Systems Marketing A New Operating Model for Pharmaceutical Marketing

By John G. Singer, Principal 917.538.4239 john@bluespoonconsulting.com

White Paper.

Blue Spoon

A Marketing Architecture Consultancy

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Blue Spoon Consulting Group, LLC www.bluespoonconsulting.com 10000 Highway 55 Minneapolis, MN 55441 Copyright © 2005 by Blue Spoon Consulting Group, LLC, All Rights Reserved

Blue Spoon is a marketing architecture consultancy to the pharmaceutical, biotechnology, and medical device industries. Systems marketing is a new operating model for marketing developed by Blue Spoon to solve problems of strategy, create operational advantage, synchronize action, and design effective enterprise marketing solutions, agency network initiatives, and new business architectures that span life sciences research, commercial, and manufacturing operations.

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A New Operating Environment

Toward the end of 2004, Procter & Gamble announced a series of

urgent initiatives to find a new marketing model. The news wasn’t surprising. Nearly every industry is struggling to reinvent marketing in a way that responds to exploding technological innovation, product and service proliferation, stakeholder fragmentation, new government regulations, and the commoditization of data. Systems thinking is considered a high-leverage frame of reference for its ability to change patterns of behavior and uncover fresh approaches to complex problem situations; it is being applied to a diverse range of subject areas that are dynamically complex, including environmental change, economic policy, operational alignment, and population health. This white paper provides strategic context for pharmaceutical companies to increase their marketing competitiveness using a systems approach. As the drug industry adapts its activities to meet high rates of change in the marketplace, the imperative is on developing a new way of marketing guided by new thinking. Systems marketing responds to this need.

John G. Singer May 2, 2005

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CONTENTS Strategic Context Marketing Resistance 5 The Pharmaceutical Marketing System 6-7 The Systems Concept 8-9

Systems Marketing New Assumptions 10-11 Adaptive Tactical Systems 12 Iterative Progression of System Design 13

Brand Module Enterprise Marketing Solution: A Prototype 14 The 1st Progression of Marketing Integration 15 Subordinate Messages 16 Systems Management: Sense & Respond 17 Marketing Integration with Sales: The 2nd Progression 18 Synchronizing Brand Module Output with Sales 19

A Corporate Asset Embedded in the Marketplace: The 3rd Progression 20 Dynamic Portfolio Management: The 10th Progression 21 An Asymmetric Tactic 22

Systems Marketing A New Path to Alignment 23

Endnotes 24-26

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Strategic Context

The marketing industry is passing through one of the most disorienting times in its history. Atomizing customer segments, an unrelenting flood of product and service options, infinite media channels, distribution and supply chain innovations, vendor commoditization, and the onward march of technological change has made marketing more complex, more costly, and less effective for all industries. As entire categories of business move toward price, performance, and tactical parity between products, customers are demanding new types of benefits that go beyond functional attributes, which are increasingly less differentiated. Shifts in the broad mass of behaviors and attitudes toward advertising are forcing a fundamental rethink of the marketing organization, calling into question the very ground rules and belief systems that form the basis of strategic planning. Yankelovich has identified a “socialization of marketing resistance”: consumers opting out in ever greater numbers by ignoring commercial radio and television and hiding behind technologies that exempt them from the onslaught of product promotion1. These are radically new business dynamics. The speed at which they have penetrated the United States, Western European and Japanese markets, their scope, and their dramatic impact on the information en-vironment is forcing an explicit consideration of conventional wisdom and questioning what had traditionally been in the background, the invisible becoming visible2. The implication means, among other things, re-evaluating advertising-based perspectives and principles of “branding” and “message” as lead elements to the marketing idea. Everyone is looking for strategies to lower their marketing, sales, and customer interaction costs. That major marketers have begun consoli-dating their budgets within advertising holding companies is an impor-tant shift in business practice, reflecting the underlying structural trans-formation taking place in the marketing industry. Identical issues of marketing creativity, productivity and competitive-ness confront the pharmaceutical industry. Pharmaceutical marketing operates in a completely unique dimension, however, with added lay-ers of complexity and more rapidly diminishing returns from current business strategies. Pharmaceutical companies are driven by high investments and risk in clinical research and development, a weaken-ing blockbuster model wed to creating medicines that serve large pa-tient populations, intense competition, multiple stakeholders responsi-ble for writing, approving, dispensing and paying for prescriptions, more marketing components and processes deployed to reach and influence these stakeholders, science and medicine as a key element to product offerings, and short periods of market exclusivity before ge-neric competition. The average drug brand gives up 90 percent of its market share within six months of losing patent protection. Pfizer is expected to lose $14 billion in sales by 2007 -- nearly a third of its an-nual revenue -- because of patent expirations on some of its biggest-selling drugs3.

Shifts in the broad mass of behaviors and attitudes toward advertising are forcing a fundamental rethink of the marketing organization….The implication means re-evaluating advertising-based perspectives and principles of “branding” and “message” as lead ele-ments to the marketing idea.

Identical issues of marketing creativity, productivity, and competitiveness confront the pharmaceutical industry.

MARKETING RESISTANCE

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The Pharmaceutical Marketing System Pharmaceutical companies began mass-market advertising in 1997 after the Food and Drug Administration relaxed its rules governing pre-scription drug ads to consumers. By the end of 2004, the pharmaceuti-cal industry had spent $4.1 billion on DTC campaigns for the year, the fourth largest category of consumer advertising, surpassing motion pic-tures, credit card services, computers, beer and apparel categories4. The conspicuousness of their marketing has caused side effects for drug manufacturers, primarily from a perceived link between advertising and rising healthcare costs. A growing number of states are drawing a bead on the industry and enacting legislation directly affecting market-ing practices -- as of September 2004, five states had laws or resolu-tions on the books restricting drug promotion activities, and more are following suit5. California is now debating a bill (AB95) that would re-quire drug companies to pay rebates equal to the costs of marketing certain drugs in the state. On January 10, 2005, Fortune described the prior year “as one of the most painful in the history of Big Pharma.” Congressional investigations into drug marketing practices, safety is-sues and product recalls, pricing pressure, more restrictive formularies, full transparency in clinical trial disclosure, and closer regulatory scru-tiny for drug approvals and line extensions have surfaced as critical business issues, promising even more difficult times ahead. That ROI has never really been there for most DTC advertising now seems al-most secondary (about four percent of consumers say they visit a doc-tor because of a prescription drug ad6).

This uninspiring data and widening legislative fallout from direct consumer promotion of branded medicine is one of the smaller, albeit more visible, plot lines in the story of diminishing returns across the spectrum of drug marketing and sales activity. The pharmaceutical in-dustry has grown its sales force more than 75 percent in the past seven years, today reaching 94,000 detail representatives on the streets who require $30 billion annually to maintain7. The statistics around physician access are well known: more than half of all detailing never gets past the receptionist, and 35 percent of doctors are not seeing drug reps at all; of those who do, about 90 percent of details are under two minutes, primarily a sample drop8. Free drug samples distributed during these visits were valued at $16 billion in 20039. Noncompliance with medica-tion is another major issue: revenue loss due to unfilled prescriptions runs as high as $25 billion a year10. About 95 percent of patient education materials developed by drug companies never get distributed to patients11. More than 80 percent of all clinical trials are delayed be-cause of difficulty in recruiting research volunteers; depending on the drug being studied, these delays can cost pharma companies around $5 million a day in lost sales12. Delays can affect a company’s valua-tion, as investors closely watch the progress of new drug candidates through the clinical development process. Using marketing techniques to improve patient recruitment for clinical trials is advocated13, an inter-esting idea in light of the constellation of issues facing marketing dis-cussed in this paper. We have come full circle.

2004 was “one of the most painful in the history of Big Pharma.”

STRATEGIC CONTEXT

INTERDEPENDENT PROBLEMS

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STRATEGIC CONTEXT

Rearranging Mental Furniture The interdependency of so many problem situations, their urgency and implications for the future direction of two industries (marketing and pharmaceutical), and the potentially endless operational and contextual complexities in dealing with them, present a mosaic of busi-ness challenges that calls for an entirely different conversation about the structure of pharmaceutical marketing. This conversation should expose deeply rooted habits of thought and rearrange our mental furniture about marketing management. It should create conditions to push marketing itself into a new paradigm.

A DIFFERENT CONVERSATION

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STRATEGIC CONTEXT

The Systems Concept Systems theory is a different mode of thinking based on the primacy of the whole, principles of integration, and organized complexity. It focuses on interrelationships rather than things, for identifying patterns of change instead of static snapshots taken at a particular moment in time, for seeing the forest and the trees14. Systems thinking opens interactions for examination. It is a field whose lineage, and the emergence of core systems concepts, can be traced to parallel developments in biology, behavioral sciences, and control engineering in the first half of the twentieth century. There are two main strands of systems thinking – known as hard and soft approaches – and how they’re used varies based on the individual styles of systems practice. The vision of a general system theory was first introduced in the late 1930s by an Austrian biologist, Ludwig von Bertalanffy. Rooted in his search for a more holistic framework to study biology, and what he saw as the increasing fragmentation of knowledge at the time (decades before the internet), Bertalanffy emphasized the importance of analyz-ing interactive relationships and believed that certain common princi-ples apply to systems irrespective of their nature. He defined a system as a “complex of elements in mutual interaction” and believed that physical, technological, biological and social systems all shared struc-tural and functional similarities. Bertalanffy linked his thinking to ad-vances in contemporary physics at the time, and suggested that a sys-tems approach is basically a new attitude, a new orientation toward ideas of organization, where the parts and processes were ordered in light of the development, maintenance, and evolution of the system. Bertalanffy introduced the open-system concept that emphasized an inflow and outflow between the system and its environment. In this sense, systems are ideal-seeking, constantly evolving toward higher levels of organization and equilibrium based on information received from an external environment15. At the turn of the century, two biologists published their interactive view of natural phenomenon, and also introduced the concepts of emergence and emergent properties, in which the attributes of any part in isolation are not the same as when they are interacting with others in a whole. In other words, the system creates its own potential. This systems view also holds that emergent properties are destroyed when the system is dissected16. The rise of early computer technologies, and the subsequent study of communication and control between people and information technology, gave birth to the field of cybernetics in the 1950s, considered a revolutionary concept at the time. Cybernetics was primarily concerned with circular forms of causality, goal-seeking behavior, and studying the importance of information and communica-tion in regulating external, complex systems17.

A systems approach is basically a new attitude, a new orientation toward ideas of organization.

A NEW ORIENTATION

Systems thinking opens interactions for examination.

A system creates its own potential.

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STRATEGIC CONTEXT

Systems-Based Approaches

The fields of operations research, information theory, and management science arose in connection with World War II, growing directly out of the expansion of large-scale engineering projects, and from using sci-entifically-trained civilians in planning complex military operations that required close coordination between components. Early applications included developing anti-submarine tactics and the synchronization of radar and anti-aircraft artillery during the Battle of Britain18. In the period after the Second World War, considerable effort was made to apply the lessons learned from wartime operations research to industrial companies and government agencies. Systems analysis as a method of long-range research and strategic thinking was pioneered by the RAND Corporation, a military research and development institution concerned with broad strategic and policy questions that was founded in the late 1940s19. All four branches of the U.S. military currently use systems concepts for teaching strategic planning, developing doctrine, and designing weapons systems. That marketing and business today are often viewed in terms of warfare and military thinking is worth keeping in mind. The idea of feedback was another important development in under-standing systems. The sources of the feedback concept have been traced to six separate fields -- mathematical biology, econometrics, en-gineering, the social sciences, the biology of homeostasis, and logic – that reach as far back as Hippocrates and his holistic view of medi-cine20. Feedback helps understand interrelationships between different variables in complex systems. Jay Forrester, whose influential work on industrial and urban dynamics provided the foundation for the system dynamics group at Massachusetts Institute of Technology, worked with formal computer modeling techniques to simulate the nonlinear dynam-ics of feedback between variables. He inspired broader analyses of be-haviors in systems, including Peter Senge, who extended the concepts of system dynamics into five disciplines of organizational learning, of which systems thinking is the last discipline. Senge’s The Fifth Disci-pline has had considerable impact on management theory. The quanti-tative computer modeling techniques of system dynamics are now con-sidered the ‘hard’ systems approach to problem analysis. ‘Soft’ systems thinking takes the systems idea in another direction. The intellectual starting point for soft systems thinking was in the UK in the 1960s, based on the idea that an organization could be viewed as a system with functional sub-systems. Shaped by Peter Checkland fol-lowing consulting work applying systems engineering to the Concorde project, Checkland realized the need for a systems-based approach to solve problem situations which were not technically defined and also considered the complex systems in which human beings play essential roles. Soft systems methodology emerged as a way to organize learn-ing about complex, confusing situations with an overall aim of imple-menting change21. ‘Creative holism’ maximizes the value of various sys-tems approaches by using them creatively and in combination22.

Early applications included developing anti-submarine tactics and the synchronization of radar and anti-aircraft artillery during the Battle of Britain.

Peter Senge’s The Fifth Discipline has had considerable impact on management theory.

STRATEGY FOR COMPLEXITY

Soft systems thinking takes the systems idea in another direction.

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Systems Marketing

Systems marketing is a transformational concept based on applying general systems theory to marketing pharmaceuticals in the United States. Systems marketing accelerates the development of new mar-keting capabilities. It defines competitive strategy in a unique way and serves as a creative platform to design an infinite variety of enterprise marketing solutions, communications models and new business archi-tectures for all strategic and tactical levels within an organization. It ad-dresses the semantic problem, the technical problem, and the effective-ness problem of multiple stages of marketing activity and multiple deci-sion-makers within one framework. Systems marketing is based on the following assumptions:

• The reductionist, event-oriented worldview that dominates current marketing thinking is unable to cope with the dynamic complexity and instability of today’s information environment.

• Marketing is that discipline responsible for understanding and man-

aging the relations between the organization and its external envi-ronment23. A major purpose of information-processing in marketing is regulating interactions between the organization and the social systems it serves.

• A system is a set of components that work together for the overall

objective of the whole. These components can be physical objects, concepts, business activities, organizational structures, information-processing technologies, and performance measures.

• System, sub-system, and wider system are relative, subjective

terms. Choice is made by the observer. Systems are characterized by boundaries, a hierarchical structure, emergent properties, com-munications, and control. Systems can also be designed to serve other systems24.

• The primary role of brand communications is to coordinate behav-

ior. The intellectual and creative energy behind persuasive mes-sage and content planning should be directed at designing social systems, and serving the needs of those systems with an organiza-tion’s information asset. A secondary role for brand communica-tions is on increasing the value and capabilities of these systems by maintaining the particular configuration of parts and relationships within their boundaries. This is a dynamic strategy, in which mar-keting is used to evolve the relationships between the parts and keep them from falling into decay, and in ensuring collaborations between systems25.

• Component thinking is an element of systems thinking; component-

based design is a technique to discover those components whose measure of effectiveness is truly related to the performance of the overall system26.

The primary role of brand communications is to coordinate behavior.

Systems marketing addresses the semantic problem, the technical problem, and the effectiveness problem of multiple stages of marketing activity and multiple decision-makers in one framework.

A LOGICAL FUSION

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New Assumptions

• Tactical systems are a new kind of marketing tactic. Tactical sys-tems give brand managers a coherent, continuous picture of their business dynamics at the field level and are the primary model to measure return-on-investment holistically.

• Competitive advantage goes to those firms that do the best job of

managing the sequence of information flows through tactical sys-tems. The meaning of these information flows is incidental to deci-sion-making.

• Structure drives marketing strategy. The emergent properties aris-

ing from connecting components into systems will create new ways to design strategy.

• Everything is connected to everything else. The implications of this

deceptively simple statement are significant. Isolated measures of component activity are fundamentally flawed. In light of the com-plexity of today’s information environment, traditional decision-making processes to support sales forecasts, sales force productiv-ity, advertising effectiveness, sampling demand, or resource alloca-tion must evolve to study whole system effects.

The meaning of information flows is incidental to decision-making.

OPERATIONAL ADVANTAGE

SYSTEMS MARKETING

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SYSTEMS MARKETING

Adaptive Tactical Systems

One core application of systems marketing is the tactical system. A tactical system is a new operational framework for brand management, a coordinating mechanism, which links a set of marketing and sales components in a way that actively generates synergy among all its dimensions. Tactical systems assume sales force components, and their measure of effectiveness, should be a function of integration with marketing components. Similarly, tactical systems assume marketing components, and their measure of effectiveness, should be a function of integration with sales force components. Emergent properties arise through the integration and interaction of system components. Rather than judging performance of individual pieces and independent behavior based on fragmented data feeds, information that can give detailed but isolated pictures of what may or may not be working (i.e., a false positive or a false negative), tactical systems give a meaningful perception of the whole by studying system effects. In other words, the system is the tactic, the thing that gets measured. Tactical systems are designed. They are inherently subjective, entre-preneurial and creative, but conceived in a way that synthesizes differ-ent functional groups, organizational processes, components, and core technologies to form an output module. Tactical systems are branded. They become embedded in the marketplace as an asset and dynami-cally managed through a process which tries to ensure that the whole and its parts are continually refined in cycles of action27. Tactical systems are adaptive. They sense and respond to changes in the environment. System design is a process of progressive iterations and inquiry that connects three distinct, but inter-related platforms – structure, function, and process -- and evolves them over time based on feedback from their containing environment28. Environment makes up the things and people that are fixed or given from the system’s point of view29.

A COORDINATING MECHANISM

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SYSTEMS MARKETING

Iterative Progression of System Design

Figure 1. The complementary set of structure, function, and process. Reproduced from Jamshid Gharajedaghi, Systems Thinking, Managing Chaos and Complexity, A Platform for Designing Business Architecture (Burlington, MA: Elsevier, 1999), p. 113. Reprinted with permission. Theoretically, a system has no beginning and no end, and any system configuration has an unlimited num-ber of properties, a hierarchy of systems complexity30. The boundaries are defined by the focus of the de-signer. System design begins with an idealized perspective on what is hoped for; it is assumed that an organization can bring the resources to bear and implement change to achieve the vision for the system. There are three inter-related platforms to system design, an iterative process which evolves over time based on the system’s interaction with its environment: (i) Structure (inputs), where the boundary of the system, the components to integrate, and the relationship between components are defined. A given structure can produce several functions in the same environment; (ii) Function, which defines the business objectives and purpose of the system, and system outputs; and (iii) Process, which defines the specific sequence of activities and know-how to produce the desired outcomes. Combined, structure, function, and process form the interdependent set of variables that define the whole 31.

After each iteration: synthesize the informa-tion from the market-place into a coherent image of the whole, adapt planning, imple-ment subsequent pro-gression

STRUCTURE

F U N C T I O N

P R O C E S S

ENVIRONMENT

P R O C E S S

P R O C E S S

F U N C T I O N

F U N C T I O N

STRUCTURE

STRUCTURE

ENVIRONMENT

ENVIRONMENT

1st

Progression (start)

2nd Progression

3rd Progression

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Brand Module: An Enterprise Marketing Solution

What follows summarizes how systems marketing can be applied to design brand module, a prototype tactical system for a primary care drug nearing the end of its patent life. Brand module is an example of a total system intervention32. It connects three subsystems – a brand communications system, a sales force management system, and a management information system – into an enterprise marketing solution whose main function is efficiently harvesting new patient starts (NRx top-line growth) in Scottsdale, Arizona. Brand module achieves total awareness of marketing dynamics at the field level. During the design stage, assumptions about business strat-egy are surfaced and evolved, redundancies between the marketing plan and the marketing environment are identified, inputs and outputs are chosen, questions about sales force effectiveness and right-sizing are addressed, and the criteria for measuring value based on whole system effects are determined. Marketplace auditing during the design stage will identify layers and options in the environment – formulary, timing and regulatory considerations, collaborative commerce channels, population health initiatives, distribution networks -- that can become inputs for model-building and performance measures. The idea of progression is important. Bertalanffy described four princi-ples that characterized the process of differentiation in living systems:

• Progressive integration, as the parts become more dependent on

the whole; • Progressive differentiation, as the parts become more specialized; • Progressive mechanization, as the parts become fixed to a single

function; and • Increasing Centralization, as certain parts gain predominance over

the others33. The business objectives for brand module, its structure, the range of functions it can provide, as well as the process involved to design and manage its interaction with the environment, evolve through progres-sions of marketing integration. As the tactical system becomes more deeply embedded in the marketplace, and managed as a corporate as-set that can accommodate more and more marketing components and functions (harvesting new sales and improving patient compliance and driving recruitment for clinical trials and negotiating formulary advan-tage and optimizing portfolio management), the components them-selves will evolve to specialized roles supporting the tactical system, form new subsystems and functions within the wider system, and inte-grate with other components in relationships that were previously un-foreseen. Slack in the system – i.e., marketing waste and inefficiency -- will be identified and removed in successive iterations.

Progression also provides a path that an organization can take, using a tactical system as a first step, to align their operations in a way that is in tune culturally with their needs.

Slack in the system — i.e., waste and inefficiency — are removed in successive iterations.

Marketplace auditing during the design stage will identify redun-dancies between the marketing plan and the environment, dis-tribution networks, and collabo-rative commerce channels that can be integrated into the whole.

An example of a total system intervention. The main function of brand module is to efficiently harvest new patient starts.

HARVESTING NRx EFFICIENTLY

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BRAND MODULE

The 1st Progression of Marketing Integration

For the 1st progression of marketing integration, the starting point be-gins by identifying a unifying structural component at the field level – in this case, an abstract on a clinical study of the drug presented at the Arizona Geriatric Society Annual Meeting on November 6. The abstract has news value for all print and broadcast media in the state of Arizona, creating an opportunity to connect a publicity component to the data presentation. Knowing the time-frame of the data presentation and pub-licity output allows the consumer media buy to be directed locally and pulsed in the same time sequence. Satellite symposia can be sched-uled to reach all of the hospital and health systems in the state around the publicity and publication plan activities. Sampling can be synchro-nized to patient inflow to physician offices. Longitudinal patient data can be localized for Arizona and connected to marketing components. And so on…All marketing components are designed to execute at the ‘push of a button’ within the boundaries of the system. The intent is to closely-couple information flows to prescribers and consumers.

SYNCHRONIZED ACTION

All components are designed to execute at the ‘push of a button’ within the boundaries of the system in order to deliver multi-ple message inputs to prescrib-ers and consumer simultane-ously.

BRAND MODULE (Example is for Scottsdale, AZ)

“Push Button” Marketing

Components

(Event-Based) Marketing Automation

Information

Flows Sequenced November 1-14,

2005

(subordinate message = message interactions)

FIELD-LEVEL PUBLICATION PLAN COMPONENT

- Abstract at local meeting (subordinate message)

- Arizona Geriatric Society Annual Meeting (November 6)

FIELD-LEVEL PUBLICITY COMPONENT

- Publicity around abstract (subordinate message)

- Local evening news in Arizona

DTC ADVERTISING COMPONENT

- Reminder/brand awareness (subordinate message)

- Media buy “pulsed” around publicity on November 6

MEDICAL EDUCATION COMPONENT

(subordinate message) Satellite Symposia -

Arizona Health Sciences Center -

TECHNOLOGY COMPONENT

Point-of-care MD education (e.g., Epocrates) -

Target prescribers in Arizona -

MANAGED CARE COMPONENT

(subordinate message) Distribute content -

Blue Cross/Blue Shield plan members in AZ -

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BRAND MODULE

Subordinate Messages Tactical systems introduce the idea of subordinate messages as an emergent property. Rather than trying to repeat the branding in as many different media channels as possible, a tactical system optimizes message interactions between components. Lipitor, for example, is ap-proved to lower cholesterol, which is currently the primary benefit mes-sage communicated for the drug in promotional content. Lipitor belongs to a class of drugs called statins, however, and the science of statins is rapidly demonstrating great potential benefit for this drug class for a range of conditions, including osteoporosis, multiple sclerosis and Alz-heimer’s. There is considerable difference in pharmaceutical marketing between what messages can be communicated (using medical educa-tion components, for example), what messages can be communicated on behalf of an organization (using public relations components) and what messages can be communicated within the context of approved brand labeling (using consumer promotion components). Structure drives strategy. A tactical system – and leveraging the prop-erty of emergence within it – allows consideration of multiple kinds of benefit messages, brand and science, that can be closely-coupled and communicated simultaneously. This element has significant implications for strategic planning: Should the thrust of business strategy for Lipitor focus on the drug as a statin or as a cholesterol-lowering agent?

Rather than trying to repeat the branding in as many different media channels as possible, a tactical system optimizes message interactions between components.

MESSAGE INTERACTIONS

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BRAND MODULE

Systems Management: Sense & Respond Some management theorists propose an input-output approach to systems management, using the view of a “black box” as a way of controlling systems. The innards of the black box are less important to understand; one is mainly concerned with the inputs to the box so as to maximize the quality of the outputs35. Input and output flows can be physical (e.g., materials, money) or abstract (e.g., information, energy). The design process for brand module incorporates the ‘black box’ management concept to capture communications feedback from the environment, measure precise and specific performance of the overall system, and lay out an interactive type of planning that can adapt to changes in the environment36 Integrating brand module with business intelligence components forms the management information system. New data-sets are captured from brand module as it interacts with its environment, analyzed through a digital dashboard (or business intelligence portal), and then rapidly ap-plied to evolve the system and its functions. Marketing performance management strategies are based on calibrating brand module via this feedback, measuring the incremental change from adding components to the box, and synchronizing their information flows to the marketplace. One can envision an organization using brand module as a way to evaluate vendor services and their integrative compatibility to the over-all whole before making long-term investment decisions (i.e., on-demand contracting).

ADAPTIVE PLANNING

John Singer, MD (PrimaryCare Physician inScottsdale, AZ)

Business

Intelligence Portal

New Data Sets

Data Mart

Data Warehouse

Analytics/Data Mining Tools

(Predictive Modeling)

Brand Module

Marketing ResourceManagement

("Manage the Box")

BRAND MODULE:

Communications Feedback & Control

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BRAND MODULE

Marketing Integration with Sales The 2nd progression of marketing integration focuses on synchronizing brand module output with sales force management. Pharmaceutical companies gather considerable and increasingly precise data about sales force effectiveness and prescribing patterns using sales force automation, customer-relationship management, longitudinal patient information, and sampling management components. Despite the rich-ness of all this available data, physician access and sales force effec-tiveness remain a stubborn problem.

The pharmaceutical industry’s approach to addressing rapidly diminish-ing returns from ever larger sales force investments has been to isolate the problem as a sales force operations issue, or to define the sales force problem with solutions the industry already has. Off-the-shelf technology applications that allow deep levels of customer segmenta-tion are driving strategy recommendations based on “calling on the right doctor, with the right message, the right number of times”37. Alterna-tively, Pfizer’s lead will be followed, and big pharmaceutical companies will begin rolling back what has been described as a sales force arms race. Systems marketing assumes the meaning of a brand message (i.e., the drug’s functional attributes) for many drugs is incidental for decision-making. This is particularly true for primary care drugs, where func-tional attributes, brand imagery, creative programs, and messages are often at parity with, if not identical to, a competitor’s tactics for drugs in the same class. Serving the health information needs of the entire office is also advocated as a ‘customer-centric’ approach, although the extent to which these information needs are already served by the environ-ment is an overlooked dynamic. The systems marketing methodology asks questions, surfaces assumptions, and defines problems about key performance indicators, sales force productivity and right-sizing within the context of a wider system, one that connects the output from brand module to interact with the hierarchy of systems in territory manage-ment.

The functional attributes of many drugs are nearly identical.

Tactical systems assume sales force components, and their measure of effectiveness, should be a function of integration with marketing components.

THE SECOND PROGRESSION

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BRAND MODULE

Synchronizing Brand Module Output With Sales Stimulating a system creates a network of effects — feedback and flows — at various points throughout its structure. Capturing and controlling the pattern of these behavior changes, and their rates of change over time, enables a holistic form of territory management that can interface with current SFA and/or CRM platforms. In the systems map below, when the call plan is synchronized with the output from brand module, different kinds of consumptive behavior — i.e., prescriber contact rates, sampling demand, patient inflow to the office, decile change, calls to the help desk, script writing, script dis-

pensing – will take place (the +/- ) throughout a hierarchy of subsys-tems. Each subsystem is its own story to understand, learn from, and adapt to the larger whole. Analyzing subsystems will answer questions about message strategy, operational alignment, health content design, supply chain coordination, performance measures, business objectives, resource allocation decisions, and the linkages and interactions be-tween them. It also allows systems to be reconfigured quickly based on events in the marketplace.

DEMAND-BASED METRICS

John Singer, MD (PrimaryCare Physician inScottsdale, AZ)

Sales Force (1)

Territory ManagementSystem

PrescriberDynamics

SamplingDynamics

DetailingDynamics

PrescribingDynamics

Office DynamicsContact Rates

Access

Patient Inflow

Care ManagementInitiatives

Patient Base

Detail Sensitivity

PatientCharacteristics

Place

Time Allowed

Synchronized BrandBenefit Message

Health InformationNeeds

Friends & FamilySupplementation

Health PlanSupplementation

InternetSupplementation

Advocacy GroupSupplementation

FormularyStatus

Decile

PrescribingChange

+/-

+/-

+/-

+/-

Brand TeamSupplementation

+/-

Brand Module

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An Embedded Corporate Asset One of the operating principles for tactical system management is that it becomes embedded in the marketplace as a corporate asset. Evolved over time by brand teams, tactical systems can accomplish multiple functions simultaneously, integrate more components and processes around a unified vision of strategy, achieve total awareness of the local operating environment, meet business objectives more effectively, and serve a greater diversity of customer segments more efficiently.

Managed and evolved over time, tactical systems can inte-grate more components around a unified vision of strategy and serve a greater diversity of cus-tomers with speed and effec-tiveness.

EVOLUTION

BRAND MODULE (Example is for Scottsdale, AZ)

“Push Button” Marketing

Components

(Event-Based) Marketing Automation

Information Flows

Sequenced November 1-14,

2005

(subordinate message = message interactions)

Brand Module: 3rd Progression of Marketing Integration

FIELD-LEVEL PUBLICATION PLAN COMPONENTS

- Abstract at meeting (subordinate message)

- Arizona Geriatric Society Annual Meeting (November 6)

- Arizona Medical Association

- Arizona Diabetes Association

FIELD-LEVEL PUBLICITY COMPONENTS

- Publicity around abstract (subordinate message)

- Local evening news in Arizona

- Newspapers in Arizona

- Consumer magazines in Arizona

LOCAL ADVERTISING COMPONENTS

- Reminder/brand awareness (subordinate message)

- Consumer broadcast media buy “pulsed” around publicity

- Professional buy in state medical journals

- Direct mail to data warehouse in Arizona

MEDICAL EDUCATION COMPONENTS

(subordinate message) Satellite Symposia -

Arizona Health Sciences Center -

VA Medical Center -

Banner Health -

TECHNOLOGY COMPONENTS

Sales force automation (e.g., Siebel) -

Point-of-care education (e.g., Epocrates) -

Longitudinal patient data (e.g., Pharmetrics) -

Electronic detailing (e.g., Medsite) -

LOCAL MANAGED CARE COMPONENTS

(subordinate message) Distribute brand content -

United Healthcare plan members in Arizona -

Blue Cross/Blue Shield plan members in Arizona -

Arizona PPO Networks -

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A CORPORATE ASSET

Dynamic Portfolio Management The idea of special-purpose modules deployed in a series has been introduced by others in the systems field. Each special-purpose module has unique behavioral characteristics and performance measures that are independent to the behavior of other peer modules in the platform38. Extending this concept to brand module creates a new approach to pharmaceutical lifecycle planning and portfolio management.

A new approach to portfolio management.

DEPLOYED IN A SERIES

Brand Module (drug a) Brand Module (drug c)

Brand Module (drug d) Brand Module (drug b)

January December

Scottsdale, Arizona

BRAND MODULE: 10th PROGRESSION Dynamic Portfolio Management (weekly, monthly, quarterly)

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A CORPORATE ASSET

Coordinated Changes Tactical systems achieve coordinated changes in motivation, knowl-edge, and understanding that become more precise and predictable with experience. Their value to managers can be summarized in the following points: • The tactical system concept is an ‘inclusive’ approach to marketing

integration that emphasizes the benefits of incorporating the values of all stakeholders in planning and decision-making39.

• Tactical systems are a complete vision of marketing integration. They provide new metaphors, orientations, language, and detailed models for solving critical issues of marketing and sales manage-ment for a complex information environment.

• Tactical systems will create emergent properties. Conventional as-sumptions about strategy and effectiveness based on isolated as-sessments of component performance will shift to a different mode of thinking based on holism. Tactical systems open the door to unlocking value from synchronizing message frequency with mes-sage integrity, ad pulsing, capturing message decay, and creating whole new categories of process and service benefits bundled with product offerings.

• Tactical systems are an asymmetric marketing tactic. Their unique structure and function changes the nature of competition.

AN ASYMMETRIC TACTIC

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SYSTEMS MARKETING

A New Path to Alignment Systems thinking and ideas are still quite rare in most organizations; it is often construed to mean something related to computers, which is an obstacle to its broad adoption by front-line managers. The systems approach, however, is simply a different way of understanding the world and going about finding solutions to messy problems. As the chaos of marketing intensifies for all industries, as the pace of change – techno-logical, social, cultural, and environmental – accelerates exponentially, and as the institutions and ideas that have guided us in the past fail to solve systems of problems, a new approach to manage the complexity of marketing is called for. This paper introduces systems marketing, a new operating model for marketing with practical applications for all industries. It focused on adaptive tactical systems as a coherent, actionable, reproducible pathway for the pharmaceutical industry to reorient itself to the prevailing winds of the future, and to begin marketing within the context of everything else.

_________

Solving systems of problems.

MARKETING TRANSFORMATION

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End Notes 1J. Walker Smith, ”The New Consumer: The Craving for Comfort and Connection”; results from Yankelovich Monitor Survey (presented at the 2003 American Association of Advertising Agencies Management Con-ference). 2”Marketing and the Changing Information Environment: Implications for Strategy, Structure, and the Marketing Mix,” Marketing Science Institute Report No 89-108, 1989. 3Morningstar. 4Nielsen Monitor-Plus, “U.S. Advertising Spending Rose 8.3% in the First Three Quarters of 2004, Nielson Monitor-Plus Reports,” December 9, 2004. 5National Conference of State Legislatures, “Read Two Drug Ads and Call Me in the Morning,” March 2002 State Legislatures Report, up-dated January 20, 2005. 6Food and Drug Administration, “Patient and Physician Attitudes and Behaviors Associated with DTC Promotion of Prescription Drugs, FDA Survey Research Results,” Final Report, November 2004. 7”Sales Growth, For What?”, Pharmaceutical Executive, September 2004 8”Access to High Prescribers: The World of the Doorknob Detail,” The Health Strategies Group, Palo Alto, CA, 1999. 9IMSHealth, “Total U.S. Promotional Spend by Type, 2003”. 10Datamonitor, “Improving Patient Compliance: Utilizing on-line and mo-bile compliance tools,” (July 16, 2003). 11K.L. McVea and M. Venugopal, “The organization and distribution of patient education materials in family medicine practices,” Journal of Family Practice 2000;49(4):319-326. 12”Clinical Trial Delays Boosting Cost, Slowing Pipeline,” The Food & Drug Letter, Issue No. 686, October 24, 2003. 13McKinsey & Co., Inc., “A cure for clinical trials,” The McKinsey Quar-terly, 2002 Number 2. 14P. Senge, “The Fifth Discipline, The Art & Practice of the Learning Organization” (New York: Currency Doubleday, 1990).

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End Notes (cont.) 15D. Hammond, “The Science of Synthesis, Exploring the Social Impli-cations of General Systems Theory” (Boulder, CO: University Press of Colorado, 2003). 16F. Capra, “The Web of Life” (New York: Anchor Books, 1996). 17D. Hammond, “The Science of Synthesis, Exploring the Social Impli-cations of General Systems Theory” (Boulder, CO: University Press of Colorado, 2003). 18P. Checkland, “Systems Thinking, Systems Practice” (West Sussex, England: John Wiley & Sons, 1999). 19F. Capra, “The Web of Life” (New York: Anchor Books, 1996). 20G. Richardson, “Feedback Thought in Social Sciences and Systems Theory” (Philadelphia: University of Pennsylvania Press, 1991). 21P. Checkland, “Systems Thinking, Systems Practice” (West Sussex, England: John Wiley & Sons, 1999). 22M. Jackson, “Systems Thinking, Creative Holism for Managers” (West Sussex, England: John Wiley & Sons, 2003). 23”Marketing and the Changing Information Environment: Implications for Strategy, Structure, and the Marketing Mix,” Marketing Science Insti-tute Report No 89-108, 1989 24P. Checkland, “Systems Thinking, Systems Practice” (West Sussex, England: John Wiley & Sons, 1999). 25E. Laszlo, “The Systems View of the World, A Holistic Vision for Our Time” (Cresskill, NJ: Hampton Press, 1996). 26W. Churchman, “The Systems Approach” (New York: Dell Publishing, 1968). 27P. Checkland, “Systems Thinking, Systems Practice” (West Sussex, England: John Wiley & Sons, 1999). 28J. Gharajedaghi, “Systems Thinking, Managing Chaos and Complex-ity, A Platform for Designing Business Architecture” (Oxford, England: Butterworth Heinman, 1999). 29W. Churchman, “The Systems Approach” (New York: Dell Publishing, 1968). 30P. Checkland, “Systems Thinking, Systems Practice” (West Sussex, England: John Wiley & Sons, 1999).

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End Notes (cont.) 31J. Gharajedaghi, “Systems Thinking, Managing Chaos and Complex-ity, A Platform for Designing Business Architecture” (Oxford, England: Butterworth Heinman, 1999). 32M. Jackson, “Systems Thinking, Creative Holism for Managers” (West Sussex, England: John Wiley & Sons, 2003). 33L. Bertalanffy, “Problems of Life An Evaluation of Modern Biological Thought” (New York: John Wiley & Sons, 1952). 34A. Berenson, “Some Analysts Expect Job Cuts from Pfizer,” The New York Times, February 9, 2005. 35W. Churchman, “The Systems Approach” (New York: Dell Publishing, 1968). 36P. Checkland, “Systems Thinking, Systems Practice” (West Sussex, England: John Wiley & Sons, 1999). 37J. Gharajedaghi, “Systems Thinking, Managing Chaos and Complex-ity, A Platform for Designing Business Architecture” (Oxford, England: Butterworth Heinman, 1999). 38M. Jackson, “Systems Thinking, Creative Holism for Managers” (West Sussex, England: John Wiley & Sons, 2003). 39W. Churchman, “The Systems Approach” (New York: Dell Publishing, 1968).

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