Death by a thousand price cuts: is commoditisation killing med comms?

Ryan Wallman
February 13, 2013

If you work in medical communications and are not worried about commoditisation, you should be.

Commoditisation occurs when a product or service is so freely available that it becomes a ‘commodity’; in other words, the market does not differentiate between brands. In our broader industry, it is a firmly established killer of businesses. Providers of communications and creative services – dealing as they do in entities increasingly considered homogeneous (ideas, words and design) – are sitting ducks for death by commoditisation.

It hardly needs saying that major technological and social shifts underpin this threat. Globalisation and an explosion in virtual networks have exposed the communications industry to a previously unfathomable breadth of competition. And when you add in the impact of global economic conditions – notably the tendency to focus on finance, procurement and short-term business survival – it’s a perfect storm for an industry geared towards delivering longer-term benefits for clients. 

Aren’t medical communications a special case?

For those of us in med comms, there’s a temptation to be complacent about all this. Ours is, after all, a specialised field. It requires specific experience and a high minimum level of technical knowledge – factors which inherently serve as barriers to entry. What’s more, the regulatory idiosyncrasies of regional markets mean that local understanding represents a distinct advantage for med comms providers faced with the threat of international competition.

So why worry? Well, because despite all that, we’re not immune.

For one thing, the mind-blowing scale of industrialisation in places like China and India is bringing a huge number of highly skilled professionals into the game, including those with training in health sciences. Coupled with the increasingly widespread use of English as the default language of the internet, this means that med comms providers will be (if they aren’t already) exposed to a large group of competitors who are technically proficient and strong communicators in English. And who offer their services at a lower price.

Second, we are subject to pressures from the client side. Although healthcare broadly tends to be protected from the vicissitudes of commerce, it’s no secret that the pharmaceutical industry faces numerous challenges, not least:

  • Increasingly restrictive regulatory environments
  • The growing threat posed by providers of generic medications
  • Scepticism among healthcare professionals, with an increasing reluctance to associate themselves with pharma companies
  • Media coverage of unethical industry practices and an attendant public antipathy towards pharmaceutical marketing
  • Persistence with outdated strategies and business models – an approach that PricewaterhouseCoopers describes in its Pharma 2020 report as the industry’s ‘cultural sclerosis’.

Naturally, these factors will tend to increase pharma clients’ price sensitivity. And whether justified or not, marketing expenses are often the first to be scrutinised when things get tight.

Is quality an anachronistic notion?

In a commoditising industry, the challenge is to ensure that clients understand the value your product offers.

But one obstacle to demonstrating value in our industry is the extent to which the quality of medical communications is actually recognised. Do most clients know – or if they do know, do they care? – what represents high-quality med comms?

There can be little doubt that the self-publication opportunities afforded by the internet have led to a decline in the average standard of published communication. And a corollary of this trend is the seemingly growing belief that ‘anyone can write’ (or design, for that matter); a view that many of us will have encountered in our dealings with clients and others.

In this context, it’s fair to assume that some previously immutable markers of quality in med comms are now considered less important than they once were. And when this is further complicated by the inherently subjective nature of creative outputs, there is no guarantee that the market will value a superior product. The upshot? Even the ‘fittest’ among us may not necessarily survive.

To the victors go the spoils – or not

So does anyone actually win from the commoditisation of med comms?

In theory, customers are the main beneficiaries when an industry becomes commoditised. And in the case of med comms, it’s certainly true that clients’ procurement departments will be happy, since commoditisation eliminates the need to compare value. But the broader benefits to our clients may be spurious, in that the quality (and value) of their communications may suffer.

For med comms providers, there will of course be winners and losers. The trouble is that in a truly commoditised market, the collective loss for providers is enormous. According to the Bertrand model of economic competition within a market of undifferentiated products, it’s a race to the bottom: firms will continue to undercut each other on price until their product’s price equals its unit cost. In this scenario, all but the lowest-cost providers go out of business. Simple as that.

Finding a way to survive

There’s no doubt that the threat of commoditisation for med comms providers is real, but there are strategies that can help you militate against it.

  1. Work to maintain (and communicate) your brand equity; i.e. provide a compelling reason for clients to pay a premium. Competing on price is not a realistic option.
  2. Bundle ‘extras’ with your core offering – especially those that can’t easily be imitated by remote providers, such as in-house writing services.
  3. Get to know your clients better and customise your product for the individual client. If your clients/prospects share a similar therapeutic focus, become a ‘specialist’ in that area.
  4. Consider new markets to which your capabilities can be extended, such as related technical industries beyond healthcare.

With the right approach, med comms providers can survive – and prosper. The key is shared value: increase the value captured by your business by first increasing the value you provide to your clients.

This article was originally published in pharmaphorum, an online forum for communicating thought leadership and innovation in the pharma industry. You can view the original article here.

By Ryan Wallman, Head of Copy at Wellmark.

Connect with me on Google+ at +Ryan Wallman

 

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