SOI 2012 - Rising Markets: Rx for Increased Sales

Health-Care And Pharmaceutical Markets Are Big Winners For Promo Sales

Rising MarketsAfter a comparatively weak 2010, both the health-care and pharmaceutical sectors saw a sizable share of business return in 2011. This came in part thanks to the greater certainty surrounding health-care reform, shifting marketing needs for hospitals, and more creative marketing on the part of pharmaceutical reps.

Last year, the health/medical/hospital category returned to its position as the top market for ad specialties, with a 12% share of overall distributor revenues. This marks a partial rebound after it dropped to a 10.4% share in 2010, from a high of 15.1% in 2009. Part of this rise can be attributed to the sense of stability that came with the passage of the Affordable Care Act (ACA) in March 2010, and the beginning of its implementation in the subsequent months.

"There is a lot of stress and discomfort that came from not knowing what the future would hold before the new law got passed," says Dan Dunlop, president of Jennings, a health-care marketing firm. "If you're a hospital, there are elements in there that are great and elements that present a challenge, but the sky didn't cave in, so people breathed a sigh of relief at that point and started spending again."

While the Supreme Court's current deliberations on the constitutionality of the law have renewed the uncertainty, health-care institutions at least have had a chance to prepare for the new policies, which has meant an increased willingness to spend on marketing.

"I see the hospitals and medical profession business growing," says Carey David, owner of Carey David Creative LLC (asi/157468).

He attributes this in part to an aging population, as boomers reach retirement age, and more seniors use the services of home health care and assisted living facilities. In the small town of Ocala, FL, where his company is based, David has seen growing competition between these facilities as they vie for customers, which means more need for promotional products.

"There are a lot of health-care facilities here, so each one wants to make the biggest impression possible," says David. "They understand the importance of having some kind of collateral material to keep them top of mind – I see repeat orders that I didn't see a year ago."

The ACA's goals of wider coverage and focus on early prevention of chronic diseases have led to a shifting role for hospitals, with rewards for maintaining a healthy population rather than transactions for sick patients. As hospitals present themselves as "wellness centers" more than places to go when feeling ill, opportunities for promotional products grow.

Industry watchers expect to see growing demand for products that encourage healthy day-to-day habits, from pedometers to water bottles for the gym to refrigerator magnets with health tips. "It's all about how do you begin a relationship with someone who is pretty much healthy, so when they want to choose a provider, they are going to make you their choice," says Candace Quinn, chief experience officer and senior consultant for health-care marketing firm Brand=Experience.

Quinn notes that these goals have led to a rise in marketing to affinity groups, such as women, children or seniors, as well as support groups for those with hip replacements and the like, all of which can be enhanced with targeted promotions.

Andrea Pearman, creative commander of Diversified Marketing Strategies, Inc. (asi/181308), has had a number of hospital clients investing in promotions targeted for women. "It's for everything from treatments like mammograms to separate women's clinics at the hospitals," she says. "I'm doing jewelry now – some bracelets, some watches, little purse keychains – and a few other things that are very different from traditional coffee cups or things like that."

Bruce Michaud, president of George H. Dean Company (asi/204615), works with a hospital that does cardiac drug testing and has seen business grow as they have begun to use the company to produce the entire kit, from printing educational materials to branding flash drives. "They used to buy the promotional stuff from another supplier, but since we have fulfillment, it's a natural fit for us to start doing the promotional materials as well," says Michaud.

A more significant boomeranging happened to pharmaceuticals, if on a smaller scale than health care, as it claimed 3.2% of distributor revenues, after two years at a mere 1.1%. This is a strong comeback for a sector that has suffered under industry guidelines and federal laws that greatly limit pharmaceutical companies from giving small gifts or merchandise to medical professionals. Between 2006 and 2010, the pharmaceutical sector fell from being the largest ad specialty sector to the smallest.

John Mack, publisher of Pharma Marketing News and Pharma Marketing Blog, was surprised to learn that the spending seemed to be on the rise but expected the explanation might be related to the forthcoming regulation.

"Some of the uptick you have been seeing may be for companies buying up promotions before they have to keep records of that kind of spending," says Mack. "Certain companies that have an agreement with prosecutors will have to reveal those payments because of the kickback they have gotten from the federal and state government, but other companies are below the radar."

He believes marketers may be adapting to the new rules in other ways as well. The regulations give marketers leeway to give out items if they offer educational value, so those who can offer their specialty items as learning tools rather than promotional ones are more likely to get through to their audience.

How much companies can spend on promotional products is regulated on a state-by-state level, but according to Mack it will become federally enforced in 2014, when all of them will be required to keep records. In the face of regulations about what they can and can't give to physicians, pharmaceutical companies are also targeting pharmacies and drug stores, according to Harry Hawkins, president of West Hawk Industries, (asi/358230).

"Some of the pharmaceutical companies are giving the drug stores free pens and trying to encourage more business that way," he says. "They're not allowed to give doctors anything anymore, but they can give to the pharmacies."

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