The first workshop took place at the end of fiscal year 2013. As discussed earlier, the key objective of the first workshop was to define the corporate goals and business metrics that could be used to evaluate the marketing activity. In this workshop, the participants discussed how the organization would handle the consumer line in general and the analgesics line in particular. This was done from the focus of entering the private market business, a key segment that had not been of interest in the past. The organization decided to invest in rebranding the analgesic line, which is a generic OTC line, to gain a solid lead position in the market over the next five years. At the corporate level, the organisation set a desired growth rate of 45% in revenue for 2014, a target revenue of 600,000 USD, a target gross margin of 240,000 USD and a net profit of 108,000 USD for the analgesics line. The targets set at the corporate level were based on the market size for the analgesics line in the private market, which was defined by the IMS data for 2013 to be around 9,000,000 USD, with an expected growth of 5%.
The team defined three target segments for the analgesics line: community pharmacies, polyclinic pharmacies and hospital pharmacies. The defined segment profiles are summarised in Table 11.
159 Important
drivers Segment 1: Community
pharmacies Segment 2: Polyclinic pharmacies Segment 3: Hospital pharmacies What do they
buy? Consumer products more
than prescription products Prescription products more than consumer products Prescription products more than consumer products
Who buys? Healthy and non-
healthy patients Mainly non-healthy consumers Mainly non-healthy consumers Number of pharmacies 324 55 11 Segment proportion of the total market in number of pharmacies 0.83 0.14 0.03 Segment proportion of the total market in value 0.35 0.21 0.44 Physician prescription influence
low High high
Pharmacist recommendation influence
high Low low
Direct marketing to consumer influence
high high Medium
Spending contribution on medical marketing 30% 20% 44% Spending contribution on POSM marketing 56% 24% 20%
160 Impact factor for
medical marketing
20% 30% 35%
Impact factor for
POSM marketing 30% 15% 10%
Since the organization decided to move the analgesic consumer line from its comfort zone of the tender business to a focus on the private market, it was critical for the team to define a set of metrics that could help management track performance. This would ensure positive and desired progress toward achieving the corporate goals. The team defined key metrics, shown in Table 12 that could be greatly influenced by the planned marketing activities, along with set targets. As described in Table 11, the community pharmacy has access to both healthy and non-healthy consumers, unlike the polyclinic and hospital pharmacies. Community pharmacies represent the vast majority of pharmacies in Kuwait in terms of number. However, that does not reflect the potential of the pharmacies in terms of revenue, as the hospital pharmacies represent 44% of the revenue stream related to pharmaceutical products despite only making up 3% of total pharmacies. Due to the high flow of prescriptions coming from hospitals and polyclinics, the team decided to set the influence of prescriptions as high for polyclinics and hospitals. Based on the survey, and as shown in the rankings of the most effective drivers of OTC analgesic product sales in pharmacies (see Figure 6), pharmacists believe that their own recommendations are the most effective driver of OTC sales. Thus, the team ascribed high influence to pharmacists’ recommendations for community pharmacies compared to polyclinic pharmacies and hospital pharmacies. According to the survey and the mean scores for the three categories of influential forces shown in
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Figure 9, the team decided to set the influence of direct-to-consumer marketing as high for both polyclinic pharmacies and community pharmacies compared to hospital pharmacies. The team decided to distribute the spending across the three different segments based on the identified influence levels. Spending contribution for medical marketing represented the majority of spending in the hospital pharmacy segment due to the high revenue potential and number of physician prescriptions. The spending contribution for POSM marketing was the highest for the community pharmacy segment, followed by the polyclinic pharmacies and the hospital pharmacies. The impact factors were calculated based on the team’s assumptions of the revenue that would be generated with and without the marketing activity. Using this information, the ROMI calculation shown below defines the incremental revenue attributable to marketing for each marketing activity in each segment.
ROMI =
[Incremental Revenue Attributable to Marketing(USD) ∗Contribution Margin% − Marketing Spending(USD)]
Marketing Spending(USD)
The second objective of the first workshop was to identify sets of metrics related to the target segments. The team decided to set the metrics and targets as shown in Table 12.
162 Table 12: Metrics for each target segment
Metric (title) How
measured/source Actual Target
Segment metrics
Desired Market Share vs. Actual market leader
%/ IMS 8% vs. 82%
Sales Value vs. Competitor
(market leader) Value/IMS $885,000 vs. $6.1m
Revenue segment 1:
community pharmacies ERP system $310,000
Revenue segment 2: polyclinic pharmacies
ERP system $185,000
Revenue segment 3:
hospital pharmacies ERP system $390,000
Gross Margin segment 1:
community pharmacies ERP system $124,000
Gross Margin segment 2:
polyclinic pharmacies ERP system $74,000
Gross Margin segment 3:
hospital pharmacies ERP system $156,000
ROMI (Medical Marketing) segment 1: community pharmacies
ERP system 3%
ROMI (Medical Marketing) segment 2: polyclinic pharmacies
ERP system 4%
ROMI (Medical marketing) segment 3: hospital
pharmacies
ERP system 12%
ROMI (POSM marketing) segment 1: community pharmacies
ERP system 107%
ROMI (POSM marketing) segment 2: polyclinic pharmacies
ERP system 48%
ROMI (POSM marketing)
segment 3: hospital
pharmacies
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The team decided to define the corporate metrics as follows: the desired market share versus the market leader, sales value versus the market leader, revenue target for each defined segment, and the ROMI target for each defined segment for both medical marketing and POSM marketing. The target ROMI was defined by applying the above mathematical formula for ROMI. It was important for the team to first define the incremental sales of the marketing activity for each defined segment, allowing the ROMI calculation. The determination of the market leader in the category of OTC analgesic medications was done according to AC Neilson’s report for the year 2013, when the market leader had a more than 80% share of the market. As such, the competitor was set as the benchmark against which to monitor performance. It was also important to monitor market share as a key metric. The market is monitored by the IMS, which was a key secondary source of data. The target revenue and gross margin are normal metrics that the sales team was accustomed to using in all scenarios related to sales activities. The ROMI calculation was a new metric that was being introduced to the team for the first time. At first, it was difficult for the team to accept its use and it was also difficult for the team to make the calculation of incremental sales related to the marketing activities. In the end, however, the team began to realise how important the exercise was, as it enabled them to reflect on how each marketing activity would be reflected in the metrics for each defined segment. The other important factor was for the team to appreciate the marketing spending for each marketing activity in each segment. This gave them a thorough understanding of the amount to be spent and allowed them to carefully calculate the desired ROMI. The team also concluded that having more historical ROMI data in the coming years would enhance their learning about how to increase the efficacy of the marketing decision making process.
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