Pharmaceutical Market Europe • June 2023 • 14
MIKE DIXON
MIKE DIXON
RETURN ON INVESTMENT
If we are being asked to demonstrate ROI, we first need to agree on the value of the outcome
'We need a good return on investment’ – a phrase often uttered when agreeing budgets for commercial programmes within the sector. Used generically, that’s a laudable aim. But in its purest sense, return on investment, or ROI as it is often abbreviated, has a defined meaning.
Go onto Wiki and you will find this: ‘ROI is a ratio between net income (over a period) and investment (costs resulting from an investment of some resources at a point in time).’ That’s fine to consider at the highest level within an organistion, where ensuring investment overall is delivering the returns needed to sustain the business.
But for me, it’s a real problem when mentioning ROI in the context of measuring most communications programmes (and not exclusively comms programmes either). Why? Because most successful communications deliver both tangible and intangible outcomes, and often not even the tangible ones are being measured to assess their real impact on income generation.
So anybody who asks for a communications programme to demonstrate a good ROI should immediately be asked these two questions: ‘Measured by what?’ and ‘In what timescale?’. They should also be aware that the answers to those questions will be fundamental to how the subsequent communications programme is developed.
Deciding on the most appropriate time period
At least the definition of ROI includes the important mention of a defined time. For communications, the question is this: What is the most appropriate time period to measure in order to truly assess the return on investment? Even in its more generic interpretation, you need to consider the full period where there is an impact from that investment. With a disease awareness programme, for example, the investment could be delivering return for years to come, as without the strong foundations, long-term success could be diminished. ROI might be a perfectly fine measure for campaigns where it can be shown that constant pulses of brand reminders are needed to boost sales, which then drop off again once the activity ends. But there are few communications initiatives where that is the case and ‘net income’ can be measured so directly.
Assigning value to intangible and tangible outcomes
To fully recognise the return on investment, consideration needs to be given to how you measure and assign a value to the tangible and intangible outcomes from programmes. This means going beyond the ‘outcomes were achieved so we feel it worked well’ assessment that is currently too often used as the barometer of success.
Companies now recognise the value of corporate or brand image in supporting commercial success. It is also accepted at any level within an organisation that a strong pre-launch scientific communications programme can be ‘make or break’ for a pharmaceutical brand’s speed and degree of success. But how do you value these intangible achievements and show which elements, strategies or specific campaigns are working hardest and delivering the best return?
Even the tangible outcomes do not necessarily provide an easy to calculate ROI. The successful inclusion of a specific treatment in a clinical guideline would most definitely be a measurable outcome and one any organisation would be pleased to achieve. But again, how do we allocate a monetary value to something so fundamental in order to assess return on investment?
Communications is an important part of the overall mix
Communications is often just one component of a mix of activity. Our challenge is, if other parts of the mix can more easily demonstrate their ROI, it makes it easier to invest more there, rather than in communications – even if in truth the communications role is more fundamental to the success. Our credibility and the future success as a sector is therefore, in part, predicated on being better at demonstrating our true value.
More questions than answers
That’s a lot of questions without many answers, in part because we still have a long way to go as a sector to address these challenges.
One thing is for sure, when we are measuring communication campaign success we need to ensure we are effectively measuring the intangible as well as the tangible. Not least because the intangible may be equally, or possibly even more, important for business success.
That needs both qualitative and quantitative data. And by definition, the measurement parameters and methodology need to be embedded from the inception of the programme, with good benchmarking against which to determine change.
Modelling the expected commercial impact
We need to be more open to the idea of modelling upfront the expected commercial impact from the change a communication programme aims to make. So, if we are being asked to demonstrate ROI, we need to first agree the value of the outcome. It’s not as if our sector isn’t familiar with this concept of modelling based on possible outcomes and whether the investment is justifiable. We do it all the time in the R&D phase, considering treatment profiles against their commercial potential and the associated research cost to robustly demonstrate them. Can we not therefore get more sophisticated in similar modelling for communications? I think that would be fantastic if it happened, as we could truly start to demonstrate the value of communications in the terms some senior management teams need to fully appreciate the importance of the discipline.
However, how achievable is all that? That is the question we need to ask, and solve quickly, if we are to fully demonstrate our true ROI.
Mike Dixon is CEO of the Healthcare Communications Association (HCA) and a communications consultant