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Basic Marketing Principles
Author:Mickey Smith, RPh, PhD
Director, Center for PharmaceuticalMarketing and Management
University of Mississippi
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Learning Objectives
Define marketing in official and real worldterms
List at least five viable market segments
Differentiate by example between services andphysical products
Describe the interaction among and between
the four elements of the marketing mix Enumerate the ways positioning combines the
other elements of the marketing mix
Identify possible competition for your ownpharmacy
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Definitions
The process of planning and executing theconception, pricing, and services to createexchanges that satisfy the individual and
organizational (pharmacy objectives) Creation and delivery of a standard of living
Fundamental social process whichevolveswithin a society to facilitate the effective andefficient resolution of societys needs for
exchange of consumption values
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Requisites of Success
Get and keep patients In a way that is cost consistent with
patient evaluation Survive and profit regularly
Define purpose, plan and communicate Develop a system of rewards and
sanctions
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The Marketing Mix
Product Price
Place Promotion
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Target Market Variables
Age Income Education Race
Gender Religion National origin Place of residence
Life style
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Differences Between Servicesand Products
Services are oftenintangible - acts, deeds andcannot be physicallyprocessed. Value lies in
experience and no transferof title
Usually perishable, unusedportions cannot be stored
Quality cannot beseparated from the serviceprovider
Vary in quality over time
and are difficult tostandardize over time
Products are often tangibleobjects or things. Value liesin ownership and use andtransfer of title takes place
Can be stored, and unusedportions can be used later
Quality can be differentiatedfrom the channel members
quality Products can be
standardized and massproduction and quality
control are possible
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Product Mix
The assortment of goods and servicesthat must be maintained in order tomeet patient needs
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Service as a Product
A service is a product at the instant ofdelivery; it can be created in advance or heldin readiness
A service cannot be centrally produced,inspected, stockpiled, or warehoused.Usually delivered to the customer, by peoplebeyond the immediate influence ofmanagement
The product cannot be demonstrated, norcan a sample be sent for approval
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Service as a Product
The person receiving the service has nothingtangible, value depends on personalexperience
The experience cannot be sold or passed onto a third party
A service cannot be recalled or repeated Quality assurance must happen before
production rather than after production, as in
the case of products
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Service as a Product
Delivery of the service requires humaninteraction; buyer and seller must come incontact in some relatively personal way to
create service Receivers expectations are integral to
his/her satisfaction, and are largely
subjective The more people the customer must
encounter during the delivery of the service,
the less likely it is that he/she will besatisfied with the service
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Results
The final product class is theanticipated results of the goods and
services
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Product
The benefits or positive results(outcomes) that your patients derive
out of dealing with you and using theservices you offer them
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Customers Perceptions ofProducts
Revlon: Cosmetics sell hope
Black and Decker: Drills sell holes
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New Paradigm
Pharmacist as a therapeutic agent
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Customers Perception ofPharmacists
Your pharmacist: helping you take careof yourself
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Pricing Considerations
Nature of the target market(aforementioned)
Nature of the competition
Cost of merchandise (IE, successfulbuying practices by the pharmacy
manager) Familiarity of the customer with price
ranges
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Price
The costs or negative effects thatpatients must bear in order to do
business with you, using your servicesin the way that you offer them
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What Is a Discount Really?
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Pricing
One respects older people andbelieves they should get specialconsideration because of their agealone. That may not be very goodbusiness, but its a fine human gesture
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Pricing
Older people have lower incomes andcant afford health care. Another finegesture, even though imprecise. Manyolder people can well afford theirhealth care. If one offers differential
prices based on ability to pay, age maynot be the best criterion.
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Pricing
One wants the good will of thesecustomers and discounting for seniorcitizens is price willing to be paid forthat. Now that is serious businessreason for setting prices.
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Pricing
It isnt really a discount. Its justadvertising. While many may engagein this practice, the risk of being foundout is rather great. More and morepeople know their medicines and
compare prices.
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Pricing
Older people use more prescriptionsand other health products than doyounger customers; their business is
valuable. Again, a sound businessdecision. Consciously or not thisdiscount is based on expectedbusiness volume. Its not really an age-related discount.
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Pricing
One must do it to meet the competition(all of whom are doing it). Another validbasis for pricing. Of course ifeverybody does the same thing thecompetition does on every competitive
decision, some non-price differentialadvantages may be overlooked.
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The Pricing Process
The pricing process involves 5 steps: Setting price objectives
Setting a broad price policy
Developing a price strategy
Implementing the strategy
Making necessary adjustments (finetuning)
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Competitive Objectives
Meet the competition Be the price leader
Offer the lowest price
Increase sales volumes
Prevent competition
Neutralize price through non-pricemeans
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Financial Objectives
Maximize short-run profits Maximize long-run sales
Stabilize income Move high-margin items
Move slow turnover items Sustain a certain gross profit level
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Market Objectives
Build market share Build traffic
Emphasize low price image
Desensitize customers to price
Create attention and interest
Achieve future growth
Maintain current market share
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Price Policy Options
One-price policy Variable price policy
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Reasons to Vary Prices forIdentical Goods
Different acquisition cost Increased record keeping cost
Cost of credit to the customer or a thirdparty
Delivery costs
Pilferage risks
Frequency of customer buying
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Pricing Strategies
Cost-based Demand-based
Competitive-based
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Cost Considerations inDetermining Prices
Advertising and other forms of promotion All kinds of customer discounts
Returns Delivery
Credit and other costs of money
Administrative costs Selling expenses
Pilferage and shoplifting
Security costs
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Pricing Strategies
Demand-based pricing is related tothe patients willingness to pay
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Price Elasticity and Inelasticity
Elastic pricePrice = $1.00, 100 units sold = $100.00
Price = $0.50, 300 units sold = $150.00
Price = $1.50, 50 units sold = $ 75.00 Inelastic price
Price = $1.00, 100 units sold = $100.00
Price = $0.50, 125 units sold = $62.50
Price = $1.50, 75 units sold = $112.50
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Place
The hours location and physicalcharacteristics that make it possible,easy or difficult for patients to use yourproducts and services
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Ways to Manipulate Place
Delivery Parking
Drive-in windows Interior design and atmospherics
Exterior appearance Telephone
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The Telephone as an Asset
Calls to increase patient compliance Calls to patients to assess patient
progress and satisfaction
Calls to newcomers to the communityto alert them to your services
Calls to old customers whose accountshave become inactive to determine thereasons
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Promotion
The most important of the Ps
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Advertising
According to the American MarketingAssociation:
Mass, paid communication, thepurpose of which is to impartinformation, develop attitudes, and
induce favorable action for theadvertiser.
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Why Advertise?
Attract attention Induce interest
Develop the desire to buy and Activate the sale
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Advertising Appropriation
and Budget
Establish the objectives for advertising
Determine the type and amounts of
advertising necessary to accomplish theseobjectives
Determine the overall cost of the
advertisement Schedule the advertisement day by day
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Types of Ads
Institutional - focus on the pharmacysservices
Merchandising - emphasize productsand services
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Selecting the AppropriateAdvertising Media
Newspapers Radio
Television
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Newspapers
Local newspapers - widely read Account for 30 percent of all
advertising dollars
Disadvantage - circulation sometimesmuch larger than pharmacy trade area
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Radio
Can be more persuasive than print High degree of geographic and
audience selectivity
Local radio-need repetition, brevity
Lacks visual reinforcement
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Television
Most conspicuous advertising medium Products or services must have mass
appeal
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Advertising Considerations
Consider clearly defined marketinggoals
Is advertising best medium toaccomplish your purpose? Or, wouldpublicity be a better option?
Do you deliver what you promise?
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Positioning
Position - sum total of its product,price, place, and promotional activities
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Positioning
Do you match your position (assumingyou have found one)?
Perception becomes reality
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Service Strategy
Distinctive formula for deliveringservice
Vision plays an important role
Judgment, creativity and the ability tothink on a global level - necessary to
see the forest for the trees
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Service Strategy
Organizing principle allowing people inservice enterprises to channel theirefforts toward benefit oriented services
that make a difference in the eyes ofthe customer
Concept that describes the value to beoffered
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Service Strategy
Being called back when promised Receiving an explanation of how a
problem happened
Providing me with information so Iknow what number(s) to call
Being contacted promptly when aproblem is resolved
Being allowed to talk to someone inauthority
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Service Strategy
Being told how long it will take to solvea problem
Being given useful alternatives if it cant
Being treated like a person, not anumber
Being told how to prevent future aproblem
Being given progress reports if aproblem cant be solved immediately
S i R li bilit
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Service Reliability
Recovery Link
The problem reinforces a recurringpattern of previous shortcomings
The recovery effort fails to satisfy thecustomer
Influencers of
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Influencers of
Quality Assessment
Reliability Tangibles
Responsiveness Assurance
Empathy
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Complaints
Customer complaints:The least expensive consulting you can
get
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Complaints
The average business never hearsfrom 96 percent of its unhappycustomers
Complainers are more likely thannon-complainers to do business again
with the company that upset them
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Complaints
Of the customers who register acomplaint, between 54 and 70 % willdo business again with the
organization if their complaint isresolved
The average customer who has had aproblem with an organization tells 9-10 people about it
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Market Audit
A methodical analysis of theoperations, tactics, and strategiesused in marketing
A self-examination
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Market Research
The most effective way to forpharmacists to find out the needs andattitudes of patients and thus
effectively market their services Self test (Figure 2): What you know
and dont know about marketing
Patient Survey Form (Figure 3): Vital
information for the people you serve or
want to serve
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Conclusion
Marketing pharmacy services andproducts - achieving patient satisfactionand yoursatisfaction!