Pharmaceutical Outsourcing, February 2015 

Understanding segmentation within your market offers a variety of benefits for the forward thinking company. Market segmentation is defined as the process of defining and subdividing a large homogeneous market into clearly identifiable segments having similar needs, wants, or demand characteristics.1 

Not many companies are large enough to meet the needs of an entire market1; this is especially true for the pharmaceutical outsourcing market. Through identifying market segments, contract research organizations (CROs) and contract manufacturing organizations (CMOs) can increase the efficiency of their marketing campaigns by targeting specific segments of the market that are most applicable to their company’s particular offerings. Industrial market segmentation is commonly assessed from 3 distinct perspectives: geographic segmentation, demographic segmentation, and behavioral segmentation. In this article, each perspective is analyzed while comparing the relative outsourcing preferences within each market segment.

Survey Methodology

The Nice Insight Pharmaceutical and Biotechnology Survey is deployed to outsourcing-facing pharmaceutical and biotechnology executives on an annual basis. The 2014-2015 report includes responses from 2303 participants. The survey is comprised of >240 questions and randomly presents approximately 35 questions to each respondent in order to collect baseline information with respect to customer awareness and customer perceptions of the top approximate 125 CMOs and approximate 75 CROs servicing the drug development cycle. Five levels of awareness, from “I’ve never heard of them,” to “I’ve worked with them,” factor into the overall customer awareness score. The customer perception score is based on 6 drivers in outsourcing: Quality, Innovation, Regulatory Track Record, Affordability, Productivity, and Reliability. In addition to measuring customer awareness and perception information on specific companies, the survey collects data on general outsourcing practices and preferences as well as barriers to strategic partnerships among buyers of outsourced services.

Geographic Segmentation

As the name suggests, geographic market segmentation is defined by the different needs of consumers that result primarily from being located in different geographic areas. For this assessment, we compare North American versus European outsourcing preferences of CRO/CMO services. Of the 46 services identified and surveyed, 5 were found to have significant differences (>5 percentage point variance) between the 2 submarkets. This type of discrepancy creates an opportunity for CROs and CMOs to tailor their marketing efforts more effectively. To be clear, these services do not necessarily represent the most in-demand outsourcing services. As a whole, respondents indicate that Analytical Services, Clinical Research, and Clinical Monitoring will be the most demanded services over the next 12 to 18 months.

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Ingredient Processing
In the North American market for pharmaceutical outsourcing, 60.06% of respondents indicate they will be outsourcing Ingredient Processing within the next 12 to 18 months compared to just 45.08% of respondents based in Europe. This category represents the greatest discrepancy between the 2 submarkets; thus, companies offering such services should take note.

Analytical Services
In the North American market for pharmaceutical outsourcing, respondents indicate they will be outsourcing more Analytical Services (+8.27 percentage points) within the next 12 to 18 months when compared to respondents based in Europe. Within this category, Analytical Testing andBioanalytical Testing services are ranked highest in terms of upcoming demand in both markets.

Packaging
In the North American market for pharmaceutical outsourcing, respondents indicate they will be outsourcing more Packaging services (+7.13 percentage points) within the next 12 to 18 months when compared to respondents based in Europe. Within this category, Clinical Packaging andDistribution is identified as the top demanded service in aggregate.

Injectables
In the North American market for pharmaceutical outsourcing, 64.73% of respondents indicate they will be outsourcing Injectables within the next 12 to 18 months compared to 67.11% of respondents based in Europe. This is the only category where respondents based in Europe have indicated a higher likelihood to utilize a service compared to their North American counterparts.

Biomanufacturing
In the North American market for pharmaceutical outsourcing, respondents indicate they will be outsourcing more Biomanufacturing services (+5.37 percentage points) within the next 12 to 18 months when compared to respondents based in Europe. Microbial Manufacturing leads the demand for services in this category. Interestingly, when analyzing this subcategory (Microbial Manufacturing), European respondents indicate greater demand (82.71%) compared to their North American counterparts (73.96%).

Through identifying market segments, contract research organizations (CROs) and contract manufacturing organizations (CMOs) can increase the efficiency of their marketing campaigns by targeting specific segments of the market that are most applicable to their company’s particular offerings. 

Demographic Segmentation

For our demographic segmentation analysis, the market for pharmaceutical outsourcing has been reclassified into 3 groups by each company’s annual outsourcing budget: <$10 million; $10 to $50 million; and >$50 million.

From a macro perspective, respondents indicate Clinical Research, Clinical Monitoring, andAnalytical Services to be the most demanded services over the next 12 to 18 months; however, reviewing this data from an annual outsourcing budget perspective reveals a different picture. It is interesting to note that although these segments show a clear distinction in the rankings of services demanded, their relative distributions of demand are moderately inconsistent with the overall market trend. Having only 3 service categories exhibiting differences smaller than 5 percentage points suggests that variances in these outsourcing preferences may be a case of correlation rather than causation.

<$10 million
For companies with an annual outsourcing budget of <$10 million USD per year, respondents indicate their top 3 demanded services over the next 12 to 18 months to be Packaging (29.39%),Analytical Services (27.36%), and Clinical Research (27.03%).

$10 to $50 million
For companies with an annual outsourcing budget of $10 to $50 million USD per year, respondents indicate their top 3 demanded services over the next 12 to 18 months to be Clinical Research(32.45%), Clinical Monitoring (29.50 %), and Packaging (29.35%).

>$50 million
For companies with an annual outsourcing budget of >$50 million USD per year, respondents indicate their top 3 demanded services over the next 12 to 18 months to be Biostatistics (39.41%), Analytical Services (37.08%), and Biomanufacturing (36.65%).

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Behavioristic Segmentation

Behavioristic segmentation is defined by differences in consumption behavior within a group or market. Regarding the market for pharmaceutical outsourcing, a market segmentation analysis can be performed when separating companies via the phase of drug development companies are in when choosing an outsourcing partner. The most popular phases of development in which companies engage an outsourcing partner are Pre-Clinical (61.77%), Phase I (57.92%), and Discovery (47.79%). Reviewing market segments in this light would be beneficial to CRO/CMO marketing teams as it offers a relative ranking of the needs which customers are likely to be searching for from their outsourcing partner as dependent on which stage of drug development in which they are currently engaged.

Discovery
For companies that engage an outsourcing partner during the Discovery phase of development, respondents indicate their top 3 demanded services over the next 12 to 18 months to be Analytical Services (41.89%), Biostatistics (38.00%), and Clinical Research (37.03%).

Pre-Clinical
For companies that engage an outsourcing partner during the Pre-Clinical phase of development, respondents indicate their top 3 demanded services over the next 12 to 18 months to be Clinical Research (37.22%), Analytical Services (36.47%), and Clinical Monitoring (34.51%).

Phase I
For companies that engage an outsourcing partner during Phase I of development, respondents indicate their top 3 demanded services over the next 12 to 18 months to be Clinical Research(37.13%), Clinical Monitoring (36.41%), and Biostatistics (35.77%).

Conclusion

While identifying the most-demanded services should be the focus of any organization's marketing efforts, insight into market segmentation allows for a more robust campaign.

As the competition in the CRO and CMO markets increase, so does the importance of marketing communications. In order to efficiently and effectively reach potential customers, CROs and CMOs should pay attention to market segmentation and focus on those groups of customers most relevant to the company’s specific offerings. However, identifying market segmentation is only part of the formula for success.

The successful company will not only identify various segmentations within their operating market, but also determine the reasons for segmentation—correlation or causation. Without a thorough understanding of the latter, companies run the risk of misinterpreting their customers’ needs/wants. Apart from in-house research teams, statisticians, and economists, the next best way to achieve this understanding is through working with market research firms in order to develop tailored marketing plans specific to your goals.

Reference

  1. Market segmentation. BusinessDictionary.com. WebFinance, Inc. 
    http://www.businessdictionary.com/definition/market-segmentation.html.
    Accessed December 29, 2014.