Digitalisation of the pharmaceutical industry
About the pharmaceutical market
In terms of digital integration, the pharmaceutical industry has historically fallen behind other industries. This is well illustrated by the relatively small proportion of marketing budget devoted to online sales. The focus is placed on sales representation and PR activities, as well as offline media. There are several objective reasons for this: regular pressure on the industry, restrictions on advertising media, the journey of the client on the way to the purchase.
A year ago, an assumption that the industry would soon experience a complete digital transformation would have been bold. However, current changes due to COVID-19 have caused the much-anticipated breakthrough. In a couple of months, digital distribution has flourished and advertising budgets have ramped up because many buyers of pharmaceutical products were shopping online.
Is this situation stable? Is it possible that the pharmaceutical industry will go back to previous marketing and communication channels?
During the epidemiological crisis, many industries have faced radical changes. The technological structure of marketing and communication with the target audience during COVID-19 is changing everywhere in the world. However, what allows us to conclude with certainty that radical changes are also taking place in the digitalisation of the pharmaceutical industry?
Long-term stagnation
Digital advertising budgets are growing, albeit slowly. Still, until now, pharmaceutical marketing in the digital environment has been relatively inactive. We have come to this conclusion after creating digital advertisements for companies in the pharmaceutical and medical industry and studying publications about the special aspects of the industry made in recent years. Different trends and a possible new technological breakthrough are mentioned every year; however, these innovations are regularly postponed from one year to the next. Of course, this is not proof of the definite stagnation of digital transformation in the industry, but it is a good indicator.
There are 4 main reasons that hinder the digital development of the industry:
- LEGAL RESTRICTIONS ON ADVERTISING
In many countries, including Latvia, the legislation restricts the promotion and sale of medical goods, medicines and dietary supplements on the internet. For example, advertising prescription medicines is forbidden. Advertising over-the-counter (OTC) medicines and dietary supplements is restricted; creating personalised advertisements is forbidden. All these restrictions mean smaller opportunities for internet sales. Pharmaceutical companies need to consider the big financial risks of being caught placing information non-compliant with the law or, the opposite, not placing warnings in accordance with the requirements of advertising laws. In such a situation, conservative methods for attracting clients seem more enticing and less risky. Legislative restrictions directly apply to interaction with the end consumer. This, in turn, strengthens the priority of non-digital marketing strategies such as expanding cooperation with doctors, who further communicate with end consumers – the patients.
- RESTRICTIONS ON ADVERTISING PLATFORMS
Legislative restrictions are only the tip of the iceberg. Advertising platforms, their services and tools have a significant impact on promoting the pharmaceutical industry in the digital environment – the requirements are strict, very restrictive, or even completely prohibitive.
Rather vague limits of the requirements of advertising platforms pose additional difficulty and require a lot of time. This is the most important difference from legislation where restrictions and prohibitions are clearly defined and comprehensible. The combination of automatic and manual moderation on advertising platforms renders the results unpredictable – it is difficult to predict the return on investment (ROI) on advertising. An advertisement that seems to meet all requirements can be rejected, and feedback with the reasons for rejection often comes after 2 days and even up to a week later – this is especially characteristic of Facebook and Instagram. Time is required to prove to Facebook that a particular advertisement is not forbidden and there has been a misunderstanding. Google, too, often rejects advertisements. For example, personalised advertisements of dietary supplements, OTC medicines and medical goods are forbidden. Target audience segmentation on the internet according to the audience’s behaviour is also significantly restricted. Moreover, in the majority of the world’s countries, digital advertisements of prescription medicines are forbidden.
This situation overall complicates the planning of the digital advertising budget, as well as the periods of advertising campaigns.
Restrictions do not only apply to advertising. Promoting on the Google search engine is complicated by algorithms (Expertise, Authoritativeness and Trustworthiness & YMYL (Your Money, Your Life). These algorithms check for the presence of potentially harmful content on websites, which means that the pharmaceutical industry has the additional responsibility of considering the content well. Unfortunately, the issues with these algorithms are also only documented formally – similarly to advertisements, no specific rules or clear feedback exist in the case of a violation.
- THE BUYER’S JOURNEY TO THE PURCHASE AND COMPLICATED ATTRIBUTION
Purchasing pharmaceutical products (with the exception of dietary supplements) is determined by necessity – an assumption can be made at an intuitive level that even if the buyer trusts the brand, they are not going to the pharmacy without an objective reason.
After studying the results of different consumer surveys in different European countries, it was found that, on average, buyers purchase OTC medicines once every six months.
Less than 40% of consumers are ready to purchase medicines for the future without a specific plan to take them. This is why nowadays pharmaceutical companies choose to devote the majority of their budget to advertising focused on the end consumer, using media advertising based on social demographics and reach. Brands are focused on the goal to increase the knowledge and understanding of the audience about the use of medicines. Encouraging TO BUY would only be effective on a consumer who has felt the need for the medicine. Difficulty identifying potential buyers, as well as the clearly short period when the medicine is needed, makes such encouragement less than effective.
A properly designed sales funnel is the basis for quality e-commerce. In pharmaceuticals, it starts to get complicated as early as in the first steps. First, it is difficult to evaluate the effectiveness of digital advertising objectively – the majority of purchases are made in offline pharmacies, which is why they cannot be directly attributed to advertisement views on the internet.
Secondly, the effect of advertising can be neutralised in the last steps of the purchase. For example, the buyer’s opinion can be changed by the pharmacist’s recommendation at an offline pharmacy or by a doctor’s consultation.
CONVENTIONAL WISDOM OF THE AUDIENCE
And the final reason – people take care of their health and carefully evaluate information published on the internet. Considering the requirements of the legislation and advertising platforms for promoting pharmaceutical products, it is easier for the buyer to identify commercial advertisements of medical goods and medicines than advertisements of other goods/services.
There is no doubt that TV and outdoor media advertisements also face such restrictions, and any orientation towards the end consumer is difficult. The pharmaceutical industry is characterised by a large gap between, for example, the opinion of a celebrity and a doctor, if these opinions contradict each other. At least 90% of the audience trust the doctor. The doctor is followed by the pharmacist, articles and books, as well as recommendations from friends and acquaintances, and forums. This is also one of the factors why pharmaceutical brands prefer to cooperate with distributors and doctors for PR and marketing activities.
These are four main reasons for the stagnation of digital sales. It is also important to mention that the pandemic of 2020 has reduced these restrictions and shown why there is not going to be a return to the pre-COVID-19 stagnation.
The longjam has been broken
In spring, during the strict COVID-19 restrictions, many buyers who used to visit pharmacies in person had to look for opportunities to buy pharmaceuticals elsewhere, and this opportunity turned out to be the internet. People have come to understand that such a way of shopping is convenient. Buying goods online with delivery to your door and payment when the goods are delivered is now very popular; however, purchases in physical pharmacies still prevail. Buying goods online with payment before delivery is still significantly behind offline pharmacies; however a clear positive trend is observed. The most popular products in internet pharmacies are still medical cosmetics, goods for mums and children; whereas the sales of dietary supplements and OTC medicines online continue to grow while pharmacies are starting to make active use of digital marketing solutions. Buyers who have started shopping in online pharmacies make repeated purchases with increasing frequency, and this audience is becoming very important for pharmacies for creating loyalty.
Restrictions on advertising platforms and services are still the same. However, in practice, with a significant increase of online activity in the field of health and pharmaceuticals, advertising terms and conditions have been relieved (observed on Facebook in particular). Communication with moderation services has improved. The number of rejected advertisements has decreased by at least 30%; there are more opportunities to dispute the compliance of the advertisement, and it all happens at least twice as fast as it did before the pandemic.
There is only one group of non-medical goods that advertising platforms strongly oppose. These are face masks. The prohibition applies not only to advertisements of face masks but also other products, if the end consumer is redirected to a website section where face masks can be seen. Due to marketing restrictions, advertisements containing the words “masks”, “headscarves”, “cosmetic masks”, “face shields” and “bandanas” are currently rejected. Apparently many advertisers at the beginning of the pandemic tried to advertise and sell medical face masks using work-arounds and thus misleading consumers.
Finally, during the pandemic, people’s opportunities to see doctors and receive specialist consultations in person have generally decreased, which resulted in a significant growth of queries for information on the internet, and pharmaceutical companies have successfully used this circumstance.
CONCLUSIONS
- All 4 restrictive factors in the pharmaceutical industry have decreased. This shift has launched an irreversible process and is finally encouraging the pharmaceutical industry to start a digital transformation: traditional product promotion methods are expected to become less and less effective.
- COVID-19 has become a catalyst for digital transformation; however, a pandemic is no longer necessary to continue this transformation – consumer behaviour has changed and people are going to shop in online pharmacies even more.
- New circumstances call for new methods. A decline in the effectiveness of traditional channels is expected: TV, trade-marketing, out-of-home or outdoor media advertising. Whereas performance marketing and direct-to-consumer (DTC) solutions are going to take a more advantageous position.
- More and more buyers are going to shop in online pharmacies without a consultation with a doctor or pharmacist.
- Consumers more often tend to research issues independently, guided by accumulated knowledge, word-of-mouth and online sources, without expert consultations.
How can pharmaceutical companies use this time effectively?
- Focus on testing marketing channels and tools, diversify your marketing strategy, and remember that doctors and distributors are a tried and tested offline channel!
- Deepen your interaction with the end consumer!
- Communication with online consumers needs to be established and improved not only at the beginning, but at every step of the sales funnel!
- Integrate end-to-end analytics into your sales cycle, which allow the full purchase cycle to be analysed! Evaluate your advertising ROI and other digital activity and advertising data! Use the analytics to test hypotheses, testing different digital channels and tools!
- Use real-time bidding/programmatic tools, which allow consumer behaviour to be studied from first interest until the purchase!
- Add post-service communication with the buyer immediately after the purchase!
- Give more attention to the digital environment: feedback, social media content, live-stream videos about the product, etc.!
The article will be followed by a success story about a pharmaceutical industry leader in the Baltics. In the article we are going to reveal what methods, audience segmentation and digital tools we have used to increase online sales in 18 months by more than 2000%.
Follow RealWeb Marketing Agency on Facebook and LinkedIn and be the first to find out about the latest trends in digital marketing, learn about specific marketing features in different industries, and read the success stories of world-famous brands!
