Measuring Promotional ROI Benchmarking Insights March 16, 2004

1. Measuring Promotional ROIBenchmarking InsightsMarch 16, 2004 Presented to: Presented by: The Pharmaceutical Marketing Club of Quebec

2. PromotionalBenchmarking & ROI Presented by: Richard C. (Dick) Anderson Vice President & Managing Director Mattson Jack ROI 9 Campus Drive 2nd Floor East Parsippany, New Jersey 07054

3. Why analyze the CAMPAIGN? Integrated Analysis of Promotion Yields: Measures of effectiveness regarding the interaction & impact of each promotional element within the campaign and in a market Impact of the Products Promotional Campaign versus the competitive environment and competitive activity Optimization of promotional mix: Levels within & between products Balanced within product by modality Timing and timed relations by modality Analysis of competitive campaigns Promotion and mix insight into future competitive market conditions Analyzing the Promotional Campaign

4. Promotional Benchmarking • MJG Research has shown that: • All forms of promotion CAN WORK if they are done correctly, under the proper environmental conditions and budgeted properly. • The BALANCE, TIMING AND LEVELS, within the promotional MIX are critically important to the effectiveness of your promotional program.

5. The Role of Promotional Optimization • First, nothing said todaynegates or replaces basic marketing or promotional theory. It is simply a means of measuring and quantifying the sequence of events that must occur for promotion to work. • Create and Convert new prescription and market share Instability(or volatility) into: • New Prescription • Market Share • Our extensive research reveals that (on average) 35%* of your results are directly attributable to your promotional campaign, while the remaining 65% is dependent upon your product’s market and competitive environment. Note:*MJG has seen instability accountability ranges of 5% to >60% attributable to the marketers promotional campaign

6. Promotional Benchmarking Inputs • 60 months of product level data for all products in competitive set: • NRx and TRx’s • Audited • Details – Primary, Secondary, & Tertiary; w & w/o samples • Samples – Samples & Extended Units • Physician Meetings & Events – Dollars & Events • Professional Print – Pages & Inserts • Direct-to-Consumer: • Television – Network, Cable, Syndicated, Spot, etc. • Print – Pages, Dollars • Magazines • Newspaper • Radio – Network, spot, etc • Other client driven data

7. Promotional Benchmark Input • Financial Inputs: • Average/Marginal Cost of a call – and allocation across primary, secondary and tertiary position • Marginal Cost of a sample • Average/Marginal Cost per Pages • Average/Marginal Cost of an PME Event • Average/Marginal Cost per GRP/TRP • For Television – by type • For Print – by type • For Radio – by type • Marginal Profit contribution of 1-Rx

8. Market Environment Promotional Environment Total Competitive Environment Disease Environment Product Environment Integrated Competitive Environment This is the heart & soul of efficient & effective promotional planning

9. What Constitutes each of these Environment? • Market Environment • Size – NRx’s & TRx’s • Dynamics • Acceleration • Velocity • Momentum • Econometric Structure • Instability – NRx’s and Market Share • Concentration • Location • Dominance

10. Environment - continued • Promotional Environment • Level of Activity for each modality • Dynamics – of each modality • Acceleration • Velocity • Momentum • Econometric Structure – of each modality • Instability – NRx’s and Market Share • Concentration • Location • Dominance

11. Environment - continued • Product Environment • Number of competing products • Age of each of these products • Number of competing therapies • Age of each of these therapies • Product usages • Indication(s) • Acute -vs- Chronic Spectrum

12. Environment - continued • Disease Environment • Acute -vs- Chronic • Severity • Type • Treatment Rate • Awareness

13. Velocity Momentum NRx Share Benchmarking Measures & Indices You must develop an understanding of the product & market dynamics • Leading indicators : • Acceleration • Velocity • Momentum • Level of Activity • Market Responsiveness or Elasticity: • Concentration (uniformity) • Product position • Momentum • Market Instability • Product Accountability: • Effect of promotion  product gain &/or loss month • Strategic Brand Planning • Marginal ROI Analysis Acceleration

14. Market Share Market Share Velocity Market Share Velocity Market Share Acceleration Velocity & Acceleration

15. The Modeling Process Creating the Proper Analytic Variables

16. Promotion at Work • Starting questions: • Is the impact of promotion on NRxs and Market Share direct or indirect? • Is the impact of promotion independent of product age? • Is the impact of a given promotional modality independent of other promotional modalities? • Is the impact of promotion, for a given product, independent of the competitive products? • Is impact of promotion affected by inconsistency and/or Instability? • Etc., etc., etc.

17. Aggregated Promotion (all Products) Market Acceleration: NRx Growth Market Velocity: NRx Growth Market Market Impact: NRx Instability Share Instability Market Momentum: NRx Growth Market NRx’s NRx Accountability Share Acceleration Product Promotion Product Share Accountability Share Velocity Share Momentum Market Share Promotional Impact & Interaction

18. Example MarketsBenchmarking Insights

19. Markets Examples • ADHD • Antihistamine • Antidepressant • Contraceptives • Antihypertensive – All classes

20. New Prescriptions

21. 350 325 300 275 250 225 200 175 150 125 100 Velocity Definition • Velocity is the rate at which time series data are changing. • Basically, it is the smoothed change of one month over the prior month of either prescriptions or any form of promotional modality.

22. Velocity  Measure of Growth • Definition:The rate at which a variable is growing or declining in: • NRx’s/Month • Market Share Points/Month • Details/Month • Pages/Month • Etc. • Benchmarking insight: • Positive Market NRx Velocity is indicative of new patient growth • Positive Product NRx Share Velocity tends to make your promotion more effective

23. New Prescriptions Velocity

24. 350 325 (325-300)=25 300 (300-275)=25 275 (275-250)=25 250 (250-225)=25 225 (225-200)=25 200 (200-175)=25 175 (175-150)=25 150 (150-125)=25 125 (125-100)=25 100 Acceleration Definition • The rate at which Velocity is changing. • As an example, look at the change in NRx’s between March & February versus the change between February & January.

25. Acceleration  Change in Velocity • Definition:the (current month over prior month) rate at which Velocity (rate of growth or decline) is changing in: • NRx’s • Market Shares • Details & Samples • Pages • DTC, etc. • Benchmarking insight: • Acceleration is a powerful leading indicator of market dynamics • Product share Acceleration is a leading indicator of promotional impact

26. New Prescriptions Acceleration

27. MomentumCreating Strategic Options • Momentum is a function of Velocity and mass (level of activity). For example: • NRx Velocity and level of NRx • Share Velocity and level of share • Pages Velocity and level of Pages • Momentum of a promotional activity considers the timing, levels and balance of the promotional mix. • Benchmarking insight: • Positive market Momentum is created by consistent, balanced & well timed promotion • Positive product Momentum enables the marketer to select between promotional strategies: continue to maintain or reduce/reallocate levels of promotion

28. New Prescriptions Momentum

29. Instability OpportunityNew Prescriptions and/or Market Shares • Instability–An aggregate measure of monthly market & brand variances: • Absolute Variances • Standard Deviation • Mean Absolute Deviation • Benchmarking insight: • Goal of promotion is to create market Instability • Instability is a function of promotion and/or market growth • Markets with high Instability present opportunity • Converting market share & NRx’s • Markets with low or no Instability may require the marketer to create the Instability • Cost vs. benefit (ROI)

30. InstabilityDefinition • A measure of dispersion. • Mathematically it is the sum of forward changes and/or a sum of absolute changes. • For example: • Instability is computed for a host of measures: NRx’s, Market Share, and any form of promotion. • Instability is plotted over time to examine the growth and/or decline, as well as the patterns and levels, which are used to judge opportunity.

31. New Prescriptions Instability

32. Market Share Instability

33. New Prescriptions InstabilityADHD Market

34. New Prescriptions InstabilityAntidepressant Market

35. New Prescriptions InstabilityAntihypertensive Market

36. New Prescriptions InstabilityContraceptive Market

37. New Prescriptions InstabilityAntihistamine Market

38. Accountability  ScorecardNew Prescriptions & Market Shares • Accountability –Percent of monthly Instability attributed by a given product and its promotional program measured in gain or loss of: • NRx’s • Market Shares • Benchmarking insight: • Measure of promotional effectiveness • Instability creates opportunity Accountability tallies the results

39. Accountability  Scorecard • Accountability: • You can both CAUSE and CONVERT • You can CAUSE and NOT CONVERT • You DO NOT CAUSE but CONVERT • You DO NOT CAUSE nor CONVERT

40. AccountabilityDefinition • Accountability is a continuation of Instability analysis. • It is the percent of monthly Instability attributed to a given product. • The key driver of Accountability, is the quality, level, and mix of the promotional campaign.

41. Product A - Old Accountability Mar-2003 Jul-2003 Jan-2003 May-2003 Jun-2003 Feb-2003 Apr-2003

42. Jul-2003 Jan-2003 Oct-2002 May-2003 Dec-2002 Mar-2003 Sep-2002 Apr-2003 Jun-2003 Nov-2002 Feb-2003 Aug-2002 Product A - New Accountability

43. Mar-2003 Jan-2003 Jul-2003 May-2003 Feb-2003 Jun-2003 Apr-2003 Product B - Old Accountability

44. Jan-2003 May-2003 Mar-2003 Jun-2003 Jul-2003 Apr-2003 Feb-2003 Product B - New Accountability

45. Concentration Measures of Uniformity • Concentration measures: • Location– percent of market accounted for by your product and all products with smaller market shares • Dominance– your percent of location • Concentration/Location Dynamics– what is happening to your position within the Concentration Curve? • Benchmarking insight: • Highly concentrated markets favors promotion of market leader(s)

46. Concentration • Measure of Uniformity • Nrx’s • Share • Pages • Detailing • Etc., etc., etc. • Roots: • Income distribution theory • Lorenz Curve

47. ConcentrationExample Concentration Location Dominance Product C Dominance = 100*(8.7/31.1) = 29.97%

48. The Lorenz Curve 1.0 0.9 Theoretical – if equal shares [ ] 0.8 A A+B x Concentration Index = 100 0.7 0.6 U A 0.5 0.4 S 0.3 Actual B M 0.2 Y V 0.1 Prod W Prod X Prod A Prod K Prod F Prod V Prod Y Prod M Prod S Prod U ConcentrationMeasure of Uniformity Location Product S

49. NRx Share Concentration

50. Base Promotional Activity and Measures Pages Sampling Print PME DTC TV DTC Magazine DTC Radio DTC Newspaper DTC Other Primary % Secondary % Tertiary % Samples Extended Units Days of Therapy Pages Inserts Dollars Events Dollars Tot GRP Network GRP Cable GRP Syndicated GRP Spot GRP Network $ Cable $ Syndicated $ Spot $ Pages Dollars Total GRP Network GRP Spot GRP Syndicated GRP Network $ Spot $ Syndicated $ Units GRPs Dollars Units GRPs Dollars And, Structure and Share-of-Voice measures for each modality