Dr. Ned Roberto and Ardy Roberto
Inquirer

QUESTION: To help boost sales, our marketing department always comes up with sales promotions. One promo is targeted at the trade and the other at our consumers. Usually we’ll come up with different ideas but more often than not, we all go back to the favorite “Free t-shirt,” or “price-off” or “buy-one-take-one” promo type of thing. Sometimes the decisions are by default because we can’t or don’t know how to decide on what promo to do. Can you help us?

Answer: Many of today’s successful marketers use market research to support their sales promotion decisions to avoid the trap of getting into mindless sales promos.

Having said that, among the marketing mix elements requiring research support, sales promotion decision is the most difficult to help. The first difficulty comes from the many forms and combination that sales promotion takes. Author William Robinson traced the multiple forms as derivatives of “12 basic sales promotion techniques.” But even with just 12 forms, he says “these 12 can be combined 845,059,745 different ways.” The situation has led Magid Abraham and Leonard Lodish to say in their classic Harvard Business Review article “Getting the Most Out of Advertising and Promotion,” that belief in sales promotion’s effectiveness “has largely been a matter of faith.”

Will this promo work?

We feel for you because, in addition, the situation is made even more difficult because of poor sales promotion decision-making practice. You seem to be in that situation. The sales promotion decision process is often started at the end rather than at the beginning. A particular sales promotion technique, say product sampling, is picked. Then the marketing executive asks: “Will this promo work?” The selection of the promo technique or combination of techniques should have come after an analysis of the target consumer behavior, not before.

Let’s suppose that a company has a Usage, Attitude, Image, or UAI, market research. Let’s suppose that the UAI shows that consumers are not behaving as you desire. Suppose further that the analysis suggests that what can change their behavior in the right direction is a product sampling promo or a combination led by sampling. Then and only then should the sales promotion selection take place, namely, at the end rather than at the start of the decision process. Once sales promotion is in place, the marketing executive’s concern shifts to whether it is working or not, i.e., its post-launch effectiveness. This post-decision research question evaluates the sales promotion decision but doesn’t have research to support that decision. It is a mistake to confuse the two when talking about sales promotion research. Each has its own use and requires its own research support.

There are basically two aspects of sales promotion that demands research support. The first of these research supports seeks to determine the suitable sales promotion tool or tools for changing a needed consumer usage or buying behavior. For simplicity, we refer to this as “sales promotion decision research.”

The second research evaluates how effective an implemented sales promotion is and finds out why it is effective or ineffective. We refer to this as “sales promotion evaluation research.” (Read Chapter 12 of Dr Ned Roberto’s User-Friendly Marketing Research where this column is based if you want to learn more about using research to support promo decisions.)

How pharmas do trade sales promos

Let’s take how the cutthroat pharmaceutical industry does its retail trade sales promos. In the pharmaceutical industry of the Philippines, it is a practice to distinguish the sales of a medical preparation as coming from three sources. The first of these is the doctors’ prescriptions. Called the ethical prescription sales, these sales are directly traceable to the doctors’ prescriptions of the brand. The second source is “the ethical OTC (over-the-counter) sales.”

These are purchases that users of the medical preparation make based on a previous prescription or some evidence of previous use or just on the users’ own decision. These are different from a third source carrying also the “OTC” term, “the proprietary OTC sales.” Such sales are for a medical preparation that has been classified as an “advertised product” in contrast to being an “ethical product.”

The difference between a proprietary OTC and an ethical OTC sale is the presence of mass media advertising support in the former and its absence in the latter.

Consider an ethical medical preparation brand (as against an advertised brand) whose ethical prescription sales ratio is much less than its ethical OTC sales ratio. The industry refers to this case as one where the Rx/OTC ratio is dominated by the OTC proportion.

When encountering this kind of ethical brands, one thing becomes clear — the larger the OTC percent over the Rx percent, the more the contribution of ethical OTC sales is to total revenue as against prescription sales’ contribution. In such cases, ethical promotion efforts for prescription sales and for continuing doctors’ endorsement remain important. However, the much larger portion of total revenue coming from ethical OTC sales means this revenue contribution needs protecting and active ethical OTC promotion support. Most pharmaceutical marketing executives have experienced how their competitors’ ethical OTC promo activities can intercept their brand’s sales at point of purchase.

These activities include efforts like providing drugstore incentives, “mystery buyer” campaigns, drugstore PR efforts, and similar drugstore-based ethical OTC promotional activities.

Many pharmaceutical marketing executives still overlook the need of their existing ethical brands for an ethical OTC promotion program. They should be reminded that at any given time, their existing ethical brand’s total sales is the sum total of its ethical prescription sales and its ethical OTC sales. To increase total sales, they must do something about increasing both prescription and ethical OTC sales.

The appropriate research for knowing and understanding what to do in the ethical OTC promotion is to survey drugstores.

To put it simply, the survey asks the drugstore clerks and operators for the last four or five brands that they last sold for a particular ailment (e.g., what anti-asthma brand did you last sell?). The survey then goes on to ask them to talk about their impressions of the ethical OTC promotions efforts and activities of these anti-asthma brands and asks for which they thought was the best promo tool, etc.

This enables pharma marketing executives to learn what old and new tricks competitor brands have been and are doing in this area. In the present case, it is a “competitive benchmarking survey of drugstores.” Its main rationale proceeds from the premise that everything that competitors have done and are doing in ethical OTC promotion takes place in the drugstores. They pass through the experience of and register in the memories of the large drugstore counter clerks and small drugstore owners and operators. A competitive benchmarking study draws the ethical OTC promotion data from those memories.

The research is a personal interview survey of a random representative sample of drugstore counter clerks, owners, or operators. To facilitate sampling of the respondent drugstores, the research can use the “Pareto” population of drugstores for its sampling frame.

The Pareto drugstore population refers to the 20 percent of drugstores in, say Metro Manila, accounting for 80 percent of total sales of all Metro Manila drugstores. Data from the appropriate sample drawn from this sampling frame are true and projectable to 80 percent of the business. (Remember that it helps to partner with your friendly neighborhood market research agency.)

Focus Group Discussion

Finally, it is important to keep in mind that promotional tools are continually changing and expanding. Like fashion items, they come in and out of the scene. When a once “trendy” promo tool goes out of fashion and leaves the scene, it is likely that two or three newly concocted tools will quickly take its place. This only means that the benchmarking study must be on top of the changes.

How do benchmarking pharmaceutical marketing executives get to know all these? How do they determine which ethical OTC promo tools were used during the period being benchmarked? How do they distinguish in the questionnaire checklist of promo tools those that ended within the benchmarked period from those that went on to a succeeding period? How do they keep current on the changes taking place about the “old” promo tools and the “new” ones?

This is a job for a quick FGD (Focus Group Discussion) study undertaken before the competitive benchmarking survey. For those working on a tight research budget, two groups of drugstore counter clerks, operators, or owners should suffice to serve the purpose.

The objective is to generate a comprehensive list of the pertinent ethical OTC promotion tools used by different competing brands during the promo period being benchmarked. It is this generated checklist of pertinent ethical OTC promotion tools that then gets into the competitive benchmarking study questionnaire.

How frequent should the monitoring FGD study be carried out? The answer depends on the study’s timing. If it follows a semestral schedule, then a semestral FGD study schedule can be carried out before each semester’s drugstore benchmarking survey.

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