Big Pharma Seeks Closer Consumer Ties Online

With more consumers using the Net to get health information, and the drug industry rethinking its marketing strategies, Web agencies are betting the pharmaceutical industry will pour larger amounts of money into digital initiatives.

They are pinning these hopes on the changing dynamics of the drug business. Consumers are flocking online for health information—79 percent of respondents to a Pew Internet & American Life survey said they turned to the Web for health research. Meanwhile, with its direct-to-consumer TV advertising facing burdensome disclosure requirements and regulatory pressure, big pharma is shifting its marketing model to be more targeted and data-driven, according to agency and industry executives.

“The economics of the industry are changing,” said Tom Mangano, assistant vice president for consumer communications and eBusiness at Wyeth. “The marketing model has to change.”

Digitas last week made an important bet on the growth of pharma advertising online by inking a $30 million-plus deal to acquire full-service health-care shop Medical Broadcasting Company. CEO David Kenny said MBC’s 15 years of drug industry experience would enable Digitas to build its roster of health-care accounts.

Big pharma already had begun to spend less on broadcast media. Network TV ad spending was down 7.4 percent in the first 10 months of 2005, compared to a year earlier, per TNS Media Intelligence.

So far, though, the pharma industry has lagged many other industries in moving marketing dollars online. According to Jupiter Research, health accounts for 4 percent of media spending online versus about 8 percent offline. Still, the industry has upped its commitment to Web ads in the past year, with outlays growing from $340 million in 2004 to $410 million in 2005. Jupiter Research anticipates that will reach $660 million by 2010.

The pharma-focused shop imc2 is expecting to follow up on its 60 percent revenue growth in 2005 by doubling it in 2006, according to the agency. Yahoo has already sold more pharma ad commitments for 2006 than it did in all of 2004, said Jack Barrette, pharmaceutical category development officer at the Web portal. Linda Holliday, president of MBC, said she expects clients in a few years to earmark as much as 25 percent of their budgets for online, up from 3 percent to 5 percent now. “They’re all looking at this as one of their most important channels,” she said.

The key beneficiaries of the increased ad spending have been Yahoo, Google and health-oriented portals like WebMD, according to Brad Aronson, evp at Avenue A/Razorfish. In particular, pharmaceutical companies have earmarked big spending to search ads, which let them reach self-selected consumers efficiently. “We’re seeing a lot of clients investing to own a specific disease and condition area,” he said.

This is a much more cost-effective approach, particularly for drugs that are only appropriate for particular segments of the population, noted Debrianna Obara, media director at Avenue A/Razorfish. “When you buy a TV spot, you’re getting a percentage of a demographic,” she said. “There are opportunities online when you’re getting 100 percent.”

AstraZeneca has been a leader in moving marketing money online, currently earmarking 8 percent of its budget to the Web. John Fish, director of global eBusiness at the drugmaker, said online advertisements avoid many of the pitfalls of broadcast spots by allowing pharma advertisers to clearly explain the side effects of drugs without overwhelming the ad. Thanks to co-branded sections on WebMD and MSN, AstraZeneca has been able to target its messages to specific constituencies for drugs. “The results we’ve seen have justified increasing our budgets year after year,” he said.

With consumer pharma media money shifting online, more attention is being paid to Web sites. Drug companies are increasingly creating non-branded, so-called “disease state” sites, dedicated to educating consumers about a specific disease or medical condition.

For example, MBC in the fall rolled out, a breast cancer awareness site constructed for AstraZeneca, which makes breast cancer treatment Arimidex. The site provides a range of useful information for women at different stages of treatment, whether they only recently found a lump or are currently undergoing chemotherapy. “It’s not necessarily about the product and the brand. It’s much more about the customer life cycle,” said Fish.

With broadband now in 50 percent of U.S. homes, pharma Web sites can include video to make medical information easier to digest., an MBC-created site for Wyeth, features videos of actress and model Cheryl Ladd explaining her experience with menopause.

Drug companies are increasingly using sophisticated segmentation techniques, said Dori Stowe, group account director at Omnicom’s Tribal DDB, and using their sites to communicate with different audiences, whether they are using the drug or just seeking information about a condition.

Such segmentation has led to more emphasis on relationship marketing. Since Barr Laboratories released Seasonale, a contraceptive that gives women just four periods a year, in November 2003, it has increased its use of relationship marketing through imc2. Andrea Porzio, senior product manager for Seasonale, said the use of e-mail and other Internet relationship tools is critical to customer acquisition and retention in a highly competitive category like contraceptives, not known for much customer loyalty.

“They’re realizing they need to have more of a dialogue base with consumers,” said Reuben Hendell, CEO of McCann Worldgroup’s MRM Worldwide.