Recession, depression, aggression! Oh, my!

February 2, 2009 – 11:59 am by Gina Monari

“These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again.” — John D. Rockefeller (July 8, 1839 – May 23, 1937)

In this era of financial uncertainty, no business is entirely immune to the economic tide of woes. This includes the pharmaceutical industry, which is a relatively new industry post-dating the period of the Great Depression in U.S. history. It was not until the 1950s and the development of innovative approaches in science and manufacturing did ardent pharmaceutical industrialization begin to emerge. In reality, there has never been a recession in the pharmaceutical timeline quite like the one that exists now.

As part of Med Ad News’ Agency Roundtable discussions, several agency heads discussed the existing dilemma of pharmaceutical clients during this age of increasing financial flux . According to Rich Minoff, president and CEO, Dorland Global Corp., the pharmaceutical industry was once supposedly a ‘recession-proof’ industry.

Did somebody say ‘unsinkable ship?’

Mr. Minoff admits that the industry is struggling, clients and agencies alike. His message: Take moderate risks, assess your value, and adapt to change.

Pharmaceutical companies have been steadily slashing their work forces and cutting their budgets. According to Susan Miller, a partner at The CementBloc, the advertising sector is forecasting poor prospects in 2009, IMS is reporting a drop in unit sales for the first time in 10 years, and about 11% of Americans are saying they have cut back on the number of prescriptions they take.

Cutting back on prescriptions? Does this mean diabetics will be taking their insulin once a day instead of twice or three times a day? I surely hope my mother is educated on the importance of taking her thyroid medication once a day compared with a once-a-week regimen. What a scary scenario. In addition, what kind of outcome for the cost of health care in the United States would this have with emergency room visits costing on average about five times more than a visit to a doctor’s office.

Chronic illness does not disappear. People are always in need of physicians and patients always need medications.

Hi De Hi De Hi De Hi

To know what advertising is, we need to understand human behavior as it pertains to preferences and the processing of stimuli. After examining tactics used by many of the Depression-era survivors, I wonder what innovative routes pharma may take to survive and thrive.

What do Camel, Chevrolet, Ford, Goodyear, General Electric, General Mills, Proctor & Gamble, and Quaker Oats have in common? These are among the few American brands to have weathered and survived the Great Depression, and many did this with aggressive advertising strategies. According to Dave Chase, chief marketing officer, Altus Alliance, at least three of these companies increased their advertising spend during that time, while competitors cut advertising budgets.

There are reasons not to trim advertising and promotional budgets in an economic downturn. According to Robert Grede, online columnist for Sales 6 Marketing Management, some key reasons are: advertising bargains exist, you can stand out against competitors who do trim their budgets allowing you to gain market share, and in the end customers and prospective consumers will remember your brand when the economy turns around.

The use of radio as an emerging media propagated advertising messages into more homes than ever during the Great Depression, and an aggressive approach by some companies rendered competitors unable to deliver. Big spenders included Camel, Chevrolet, and Procter & Gamble. Chevrolet went into radio, sponsoring Depression-era classics, while print advertisements appealed to the “emotional” side of buying decisions. P&G also turned to radio.

An article written by Doug Tsuruoka, Investor’s Business Daily, referenced the aggressive advertising moves by Richard Deupree, who became president of P&G in 1930. Mr. Deupree ramped up P&G’s advertising budget, while shareholders were clamoring to cut advertising spending. His sales instinct to success during hard times: keep P&G’s name in the public eye. By 1939 the company was sponsoring several radio programs and doubled their radio advertising budget every two years during the Great Depression.

The Internet is the newest of all the emerging media with a myriad of interactive applications and services scaling the World Wide Web. According to Draftfcb Healthcare Executive VP and Managing Director Sheri Rosenblatt, despite the current financial woes, online advertising is expected to grow in 2009.

As an interactive observer, I personally hesitate to gloss over the potential of YouTube and other networking sites. Could YouTube be the host for the next “Ma Perkins”? … We shall see.

Pennies from Heaven

As the economy tanked in the ’20s and ’30s, companies such as Quaker Oats and General Mills made strategic acquisitions and consolidations of established products. For example, General Mills was created in 1928 by consolidating several major flour-milling companies around the country, making General Mills the largest flour-milling company in the world. As a part of General Mills, these mills kept their operational independence, but left advertising and product development to General Mills headquarters. This consolidation provided the strength to survive and prosper through the Great Depression, when earnings grew steadily and stock in the company was stable.

Pharmaceutical marketers are no strangers to mergers and acquisitions. In the past week, one of the largest acquisitions in recent years surfaced as Pfizer Inc. and Wyeth announced a definitive merger agreement under which Pfizer would acquire Wyeth in a cash-and-stock transaction. The combined U.S. company is expected to create one of the most diversified companies in the global health-care industry or as Pfizer states: The world’s premier biopharmaceutical company.

Might Pfizer become the General Mills of Big Pharma? Certainly this remains to be seen, however, such a definitive action during sensitive times will surely be remembered.

Tags: advertising, compliance, consolidation, Economy, education, M&A, spending