There's the old saying that what's good for the goose is good for the gander. But does one drugmaker's advertising actually benefit its rivals? According to a new report, the answer is yes.
University of Chicago assistant professor of marketing Bradley Shapiro lined up sales and advertising data, zeroing in on boundaries of local advertising markets to find viewers who lived close to one another but were seeing different sets of DTC ads. He also collected doctor detailing information and drug sales information that was sorted geographically. Shapiro's research showed that one drugmaker's antidepressant campaign spills over onto its neighbors, producing a halo effect for an entire group of drugs. Some brands backed off of advertising when a rival loaded up on TV commercials, to piggyback on someone else's ad spending.
This sort of category-growth effect is common in advertising, but for drugs, there's another layer involved. As Shapiro points out, viewers can forget the name of a specific drug from an advertisement but identify with the general health issue. When they ask their doctors, the physician decides which med to prescribe--and it may well be a different drug than the one advertised.
Shapiro looked at Eli Lilly's ($LLY) depression behemoth Prozac, and suggested a scenario where 20% of people take antidepressants, and Prozac holds a 25% share of the market. Lilly runs a Prozac ad campaign, which increases sales of not only of Prozac, but other antidepressants, expanding the percentage of people who use the drugs to 30%. More people take Prozac as a result of the campaign, but the real, long-lasting impact is on the overall market for antidepressants, benefiting rival products like Pfizer's ($PFE) Zoloft of GlaxoSmithKline's ($GSK) Paxil, which were rival products at the time.
That doesn't mean individual companies should simply eliminate their ad budgets and ride the wave of one brand's DTC push. Shapiro's research suggests that there is a limit to the halo effect. In the end, while Zoloft might have benefited from Lilly's Prozac advertising, it's Prozac that benefits most. On the other hand, there's a limit to the effectiveness of DTC ads when rivals are on the airwaves, too; the ROI for a brand's own advertising tends to be highest when no one else is advertising in the same category, Shapiro shows. Backing off of DTC ads when another company is going full throttle could make sense; in fact, in one of Shapiro's examples, Prozac ads did diminish when Paxil was heavily advertised, and Paxil slowed down as Prozac surged.
If drug marketers get tired of making these sorts of complicated judgments, Shapiro suggests a "win-win" solution. U.S. drugmakers could band together in an advertising cooperative, he says, akin to the U.S. dairy industry and its famous "Got Milk?" ads. Under this model, free-riders would be eliminated and companies could together produce ads that raise awareness about symptoms without pitching a branded product. Shapiro estimates that co-op advertising could increase the total number of antidepressant prescriptions by 18% and profits by 14%, a potential boon for the industry.
Of course, pharma companies already have lots of experience with awareness campaigns--and know they work. A recent study published in the British Journal of Cancer took a look at the National Health Service's Be Clear on Cancer campaign, and found that 33% of 1,100 participants knew that a three-week cough was a cancer symptom. Before the campaign, only 18% of participants were aware of that fact. But that doesn't mean drugmakers are likely to give up on their own branded ads anytime soon.
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