Is Online Pharma Promotion ROI Scalable?

Yesterday, at the 6th Annual Digital Pharma East conference here in Philadelphia, I met many "old" friends including Bill Drummy, CEO of HeartBeat Ideas.

Drummy's presentation had a long and complicated title -- "Outsize Results on Modest Budgets: Think You Can't Afford World-Class Marketing on Your Limited Budget? Think Again" -- but his message was simple: the ROI of online promotion is an order of magnitude greater than the "typical" 2:1 ROI for non-digital channel promotion.

"With digital you can get way more bang for your buck," said Drummy, "so you HAVE to think of the digital channel. If you have a real insight about your target, use really bold creative, and use a lot of precision targeting and pay-for-performance techniques, you can get dramatically higher and better results."

Drummy then said that ROI for digital ranges from 4:1 on the low end to high double digits on the high end. He's seen digital ROIs of about 29:1 in "a number of different cases." That's return on investment measured by increased sales, not surrogate key performance indicators like ad impressions, clicks and Facebook likes, etc.

Drummy didn't go into too much detail about how these ROI are measured, but he did show a blinded digital promotion case study (paid search and online display) where the ROI was about 5:1 (it was 13:1 for just paid search). The spend on that promotion was $32,000, I believe.

My question is this: Is this scalable to the point where digital promotion gives you a significant bump in sales?

A 5:1 ROI on a spend of $32,000 translates into $160,000 in additional sales. This is a small number as far as Rx sales go. A TV ad campaign spend of $100 million at 2:1 ROI results in $200 million in additional sales -- now we're talking about a real bump. At 5:1 ROI, how much money would you need to spend on search/display ads to realize a bump of $200 million? You would have to spend $40 million! I contend that it is impossible to spend that amount of money in one year on paid search and display advertising. And, if it was possible, would the ROI still be greater than the traditional, non-online ROI of 2:1?

If Drummy knows of a case to disprove this, I'd like to hear about it.

To be fair, Drummy was talking to companies with LIMITED budgets for promotion. In that case, there are probably limited sales opportunities as well. Therefore, putting your limited promotion budget into digital makes sense.

Drummy showed some examples of what he considered online campaigns that had "bold creative." I'll have more to say about this is a later post; right now, I have to get ready to have a chat with BI's John Pugh over coffee and bagels!

The Coming Pharma Digital Depression Caused by Facebook

P&G Discovers It's "Free" to Advertise on Facebook!

That's the gist of an article written by Jim Edwards over at Business Insider - Advertising (read the article here).

Of course, advertising on Facebook is not really free, but it's pretty darn close when compared to TV. According to the article, "P&G said it would lay off 1,600 staffers, including marketers, as part of a cost-cutting exercise."

Interestingly, P&G CEO Robert McDonald had some interesting comments about the cost-effectiveness of digital advertising, including:

"I believe that over time, we will see the increase in the cost of advertising moderate. There are just so many different media available today and we're quickly moving more and more of our businesses into digital. And in that space, there are lots of different avenues available. In the digital space, with things like Facebook and Google and others, we find that the return on investment of the advertising, when properly designed, when the big idea is there, can be much more efficient."

If a packaged goods company like P&G is "moderating" its cost of advertising by shifting to digital and laying off marketers, then the pharmaceutical industry can't be far behind. A "recession" in pharma digital marketing is even more likely considering the well-known "patent cliff" that's currently in progress; ie, blockbuster drugs with a combined $170 billion in annual sales will go off-patent by 2015. That means even less mass media advertising and more digital advertising.

But "more digital advertising" does not mean that much more money will be spent in the digital arena. That's because of social media, where it's virtually free to advertise!

Today, I will present a webinar on this topic as part of a BrightTalk "Digital Marketing & Pharma Summit" series of webcasts. The title of my presentation is "The Coming Pharma Patent Cliff and 'Recession' in Digital Spending."

According to BrightTalk's Quoc-Thai Dang, "At this summit, we'll be exploring the realities of how Pharma is spending it's budgets on digital. Experts will critically evaluate the impact of social media and mobile marketing, and if this has had an impact on their business."

My webinar will be at 10:00 AM this morning (January 31, 2012). You can go here to attend live or listen afterward or use the widget below.

I admit that my ideas are only half-baked and invite your comments.