Modeling the Effects of Promotional Efforts on Aggregate Pharmaceutical Demand: What We Know and Challenges for the Future - Innovation and Marketing in the Pharmaceutical Industry - page 595

data, demonstrate that pooling across brands within categories and across brands in
different categories obfuscates the underlying heterogeneity. What is more impor-
tant, they fi nd that by conducting brand level analyses, the conclusions regarding the
effectiveness of pharmaceutical instruments are diametrically opposed to the fi nd-
ings of De Laat et al. ( 2002 ).
We conclude that brand level demand effects of pharmaceutical marketing are
generally positive and signifi cant, but moderate in size. Effectiveness is moderated
by the type of marketing instrument: detailing appears to be the most effective, fol-
lowed by journal advertising, meeting expenditures, and direct mail. DTCA appears
to be the least effective instrument at the brand level. We also observe that the effec-
tiveness of pharmaceutical promotion differs across therapeutic categories and that
this interacts with the type of marketing instrument used. Another general conclu-
sion is that pharmaceutical marketing efforts usually have substantial lagged effects.
These fi ndings have important consequences for budget allocation decisions across
products and markets, and time. The implications for researchers in this market are
that they should account for differences in effectiveness and in lag structures of
promotional instruments, and accommodate interaction effects.

20.2.3 The Function of Pharmaceutical Promotion

We now turn to the function of promotion in pharmaceutical markets. Several stud-
ies that investigate this issue distinguish between the informative and the persuasive
functions of promotional efforts. The persuasive function leads to a direct sales
effect as it creates market power via investing in promotions for ethical drugs and
developing goodwill towards the product. This makes physicians prescribe out of
habit rather than by evaluative choice (Leffl er 1981 ). The information function rep-
resents an indirect effect, with promotional instruments serving as information
sources for prescribers, with the assumption that they learn (and subsequently pre-
scribe) by being exposed to the promotional instrument (Hurwitz and Caves 1988 ;
Leffl er 1981 ). The information function also serves to reduce uncertainty for the
risk-averse doctors (Coscelli and Shum 2004 ).
These functions are investigated in two distinct research streams. In the fi rst,
promotion has either a persuasive or an informative function, but not both. This
stream assumes that the function is persuasive when promotional efforts reduce
price elasticity (e.g., Hurwitz and Caves 1988 ; Leffl er 1981 ), and this leads to nega-
tive welfare effects as it causes physicians to become more loyal to the promoted
brand, irrespective of its price (De Laat et al. 2002 ). On the other hand, promotion
has an informative effect when it increases price sensitivity with the resulting posi-
tive welfare benefi t of physicians responding more strongly to price changes and
more effi cient allocation of prescribing resources. Some studies fi nd a dominant
information effect of promotional instruments (e.g., Leffl er 1981 ; Narayanan et al.
2004 ), whereas others fi nd a more pervasive persuasion effect (De Laat et al. 2002 ;
Hurwitz and Caves 1988 ; Rizzo 1999 ; Windmeijer et al. 2006 ). Leefl ang and
Wieringa ( 2010 ) fi nd no evidence of persuasive pharmaceutical promotion effects.