Consumer healthcare client faced with under-performing marketing

Challenge

The client was the German division of a large multinational healthcare company with sales exceeding $20 billion. Client marketing spend was geared towards direct to consumer advertising, with TV accounting for more than 50% of the budget. The seven-brand portfolio had a high spend- to-sales ratio of 25%, and management wanted to to increase efficiency by optimizing marketing spend.

Solution

Marketing Analytics constructed models to measure the sales effects of key marketing vehicles targeted to consumers as well as those targeted to pharmacists. These models were built using a wide variety of data sources including IMS, media agency, client internal data and financials, and government records.

The models found that 13% of sales were due to marketing programs. TV commercials, pharmacy displays, and sales calls on pharmacists had the largest contributions. However, this was unprofitable relative to the 25% spending-to-sales ratio.

Marketing Analytics developed two scenarios to improve profitability:

1.       Reduce spending 10% and optimize smaller budget

2.       Hold spending and optimize current budget

The reduced spend scenario increased profits while maintaining sales. The constant spend scenario provided higher sales and slightly more profit. The client CEO and CFO opted for reduced marketing spend.