Russell Ackoff, a management thinker on par with Peter Drucker, has died at the age of 90. He long worked with Anheuser-Busch. While studying the A-B marketing strategy he concluded that increasing advertising budgets had little effect on sales. Neither did the taste of beer, he found through blind taste tests.
Marketing spending was passed onto the consumer in the form of better prices, making Bud inexpensive compared with local brands that had dominated the market. His findings and recommendations gave A-B the confidence to keep its marketing budget flat from 1961-1976 (flat, for 15 years!). The result, A-B quadrupled sales. In 30 years of working with A-B, beginning in 1960, market share grew from 7% to 40%.
Novartis is launching Prevacid OTC this week. The product was a monster Rx drug with $3.1B in sales last year but lost patent protection. The product is entering a very crowded OTC field and one that includes an identical product from P&G, which has the same claims and a slightly lower price. The market also includes a host of other brands and generics with similar claims and a lower price.
How does Novartis plan to win? With a $200 MM ad spend. TV ads will show people with heartburn unable to enjoy themselves - at a restaurant, at a comedy club, while sleeping. Original? Compelling? With no positioning, performance nor price advantage, Novartis is not going to win, nor is it even likely to generate sales to equal the planned ad spend. At the least, Novartis should focus like a laser on one or two segments of the user population where it can realistically be the first choice - e.g. diabetics with heartburn - and build from there. Novartis should take lots of the ad money and devote it to sampling - touch people in real life to stimulate immediate use of the product to link cause and effect. This late in the game, Novartis needs to either forgo the market or take the long view.
O.D.O.o.O.D.B.
(TY: Wall Street Journal)
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