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Can your brand stand out in a crowd?

Published on 21/04/08 at 04:58pm

The 'value proposition' is a good example. It is a buzz-word used by marketers the world over, and yet far too few of those marketers really understand what is meant by it. Or if they do have a definition, it's different to the one given by the next marketer you speak to. That is worrying - because understanding a brand's value proposition has never been more important in the pharma industry. In a world of shrinking product differentiation, being able to demonstrate the total value that a product brings to customers is vital.

So what exactly is the value proposition? Why is it important, how can it be developed, and what is its intrinsic value?

What do we mean by value proposition?

Too often, marketers view a value proposition as merely being about a series of brand-specific messages and not necessarily about the actual value that the brand or 'proposition' represents to the respective customers.

For example, what would be the perceived overall value of a drug that significantly reduces the number of hospitalisation events - and with it the associated human and financial costs - to a key stakeholder who manages the total regional budgets for primary and secondary care? How would perceived value compare with a drug that is seen as only safe, effective and well tolerated, but with a high price? This may be an extreme example, but we need to consider how the different target audiences view the value that a brand represents - and in what context. In the pharma context, we need to refer to the 'total value' that a brand represents, including potential cost savings or benefits.

So the term value proposition should refer to the intrinsic value that the brand represents to the customers, leveraging all the dimensions of value and not just a proposition that focuses on the functional attributes.

Historically, marketers focused primarily on communicating to the prescribing physician the safety, efficacy and tolerability of their products. These things are all about specific medical effects, but not total value.

The issue is that in the current health care environment, these basics are now seen as the minimum requirement to obtain regulatory approval and a product licence. In other words, this is seen as a given by the physician and key stakeholders, and no longer a compelling reason to use per se.

What purpose does the value proposition serve?

In all major markets, the rising cost of healthcare is an important national issue, and consequently the respective healthcare systems are actively looking at ways to manage healthcare budgets.

Payers and other stakeholders with budgetary responsibility must balance the needs of cost containment, manage the availability of new treatments and technologies, and get the best deal from healthcare suppliers such as the pharmaceutical industry.

As a result, the environment has moved on from clinical data demonstrating that the product is safe, efficacious and well tolerated - to the need for value-based propositions.

A study published in February 2007 by the Office of Fair Trading recommended that the UK government reform the Pharmaceutical Price Regulation Scheme (PPRS), replacing current profit and price controls with a value-based approach to pricing, with the aim of drug prices reflecting their clinical and therapeutic value to patients and the broader NHS.

This has major implications, as pharmaceutical companies need to understand how target audiences view value to make sure their value proposition is well thought out and a key element of the brand. Consequently, a robust value proposition is essential in pricing and reimbursement discussions and for securing local formulary listings.

An example of when the value proposition is relevant post launch is Pfizer's blockbuster statin Lipitor. After securing funding and formulary placing in the previous environment, Lipitor was then targeted by PCTs looking to make cost savings by increasing the use of generic simvastatin once it was available. In certain patient types, using a low cost and effective alternative to Lipitor is appropriate, but there are other patients for whom there may be added value in prescribing Lipitor. The issue here is that PCTs tend to look at the population as a homogenous group while clinicians look at patients as individuals.

Through a relevant value proposition, the PCT decision makers should be able to identify in which settings Lipitor has a higher value to patients than its cheaper generic alternatives so they don't view value purely as price per treatment.

Therefore a good value proposition serves to:

* Support appropriate pricing and reimbursement and securing local formulary listings

* Support continued funding by payers post launch

* Ensure that payers, prescribers and key decision makers understand in which situation or setting the brand offers value

* Accelerate the time to peak year sales as a consequence of faster and broader product uptake post-launch

* Maximises the commercial value of the medicines (increasing the area under the sales curve)

When should I develop a value proposition?

So if the value proposition plays a role throughout the lifecycle of the product, when is the right time to develop it? This will depend on the stage of the product in the life cycle as well as the therapy area, but it should be considered as early as possible in the clinical development phase, and should be regularly updated.

In the pre-clinical/development phase, there should be an early understanding of payers' business case for reimbursement, which can help to develop a value proposition hypothesis.

For example, during the early clinical development phase of a product that is a once-daily formulation of a well-established molecule, it would be imperative to develop an early hypothesis of what the added-value would be and what would be relevant to the key stakeholders. The concept of a once-daily formulation in a therapy area where compliance is seen as an issue may seem compelling, but it may be necessary to translate this product feature into what the payers consider to be value-added.

It would be appropriate to translate once-daily dosing into an increase in patient compliance, improved patient management and clinical outcomes/cost benefits. This then provides the input into what pharmacoeconomic clinical studies may be required to support the value proposition. Payers, and especially reimbursement review bodies, are looking more and more to cost-effectiveness statements and claims based on robust clinical studies and not just on hypothetical cost models.

As we have seen, during the launch phase it is imperative to have developed a value proposition to support securing formulary listings, reimbursement and funding. This then underpins the reimbursement dossiers, submissions required for technology appraisals or materials developed for formulary committees.

There have been many recent cases where products originally granted full access to prescribers then become restricted, so the maintenance of a value proposition should not be seen as an 'event', but rather an iterative process. Indeed, you would do well to approach value proposition planning in the same way as you approach publication planning.

It is important to properly plan the time and anticipate the clinical data requirements to substantiate an effective and evolving value proposition. This also helps the marketer respond to changes in market conditions such as competitor activities or new market entrants.

How do you develop a value proposition?

The starting point for any value proposition is establishing who the relevant stakeholders are for the outcome you are trying to achieve. This will vary over the lifecycle of a brand. For launch this is likely to focus on those stakeholders key to gaining market access, reimbursement and funding. Ideally these stakeholders should be weighted by relative importance to the desired outcome.

So if the UK was being used as the first entry point in Europe for a new brand (and subsequently become a reference price for other states) a high weighting might be placed on gaining positive recommendations from NICE, SMC etc. Another scenario might be where a product which is already reimbursed in the market and on formulary but now under pressure because of new local budget restrictions. In this case, the company would need to be more focused on hospital budget holders or PCT advisors, for example.

The value proposition should be fully aligned with the marketing segmentation model and proposed target segments, which should also include key stakeholder segments. In other words, a value proposition should be a key component of the brand umbrella, and not as a separate proposition with different messages. This approach helps to ensure the different target customer audiences receive consistent messages, with a customer-tailored emphasis on value.

The next step is to understand what key stakeholders perceive to be clinically valuable for the target patient segment.

A guide for thinking about value dimensions should include the following dimensions:

* Medical, therapeutic benefit

* Patient-reported outcomes, which focus around the patient/care giver benefits and the difference it makes to their lives, e.g. reduction of pain may enable them to regain more independence and so require less carer time, loss of sleep may impact on work and relationships with links to depression and psychological problems etc

* Economic benefit, especially in the context of the shift of budget management from secondary to the primary care setting in the UK

Market research is valuable in gaining insight and helps to validate the relative importance of value drivers. The aim is to build a Target Value Profile (TVP) for each proposed segment to tell us what is required by external stakeholders for us to achieve our strategic and financial objectives. The TVP helps us assess our product/service offering against what currently exists and identify its most valuable strengths in the eyes of the stakeholder.

While this is likely to include specific product attributes, it may also include budget impact, different cost effectiveness measures, and the unique qualities the product has compared to existing treatments. Ideally you would develop a weighting of the relative value of each driver in the TVP to understand the financial return of improving performance in certain value drivers, which helps to develop a cost benefit argument for the brand.

TVPs in place, we can then assess how the brand performs against the minimum performance level required, and look out for potentially unique advantages that would be highly valued.

If minimum requirements are not currently being met, and if no commercially worthwhile initiatives can be undertaken, we must assess whether this is a segment we can realistically access. But presuming there are unique advantages, these can be built upon in a three step process to identify meaningful value to support the brand's value proposition.

A core value proposition builds around the following common themes:

* Burden of disease for the target patient segment

* The current treatment challenge and unmet need

* The value of solving the problem for the stakeholder group on their terms

* How Brand X provides a valuable solution to the problem (using afore mentioned value dimensions)

* Supporting evidence built around the unique value/s the product has and the overall package

Messages are then tailored to different audiences around this.

Valuing the value proposition

Because the value proposition is not a standalone process, it should be developed in tandem with other core marketing principles. The value proposition should also be developed early in the clinical development phase (e.g. phase IIb) so that the new brand is developed to deliver against a TVP.

The value proposition must also be integrated into the global pricing and reimbursement strategy with each country having a clear understanding of the status and price that the value proposition supports.

The good news is that payers in healthcare systems are at last waking up to the fact that pharmaceutical products can offer far more than the functional benefits that can be proven in clinical trials.

The right prescribing decision can help the healthcare system and the patient by providing effective treatment and potentially preventing the need for more expensive therapies down the line. It can also enable the patient to resume an economically and socially useful life, unencumbered by the effects of their condition.

Those pharma marketers who can demonstrate that their brands can deliver all this will gain a huge competitive advantage. Because aligning itself with the agenda of health policymakers is absolutely crucial to pharma's survival and prosperity. And that's a jargon-free statement that anyone can understand.

Dr Richard Jones is a senior consultant and Alex Blyth a senior consultant in marketing sciences at pharmaceutical consultancy firm The MSI Consultancy. They can both be contacted via www.msi.co.uk

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