Is Marketing Manipulating Your CMO Selection?

By Louis Garguilo, Chief Editor, Outsourced Pharma

Perhaps it’s an inherent predilection to draw marketing lessons from any industry report, but that’s what happened after pouring over Industry Standard Research’s (ISR) recently released Biologic API Contract Manufacturer Quality Benchmarking (2016).

Whether evidence of a latent tendency or not, some marketing insights from this report will benefit BioPharma companies selecting CMOs for biologics (or small-molecule) development and manufacturing. CMOs might pay attention as well. Here’s why: Company branding and industry reputation exerts an even larger influence on sponsors than we might have imagined.

Your Reputation Precedes You

An increase in biologics-services outsourcing, and the number of providers to select from, have brought sponsors more opportunities, but also less clarity as to which CMO does what, let alone which does it well. This situation presents itself clearly in the fact that some BioPharma sponsors, when asked whom they perceive as leaders in manufacturing of biologics API, select CMOs who don’t even offer the service.

As the ISR report points out, this is actually an interesting consequence resulting from what is a broadly known marketing condition, dubbed the “halo effect.” This market phenomenon occurs when a positive reputation in one (or more) category of services – or an overall company reputation – spills over onto services a company doesn’t offer. In some respects, this can be by seen as a good thing: It’s an indicator of stellar performance and customer service, and yes, some marketing prowess in getting the word out.

Others see this differently. I for one would be less sanguine, and instead designate this situation as the “hello effect,” as in: “You had me at the first hello.” Sponsors should be careful to get past first – or more precisely, market-driven – impressions of CMOs. “Careful” because this is more difficult than it sounds. The ISR report gives us a hint why: “Sponsors rely on various means to access a CMOs quality, often first by reputation.” (The report says the other attributes to define a biologic API contract manufacturer’s quality are experience, regulatory history and FDA compliance, and timeliness.) This suggests that some of the “due diligence” when looking for a CMO may actually catch sponsors in the trap of (first) impressions. And as we all know, these are not always accurate.

As for the CMOs experiencing this attribution of positive reputation across the industry, congratulatory feelings should be tempered. Any market misunderstanding (even potential customers thinking positively of you) can indicate the need for more effective communicating of the actual capabilities at which you appear to excel. Consider: What happens to those (misplaced) positive perceptions when BioPharma companies realize you don’t offer the services they think of you for? At the least, this can lead to lost time in pursuing real opportunities. At the most, a diminution of those positive feelings.  

We’ve Never Met, But I Think I’m In Love

Here’s a related marketing morsel from the ISR report. A percentage of BioPharma respondents – responsible to some degree for outsourcing at their company – indicate that if the decision were up to them, they’d select a CMO as a partner for biologics manufacturing that they have never worked with. Moreover (Astoundingly?), some respondents actually selected a company they had not previously worked with as their preferred CMO for biologic API manufacturing projects. Really? Why?

This is also an extension of the “hello effect.” And it comes with a clear and present danger. That danger is demonstrated by the fact that in some cases, the percentage of sponsors who have not worked with a CMO but indicated they would select it for their next project, was higher than the percentage of sponsors who had actually worked with that CMO in the past. 

This risks repeating. Those who had actually worked with a particular CMO were often less prone to work there than those who haven’t. A case of “familiarity breeds contempt”? Let’s hope not, and results discussed in our next selection suggest this isn’t the case. Perhaps it’s more a case of “unmanaged expectations” (also partly a marketing problem), or the simple human proclivity to look over the fence, because as with that traditional adage, the grass has to be greener somewhere else.

These are more than aphoristic fragments. The downside in judging a biologics API manufacturer – this report focused most precisely on the quality aspects of that CMO – by reputation and brand recognition cannot be overlooked. Biologics API manufacturing for innovative, mass-market drugs is still a relatively new service and industry segment. Despite our mention above of various service providers coming on line to offer these services, options are certainly more limited than for small-molecule manufacturing. (Some in fact continue to fear a large-molecule capacity crunch.) In an era of accelerated time-to-market, increasing competition, and more complicated products and technologies, picking the right CMO from the get-go has never been more important.

Finally here, since I’d most likely be overly effusive, let’s use a steadier (if not understated) sentence from the ISR report to summarize both sections above: “General awareness levels for contract manufacturers with biologic manufacturing capabilities is fairly strong, however there is a lot of opportunity to improve the familiarity levels with individual contract manufacturers’ large molecule service offerings.” (Yeah, that is if they offer the services at all! … I couldn’t resist.)

I’ll Pay For That

A last point of lasting impression: There was little correlation in the report between the contract manufacturers with the “highest usage rates” and the “best price perceptions.” This indicates cost is not the most influential factor in selecting a CMO. Sponsors seem to have determined that, as they say, you get what you pay for. Here, a more negative perception (higher prices) doesn’t dampen sponsors’ enthusiasm when in fact they have received quality product and good customer service.

The report also indicates a high degree of sponsor loyalty to the most frequently used CMOs. One service provider stood out among all the biologics API contract manufacturers, holding the top position as the perceived leader in the field, despite 19 percent of responders saying it was “much more expensive relative to the competition.” Most in the industry would take this as an indicator that good service sells well, and recognition of the value of external relationships in the biologics supply chain today.

So perhaps we draw these final conclusions. Both sponsors and CMOs should take care to line up actual performance with market perception. CMOs need a better marketing plan relaying that actual (positive) performance, which not only keeps activity up, but margins, too. More fundamentally, CMOs need to make clearer to sponsors precisely what services, capabilities, technologies, equipment, and skill-sets they offer (and clarify which they don’t).

Sponsors need to take care to avoid the “hello effect,” which we have found very much in play in our industry. It also appears we’ve learned the best way to select CMOs is to find the ones perceived as the most expensive! That is, as long as sponsors are careful to confirm those perceptions are correct.

Maybe we’ve all come under a CMO marketing spell.