Roi Implications for Pharmaceutical Promotional Expenditures: The Role of Marketing Mix Interactions
Stanford Graduate School of Business
University of Central Florida - College of Business Administration
Pradeep K. Chintagunta
University of Chicago
October 1, 2004
Journal of Marketing, Vol. 68, October 2004
In recent years, pharmaceutical companies have increased their promotional expenditures, particularly on direct to consumer advertising (DTC) and detailing. Given the large dollar amounts involved, this study focuses on the likely effect of these expenditures on a firm's revenues. More specifically, using data from a category of pharmaceutical products, the study empirically explores the impact of interactions between pairs of marketing mix elements on ROI.
The findings of this study from the second-generation prescription antihistamines category include the following: (i) DTC affects category sales but detailing does not; (ii) Category sales are not influenced by interaction effects; (iii) Both detailing and DTC affect brand shares; (iv) Marketing mix interactions, e.g., between price and detailing, detailing and DTC, etc, significantly influence brand share. The study finds interesting variations on how these interactions affect revenues. (v) Detailing has a greater impact on revenues than DTC; and (vi) Detailing and DTC have long term effects on revenues that are about four to seven times the current-period effects. To assess the extent of category specificity of these results, the analysis is repeated for a very different pharmaceutical product category – antivirals to treat genital herpes, and several key results are supported.
Keywords: Marketing Communications, Interactions, Detailing, DTC, Discrete Choice Models, Generalized Method of Moments, Pharmaceutical Industry
JEL Classification: C35, I11, M31, M37
Date posted: June 5, 2011