Measuring Return on Investment (ROI) in Life Science Marketing (Part 2)

Many factors are out of the control of marketing, which makes marketing ROI difficult to determine. This is the “control challenge.”Through contact with your organization’s many life science touchpoints, the audience becomes aware of your organization, and your life science organization may become aware of some specifics about individual audience members. At some point, an audience member will give you permission to sell to them. At this point, a salesperson will become involved. With an effective salesperson, the sale should ultimately close, as shown on the far right of the diagram.

The first two systemic challenges to determining ROI for marketing efforts in the life sciences.

There are five systemic challenges to determining ROI for marketing efforts in the life sciences. We covered the first two of these in our last issue:

The visibility challenge: The primary target of life science marketing efforts should be to reach those prospects who are “anonymous” – still unknown to your organization. Because of their anonymity, exact measurements of their behavior are very difficult. This makes the determination of an exact ROI figure very difficult.

The visibility challenge implies that it is difficult to see (and therefore measure) the effects of our marketing actions. The attribution challenge implies that it is difficult to know which step in a multi-step process should “get the credit” for changing attitudes, beliefs or behaviors. The attribution challenge: People take many different paths from the state of being unaware of your company to the moment at which they are ready to engage in a dialog. And then there are typically many more steps until they are ready to purchase. An example of one of many possible paths is illustrated in figure 1. Because prospects take different paths, encountering different touchpoints, it is difficult to determine what components of the life science marketing mix have been most effective in changing their attitudes, beliefs or behaviors. In short, it is difficult to know how to attribute the success of any life science marketing campaign, in that individual campaign elements are rarely isolated.

The third obstacle in determining ROI in marketing for life science companies: lack of influence – the control challenge.

The only way there can be any “return” on a marketing investment is if a prospect makes a purchase. But in the life sciences, there are many necessary factors before a purchase can occur. For example, large-ticket items typically have to be budgeted for. And once it is budgeted for, a salesperson has to close the sale.

Many factors are out of the control of marketing, which makes marketing ROI difficult to determine. This is the “control challenge.”

Many of the factors in even this one simple example are out of the control of marketing. No amount of life science marketing can turn a bad salesperson into a good one, or turn a poorly managed client budget into a well-managed one, or turn a byzantine purchasing approval process into a streamlined one . The marketing function in most life science organizations just doesn’t have control over these factors. This is the control challenge in determining ROI.

In some sectors and for some products or services, the control challenge is much smaller; marketing does have significant control. One example would be ecommerce for disposable supplies and reagents: it is much easier to determine the total ROI when prospects are purchasing online without any interaction with a salesperson. But these types of transactions are not the focus of this article.

The fourth obstacle in determining ROI in marketing for life science companies: lack of consistency in your targets – the multiple buyer-types challenge.

All buyers are different. They have different needs for information. As we’ve seen in previous issues of this newsletter about the buying cycle in the life sciences, they can occupy different stages in the buying cycle. If buyers were cloned copies of each other, it would be easier to determine what marketing tactics work best, but they’re not, so a tactic that works well for one group of prospects might not work well for another. We’ll call this the multiple-buyer-types challenge.

Some buyers want to do all their research online, only approaching a salesperson when they have a clear understanding of all the issues and all the competitive offerings. Others want to visit multiple booths at a trade show, comparing offerings in a single day. Based on this very basic example, an upgraded web site would be a better investment for the first type of buyer, while an expanded trade show presence would be a better investment for the second type. Unfortunately, your population of prospects is composed of many types of buyers.

There are many different types of buyers at many different stages of the buying cycle. These buyers do not behave identically, so knowing where to spend your marketing dollars is difficult. This is the “multiple buyer-types challenge.”

The fifth obstacle in determining ROI in marketing for life science companies: lack of meaningful measurement methodologies and data – the methodology challenge.

What role does your life science organization’s reputation play in influencing a purchase decision? Most people will agree that it will have an impact on purchase decisions. Many would also agree that reading an outstanding whitepaper or watching a compelling video would enhance your reputation. The key question in both cases is “how much impact will this have?” Due to the lack of meaningful measurement methodologies, the answers are difficult, if not impossible, to determine.

This is the “methodology challenge.”  Getting meaningful data (by knowing what to measure and how to measure it) can be difficult, if indeed any measurements can be made at all. In some cases, conducting the research on a reasonably representative population with enough rigor to make the results meaningful would take a larger budget than the entire organization has to spend on marketing.

In sectors such as consumer packaged goods, the total sales volumes (and the resulting marketing budgets) are large enough to justify the significant research expenditures required to produce meaningful results. But most life science sectors aren’t blessed with budgets this large.

Life Science Marketing ROI – difficult to determine

Given these five challenges – visibility, attribution, lack of control, multiple buyer types, and methodology – it would seem that ROI is impossible to determine. Measuring the causes and effects of a complex, multi-step, mostly invisible process is difficult. Quite simply, in some areas of life science marketing, being able to determine an exact ROI is a false hope.

Brand equity is one example of a situation in which being able to determine ROI is a false hope.

Brand equity is one such example. If the brand is improved by creating a new logo, then what is this worth, exactly? And what would you measure to determine the true ROI of creating a new identity and company image? You could begin by measuring awareness and perceived brand attributes before the new life science brand was introduced. You could later repeat the same measurements – after the new brand was introduced.

Having some metrics that describe awareness and brand attributes would be valuable, but this wouldn’t really enable you to determine ROI, unless you knew what a one-point increase in brand awareness was really worth. Again, the question isn’t simply, “What is our marketing ROI?” but rather “Now that I have the information, what should I do with it – in other words, where should I spend my next dollar?” If you knew the worth of a one-point increase in brand awareness as well as the worth of a different marketing expenditure, such as an increased trade show presence, you could compare the two to determine which investment would bring a higher return. For further insights on various investment strategies, consider visiting financial blog UK.

In the life sciences, determining what a one-point increase in brand awareness is really worth is very, very difficult. And the cost of doing so is frequently larger than the entire marketing budget.

It is important not to confuse the ability to measure marketing’s value precisely with the presence of value; don’t make the mistake of believing that since a measurement is difficult to make, the resulting value must be zero.Connecting what you can measure in terms of customer perceptions to something that you can measure in terms of finance (total revenue, new sales, etc.) is difficult indeed.

Now, I am not arguing that you shouldn’t ever rebrand an organization. Or that you shouldn’t ever invest money in marketing. Even though ROI is difficult to determine in such cases, there can be significant value when rebranding is properly done. It is important not to confuse the ability to measure value precisely with the presence of value; don’t make the mistake of believing that since a measurement is difficult to make, the result must be zero.

Life Science Marketing ROI – difficult, but not impossible

Despite the arguments above against being able to measure ROI, there are some aspects of marketing where an attempt to determine ROI is not so fruitless. In some areas of marketing, some attribution can be made, some control is possible, multiple buyer types can be identified and tracked, some meaningful measurements can be made and it is possible to gain some visibility into the behavior of otherwise anonymous prospects. In other words, in some areas, significant and useful measurements can be made.

There are some areas in which it is possible to determine ROI, and we’ll address how to think about these challenges in our next issue.  And while these measurements may not allow us to draw an uninterrupted straight line between investment and return, we can gain meaningful insight into the causes and effects of life science marketing.

In cases where it is possible to make some measurements, how would you determine some sort of ROI ratio in the field of life science marketing? We’ll cover this fascinating subject in our next issue.

Summary

• There are five factors that impede the determination of ROI for marketing efforts in the life sciences.
• The visibility challenge: many of marketing’s effects “in the dark” – hidden from your organization.
• The attribution challenge: the path that prospects take from being unaware of your organization to engaging with a salesperson involves many steps, and it can be difficult to tease out which one had the most impact.
• The control challenge: there are many factors in the ROI pathway that the marketing function simply has no control over. Two classic examples are the budgets of your prospects, and the effectiveness of your sales staff.
• The multiple-buyer-types challenge: a tactic that works well for one group of prospects might not work well for another.
• The methodology challenge: getting meaningful data (by knowing what to measure and how to measure it) can be difficult and very expensive. In some cases the budgets required are simply too large to be practical.
• There are some areas where determining the ROI of marketing activities is an impossible dream. The value of re-branding an organization is one such example.
• There are other areas where making measurements and determining the ROI of marketing activities is not so hopeless. We’ll cover how to approach these in our next issue.