Factor the Economy into your Sales and Promotion Analysis!

The financial crisis starting in mid-2008 pulled the US economy into the most severe and protracted recession since the Great Depression. 

Unfortunately, the economic downturn is not over yet.  And even though conventional wisdom states that healthcare is mostly immune to such economic turmoil, the drastic changes in unemployment and the duration of the economic meltdown compel us to ask . . . 

What is the impact of this recession on brand sales?

 

• How much of a brand's budget shortfall can be attributed to the economy? 

In general, pharmaceuticals have been less impacted by the recession than other industries . . . but there has been a definite impact on most brands we analyze.

Some brands that are below budget are still performing relatively well once the economic climate is considered. 

But there is also a tendency to use the economy as a scapegoat for poor brand performance, even if the analysis suggests that the economy is a relatively small factor.

We recommend that every brand team know how the economy and other factors are driving sales results.

•  Are there any "rules-of-thumb" on how much the economy has impacted brand sales?
  • Have brands with lower co-pays done relatively better? 
  • Have brands for treating life-threatening conditions fared better?

Brands in competitive markets with lower out-of-pocket costs appear to perform relatively better.  But it is unclear if brands in life-threatening categories are less impacted by the economy than other brands.


While there are plausible theories that may help explain or generalize these results, our experience is that each brand is a unique situation, each has an economic sensitivity that cannot be predicted by general rules or averages.
              
We have even analyzed brands that have been helped by the economy!  One such brand that has done very well had the unique advantage of significantly reducing hospital and nursing costs for drug administration - and the company took the initiative of promoting this advantage heavily even in this down economy.

Of course, measuring the economic impact on a brand is easier said than done.  There are a number of analytic challenges that can significantly bias the results up or down, depending on the situation.

As always, we welcome your point-of-view.