Reinventing the Market Research Function( Sanjiv Sharma)

http://pharmexec.findpharma.com/pharmexec/article/articleDetail.jsp?id=651665


the old pharma business model, market research was an open-ended source
of insights designed to help gauge market risks
by raising questions that management might not have been prepared to
ask in an era when development costs were lower, payers
were flexible (and forgiving), and promotional strategies relied on
platform technologies that changed little over time. Today,
the function is expected to respond with more metrics and added focus,
in a fast-changing environment where the customer is
king. More importantly, market research is expected to quantify ROI
risks—chiefly by identifying and managing exposure to
the soaring costs of building brand awareness among a fickle, demanding
audience of payers with multiple purchasing options.
This month, Pharm Exec sits
down with marketing experts Sanjiv Sharma and Susan Schwartz McDonald to
discuss the latest changes
in the business model, and what these hold for the future of this
important "c-suite" function. We also sift through a range
of marketing experiences, at all stages of the product life cycle, to
uncover five basic principles that can help managers
use market research tools to make successful decisions in positioning
medicines to meet the escalating expectations of customers.
—William Looney,
Editor-in-ChiefPHARM EXEC: What are the key goals that
market research is expected to accomplish in today's business
organization?
SANJIV SHARMA: There are two. The first is to identify, prioritize, and
quantify new business opportunities. The second is to wrest maximum
value from the opportunities the organization decides to pursue. In
this latter case, guidance and support for execution strategies
is increasingly important. And it should be done with an eye to
obtaining real value at all phases of the product's life cycle,
not just at launch or during the early years, when market research
helps to build take up by providers and patients.

PE: How would you
describe the role of market research today compared to a decade ago? SUSAN SCHWARTZ MCDONALD: Management
expectations about what market research can do are much higher today. In
the past, the predominant view was that
market research was a subsidiary activity designed to backstop
decisions and confirm the intuition and judgment of the marketing
team, which would steer the ship based on close knowledge of the
external environment. Today, market research is driven by
quantitative approaches that focus on unmasking the will of the
customer, and then implementing strategies to meet their expectations.
Research has become an instrument of market democracy, where all
decisions are filtered through the "customer plebiscite."
Although the motivating factor is to manage risk by making the approach
to the customer more predictable, this can work to
limit the discretion that an internal marketing team has in driving
specific actions to build the brand.
PE: Doesn't this pose a challenge to the
credibility of the market research function, in trying to deliver
against such expectations?
SHARMA: There
is an inherent danger in requiring market research to conform to a
rigid ROI calculus. That can actually drive research
in the wrong direction, and limit options that can provide more
insights. Strict reliance on the will of the customer can
mean that marketers don't rely on their discernment skills, which have
often produced the most insightful thinking. It can
lead to a presumption that the customer always has the right answer, or
that marketers are always posing the right question.
Sometimes we don't.
PE:
Are you saying that market research is best viewed as a decision
support tool?MCDONALD:
Yes. The problem with the notion that market research should deliver a
high ROI is that management will expect too much
from the function and skew outcomes away from what really counts, which
is creating a true value proposition among the customers
most likely to buy your product. There is also the assumption that good
decision support requires adherence to a "best practices"
model, along with an overwrought reliance on customer insight.
Unfortunately, this is a double-edged sword; it may foster
discipline and consistency at the expense of creative thinking while
actually driving costs higher.
PE: Can you clarify why these
two "markers of excellence" may be subverting what market research wants
to accomplish?
SHARMA:
Under the mantra of best practices, senior management has tasked the
market research function to improve decision making
with procedures that are tied to specific performance benchmarks. This
fosters a sense that marketers can bend the market
to their will. There is an appealing logic to this: If we don't follow
the same protocols to vet opportunities and assess
options, then how can we argue that decisions and follow-up actions are
grounded with evidence? The question is that if the
FDA holds our drug development process to rigorous standards of
scrutiny, then does it not make sense to apply the same discipline
to market research? You could say that the stakes are even higher here.
It's the task of market research to create what FDA
approval alone does not confer—a market for a new drug. The challenge is finding the right balance
between systems and serendipity. There are principles and standards
that can be
incorporated into company culture. But there are limits to its
practical application. It is virtually impossible to rely on
the same research techniques to define strategies for every product and
therapeutic segment because context will have a powerful
impact on the options available, as well as the accuracy by which
models and metrics can be used in evaluating them. Today's
complex business environment argues even more against the notion that
machine-tooled, ready-to-use solutions can be drawn
from the analytical hopper and applied to shape the market for your
products. Market research is instead a process for uncovering
insights and making inferences from multiple sources, evidence, and
survey techniques. Simply handing a "how to do it" manual
to a manager is not going to work, particularly if the manager is young
and inexperienced.

PE: What about all the attention given
to identifying, tracking, and defining metrics around "customer
insight"? MCDONALD:
It is ironic that customer insight is being sold as something entirely
new, a practice that will somehow reinvigorate market
research or take it to a new level as a business guidance tool. That's a
misconception. The function would never have survived,
much less grown, had researchers not been delivering good customer
insights to position our brands. A good example of flawed—and
wasteful—thinking is when senior management commissions "insight
research" as a separate exercise, with no alignment against
the strategic, course-of-business studies that drive market research.
This is like adding another course to the banquet, when
we ought to be adding more flavor to what we are already serving.
PE: You mentioned earlier the importance
of casting the market research net widely to cover a product's entire
life cycle.
Does this suggest that the real value of market research is as a
forecasting tool?
SHARMA:
With three out of every 10 medicines failing to obtain a positive
return on up-front investment in R&D, both aspects of the
market research function—opportunity assessment and opportunity
optimization—are critical to P&L success. Companies must be
thinking about product positioning in the earliest stages of product
gestation, even before proof-of-concept has been established.
This is where the market research function has to stretch to prove its
mettle. At the pre-launch stage, the time horizon
is longer and market conditions are harder to predict, much less set
real numbers against the analysis. As a rule, once the
marketing mandate shifts from foresight to oversight, the process is
less suspenseful and strategic.
PE: What about the task of anticipating
how customers will respond to innovation, especially in determining
access and price
for a new medicine? MCDONALD:
Innovative products and technology platforms require additional
marketing foresight and investments in analytics because
the risks of miscalculation are greater. Customers are unimaginative
about their unmet needs, and can react negatively when
confronted with radically new options that alter their priorities.
Twenty years ago, when Merck began to explore physician
attitudes toward osteoporosis in preparation for the launch of Fosamax,
it was clear that the prevalence and implications
of the condition were under-estimated, essentially because it couldn't
be seen until significant bone damage had been done.
Merck's effective deployment of market research to highlight the
societal cost of osteoporosis, coupled with technical advances
in bone densitometry measurement, helped support the introduction of a
drug that the medical community has come to recognize
as an innovative standard of care for many women entering menopause. A lesson here is that in order to minimize
risk and uncertainty, marketers must be unsentimental in understanding
how a product
might influence attitudes in the payer and provider communities. When
you bring forward a subtly differentiated medicine that
follows a path laid down by others, the market research burden shifts
from strategic questions on how to develop a new market,
to the tactical questions of securing a beachhead against the existing
competition. The more uncertain and uncharted the environment,
the tougher it is to predict outcomes by simply relying on customer
insight; while the less innovative the product, the more
difficult it can be to count on market research heroics to compensate
for its limitations.
PE: How can market research
reasonably expect to build accurate metrics that forecast the uptake of a
certain innovation?
SHARMA:
Statistical controls should always be incorporated in the analytical
package to guard against the tendency to overstate potential
demand for a product. Survey respondents often try to please the
research sponsor with the "right" answer, and there is little
awareness of how inertia can slow real-life uptake of a new drug. In
addition, we have to account for the fact that highly
innovative products are subject to a failure of imagination about how
the technology might transform medical practice. This
means that raw projections might actually understate ultimate demand.
Lilly's initial forecast numbers for Prozac prescriptions
never encompassed the impact that enhanced tolerability and safety
would have on the market for antidepressants, while Pfizer's
analysis failed to take into account how interest in Viagra would be
fueled by the health information revolution fostered
by the Internet.
PE:
So do numbers really count as a benchmark for evaluating the
prospective response to a new therapy? MCDONALD: Both of those cases
[Prozac and Viagra] demonstrate the importance of using market research
techniques that tap a vision,
rather than simply tally votes. Even when statistics are required to
advance the proposition, emphasis should be placed less
on large numbers—the reliability test—than on developing a product
proposition or scenario that the survey population can
meaningfully evaluate. A validity test. In other words, selecting the
right targets in survey research is essential to ensuring
that the proposition is applicable to a commercial strategy. For
example, key opinion leaders are often the best "prophets"
of change, and can tell us more about the prospects for an innovation
than would a survey of community physicians. But when
seeking to identify barriers to the uptake of a new medicine, the
community physician's perspective might be more relevant
due to their tendency to resist the "re-engineering" of clinical
paradigms. In
addition, careful targeting of a survey audience should not be limited
to products promising a dramatic technical advance;
it applies also to situations where deeply ingrained customer thinking
must be adjusted only a few degrees to render distinctions
where none have been made. So market research has to first establish
how best to tell a story, and determine to whom that
story should be told, deferring costly quantitative research until
there is confidence that customers are in the right frame
of mind to validate a path forward.
PE: A standard tool of market research is
the product positioning study, designed to help establish a clear
therapeutic footprint
and drive acceptance by customers. Is this approach still relevant in
ensuring success in an increasingly crowded marketplace?
SHARMA:
Positioning research is applied to a variety of uses, and can be
described as a tool to inform the marketing process, to
identify a product attribute or benefit, or assess a marketing outcome.
Learning what we need to know about product positioning
typically begins when the product is in early gestation, where we start
to establish what outcomes or characteristics are
necessary to ensure success with the FDA and with customers. It is
based on a program of research that allows us to understand
how competitors are viewed, what space is available in the marketplace,
how well our product meets unmet needs, and how differentiated
from competitors our customers believe it to be. The culmination is
the positioning study, which tests one or more positioning
statements with different customer constituencies. Our experience is
that such work is a waste of money and resources. It
is also potentially dangerous, in that it limits potential market
opportunities by framing positioning as a vote on various
slogans. It risks inviting customers to vote on the wrong thing—turns
of phrase—at the wrong moment—before those phrases have
been vetted by regulatory staff or set in a creative context by your
brand agency.
PE: It looks as if we are back
to your opening theme, that the "voice of the customer" must be
modulated by prudent insight
about the product and the overall market environment. MCDONALD: Yes. There is a danger in
the possibility that by inviting customers to have the final vote on
positioning, you are entrusting
them with a decision they are not fully qualified to make. Customers
will often default to the obvious when asked to vote
on positionings because they lack the experience and the judgment to
make professional marketing decisions. The outcome may
also reflect customers' lack of appreciation for ways in which they can
be influenced by execution and repetition. In research,
physicians may dismiss as unpersuasive any data suggesting a nearly
trivial difference in efficacy, yet in real-life conditions
they will learn to do so, once effective repetition creates a powerful
response—as the [GSK] Augmentin team did with sinusitis.
The lesson is that positioning guidance has to be applied and evaluated
in an integrated manner, drawing on multiple data
sources and insights rather than reducing the final decision to a
single ballot number.
PE:
Doesn't organizational responsiveness play a key role in building a
climate that maximizes the value of market research?
SHARMA: That's a critical point.
Company culture is a determinant of what gets examined and how well
market research is interpreted
for results. Doing more with less, which drives management expectations
these days, requires a refocusing away from research
mechanics and creating an organizational climate in which flexible
thinking and judgment are highlighted over calculated "answers."
This represents a sea-change from the perspective that market research
is an analog to scientific research, with rigid standards
of proof and replicatable methodologies. Market research is, after all,
a social science in the service of marketing judgment,
which means that the metrics and analyses are not always fool proof or
universally applied. And the answers are not fixed
coordinates but simply signposts that help by pointing managers in the
right direction. Five Value
Drivers for Effective Market Research A strong market research function depends
heavily on the characteristics and consistency of support from the wider
organization,
including the senior management teams ultimately responsible for
approving strategic and operational marketing plans. What
are the key preconditions for a confident, flexible and effective
decision-making culture that will lead to optimal P&L results?
Below, Sharma and McDonald highlight five factors that count. 1. Insist on leadership from
knowledgeable, career researchers who are fluent in market research
techniques and can provide
insightful decision support.Seasoned professionals have the maturity to
reflect on methodologies and challenge professional wisdom. In thrifty
times,
it is especially important to harness experience and display the
confidence to avoid research when adequate decision support
is available. The pharmaceutical industry is notorious for its
conception of the market research function as a larval stage
for career development—meant to produce young marketing "butterflies."
That conception may enrich the experience of the marketers
who emerge, but it tends to drain the intellectual vitality and
expertise of the market research function. Experience counts
enormously in managing market research. 2. Nurture an environment in which
institutional memory is mined and market research "emergencies" are
discouraged. Companies
that conduct market research are always struck by the propensity of
clients to repeat studies in pursuit of questions
that have already been answered, or to identify urgent problems that
lose management attention midway through. Many companies
permit a "triage" climate that insists on urgent answers to questions
that might be answered with data already in the pantry
or that might profit from a more deliberative conceptual approach.
While it's useful for every marketing manager to hear and
see customers discuss their worldview, customer insights may be more
cost-effectively developed if existing data were better
mined. 3. Beware
the tyranny of "best practices." At the risk of appearing to endorse
something other than the very best of practices, we want to emphasize
the importance of
flexible use of established and validated techniques in the hands of
people fluent enough to manipulate the rules skillfully.
The best practice philosophy produces excellence when it inspires
knowledgeable understanding of a breadth of good options
while still leaving latitude for a customized approach rather than
"cookie-cutter" repetition. 4. In positioning a new product for
market introduction, seek decision support rather than statistical
verdicts lifted directly
from market research.It is a misconception to assume that our
customers know the answers to all the questions we pose, and that those
answers must
be traced to a statistical outcome in a specific type of study. It is
possible to position a product without asking customers
to vote on a positioning; indeed, positioning should be our marketing
intervention—something we decide to do to effect change
in the market on the basis of cues and evidence that our customers
supply. The mission for market research is not simply to
poll our customers, or even merely to deliver insights about them. The
highest calling for market research is to help us think
like our customers so that we are empowered to improvise and even
extrapolate when key marketing decisions are made. 5. Insist on "customer insight" from
every piece of market research.We have accepted an environment in which
customer insight is a name attached to specialized studies instead of an
orientation
that informs and inspires every thing we do. This is like ordering a
meal a la carte: "I'll take that research with a side
of insight, please." Periodically
throughout the lifecycle of a product, it is useful for a team to take
stock and ensure that all are empowered
to think the way their customers do. But these need not be distinct
assignments. Those who argue that there is no time or
space in a crowded research agenda to incorporate a broad customer
insight perspective, or that insight requires a unique
study mandate of its own, may want to rethink the way the research
issues are framed. It is difficult to arrive at the correct
conclusion if the thinking is not informed by a broader set of customer
insights. It's also important that teams not ignore
insights because the information does not serve their immediate needs.
Insights can define boundaries as well as empowering
creative problem-solving. The key to using customer insight is deciding
whose worldview matters, in any given scenario, and
how to take inspiration rather than dictation from that depth of
understanding. Sanjiv
Sharma is vp of commercial development at NiCox Pharmaceuticals. He
can be reached at Sharma@nicox.com
. Susan Schwartz
McDonald is CEO of National Analysts Worldwide. She can be reached at smcdonald@nationalanalysts.com