Phad 2 pp

GROUP 3

Chapter 9: Marketing Strategies

Personalized Service- Employees greet patrons by name at the entrance, arrange for patient’s prescription to be picked up after hours and even program the remote control that an elderly customer has just purchased for his VCR.

•Imaginative merchandising, facilities, and products not offered by chains.•Competitive pricing of merchandise through aggressive buying and taking advantage of manufacturer discounts.

• Neutralizing the chains’ price advantage by offering competitive prices on the top 200 prescription drugs, even if it means selling the drugs at cost.• Advertising in local promotional circular

and offering $5-off prescription coupons.• Hiring additional pharmacists so more

time can be spent with patients and professional services such as blood pressure and diabetes screening can be offered.

Porter’s Generic Marketing Strategies- Porter argues that all business strategies are determined by the business’s source of competitive advantage (low cost of differentiation) and scope of targeted markets (broad or narrow). In other words, businesses compete on the basis of cost, differentiation, and focus, and all business strategies are some variation on these three approaches.

Cost Strategies

•Cost based strategies identify and exploit opportunities to reduce cost below competitors cost, primarily by being more efficient and to drive down prices. Efficiency can be increased by designing workplace environments that simplify customers who are more profitable to the firm, motivating employees to work harder and smarter, and so on.

•Within their market, cost leaders compete by undercutting the prices of competitors. Winning customer volume away from competitors makes p for lower profit margins and enables the business to remain profitable. Profits are then used to develop new ways of doing business that further reduce cost.

•Wal-Mart department stores are famous for their low-cost business strategy. Wal-Mart uses its tremendous purchasing power and efficient supply chain to provide products at a lower average price than most competitors. When unable or unwilling to compete with Wal-Mart in terms of price, competitors use other strategies.

Differentiation Strategies

•Price become less important when business compete by offering a product or service package that is of higher quality, performs better, or is uniquely desirable. Businesses that differentiate themselves from competitors do so by offering a distinctive mix of products and services that are highlighted by effective advertising and promotion.

• Differentiation strategies emphasize value more than price competition. Customers buy differentiated products and services because they perceive that they are getting more for their money. A desire for the lowest price is replaced by a desire for the highest value. Pharmacies often try to differentiate themselves from competitors by providing greater level of service. This might mean faster, friendlier, more varied, or more convenient service.

•Medicine Shoppe, an international chain of franchise pharmacies, uses a differentiation strategy. In 2006, the chain had 900 Medicine Shoppe and Medicap pharmacies in the United States and 400 in seven other countries.

•Medicine Shoppes differentiate themselves from the average pharmacy by being small (averaging 600 square feet) and oriented more toward health care than toward general merchandise. 97% of the chain’s sales come from the pharmacy. The limited front-end merchandise is health related. Since most Medicine Shoppe pharmacists are franchise owners deal direct with the owner, not at employer.

Focus Strategies

•While differentiation strategies target large customer populations, focus strategies identify narrow market segments (or niches) that have been ignored, overlooked, or taken for granted by competitors. Many independent pharmacies successfully compete with large chains by giving greater attention to the local community.

•Focusing on narrow geographic niches, independent pharmacists are often active in local organizations and more familiar with neighborhood needs and interests than are employees of large chains. Their closeness to the community can generate goodwill that give them a competitive advantage over larger firms.

• This type of strategy focuses on the needs of a profitable few. Rather than compete for all customers in a market, firms compete for a limited number of profitable customers whom the firms can serve better than their competitors can. Pharmacists have attempted to serve the following niches: diabetes, asthma, cholesterol, lab services, reproductive health, vaccines, hospice, AIDS, veterinary services, smoking cessation, hypertension, complementary medicines, anticoagulation services, and postal delivery.

Choosing an Approach

•The appropriate strategy to choose-low cost, differentiation, or focus-depends on the market situation and a firm’s capabilities. A single independent pharmacy may find that focus strategies are the only way to compete with large pharmacy chains, because of the vast resources available to chains.

•A small pharmacy chain may find it too difficult to be cost competitive with a larger competitor that has significant cost advantages in distribution and operations. Instead, the chain might find a unique way to differentiate itself. A large pharmacy chain that is a market leader might develop economies of scale to reduce costs.

•No one strategy is necessarily better any other. The only measure of which one is best for an individual firm is its success in the market. Porter cautions, that it is important to choose only one of these strategies. A business needs to choose a single strategy and become proficient at it. Use of a single strategy also helps present a consistent image of the business to consumers.

Product Life Cycle StrategiesThe idea of this cycle is like plants, and animals, products have LIFE. Each product life cycle has 4 stages: • Introduction•Growth•Maturity•Decline

Sales volume and profitability- this will vary overtime as products progress through each stage.

By identifying a product’s life cycle stage, a marketer can develop strategies with increased chances for success.

Product life-cycle concept- permits a business to understand sales of single product within a market.Life-cycle strategies- are most common used for products that are exceptional, meet an unrealized need, and are unknown to the general market.

The four stages

1. INTRODUCTION- new products or new brand are unique and face immediate, direct competition in this stage. * The goal of marketing is to introduced the product to consumers and induce them to try it!

Promotional dollars- are spent to educate consumers about the product’s existence.

Sales promotion, coupons, price discount- attempt the consumer to try the products.Money – put into the product as an investment that the business hopes will pay off in later stages of the life cycle.

In the community pharmacy practice, most clinical services are still in the introduction stage. Why? Because this service fulfill a latent need, but they are often not profitable and they are not widely known or accepted.

2. GROWTH- the demand for the product starts to rise. Sales accelerate rapidly, climbing initially at an increasing rate toward the end of this stage.

* As the product moves through this stage, competitors start to enter the market to gain a share of the profits- this put pressure on prices and profits.

3. MATURITY-Sales reach their peak and start to decline. Profits start to erode - This stage is typically the longest one, for some products it can still be sufficient.*the goal of marketers is to defend their share of the market from competitors- this can be done by constantly refining the marketing mix.

Dispensing services- belong to maturity stage for many years. - They are unchanged in many respects from 50years ago. - most competitions in this services has been through the minor improvements designed to attract different market segment, improve quality, and drive down the prices.Innovations- such as drive-through windows, internet services, and telephone refill services have permitted pharmacies to prolong the maturity phase of dispensing services.

4. DECLINE- Sales and profits decrease until the product is withdrawn from market. - Like any living organism, a product reaches a stage where it can no longer survive. It is because consumer taste may change or new competitor may dry up demand in the market. Example manual type-writers and the slide ruler eventually disappeared from the products provided by the pharmacist.

ALTERNATIVE LIFE CYCLES

• The classic S shape of the original life-cycle model does not always accurately describe a product’s life pattern.

• In some cases a product’s life cycle is a series of S shapes.

PORTFOLIO STRATEGIES

•PORTFOLIO is all the products and services offered by a business.

•PORTFOLIO STRATEGY helps define the mix of products and services that a business offers.

PORTFOLIO STRATEGIES• PORTFOLIO MATRIX helps drive marketing

actions, helps determine whether a product should receive greater investments or be dropped from the portfolio

are classified as :Market shareSales growth rate

PORTFOLIO STRATEGIESTo assess Rx portfolio, these steps is needed:

Identify primary target markets

Inventory our current service offerings

Identify which of your current services are viable in your target markets

Identify which services you need to add or subtract to round out your service portfolio

CONVENIENCE STRATEGY

•Refers to speed and ease of shopping

• This is the reason pharmacies are located in supermarkets, shopping malls, drive-through, mail orders and internet Rx.

DISADVANTAGES CONVENIENCE STRATEGY: The demand for greater

convenience never ends

Innovation of non-pharmacy business raise consumer expectation

DISADVANTAGES CONVENIENCE STRATEGY:

The services that are considered convenient today will be slow in the future

Can be expensive

Negative impact on professional image of Rx

Convenience Strategies

Pharmacy convenience is an important factor in pharmacy patronage.

TIP Convenience varies

among people and situations.

TIP Convenience varies

among people and situations.

Convenience: Speed and ease of shopping.Important factors in consumer patronage1. Location2.ConvenienceA major way that pharmacies differentiate themselves.

•Ability to shop at one location•Availability of store Directories•Clearly marked merchandise•Clear prices•A good store layout•Easy traffic flow in the aisles•Minimal out of stock merchandise•Short Queues•Expanded operating hours

The downside of convenienceThe Demand for greater convenience never ends.The Advantage of a convenience improvement fades

when competitors copy it.Comparison issues.Takes tremendous commitment and continuous hard

workIncreased staffing resulting to lower profits.There is a Negative impact on the professional image of

pharmacistsFast will soon be slow.It can be expensive.

TYPES OF CONVENIENCE.

T.A.P.S

TRANSACTIONAL CONVENIENCEACCESS CONVINIENCEPOSESSION CONVINIENCESEARCH CONVINIENCE

ACCESS CONVENIENCE.Refers to the speed and ease with which

customers can reach the pharmacist in person.• Location- (location analysts)- success or failure of

business locations.• Stand alone settings• Busy street corners• Close to other businesses – e.g. clinics,

physicians office, hospitals• Inside businesses- e.g. Malls, grocery stores• Parking slots

SEARCH CONVENIENCE

Refers to how easily customers can identify and select products and services they want to buy.• Low search convenience increases consumer

anxiety.• Clear and available signs.• Layout and design.• Knowledgeable and helpful personnel.

POSSESSION CONVENIENCERefers to the ease of acquiring a product or

service.• Trouble free prescription refill.• Home delivery at a fee.• Mail service.• Partial prescription refills.• Virtual inventories of a broad selection of

products available for online purchase.• Specialized specialization pharmacies.- Expensive

drugs.

TRANSACTION CONVENIENCE

Refers to the speed and ease with which a customer can complete a transaction.• Self service kiosks• Customers running purchases over a scanner• Cross training employees for different positions• Employees making simple managerial decisions• Using robotics and automated dispensing

devices• Well designed work areas.

CONDUCTING A CONVINIENCE

AUDIT

Pharmacy employees and managers need to understand consumer perceptions of the convenience of the convenience of their business. They need to see the pharmacy as consumer sees it. Each pharmacist should be able to answer the following questions about the business:

• How easy is it to enter the parking lot by

foot and by car?• How long does it take to get from the

parking lot to the door?• How difficult is It to reach the pharmacist

by telephone?• How often does the pharmacy run out of

stock?

RELATIONSHIP MARKETING

• Is a strategic orientation or philosophy of business that focuses on keeping and improving business with current customers, rather than acquiring new ones.•This strategy assumes that customers prefer to maintain an ongoing relationship with one organization

•Business that practice this usually find that it is much cheaper to keep current customers than to attract new customers•The concept of relationship marketing is compatible with pharmaceutical care, because pharmaceutical care is based on the development of a pharmacist-patient relationship

Benefits for the PatientSince long-term relationships are less expensive for a business, savings can be passed on to customers in extra services or reduced prices. Other benefits of maintaining relationships include the following:• Searching for good, reliable service

provider is difficult and stressful.• Patients know what to expect• The pharmacist is able to meet the special

needs of the patient.

Benefits for the BusinessBusiness can benefit from relationship marketing in the following ways:• As customers become satisfied with a company• Attracting new customers incur advertising and

other promotional costs, operating costs of setting up new accounts, and time costs of getting to know the customer.• Loyal customer are likely to provide positive

recommendations to friends and family.• An indirect benefit of loyal customer is employee

retention.

The $100,000 CustomerLosing a customer can be very expensive to a company. A customer can easily spend $200 a month in the prescription department of a pharmacy. That works out to $2,400 of business per year.

INNOVATION STRATEGIESAn innovation is any change in the marketing mix that customers perceive as new. It can be a change in products, services, or processes. Innovation can be used to:• Find new customers for the product.• Find new uses for the product• Increase usage of existing products• Expand product line• Expand distribution intensity• Expand distribution over a wider geographic

area• Penetrate the market position of competitors

Identifying Innovations• With an open mind and good imagination, pharmacist can identify new market opportunities.

Differentiate Yourself from Direct CompetitorsInnovate pharmacists continually look for ways to differentiate themselves from competitors who offer similar products and services (Intratype competitors) rather than mimicking innovations by their direct competitors, these pharmacist seek new ideas by identifying unmet needs.Example : Consider a pharmacy’s direct competitors for filling patients prescription.

Identify Indirect Competitors•Pharmacist looking innovations can

also get ideas from intertype competitors, who compete indirectly by providing distinctly different products that meet similar costumer needs and wants. Consumer choose products and services that they link will solve their problems. They are less interested in what is provided than in how well it meets their needs.

•Costumer may consider products and servies from many different industries to meet their needs.

Provide Simpler Alternatives•Every day, health care consumer in the US hear about complex and costly innovations for treating serious illnesses advances that overshoot the needs of the vast majority of patients.

• Most patients illnesses are uncomplicated and can be easily managed through basic diagnoses and treatments. Yet the dominants players in health care educators,physician specialists,pharmaceutical companies and hospitals devote far less effort too finding a simple,convenient, affordable means of meeting the needs of most patients than to developing highly sophisticated new treatments and technologies.

Innovation strategies

• Provide Simpler Alternatives•Consider Participants Other than the End User•Add value to the Drug-Use Process•Add Emotional Appeal

ETHICAL MARKETING

1. Would I be embarrassed to describe my actions to friends, family members, or professional colleagues?

2. How would I feel if a marketer acted in a similar manner toward me?

3. How would an objective jury of my peers judge my actions?

4. Does the strategy benefit my customers less then, as much as, or more than benefits me?

5. Do consumers have sufficient knowledge to make a good decision?