What uncertainty? 72% of health marketers say 2017 budgets are up
For the past half-year or so, healthcare marketers answered nearly every big picture question about the industry with some variation on “there's an awful lot of uncertainty out there.” When pressed for specifics, they usually sighed before unleashing a six-minute tirade about drug pricing, repatriation, intensifying regulatory pressure, a daunting R&D environment, outside perception of the industry, and Martin Shkreli.
Granted, these were politely and respectfully delivered, but they were tirades nonetheless. Sometimes you wondered if the people delivering them were considering jumping ship to an industry viewed more positively, such as big oil. (Yes, pharma and healthcare finished behind the oil business in Gallup's annual poll.)
Yet judging by the results of the 2017 MM&M/Guidemark Health Healthcare Marketers Trend Report — and its don't-bury-the-lede revelation that 72% of respondents report marketing budget increases for the current year, versus only 14% reporting budget decreases — healthcare marketers don't believe they, or the industry, are on the cusp of catastrophe. In fact, they're optimistic.
Maybe the optimism is grounded in their belief in the competence and fundamental decency of the companies for which they work, or perhaps it's simply an innate personality characteristic. But both the survey data and informal interviews with respondents suggest the healthcare marketing community doesn't subscribe to the theory that 2017 will be a dumpster fire.
Let's start with a few selected comments from those interviews — specifically, a question that asked point blank, “As a marketer within healthcare or pharma, are you optimistic or pessimistic right now, and why?”
Read the 2016 Healthcare Marketers Trend Report: How is pharma shifting its marketing budgets?
“My dad was the optimistic one in our family, so I'll attempt to channel him here. The country has survived for nearly 250 years as the greatest democracy on the planet. So although I'm worried it might be a bit bumpy for a few years, we'll get through this and hopefully come out even stronger,” says Ralph Robinson, senior director, business insights and analytics at Seres Therapeutics, a pre-commercial maker of microbiome therapeutics.
Sophy Regelous, COO at Guidemark Health, agrees. “There are certainly reasons to be optimistic. There are more channels and offerings. There are things that didn't exist before or not to the depth they currently do. You hear so much about the bad, but there's plenty of good,” she says.
Or take this thoughtful defense of pharma in the time of President Donald Trump by Eric Pluckhorn, product director at Octapharma USA, which develops and produces human proteins from human blood plasma and human cell lines.
“I couldn't be more optimistic. Healthcare is better than when I started in the industry 25 years ago across every therapeutic area and indication. There's nothing that can happen — short of an invasion from another planet — that can mess it up. Look at the survival curves. Look at the stock charts. Look at every other metric. In the vast majority of them, healthcare grades out better now than it did five, 10, 25 years ago. No matter who's in charge, as long as there's fuel for innovation, there's no reason to think this will change.”
Granted, these quotes have a bit of a small sample size taint to them. It's also possible that individuals feeling secure within an industry they treasure might be a tad more willing to discuss it than those who feel marginalized.
And on that note, we turn to the data from the fourth iteration of the Healthcare Marketers Trend Report. But first, a few quick stats about the respondents.
The survey was fielded between late November and late December 2016, and 172 healthcare higher-ups responded. Most of them, 77%, were director-level execs, with the other 23% self-identifying as members of the C-suite. They hailed from a range of companies within pharma (37%), biotech (24%), devices (30%), and diagnostics (9%), 62% of which generate less than $500 million in revenue.
Many respondents (41%) noted their budgets only covered a single brand, but 13% said they were charged with six or more. In many cases, budget responsibility was a joint endeavor: 66% of respondents said they shared responsibility for their company's marketing budget with others, while 34% said they handle it solo.
BUDGETS AND AUDIENCES
If there are troubling findings or foreboding trends within the survey results, we can't find them. And they're certainly not evident in the responses to the big and small picture budget-related questions.
The short version: Marketing budgets are up. The long version: The mean marketing budget is up overall — $8.5 million for the current fiscal year from $7.4 million in the past one, a nearly 15% surge. And 72% of respondents reported an increase, with 14% reporting a decrease and 14% reporting no change.
Break it down further and the results are much the same. Mean marketing budgets are up at pharma companies, from $14.1 million to $15.5 million (61% of respondents reported an increase, 24% a decrease, and 15% no change); biotech organizations, from $4.6 million to $6.5 million (81%/0%/19%); and device makers, from $4.1 million to $4.6 million (74%/13%/13%).
Budgets are up at companies with less than $500 million in revenue, from $2.8 million to $3.9 million (81% increase/6% decrease/13% unchanged), and at companies with more than $500 million in revenue, from $16.2 million to $17.4 million (61%/23%/16%). Budgets are up for branded programs (56%/5%/39%) and up or flat for most unbranded ones (35%/11%/54%).
It stands to reason that marketing budgets would be up across most, if not all, audiences respondents were questioned about, and they are. Half of respondents reported increasing their physician budgets (only 8% noted decreases), while 41% increased their patient/consumer budgets (7% decrease), and 37% increased their payers/managed care budgets (8% decrease). Interestingly, one of the stakeholder groups most often cited in MM&M and elsewhere as increasing in importance — the friendly neighborhood big-box pharmacist — saw little budget love from the respondents: a mere 11% increased their pharmacist budgets during the current fiscal year, and 13% decreased them. Pharmacists were the only audience that saw such a negative split.
On the other hand, this jibes with the survey data about the perceived importance of various audiences. Only 14% of respondents ranked pharmacists in their personal top three, while only 1% ranked pharmacists the most important. Not surprisingly, physicians/specialists were again deemed most important overall (93% ranked top three/59% ranked first), with patients/consumers (59%/16%) and payers/managed care (56%/8%) lagging well behind.
Industry marketers are clearly not all that upset about the upward trends, describing the effect of finally having some budget breathing room as both liberating and energizing.
What helps even more, several say, is they can stretch their marketing dollars even further in the digital realm, where lower-priced inventory abounds.
“We used to call digital media ‘nontraditional media,' but it's as traditional now as anything else,” Pluckhorn explains. “This holds for us because we're in immunology, but it holds for a bunch of other therapeutic categories, too. We don't need ads on TV or in People magazine. We know where our customers go, and it's easier than ever before to push our messages through to the right people.”
He adds that digital programs work. “In the Army, we used to call things like this ‘force multipliers' — that's how they act for us. You get eight to 10 times the impact.”
TACTICS AND CHANNELS
Such comments provide an easy segue into the most predictable result to come out of the survey: Marketers can't get enough of digital. During the current fiscal year, 87% of respondents reported using the digital channel to market to HCP audiences, up from 81% in the previous year. Every subchannel within digital experienced a similar surge: websites (from 66% to 72%), digital ads (47% to 52%), and mobile/tablet apps (23% to 30%).
Other popular channels for reaching HCPs include pretty much what you'd expect: meetings/events (80% of respondents using them this year), printed sales materials (70%), and sales reps (70%).
When it comes to the consumer marketing tactical mix, the results were only slightly more enlightening. Anyone who follows the business even casually — and has caught a few pharma Super Bowl ads over the years — knows the industry's penchant for broadcast TV. Still, traditional advertising tactics aren't the go-to they once were. Indeed, only 34% of respondents reported using such tactics during their current fiscal year, down a percentage point from the previous one.
By contrast, digital tactics targeting patients/consumers pressed upward to 75% from 73%, and 50% of respondents reported an increase in the use of those tactics.
It's worth noting the 35% usage rate for advocacy education programs and the 33% rate for research/data/analytics because one would expect both to be higher. Maybe marketers' budget assignments lag the beseeching about advocacy/education and analytics at industry gatherings?
As for payer marketing tactics, there was only a 20% difference in usage between the most-used tactic (market research and advisory engagements at 47%) and the least-used one (disease management programs at 27%). Of the eight tactics respondents were asked about, all increased in usage during the current fiscal year. Not surprisingly, reimbursement support staff and programs enjoyed the biggest jump, a 5% hike from 33% to 38%.
So where are all the dollars being spent? In some, but not all, of the same places they have in recent years. By percentage, professional meetings/conferences absorbed most of the marketing cash: Respondents devoted just under 17% of their budgets to them, with 29% reporting an increase this year. Sales reps (15.2% of the budget) and sales materials (10%) consumed the next biggest pieces of the pie. Meanwhile, paid traditional advertising (print/TV/radio) and PR fell to the middle of the pack, snaring 5.2% and 4.7% of budgets, respectively.
It's interesting that two channels deemed “hot” by marketers, video and point of care, aren't receiving budget love. They finished 13th and 14th, respectively, in the budget derby, attracting a mere 2.5% and 1.9% of marketers' available money. Video is cheap in the mobile era, but it's not that cheap.
THE CHALLENGES AND THE OPPORTUNITIES
Another note of optimism was sounded by respondents in their answers to questions about perceived opportunities — of which they count many.
Some are fairly predictable: Execs from all companies see promise in customer behavioral change (62% from companies with more than $500 million in revenue, 56% from companies with less than $500 million in revenue) and in/around emerging markets (64%/55%). Conversely, respondents from both bigger- and smaller-revenue companies see minimal opportunity stemming from ongoing media fragmentation (24%/25%) and agency consolidation (16%/24%).
However, there were some surprises. In a repeat of the findings from the 2016 MM&M Healthcare Marketers Trend Report, respondents from companies with less than $500 million in revenue affirmed they're not big on big data (35%) — as opposed to their peers at medium- and large-sized companies, who see great opportunity there (67%). The idea that relatively small players are sitting out the data revolution, or embracing it more hesitantly, is slightly worrying.
When it came to identifying the challenges they're currently staring down, respondents from small and medium/big companies were more on the same page. Both groups viewed clinical development/time to market (78% from companies with more than $500 million in revenue, 61% from companies with less than $500 million in revenue) and pressure from payers/managed care (76%/56%) as the top two challenges in their path. Respondents from the higher revenue companies are more vexed by headaches created by MLR/internal medical/legal approval processes (69%) and pipeline-related concerns (62%) than their peers at lower revenue organizations (39% and 28%, respectively).
The lower revenue companies expressed more concern than the higher revenue ones for only three of the 23 queried challenges: the economy in general (42% to 36%), social media (34% to 33%), and procurement (34% to 29%).