickly to act on those changes—and benefit from the opportunities they present—can gain a significant competitive advantage.

Gone are the days when brand names served as little more than trademark mnemonic devices for specific chemicals. The emergence of direct-to-consumer (DTC) advertising to reach and influence the public, the rise of the Internet to inform and empower consumers, and the increased expenditures on traditional physician promotions, such as one-on-one detailing, have all converged to give many pharmaceutical brands the household-name status once reserved for consumer giants.

Now, names like “Lipitor,” “Viagra” and “Ambien” are “brands” in virtually the same sense that “Shell,” “Tide” and “Apple” are brands. They are equally recognizable by the public—and so carry a level of equity once unattainable for ethical pharma products.

The Value of Commitment: Managing Brands as Assets
Along with their new visibility, many pharmaceutical brands now carry new value. Consumers attach meaning to these brands and form commitments to them. These commitments—true emotional bonds to the brand—lead to behaviors with important market ramifications.

For example, research has shown that committed consumers are more than twice as likely to ask their physicians for their brand of choice, give more of their business to their preferred brand, are far more likely to advocate actively for it and are far less likely to switch.

In addition, they are more likely to seek out supporting information for their brand, such as visiting its website. Consider that website visits are correlated with both new and total prescriptions—and can increase intent to contact a doctor by as much as 50%—and it's clear why brands that earn consumer commitment are so valuable to the companies that own them.

Research has shown commitment to be an equally powerful advantage on the physician side.
Committed physicians deliver more than double the patient share to their brand of choice and are up to five times less likely to switch to a competitor—even after a year. In addition, they are less price sensitive and less likely to be swayed by competitive messages.

As increased spending and new promotional approaches have raised visibility and commitment among both consumer and physician audiences for many brands, their value and equity have increased exponentially. As a result, it is critical that pharmaceutical companies start to recognize that their brands are now significant intangible assets that need to be actively managed.

It is no longer acceptable to think of a prescription pharmaceutical brand as having a life only as long as the original chemical's patent. In the past, companies spent little on a drug after R&D and launch expenses. As a result, the patent period was long enough for companies to recoup their investments.

In today's world, however, it is critical for pharmaceutical marketers to realize the importance of investing over the life of the drug to continue building brand power and value. If we limit our vision of opportunities to the patent period, enormous amounts of potential revenue will simply be left on the table.

To a certain point, some marketers have come to realize this in the past couple of years. We can see this in the efforts to extend patent (and brand) life by seeking approval for new indications or devising new forms or delivery systems for the original indication.

For example, there has been a noticeable increase in the number of branded prescription products like “Ambien CR”—and, by extension, a whole family of products—under the “Ambien” name potentially being created.

Is this always a good idea? When should the same brand name be used? When should a different name be chosen? How should a given brand relate to other brands in the portfolio? How can individual brands within a company's portfolio be used to reinforce each other and the company's overall equity in a particular market?

These are not questions to be dealt with lightly. Pharmaceutical companies can gain a significant competitive advantage by thinking systematically and strategically about issues such as brand portfolio management and “brand architecture.” Decisions around brand architecture are some of the most far-reaching and important that senior management can make.

Brand Architecture: Structuring Brands, Their Relationships and Their Equity Flow
By brand architecture, we simply mean the way a company structures its brands—such as how brands relate to one another and how they help generate equity flow among parent brands and sub-brands. Other sectors have had a long head start in thinking about these issues, and shrewd pharmaceutical marketers can learn a lot by considering some of the different brand architecture models other industries have employed successfully.

Obviously, pharma has particular concerns and challenges (especially regulatory and safety issues around names and chemical formulations) that other industries don't have. Nonetheless, pharma can find value in looking at the brand architecture approaches used effectively in other sectors.

There are two basic types of brand architecture models:
Standalone, where all equity accrues to specialist brands: A good example of this is Procter & Gamble, which sells nothing under the “P&G umbrella.” All products are marketed under individual brand names (e.g. Tide, Crest, Pampers), so no equity flows from one product to the other.

Masterbrand—at the other extreme—where all equity accrues to one single brand: A good example of this is General Electric, which uses only the “GE” brand for almost all of its diverse businesses.

Most pharmaceutical brand architectures have historically followed the standalone model. Each drug is a different brand, and many physicians and nearly all consumers couldn't tell you which ones were made by which company. No new brand entry gains any equity advantage from its association with a prior brand entry, nor does any equity built up over time flow back to a parent or corporate brand that can be “banked” for future advantage.

Shared and Hybrid Models: Future Models for Strategically Benefiting from Brand Equity
The more interesting architectures that the pharma industry needs to consider for the future are the shared and hybrid models. In these models, there is a strategic attempt to take advantage of the equities in two brands or to create equity in a newer or weaker brand through its association with a stronger one.

Examples of shared architectures include such formulations as “Intel Pentium” or “Pratt & Whitney, a United Technologies Company.”

In hybrid models, equity is accrued through using more than one type of architecture (see sidebar). Some parts of a business may use a shared model, often when a parent brand has a well-defined reputation. Others may use more of a standalone architecture.

A good example of a company that employs a hybrid model is actually from the healthcare world. Johnson & Johnson uses “Johnson & Johnson” or “Johnson's” branding (either shared or as a masterbrand) only for consumer products that meet the corporate ambition of “maternal care.” The large parts of its business in prescription pharmaceuticals or other areas that are not directly related to “maternal care,” tend to use a standalone architecture.

Understanding Equity Flows: The Role of Survey Research

Designing or redesigning a company's brand architecture strategy requires insights based on a wide variety of information sources, including understanding marketplace size, trends and influences, and recognizing potential breakthrough products on the horizon, whether from the company itself or a competitor. Understanding the image positionings and how equities flow from product to product among brands (both masterbrand and sub-brands) is a critical part of the equation.

By understanding which images are common drivers among more than one member of a brand family, we can determine which strengths in one product will more readily be seen as strengths in another member of the family. In order to form a communication strategy, we need to understand which components of equity can be easily exploited.

This is where survey research becomes critical. By surveying brand imagery among key audiences (physician and/or consumer), and applying proper multi-variate statistical techniques, it is possible to determine how image flows across sub-brands and their masterbrand. (There are several techniques that can be applied, including regression, structural equation modeling and partial least squares analysis.)

In the following disguised example, Brand X was rated on a number of characteristics as a masterbrand, and also as a brand in several specific sub-categories. With this information, we can determine statistically which images are common drivers of overall brand affinity for particular sub-brands and for the masterbrand. Strategic judgments about communications can then be formed.

Let us look at two specific insights:
n In the first one, we can see that the masterbrand and Product Category #1 sub-brand share two key equity drivers: “A brand that appeals mainly to specialists” and “A brand that is on most formularies.”

If we want to leverage the brand's position in Category #1 to build equity in the masterbrand, we should focus on those two attributes (see Figure 1, page 62).

n In the second example, we can see that the brand in Product Category #1 and in Category #3 share two different category drivers: “A brand with a good relationship with physicians” and “Innovative brand.”

We can influence cross-category product usage by focusing on those characteristics (see Figure 2, page 64).

Conclusions
As we stated at the start, these are uncertain times for pharmaceuticals. One thing is certain, however. With marketing spend rising—and pharma brands often achieving the level of familiarity once the sole province of consumer products—it is essential to leverage brand equity beyond the patent period. Only then can companies optimize ROI on promotional investments. The ability to take brand value beyond expiry is well within reach, as are the means by which the process can be thought through and managed. It's time for senior marketers to step up to the plate.
 
Larry Friedman, PhD, is global director, brand and communications research, at TNS

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