The first rule of business is that you have to have customers. The second is that you have to make a profit. The biotech, pharma and medical device companies have no shortage of customers, and they continue to enjoy hefty profit margins. But the future of this industry is uncertain in the extreme. The companies face pressure from all directions, and many will struggle with maintaining past profitability levels of + 20%.
You might think that all this increased pressure would force the industry to rethink its marketing and branding approach. Yet have they done so? It sure doesn’t seem like it! A recent study showed that the healthcare industry has practically zero brand recognition. Interbrand, a global consultancy firm, recently published the 13th annual Best Global Brands report. Among them, only one healthcare industry brand made it into the top 100: Johnson & Johnson (79). The top two? Not surprisingly, Coca-Cola and Apple, both with brand equity worth just over US$76 billion.
So that begs the question: Why are traditional pharmaceutical and medical device brands so unknown? Furthermore: What should be done to get their brands more widely recognized? To answer those questions, we need to get back to basics.
What is branding and brand equity?
A brand represents the promise of something. In the simplest terms, brands are trademarks (the name of a product). In a broader context, the brand is almost synonymous with the old-fashioned term “reputation” (“how will this product strengthen our brand”). In the corporate world, brand equity (or brand value) refers to customers’ and others’ beliefs and expectations about products and services sold under a specific trademark, or about the company which provide them. If you want to buy the brand name Apple or Coca Cola you must be willing to pay an estimated US$76 billion for the brand name only (products, employees and manufacturing not included).
The brand is a special intangible asset that is crucial for commercial success and the generation of long-term sustainable value. The brand is arguably the most important single corporate asset, and differs from tangible assets such as manufacturing equipment, products, land and buildings. Furthermore, the brand can be astonishingly durable. While corporate owners change or products and technologies become obsolete, brands live on, if they are managed well. Brand positioning is about owning a territory in people’s minds and in the market place.
Historically, brands have promised quality. Now, consumers have a bewildering array of choice, and quality alone no longer provides a differentiating factor. Companies need to promise more than a mass-produced, quality assured or government-approved product. A powerful brand positioning underpins why a customer should chose your brand over the others. More importantly, the brand needs to deliver exactly what it promises. In a broad sense, the brand should be a reflection of no less than the DNA of the organization: the fundamental building block that explains why the company exists and that aligns its people, processes and products to create value for the customers.
Why is brand recognition so low for the healthcare industry?
How is it that Coca-Cola, with US$48 billion revenue in 2012 has that more brand recognition worldwide than, say, Novartis, which has worldwide prescription drug sales of US$51.3 billion? It could be argued that this is rather bizarre since one company sells sugary water, while the other provides life-saving medicines.
The answer to this question is rather complex, but there are some important factors that may contribute to the low brand awareness ranking of healthcare companies.
1) Conservative industry – not focusing on being likeable
The pharmaceutical, biotechnology, medical device, diagnostics and healthcare industry is often perceived as lagging far behind other industries in areas related to digital capacity, cost transparency, data protection, consumer rights and marketing (especially when it comes to online marketing, mobile optimisation, blogging, social media and branding).
Instead of catching up, the focus seems to be on maintaining profit margins by:
- Cutting thousands of jobs (especially in marketing and R&D)
- Suing competitors in relentless patent lawsuits
- Purchasing smaller companies in order to expand into new business areas
- Attempting to sell their products in emerging markets (e.g. BRIC)
Although this strategy may secure short-term shareholder value and generous top-executive bonuses, it doesn’t really contribute to a strong and positive brand perception in the minds of the customers. Let’s face it, the reputation and brand recognition of many large companies in this industry is, at present, not much better than many of the banks dismissed as ‘unscrupulous’ or ‘profit-hungry’.
2) The complex customer
A major reason why the industry is so conservative and low-profiled can be explained by looking at the customers they are serving. The healthcare industry’s customer profile is complex because the decision power is split between three groups:
- Prescribers (primary care physicians, specialists and hospitals)
- Payers (hospitals, pharmacies, health insurers and governments)
- End consumers (patients)
These groups have different needs and expectations. The primary care physician or surgeon wants what is best for the patient, and what is easiest, fastest and most reliable. The payer is more interested in reasonable and adequate care within the constraints of the annual budget. The patient, on the other hand, just wants to get healthy as soon as possible without running into financial problems.
In most European countries, patients have little influence over prescribed therapy. While patients are interested in the best possible outcome and are increasingly informed thanks to the internet, the average patient trusts their doctor’s recommendations and do not shop around. In many cases, the patient is too ill to even think about different options. Those who do seek alternative treatments often face financial implications as these options may not be reimbursed by the local healthcare system. Consequently, the purchase decision lies most often in the hands of the payer and the prescriber.
4) A complex product in a highly regulated market
Prescription drugs and medical devices are not like other consumer goods. The products treat disease and, even when used properly, there is always a risk of side effects, which can cause serious harm. People are vulnerable when ill and it is ethically questionable whether profit-oriented companies should be able to market their products to sick and worried patients.
This is why the healthcare market is heavily regulated and marketing opportunities are restricted. For example, it is forbidden to promote prescription drugs to patients in all European countries (for now, this is still allowed in USA and New Zealand). For medical devices, the picture is not that clear in Europe. The current European regulatory framework (Medical Devices Directive 93/42/EEC (MDD)) excludes the topic advertising and promotion of medical devices. This leaves a gap in the European regulatory framework. Instead the local laws of each individual country apply. In general, it is mostly possible to advertise medical devices to the general public and to healthcare professionals in Europe as long as the advertising is not misleading, not bashing the competition and not making reimbursement claims.
The often unclear or very strict regulations makes it difficult for the industry to create any brand awareness in the general population, especially as their branding approach is very product focused.
5) The product features, functions and benefits obsession
Historically, pharma and medical device companies have chosen a ‘free-standing’, product focused, brand model. This approach focuses on creating a separate branding for each product, instead of creating an overall master brand that identifies all products from the company (like Apple, Virgin or GE).
The main reasons for the ‘free-standing’ approach are:
- Risk reduction: The belief that, in case of a product failure or a recall, only the product in question will be the focus of attention and not the company.
- Simple product messaging: Efficacy and safety claims used to be the only two criteria needed to drive sales in pharma. In medical device companies, engineers seem to run the marketing departments, and the ‘feature/function/benefit’ product claims still dominate the message. This has resulted in a lack of clear product positioning and an overall weak brand message.
- Large budgets: The era when blockbuster drugs and medical devices meet the demands of unaddressed multi-billion-dollar markets is nearing an end. The market place is increasingly crowded and generic suppliers are pressing prices down. Branded pharmaceuticals such as Lipitor, Plavix, Viagra and other big sellers are already off-patent, and the medical device market is also increasingly commoditized. The product-focused branding approach made sense in a time when sales and marketing budgets were huge, sales reps numerous, and the competition from generic products low.
The consequence of this ‘free-standing’ approach is that product brands have been pushed forward and the corporate brand kept in the background. The power of a strong overall brand positioning and message has therefore not been harnessed. This has obviously contributed to the low recognition and relatively low brand equity of companies in the healthcare industry. Most people have heard of Viagra but how many know that it is a Pfizer product?
But branding is dishonest and so commercial! Why not just state the product facts?
When words such as branding and healthcare enter the same room – let alone the same sentence – one can practically feel the air tighten with tension. It’s almost like the beginning of a bad joke. A marketing guru, a doctor and a patient walk into a bar… Joking aside, healthcare is a serious business.
In 2010, EU member states devoted, on average, 9.0% of their GDP to health spending. Of this, 23% was allocated to medical goods, primarily pharmaceuticals, which accounted for 19% of total health spending. (1) In 2011, the global pharmaceuticals, biotechnology and life sciences industries generated total revenues in excess of US$1.1 trillion. (2)
You can practically hear the accountant’s ticker tape tallying up the numbers, which boast so many zeroes you might have a blink a few times to take it all in. That’s when the word ‘business’ starts to sink in, ‘marketing’ starts to emerge, and ‘branding’ should approach centre stage.
There seem to be a lack of understanding about what actually constitutes ‘branding’. Most senior managers treat branding as a cosmetic exercise and think it only involves a refreshed logo with a revised uninspired tag line, new stationary and a few advertisements. A superficial brand-refresh is often applied in an effort to make a bad or confused business look more attractive. This approach is doomed to fail since reputation (or the brand) is nothing more than reality with a lag effect.
A strong brand message should create an emotional hook between the company and the customer. This can be achieved by, for example, employing and taking ownership over a disruptive idea or introducing a completely new way of solving a problem. This means you have to do business differently and you have to alter the way you do marketing. To be successful you have to drive the change in your market place.
“Disruption is all about risk-taking, trusting your intuition, and rejecting the way things are supposed to be. Disruption goes way beyond advertising, it forces you to think about where you want your brand to go and how to get there.”
Sir Richard Branson
A company that is able to deliver what it promises, make the brand message stick in peoples’ minds and passionately communicate why they are doing certain things and why this makes them feel good will manage to attract the best and brightest – employees and customers alike.
For the healthcare industry, the beauty of this approach is the following: By not focusing on the promotion of individual products and their features, the regulatory restrictions are much smaller and the brand message will be much stronger.
How about some more feel-good in the industry?
From this perspective, the relationship between healthcare and branding becomes more feasible. After all, who doesn’t feel good about improving ‘health’ and ‘care’, and why not just openly communicate why you are doing what you do? Why is it that people don’t naturally associate warm feelings with any particular name in the industry? Perhaps it’s time for the Life Sciences and Medical Devices Industry to put words conveying feel-good back into the marketing of their businesses; Google, Coca Cola, General Electric and Amazon do.
In a recent Wall Street Journal article (3), Noreen Clark, director of the Center for Managing Chronic Disease at the University of Michigan was quoted as saying,
“Quality of life happens to be the element that is most important in motivating people to deal with an illness […] People aren’t motivated to follow their clinical regimen if, in fact, it doesn’t improve the way they function and get along with others and manage day-to-day.”
This is a very important point to consider when creating a brand message. The use of medicines and medical devices has to be linked to the perception of an enhanced experience for prescribers, payers and, above all, for the patients.
Hence, the brand message should not be that ‘our clinically proven Product ‘XYZ’ has a 5% relative improvement and a lot of nice features – so buy our product, we are the best!’ Instead, rather communicate why your company is so committed to the patient, the physician, the hospital and ultimately everyone on this planet and then explain why Product ‘XYZ’ is contributing to achieving this goal.
The fast-moving consumer goods (FMCG) industry knows how to do this. What sets your Nespresso apart from any other regular cup of coffee is branding—the perception that there’s an enhanced experience in choosing one brand of coffee over the generic.
Naturally, Nespresso coffee is not the same as a new cancer drug or an artificial hip implant. However, in a competitive market place it is crucial to differentiate yourself from the rest. As explained above, the healthcare industry’s customer profile is complex because the decision power is split between three groups. This means that the importance of building a strong brand is even greater than in many other industries – and much more challenging.
The way forward – join the brand wagon!
There are many reasons for the low brand recognition of the healthcare industry. How can this be changed?
First, the top executives would need to agree to follow some fundamental guidelines:
- Stay out of the feature/function/benefit trap! We all know you think your product is great; otherwise, you wouldn’t have invested millions on it. However, there are many other great products out here that are very similar to yours. Remember, although healthcare customers evaluate data and compare alternatives they are still human. If two products are very similar, then the obvious smattering of benefits and features does not get you anywhere. Gut feeling can sway the ultimate decision. You have to make sure that you have a strong brand that the customer wants to connect with.
- Don’t hide! In today’s interconnected world, the corporate brand cannot hide from any product-related scandals. If something bad happens, we are all able to link the product to the company.
- Show commitment! This is a relationship business and you have to show that you will be there for the long run. You have to be the source of great solutions and value offerings that will help patients, hospitals and physicians. By experiencing commitment from your side, I will feel a longer-term emotional attachment to your brand.
- Empower you people! Make sure that you enable everyone in the organisation to ‘live the brand’ and empower every employee to deliver what the brand promises.
- Remember to tell the world why your company exists
- Deliver what you promise!
- Start thinking about your brand as the most important asset in your company and invest in it accordingly.
It is crucial that the pharmaceutical and medical device companies start working on the personality of their corporate brands. Your brand should be something other people would like to be a part of. The focus should be on providing a clear positioning and messaging platform that links your product portfolio, your customers and your employees together. Your goal is not to sell a product. Your goal is to do business with the people who believe what you believe.
Building a strong brand is hard work. The recipe for success is a crystal-clear brand positioning and a company that can deliver on its promise. Your brand should be credible, relevant and differentiated. There are plenty of companies getting it right. Get inspiration by looking at what the top 100 brands in the 13th annual Best Global Brands report do and, as a first step on your path to brand excellence, take a very close look at Johnson & Johnson who was ranked 79. Start thinking about your brand as the most important asset in your company and invest in it accordingly.
- OECD (2012), Health at a Glance: Europe 2012, OECD Publishing. http://dx.doi.org/10.1787/9789264183896-en [Accessed: 18 March 2013].
- DTTL Global Life Sciences and Health Care Industry Group analysis of “Global pharmaceuticals, biotechnology & life sciences industry profile” Marketline, May 2012, EIU database [Accessed: 18 March 2013].
[Accessed: 18 March 2013].