James Dudley Management

James Dudley Management

Winning Strategies Successful Innovation Beyond Rx to OTC Switching - A Major Consultancy Report from James Dudley International Ltd

Rx to OTC brand switches are eight times more likely to produce successful new OTC entries in Europe than new brands.

Conversely, new OTC brand entries over the last five years have been unremarkable with less than one in ten achieving critical mass despite millions of dollars invested in them.

A major new consultancy report from James Dudley shows why Rx to OTC switches have been more successful and gives reasons why new brands fail.

The report Winning Strategies - Successful Innovation beyond Rx to OTC Switching points out that while Rx to OTC switches have created new categories and new category leaders, the 'switch pipeline' will produce less new OTC blockblusters such as Zovirax in the future.

Most of the 'easy' Rx to OTC switches have already occurred and the innovatory cycle is now entering a period where:

  • late switches are entering categories which are already dominated by brands switched from the prescription only sector such as topical pain relief, antifungals and systemic antihistamines
  • the inevitable 'me too' followers are swamping new categories such as antivirals
  • the extent to which consumers and pharmacists can be expected to accept or even need more advanced molecules for fairly simple everyday ailments such as heartburn and other symptoms caused by stomach acidity. The report points to the failure of H2 receptor antagonist switches in the UK.

Companies which have been more successful in generating new brands and Rx to OTC switches have either intentionally, and in many cases accidentally, triggered trial and brand adoption by connecting with important aspects of the consumer need array.

Analysis of 14 major case studies tracing new brand launches and Rx to OTC switches for up to 10 years show that success reflects a response to consumer need across a number of dimensions:

  • Physical need e.g. pain relief
  • Psychological need e.g. short term worry or long term concern
  • Social need e.g. enabling results of treatment to allow the pursuance of social goals
  • Economic needs reflecting choices in terms of cost and time.

The study also shows that unsuccessful companies are more likely to be supply side orientated believing that pharmacy bonusing and advertising can produce demand for 'me too' products.

"Why anybody should think that the self-medication market can absorb a fourth or even a fifth aciclovir OTC brand - beats me!" says James Dudley the primary author of the report.

In contrast, new successful brands such as Diflucan One (Pfizer) in the UK and the Nicorette Inhalator (Pharmacia Upjohn) are based on a thorough understanding of consumer need.

The report draws heavily on empirical analysis to find linking success factors and shows that where these are absent, new brand success is largely mitigated.

Corporate culture based on attributes of vision and change leadership provide the internal environment for innovation. Vision led change driver companies produce higher shareholder value in terms of return on investment than any other.

Among reasons for new product failure shown in the consultancy study are:

  • A tendency to differentiate new product concepts on the basis of formulation rather than on discovery of consumer needs and expectations
  • A misguided belief that pharmacists, given sufficient incentives, will recommend or substitute a new brand for existing consumer demand for established brands. This belief ignores the fact that only a minority of consumes seek a pharmacist's advice for treating common ailments.
  • Over ambitious pricing for new brands even in categories which are mature and where consumer satisfaction levels are already high. Such policies simply reduce the penetration of a brand into consumer usage.
  • A belief that attacking competitor market share rather than delivering new consumer expectations will produce successful new brands - such strategies result in a share of a competitor's market rather than a share of consumer choice.
  • Entering market sectors where companies do not have a depth of excellence in either technology or consumer knowledge.

The primary reasons for new OTC brand failure in Europe are based on the fact that over 80% of consumer demand for self-medication is met by a handful of major brands in each category. The majority of which are over ten years old and most have come into consumer usage from doctor prescriptions either presently or in the past. These factors present major barriers to entry for new brands.

A new innovatory standard is therefore recommended in the James Dudley report.

Study Details
Title: Winning Strategies - Successful innovation beyond Rx to OTC switching

ISBN: 1 899976 06 X
Price: £1,450

For further information check the Reports page

For November press release check the November release

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