Pharma Marketing Management (Thakur Publication)
Pharma Marketing Management (Thakur Publication)
Pharma Marketing Management (Thakur Publication)
Management
Pharma Marketing
Management
B. Pharm, Eighth Semester
Published by:
Thakur Publication Pvt. Ltd., Lucknow
HO: Abhishekpuram, 60 Feet Road. Jankipuram, Lucknow-226021
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E-mail: lkospp@gmail.com Mobile No. 9235318506/07
This book is devoted to the analysis and discussion of all aspects of pharma
Marketing Management. The discipline itself is dynamic field, practiced by
pharmaceutical companies. Building on this platform this book aims to shed
light on day to day operating needs and the skills tools, necessary to fulfill them.
The book is designed specifically for the students pursuing degree in pharmacy
and is based on an emerging business perspective, particularly drawn from the
Indian context. Those currently in, as well as those aspiring to positions in
pharmaceutical companies and its domains, would find this textbook a valuable
learning tool and an application resource. The very intention of this book is to
provide the students with the most current, comprehensive analysis of
management and pharmacy field with the help of models and exhibits.
I thank Almighty God. for showing his infinite mercies on me every day
for achieving all the desire goal of my life.
I would like to thank to Thakur Publication Pvt. Ltd. and their entire
team for their timely assistance and coordination.
Syllabus
PHARMA MARKETING MANAGEMENT
(Course Code: BP803ET)
Module: 1 (10 Hours)
Marketing
• Definition. General Concepts and Scope of Marketing; Distinction Between Marketing &
Selling; Marketing Environment; Industry and Competitive Analysis; Analyzing Consumer-
Buying Behaviour; Industrial Buying Behaviour.
Pharmaceutical Market
• Quantitative and Qualitative Aspects; Size and Composition of the Market; Demographic
Descriptions and Socio-Psychological Characteristics of the Consumer; Market Segmentation
& Targeting. Consumer Profile; Motivation and Prescribing Habits of the Physician; Patients'
Choice of Physician and Retail Pharmacist.
Analyzing the Market
• Role of Market Research.
Module: 2 (10 Hours)
Product Decision
• Classification. Product Line and Product Mix Decisions, Product Life Cycle, and Product
Portfolio Analysis.
• Product Positioning.
• New Product Decisions.
• Product Branding. Packaging and Labelling Decisions,
• Product Management in Pharmaceutical Industry.
Module: 3 (10 Hours)
Promotion
• Methods, Determinants of Promotional Mix, Promotional Budget.
• An Overview of Personal Selling. Advertising, Direct Mail, Journals, Sampling, Retailing,
Medical Exhibition. Public Relations, Online Promotional Techniques for OTC Products.
Module: 4 (10 Hours)
Pharmaceutical Marketing Channels
• Designing Channel. Channel Members. Selecting the Appropriate Channel. Conflict in
Channels. Physical Distribution Management: Strategic Importance. Tasks in Physical
Distribution Management.
Professional Sales Representative (PSR)
• Duties of PSR, Purpose of Detailing, Selection and Training, Supervising, Norms for
Customer Calls, Motivating. Evaluating. Compensation and Future Prospects of the PSR.
Module: 5 (10 Hours)
Pricing
• Meaning, Importance. Objectives, Determinants of Price; Pricing Methods and Strategies,
Issues in Price Management in Pharmaceutical Industry.
• An Overview of DPCO (Drug Price Control Order) and NPPA (National Pharmaceutical
Pricing Authority).
Contents
Chapter-1: Concepts of Marketing
1.1. Marketing 15
1.1.1. Meaning and Definition of Marketing 15
1.1.2. Nature of Marketing 15
1.1.3. Scope of Marketing 16
1.1.4. General and Core Concepts of Marketing 17
1.1.5. Importance of Marketing 21
1.1.6. Distinction between Marketing and Selling 23
1.2. Marketing Environment 23
1.2.1. Concept of Marketing Environment 23
1.2.2. Factors Affecting Marketing Environment 24
1.2.3. Internal Marketing Environment 25
1.2.4. External Marketing Environment 26
1.2.5. Micro Environment 26
1.2.6. Macro Environment 28
1.2.6.1. Political Environment 28
1.2.6.2. Economic Environment 28
1.2.6.3. Socio-Cultural Environment 29
1.2.6.4. Technological Environment 30
1.2.6.5. Demographic Environment 30
1.2.6.6. Natural Environment 31
1.2.6.7. Legal Environment 31
1.2.7. Significance of Marketing Environment Analysis 31
1.3. Industry and Competitive Analysis 32
1.3.1. Industry Analysis 32
1.3.1. 1. Factors Analysed in Industry Analysis 33
1.3.1.2. Porter s 5 Forces Model 34
I.3.I.3. Significance of Industry Analysis 40
1.3.2. Competitor Analysis 40
1.3.2.1. Competitor Analysis Framework 41
1.3.2.2. Steps in Competitor’s Analysis 43
1.3.2.3. Benefits of Competitor’s Analysis 45
1.4. Analysing Consumer Buying Behaviour 46
1.4.1. Introduction 46
1.4.2. Buying Role of Consumers 46
1.4.3. Types of Buying Decisions 47
1.4.4. Factors Affecting Consumer Buying Behaviour 49
1.4.5. Buyer Decision Process 50
1.4.6. Importance of Consumer Buying Behaviour 53
1.5. Industrial Buying Behaviour 54
1.5.1. Introduction 54
1.5.2. Nature of Industrial Buying Behaviour 55
-8-
2.4. Summary 90
2.5. Exercise 91
Chapter-5: Promotion
5.1. Promotion 162
5.1.1. Introduction 162
5.1.2. Importance of Promotion 162
5.1.3. Strategies of Marketing Communication 163
- 11 -
5.1.4. Promotional Mix: Methods of Promotion 1 64
5.1.5. Determinants of Promotional Mix 165
5.2. Promotional Budget 166
5.2.1. Introduction 166
5.2.2. Objectives of Promotional Budget 167
5.2.3. Factors Influencing Promotional Budget 168
5.2.4. Methods of Promotional Budgeting in Pharmaceutical Company 170
5.2.5. Promotional Expenditures in Pharmaceutical Industry 171
5.3. An Overview of Personal Selling 171
5.3.1. Introduction 171
5.3.2. Features of Personal Selling 172
5.3.3. Process of Personal Selling in Pharmaceutical Industry 172
5.3.4. Importance of Personal Selling 173
5.4. Advertising 174
5.4.1. Introduction 174
5.4.2. Advertising Objectives 175
5.4.3. Changing Role of Pharmaceutical Advertising 176
5.4.4. Principles of Advertisement 176
5.4.5. Advertising Techniques in Pharmaceutical Marketing 177
5.4.6. Direct Mail 178
5.4.6. 1 . Types of Direct Mail Marketing 1 78
5.4.6.2. Importance of Direct Advertising 179
5.4.6.3. Effective Ways to Use Direct Mail for Pharmaceutical 180
Marketing
5.4.7. Trade Journal 181
5.4.7. 1 . Advantages of Trade Journals 182
5.4.7.2. Disadvantages of Trade Journals 182
5.4.8. Exhibition 182
5.4.8. 1. Types of Exhibitions 183
5.4.8.2. Importance of Exhibitions 184
5.4.8.3. Medical Exhibition 185
5.4.9. Sampling/ Samples Distribution 186
5.5. Retailing 187
5.5.1. Introduction 187
5.5.2. Functions of Retailing 187
5.5.3. Difference between Wholesaler and Retailer in Pharmaceutical 189
Industry
5.5.4. Importance of a Retailer in Pharmaceutical Industry 189
5.6. Public Relations 189
5.6.1. Introduction 189
5.6.2. Types of Public Relations 190
5.6.3. Public Relation Strategies in Pharmaceutical Industry 192
5.6.4. Role of Public Relations in Healthcare Industry 192
5.6.5. Limitations of Public Relations 193
5.7. OTC Products 193
- 12-
5.7.1. Introduction 193
5.7.2. Pharmaceutical Marketing Strategies for OTC Products 194
5.7.3. Promotion of OTC Medicines 195
5.7.4. Online Promotional Techniques for OTC Products 196
5.8. Summary 197
5.9. Exercise 198
Chapter-8: Pricing
8.1. Pricing 258
8.1.1. Meaning and Definition of Price and Pricing 258
8.1.2. Objectives of Pricing 259
8. 1 .3. Determinants of Price: Factors Influencing Pricing Decisions 260
8.1.4. Cost Structure in Pharmaceutical Products 261
8.1.5. Pricing Methods 262
8.1.6. Pricing Strategies 268
8.1.7. Importance of Pricing 269
8.1.8. Issues in Price Management in Pharmaceutical Industry 270
8.2. Legal Requirements in Price Control on Drugs 270
8.2.1. Introduction 270
8.2.2. NPPA (National Pharmaceutical Pricing Authority) 271
8.2.3. National Pharmaceutical Pricing Policy-2012 - Governing Drug 271
Pricing Policy
8.2.3.1. NPPP Regulation for Scheduled Formulation/Drug Prices 272
8.2.3.2. NPPP Regulation for Non-Scheduled Formulation/Drug Prices 273
8.2.4. Overview of DPCO (Drug Price Control Order) 273
8.2.4. 1. Pricing of Bulk Drugs 274
8.2.4.2. Steps of Pricing a Bulk Drugs 275
8.2.4.3. Calculation of Retail Price of Formulation 276
8.2.4.4. Price to Wholesaler and Retailer 277
8.3. Summary 277
8.4. Exercise 278
- 14-
CHAPTER
Concepts of Marketing
1.1. MARKETING
1.1.1. Meaning and Deflnition of Marketing
In a narrow view, marketing is an activity of selling and purchasing of goods or
services. But, the nature and scope of marketing is a much wider perspective.
Along with the fulfilment of needs and wants related to the sale and purchase of
goods and services, it encompasses the whole process of customer satisfaction.
Hence, the process involves identification of consumers’ needs and wants and
fulfilling it to the extent till the customers are pleased and contented. With the
changing marketing environment, the taste and preferences of the customers also
change. Therefore, marketing also considers the changing requirements of the
consumers apart from providing them with basic products or services. In totality,
marketing comprises of all activities like producing, interacting, distributing and
exchanging services which offer value to the public.
According to William J. Stanton, "Marketing is a total system of interacting
business activities designed to plan, price, promote and distribute want-satisfying
products and services to the present and potential customers”.
According to Prof. Malcolm McNair, "Marketing is the creation and delivery
of standard of living to the society”.
According to Cundiff and Still, "Marketing is the business process by which
products are matched with the market and through which the transfers of
ownership are affected”.
According to American Marketing Association (new definition), "Marketing
is an organisational function and a set of processes for creating, communicating
and delivering value to customers and for managing customer relationships in
ways that benefit the organisation and its stakeholders”.
1) Needs, Wants and Demands: Needs refer to the basic necessities of human
beings related to their inherent characters. The need fulfilment criterion
depends upon the cultural and social environment of the society. For
example, shelter is the basic need of an individual, as one cannot reside on
roadside or on footpaths.
Wants refer to the desires for particular things which are unified with the
needs of the individual. For example, for fulfilling the need of shelter, a
person may desire of a house in a clean locality. In comparison with the
needs, individuals have numerous wants.
Demands are those definite wants for any product(s) which are supported by
the willingness and ability to buy them. The purchasing power of the
consumers converts their wants into demands. In marketing, a marketer is
more interested to know about the consumers having the purchasing power
rather than those who only desire to have a product. For example, a person
may desire of a penthouse by the seaside, but due to low purchasing power
his demand remains ineffective.
2) Goods-Services Continuum: In general, organisational products are a
composition of goods and services. According to the goods-services
continuum in figure given below, some products may have either tangible
(e.g., salt) or intangible (e.g., teaching) characteristics. However, there are
some products which provide both goods and services at the same time, like
travelling via airplane. The position of product on the continuum enables the
marketer to spot potential opportunities.
At the tangible (pure goods) end of the continuum, only those goods are
positioned which are not related to services. At the intangible (pure services)
end of the continuum, only those services are positioned which have no
association with physical products. The middle portion of both the ends
consists of the products which have combined characteristics of both goods
and services, e.g., goods like air-conditioners also require services like
installation and delivery, besides being a product in itself.
3) Products: Product is anything that is offered for sale. It is a process where a
thing is produced as a result of labour, growth, thought, or activity. A product
can be anything, a service or even an item. It may be produced immediately
or gradually. It may also be a resultant of mental efforts or an unconscious
effort such as seasonal fruits, by-products, etc. In marketing, product is
anything tangible or intangible in nature, which is offered for consumption in
order to satisfy consumer needs. For example, in manufacturing, product is
brought as a raw material and sold as a finished good, which is further
distributed in the market to satisfy customer needs and wants. While in
retailing, products are known as ‘merchandise’.
4) Utility: In economics, utility is an important concept which is related to
marketing. The term utility is a measure of absolute desirability, or
consumption, or satisfaction towards a particular product. It explains the ability
of goods or services to satisfy the needs and wants of the consumers. The
measure of utility helps to identify the increase or decrease in the level of utility.
Concepts of Marketing (Chapter 1 ) (tppl.org.in) 19
It may also be used to explain the economic behaviour in the form of number of
attempts required to increase a product’s utility. They are as follows:
i) Form Utility: The process of product planning and development
combines to create form utility. This involves various stages from
converting the raw material to the development of a finished product.
Finally, the form defines the utility of the product.
ii) Time Utility: Time utility occurs when the product is made available to
cater the consumer’s demand at his/her time of desire. This can be made
possible when the goods manufactured are delivered through proper
channels at right time to the final destination.
iii) Place Utility: Availability of a product at right place, keeping in mind
the convenience of the customer, creates place utility. This can be done
by providing the product at the place, where it is required the most by
using different channels of distribution.
iv) Ownership Utility: When a seller legally transfers his ownership over
products to the buyer through a sales operation, ownership utility is
created. The products remain liable to the producer, retailer or seller until
it is purchased by someone else.
5) Customer Value: Value refers to the worth or usefulness of goods or
services. The best definition of value from consumer’s perspective is the
difference between a potential customer’s evaluation of the benefits and costs
of one product in comparison to others. The value can be generated only
when product and user come together. Therefore, the level of value generated
is determined in terms of high satisfaction, satisfaction or dissatisfaction. It
also affects the customer decision-making and long-term relationship with
the organisation. By using the formula given below, value can be calculated:
„ . . ,, .
Customer Perceived Value =
Benefits Derivingfrom a Product
-
Cost of Acquiring the Product
From the above equation, it can be concluded that the value from a product is
only created, when the perceived benefits are more than the actual cost of the
product. Another crucial factor for value creation is that the value of firm’s
product should also be more than the competitor’s product. Applying this
equation has proved beneficial to marketers.
6) Cost, Satisfaction and Quality: In general, cost is the amount paid to buy or
obtain goods or services. In marketing, cost is the estimated price of the
product which is paid to satisfy one’s needs at the lowest possible cost of
ownership or usefulness. Satisfaction is an attitude towards a particular
product or service after its consumption. A consumer feels satisfied when
his/her needs meet their expectations. Customer satisfaction is the central
focus of all marketers. It also helps to predict the future buying intentions of
the consumers. For example, when a customer feels satisfied after
consuming a particular product, then he/ she shares his/ her experience with
others, also known a positive word-of-mouth. Whereas, an unsatisfied
customer who wants to switch over to another product will also share his/her
experience, which is known as negative word-of-mouth.
20 Pharma Marketing Management
10) Market: In general, market is a place where a sum total of all buyers and
sellers of a region or area collect to exchange goods and services, e.g., fruit and
vegetable market In terms of marketing, "market' is a group of consumers or
firms who want to purchase a product are capable of purchasing the same
product and the ownership of such product is permitted by law.
1 1) Marketers: In an organisation, marketer is a person who is responsible for
recognising the goods and services required by the group of consumers and
then marketing those goods and services on behalf of the organisation. A
person, whose duty is to sell goods and services in a market where only
specific commodities are sold, is known as a marketer. In general, marketer
represents an organisation which serves a market of end-users. The relevant
products and services required by the end users are directly sent by the
organisation and the competitors through marketing intermediaries. The
environmental forces and respective intermediaries also impact the relative
effectiveness of the organisation.
With the fast changing marketing environment across India, the marketing managers
and business leaders are facing many challenges. They are finding it difficult to strive
with the dynamism of environmental factors. So as to remain competitive, improve
market share or capture new markets, companies are adopting various IT strategies to
make alterations, modifications in their products and services.
Uncontrollable factors exist outside the organisation and influence the marketing
strategies and plans of the organisation designed by the marketing manager.
These factors are uncontrollable in nature because of which marketing manager
faces numerous challenges. As a result, the marketing manager adopts various
techniques to regulate the activities of external environment such as forecasting,
analysis and surveillance. The external marketing environment can be
categorised into two parts:
1 ) Micro environment, and
2) Macro environment.
3) Customers: Customers are the central focus of the organisation. They can be
categorised into five types like:
i) Ultimate Customers: They can be individuals or groups of people who
use or consume the goods and services of the company.
ii) Industrial Customers: These customers are mainly the small and large
organisations which purchase goods and services to produce other useful
products. Their main aim is to earn profit and attain organisational goals.
iii) Resellers: They can be retailers, wholesalers and distributors. They buy
goods and services from one place and resell them at high prices to gain
profit at some other places.
iv) Government and Other Non-Profit Customers: They buy goods and
services, mostly for the consumption purpose of other people. These
people can be ultimate customers or end users.
v) International Customers: They are the customers across national
borders, who purchase goods and services for industrial purpose or may
be for their own consumption. They can be individuals, organisations,
resellers, or even governments.
4) Competitors: The firms producing and selling identical products and
services in the same market are known as competitors. The competition is
mainly based on price and product variation. In order to manage this
situation, an effective marketing system is very necessary. The use of
marketing system enables improved results and self-reliance within the
organisation. To become competent, the identification and careful analysis of
existing competitors is important. It is also crucial for a marketing manager
to study and note different basic aspects related to competitive atmosphere.
Philip Kotler suggests that a buyer’s perspective is very useful in
determining the level of competition for an organisation.
5) Public: Public is also an important factor of micro environment. The satisfaction
of general public should be the utmost aim of organisation as competitors and
customers are all part of general public. The policies and activities of the
organisations have a significant impact on other groups of the general public. A
public refers to “any group that has an actual or potential interest in or impact on
a company’s ability to achieve its objectives”. Hence, public relation is crucial
for the long-term survival and growth of the organisation.
28 Pharma Marketing Management
Being a democratic country, India has a steady political system in which the
government actively participates as a planner, regulator and promoter of
economic activity. Hence, the businessmen are well aware of the political
environment confronted by their organisations. All the business decisions taken
by the government are based on political considerations and philosophies which
are followed by political parties governing the central and state level. It affects
the rules and regulations formulated by the government under which the
organisations operate. Every organisation needs to abide by the rules and
regulations laid down by the political system as the law of the land.
and consumers’ willingness to spend also plays a vital role in determining the
economic environment. Thus, some of the other economic factors are interest
rates, inflation, disposable income, savings of the society, etc. All these factors
prevailing in the environment influence the purchasing power of the consumers.
While, economic development leads to changes in the tastes and preferences of
the customers.
For example, due to the fall in interest rates of banks, customers find it
favourable to invest in stock markets than opening savings account in banks.
Following factors should be analysed deeply by marketing managers to deal with
economic environment:
1 ) Gross national product,
2) Per capita income,
3) Balance of payments position,
4) The stages of industry lifecycle and the present stage of the company. The
four stages of industry lifecycle comprises of recovery, boom, recession and
depression,
5) Pricing trends of products and services, i.e., inflation or deflation,
6) Interest rate in banks and fiscal policies, as these directly affect the business
investment in banks and indirectly the demands of customers, and
7) Fluctuations in exchange rates, where fall in exchange rate increases exports
while imports become more expensive leading to cost-push inflation.
These factors determine the nature of inter-relationship between society and the
organisation, as well as the functioning of the organisation. This relationship
between the organisation and individuals is determined by ethics, beliefs and
norms of the society. It is not an easy task for the marketer to alter these factors.
Marketers should be trained and skilled enough to measure effects of these
factors on their business.
Following are the factors and influences that are present in the environment:
1) Social issues like environmental pollution, role of business in society,
corruption, consumerism, and utilisation of mass media.
2) Social values and attitudes, like social norms, ideologies, expectations of
society from business, practices and rituals, materialism and change in
lifestyle trends.
3) Changing family structure, family values, attitude towards the family as well
as within the family.
4) Position of children and adults in the family and society as well as the role of
women in society.
5) Level of education, rights and work ethics of members in the society.
30 Pharma Marketing Management
Besides the presence of core social values and norms, some flexible cultural
values are also present in our societies which are prone to changes like hairstyle,
outfit, etc. There is a large part of the society which has not accepted these
changes. Different age groups and social classes have diverse ways of perception
and attitude towards socio-cultural changes. The religion of different culture also
affects the marketing of business organisations.
It is not just responsible for economic growth but also affects the production
policy of different organisations. In order to be competitive in the market,
different marketers modify their products and production strategies according to
the technological environment. For example, technological factors enabled the
transformation of typewriting machines into keyboards and computers.
In India, technology has changed the face of urban areas and is yet to set its
impact across rural areas. But, it has been introduced in rural areas by launching
‘Green Revolution’. This has enhanced the productivity of farms using mix of
high-yielding varieties, tractors, fertilizers and better irrigation facilities.
Recently, introduction of ‘White Revolution’ in India has launched new
technologies for animal husbandry and institutionalised dairy activities through
cooperatives, which has led to considerable increase in the production and
availability of milk.
The legal factors may include laws, constitution, legal rights, courts, penalties,
and other legal practices, etc. These factors significantly influence the marketing
operations of different organisations. Different legal factors attached to an
organisation may also include licencing, bribery, copyrights and trademarks, and
jurisdiction for organisation as well as customer related disputes, etc. Arbitration
or local courts are used for dispute settlement.
Business operations are also influenced by State, Central government and local
bodies. There are several laws passed by the Government on matters like wages,
prices, health and safety at workplace, employment opportunities, location, gas
emission, amount of noise permissible, etc. Such laws affect the daily working of
the organisations. Even their strategic choices also affect the activities of the
government as it might create or restrain business opportunities.
Forces from the industry environment directly affect the firm, and the amount of
influence the firm has over its industry is dependent on the dominance of its
competitive position. Most strategic management books utilise Michael Porter’s
Five Forces Model as a framework for analysing the competitive forces within
the industry. As so many other models used to make strategic decisions today,
the implicit assumption of this model is that the industry is operating within an
economy closed to the greater society and ecosystem. From the view of the Five
Forces Model, industry analysis is traditionally portrayed in strategic
management books from the rather static perspective of “what is” within the
industry. This model suggests that strategic managers scan the product market
segments in which they compete for opportunities and threats without much
regard for context.
Concepts of Marketing (Chapter 1 ) (tppl.org.in) 33
1) Basic Features and Conditions of the Industry: The most basic task is to
analyse the general features and condition of the industry. The basic feature
of an industry involves the size of industry, the products and services offered
by the companies, variants of the products and services, past performances of
the industry, current industry position, future expectation, etc.
2) Industry Environment: Another factor that must be studied in the industry
analysis is the environment of the industry. Environment of industry can be
classified according to Michel Porter as - fragmented, emerging, matured,
declining and global industries.
3) Industry Structure: In order to analyse the industry in a better way, the
structure of that particular industry should be understood. Every industry has a
specific market size, certain number of companies and each company has its
own market share. The firms in an industry compete with each other to capture
the market. These characteristics determine the severity of competition in the
industry, the extent of profitability and attractiveness of the industry.
4) Industry Attractiveness: Industry attractiveness is determined by factors
like industry potential, industry growth, the profitability, future trends for the
industry, the entry and exit barriers in the industry, etc. All these play a vital
role in developing the attractiveness of an industry.
5) Industry Performance: The determinants of an industry’s performance are
its annual production, profitability per year, technological advancements, etc.
34 Pharma Marketing Management
Michael Porter developed a model which explains that the industry of a firm is
affected by five forces. The strategic business manager can use Porter’s model to
analyse an industry on these five forces and then judge the strengths and weaknesses
of his firm based on his industry analysis. The industry analysis will basically
enable the manager to review how strong each force is in that particular industry.
This model thus helps the firm to gain an edge over its rivals in the industry.
An industry can be very loosely defined as a group of firms who are all
producing similar products and services - so that the customer can substitute one
for the other. This five forces model is a widely used technique for analysing the
industry. It also illustrates the nature and level of competition existing in the
industry alongwith the forces that shape a business and its functions. An industry
consists of number of firms that produce and sell similar products or services to
the consumers. Therefore, the five force model is quite significant in
understanding the complex and diverse characteristics of the competition in
different industry areas. The competition faced by a firm is actually much
broader as it includes both current and potential competitors. A company can
face negative consequences by emergence of new technologies and new
competitors as well as the existing competitors. Before analysing the nature and
scope of competition in an industry, it makes sense to define its boundaries.
A high industry concentration ratio means that a very few firms command a
very high market share in that industry. For example, the petrochemical
industry in India is dominated by Reliance Industries and has a very high
concentration ratio. If the concentration ratio is low, then the industry is
considered to be a disciplined one. This discipline might be a result of a code
of conduct or mutual amenability among the firms. This discipline results
trom the history of competition in the industry, the presence of a great
36 Pharma Marketing Management
ix) Diverse Competitors: If the competitor firms are different from each
other in various aspects such as business orientation, culture,
background, etc., then it becomes difficult to anticipate the competitor
strategies. The rivalry in this condition can be intense and unstable.
x) Market Saturation: When the market is growing, then it attracts many
firms to enter in the industry and produce the products. This leads to
increase in the production. The market reaches to a point where it is
crowded with the competing firms and the supply is more than the
demand. Therefore, the market gets saturated and large number of rival
firms trying to target few customers increase the level of competition in
the market.
2) Threat of Substitutes: The substitutes can be defined as the products of
other industries that have the ability to satisfy similar needs. For example,
coffee can be a substitute for tea, as it can also be used as a caffeine drink in
the morning. When the price of a substitute product changes the demand of a
related product also gets affected. When the number of substitute products
increases, the competition also increases as the customers have more
alternatives to select from. This forces the companies to raise or lower down
the prices. Therefore, it can be concluded that the competition created by the
substitute firms is price competition.
The presence of a number of substitutes impacts the ability of the company to
increase the price of its products as increasing the price will make the
substitutes more attractive for the target market. Since, the substitute
products serve the same purpose therefore; a close substitute may act as a
negative competitive force in the market. Hence, the industries which have
no close substitutes are more attractive for various firms as they can charge
higher prices when required. For example, when Coca-Cola came out with a
price of ?5 for its 200ml bottle, it was able to acquire customers from
substitute products like - coconut water, mango and fresh juice, etc.
Some of the conditions in which the power of substitutes is high are as
follows:
i) Low Switching Cost: When there is slight or no switching cost paid by
the customers, they become free to select another similar product
substitute. If all the factors remain constant, such as differentiation,
brand loyalty, brand image, etc., then it becomes relatively easy for the
customers to go for a similar product. The firms must try to design their
product in a way that the switching cost is high.
ii) Low Substitute Price: If a similar product is relatively cheaper, then it
increases the risk of the consumers to go for the attractive substitute. It
also puts a limit on the level of price charged by the companies. If the
companies charge prices more than this limit, they may lose their
customers.
iii) High Quality of Substitute: If the substitute product has high quality
than the company’s product, then the customers will prefer to select the
substitute product.
38 Pharma Marketing Management
There are numerous firms competing in a single market. Therefore, the main
motive of competitor analysis is to determine and forecast the competitive level
and market behaviour of the companies competing in the same marketplace. The
recognition of existing and potential competitors is essential for analysing their
relative strengths and weaknesses or marketing strategies. If a company is only
concentrating on the present competitors’ analysis, then it will not be able to
trace the capabilities and strategies of future rivals. However, the decision of
choosing the right basis for analysing the rivals and the level of competition is a
complex one.
In the company’s potential market, the suppliers of both kinds, i.e., the ones,
which are considered as substitutes and the ones, which supply related products,
must be included in the competitor analysis. The identification of competitors is
an important activity of managers in scrutinising the level of competition,
preparing against the competitors’ moves and building counter strategies.
At the time of preparing a competitive plan, the company must be clear about its
present, potential and indirect competitors. The level of satisfaction that the
consumers are deriving from the company’s products and services and the other
competitive company having similar capabilities also assists in identifying the
competitors.
There is sometimes a variation between ‘what the competitor says’ and ‘what
it does’. The following points are the activities indicating what the
competitor actually does:
i) Hiring activity,
ii) R&D projects,
iii) Capital investments,
iv) Promotional campaigns,
v) Strategic partnerships,
vi) Mergers and acquisitions.
4) Competitor’s Resources and Capabilities: The resources and capabilities
of a competitor define its ability to respond against the competitive market
environment. For this, it is important for a competitor to have adequate
knowledge of its competitor’s assumptions, objectives and current strategy.
The strengths and weaknesses of a competitor determine its capabilities in
different functional areas, e.g., SWOT analysis. A competitor’s capabilities
are governed by its strengths. In order to increase the competitor’s
capabilities in specific areas the analysis can be further carried out. The rate
at which the competitor is growing depicts its capabilities. Other than this, a
financial analysis can also be performed to identify its sustainable growth
rate. Since, the competitive environment is dynamic in nature. The ability of
competitor to respond quickly towards the changes must be evaluated. There
are firms who adapt and mobilise things quickly whereas, there are some
firms which have a slow speed and take years to adapt a particular change.
The factors which affect the firm’s capabilities to adapt swiftly can be large
investments in fixed assets, low cash reserves and an organisational structure.
Once the company’s strengths are identified, then it can further be utilised by
the company to improve and enhance its market position.
iv) Knowledge: One of the major barriers to make a successful market entry
is knowledge. This may involve lack of expertise in manufacturing,
marketing, technical and engineering areas.
6) Building Strategic Plans to Improve Marketplace Position: The last step
involved in the process for competitor analysis is building various strategic
plans that enhance the small company’s position in the market. A well-
defined strategic plan must cover all the aspects of business processes or
operations like production, pricing, distribution and marketing of various
products or services in the competitive market.
5) Buyer: The person who actually purchases the product is known as buyer.
For example, a wife may be the decision-maker on what brand of kitchen
appliance to buy, but the buyer could be the husband.
6) User: The person who actually uses the product or avails the service is
known as user. For example, an infant may not be the buyer of a toy but he
certainly is the user of it.
A marketer has to analyse the buying process, various stakeholders involved in it,
and different roles that they play during the process. He should decide suitable
strategies for influencing each of them to buy his product.
less. For example, clothes, vacations, gifts, etc. To improve this type of
buying behaviour, a marketer needs to enhance its communication process by
providing more information about the product.
3) Habitual Buying Behaviour/Routinised Response Behaviour/ Straight
Rebuy/Brand Loyalty: In this situation, the customer is habitual to a
particular brand over a period of time and does not spends much time on
decision-making process and skips few steps.
Here, same product of a specific brand is purchased regularly or repeatedly
by the consumer, e.g., groceries, haircut, magazines, etc. The marketer must
understand the buying behaviour of potential consumers and inform existing
consumers about the arrival of superior brands in the market. This will help
in improving the buying patterns of the consumers.
4) Variety-Seeking Buying Behaviour/Brand Switching: In present scenario,
there are several new brands of similar products which are available in the
market. This has brought a change in the behaviour of consumers who seek
variety and do not stick to a particular brand. The brands which are already
leading the market try to ensure that their products are in abundance in the
market to captivate their existing customers and also attract new customers.
The new brands try to attract the customer by lower price, offering discounts
on certain conditions such as bulk purchase, free coupons or free samples for
trial and putting advertisements on social media.
consumer passes through five stages while making the decision on purchases
which are described below:
1) Problem Recognition: The basis of consumer purchase depends upon his
needs. This need may be personal in nature or might have developed on the
basis of advertisements or
recommendation of acquaintances. The
marketer has to access the product
which appeals the customer needs. In
other words, it is about understanding
the reason behind the purchase of a
specific product.
2) Pre-Purchase Information Search:
After ascertaining the need, the next
step of consumer is to collect the
information related to the product.
This information may be received
through advertisements in local
newspapers, magazines or through
online media or from an acquaintance. Figure 1.6: Buyer Decision Process
This information collected from
internal and external sources enables
him to form an idea about the product he intends to purchase.
The next step taken by the consumer is to further analyse the available
information, consult his close friends to gain further confidence or discuss
with the marketers who have first-hand and latest information about the
product in the market. These will make different levels of influences on the
decision-making process about the product. There are four sources which
supply information to consumers:
i) Personal Sources: These sources are close to consumer, i.e., family
members, close friends or acquaintance.
ii) Commercial Sources: Advertisements in local newspaper or magazines,
a visiting salesman, interaction with dealers or through display
hoardings.
iii) Public Sources: These sources can be consumers, mass media, rating
organisations, etc.
iv) Experiential Sources: The consumer may personally examine the
product for his satisfaction.
3) Evaluation of Alternatives: It is a very common practice in present market
environment for examining the products put up for sale by different brands
along with the comparative parameters and prices of each. If the consumer
has a firm thinking towards a particular brand because of his past experience,
he may not indulge in looking for alternatives. At present, the customers
have generally rational thinking which makes them to spend a lot of time in
critically examining the products of other brands as well. The consumers do
not form an idea about a product in one go, but they prefer to take inputs
52 Pharma Marketing Management
from various sources and analyse each thoroughly to arrive at the final
decision on purchase. But, before taking a final decision consumer first looks
at the positive and the negative aspects of each product and then makes the
judgement.
This formation of an idea may be divided into various systems such as:
i) Evaluative (Choice) Criteria: The different criteria on the basis of
which consumers evaluate and compare products or brands. The
evaluative criteria may include price, performance, running costs,
maintenance costs, after sales service, etc. of a particular product.
ii) Beliefs: Many a times, the consumer accepts certain product brand due to
his past experiences and characteristics of that product like reliability in
performance. Such beliefs go a long way for continuation of consumer
relationship with the product.
iii) Attitudes: Attitude is the level of liking or disliking of a consumer
towards a specific product. It also depends upon the evaluative criteria
and beliefs about the same product.
iv) Intentions: The intentions for purchase are derived from attitudes which
may be positive or negative. In case of a positive response consumers
make purchases. However, if there is a negative response, the chances of
purchase are partial.
4) Purchase Decision: After analysing different brands of a product, the
consumer restricts his choices primarily to one or two alternatives. However,
financial constraints may restrict the consumer decision to shift his purchase
plan for some time or he may even let go to the purchase decision, if no such
alternative is found suitable to meet the requirements of the customer.
At this stage, consumer sets some preferences among different brands and
may purchase the most preferable one. There are two factors which act as a
barrier between purchase intention and purchase decision:
i) The first factor includes liking or disliking of product by others, who are
close to consumer (may be his wife, children or a close friend). This
aspect has two situations:
a) The negative attitude of others towards the preferred alternative.
b) The importance attached by the consumer to honour or comply the
wishes of others.
ii) The second factor is related to unanticipated factors like performance,
durability, etc., of a product. These factors can change the purchase
intention of a customer.
The process of determining needs for buying products and services and selecting
the most suitable supplier or brand from available alternatives through
identifying and evaluating them, is called Industrial buying or Business buying
or Organisational buying.
This involves exploring the buying situations, process of buying for making
buying decisions, the way different members of the organisation affect these
buying decisions, the criteria used in making such decisions, etc. It is very
essential for purchase managers to communicate with different people in the
Concepts of Marketing (Chapter 1 ) (tppl.org.in) 55
ii) Buying Centre and its Role: In organisational buying, the buying centre
is a group of people who negotiate for purchase on behalf of the
organisation. Each of them has certain accountability, professional
standing, and ability of reasoning or arguments. The roles of different
members of the buying centre also influence the organisational buying.
4) Individual Factors: Individual factors refer to the psychological factors
associated with individuals involved in organisational buying. The persons
involved in buying have their own feelings and thoughts.
These are very important and are as follows:
i) Learning: This is a process which is associated with experience and it
has a strong influence on organisational buying behaviour. The
individuals learn from the satisfactory or profitable decisions made by
them. This encourages sticking to the same decision-making pattern
under similar conditions. In course of time with repeated successful
transactions it becomes an automatic choice.
ii) Motivation: It is difficult to understand the motivation level of
individuals involved in organisational buying. Their motives are
classified into two groups:
a) Task Related: In this category, the buying centre is motivated to
find that all factors needed for perfect buying, like right material,
right price, right quality and desired reliability of supply at desired
schedule are being offered by the supplier.
b) No-Task Related: In such category, the buyers are motivated due to
some other factors like promotion, increment and other personal
favours from the management. Such motives are associated with
personal recognition, personal growth and need for risk reduction.
iii) Perception: The same stimulus is received, interpreted and processed in
different styles within different individuals. The individuals form a
perception about a thing in their mind from their past experiences.
Thus, it is very important for the marketers to visualise the buying
centre’s perception about their products and develop their plans
accordingly. This has got two sides: perception of the buying centre
members towards the products and services of the selling firm and
perception of the same towards their own functions and responsibilities
in the organisational buying activity.
There are many internal as well as external factors that become the root cause
of the problem in the organisation.
i) Internal Factors Responsible for Organisational Problem: It may
arise due to decision of the company to launch a new product as per
market demand. This will require procurement of new material and
machinery. In any company, break downs do occur and repair of
machines require procurement of new parts. Even the machinery has
service life, they do need replacement. The material procured sometimes
gets rejected due to poor quality. This forces the company to make
urgent procurement through another vendor. Sometimes, a better price or
better quality source is found before final bid is made. This results in
making fresh quotations on urgent basis.
ii) External Factors Responsible for Organisational Problem: The
marketers placed by the organisation in the Problem Recognition
market should act as the external fact¬
informer, i.e., the performance of the product
in the market, the needed improvements to General Need Description
be immediately incorporated is to be
conveyed to the organisation along with the Product Specification
information of competitive products. This
will act as an external stimulant for the
company to make suitable purchases to Supplier Search
remain competitive.
Proposal Solicitation
2) General Need Description: After understanding
the problem, the next step is to estimate the
quantity and quality of the product required to Supplier Selection
solve the particular problem or fulfil the need.
However, the organisational buyers unlike
Purchase Routine Selection
common consumers will be constrained to budget
considerations, cost-benefit evaluations, set profit
goals and expense quotas. Post Purchase Evaluation
3) Product Specification: In this particular stage,
Figure 1.8: Industrial
the technical and other value related Buying Process
specifications of the product are analysed. These
specifications should match with the organisational requirements. The
suppliers may be offering products having wider applications but at an
additional cost. The value analysis helps to review product specifications and
actual requirements to eliminate the waste.
4) Supplier Search: The next stage of organisational buying involves finding
the suitable vendors. The organisational buyers screen the available vendors
or suppliers on the basis of their products’ quality and performance.
Generally, reliability, market reputation and financial status of the vendors
are considered. Some vendors are dropped from consideration list due to
their inability to supply at stipulated time or due to poor brand reputation.
The qualified vendors finally make the approved list, from which final
suppliers are selected.
62 Pharma Marketing Management
At this stage, the vendor analysis is not restricted to technical aspect but
reliability, punctuality, in-time delivery, price and credit offers, etc., are also
considered.
7) Purchase Routine Selection: At this stage, the organisational buyers put an
order to the selected vendor including the terms and conditions of the
purchase and mode of payment. The vendor receives the order and dispatches
the product as soon as possible. After receiving and inspecting the product,
the buying centre makes the final payment. Status reports are prepared for
every transaction to know the time consumed in the entire process. In case,
where a successful transaction takes place, companies generally follow a re¬
order policy for a specific period of time.
8) Post-purchase Evaluation: This is the last stage of organisational buying
process. An evaluation sheet is prepared by the buyers, based on price,
quality, delivery schedule, after-sale service, etc. Overall rating is given after
periodic consultation with various departments. This also helps to arrive at
the decision for continuation with the vendor or to search for another one.
The evaluation sheet is also shared with vendors to give them an opportunity
to improve.
1.6. SUMMARY
1 ) Marketing is a total system of interacting business activities designed to plan,
price, promote and distribute want-satisfying products and services to the
present and potential customers
2) The major driving force of marketing is to achieve the organisational goals
by harmonising activities which help to attain customer satisfaction.
Therefore, marketing has wide scope in relation with its universal activities.
3) Value refers to the worth or usefulness of goods or services. The best
definition of value from consumer's perspective is the difference between a
potential customer's evaluation of the benefits and costs of one product in
comparison to others.
64 Pharma Marketing Management
1.7. EXERCISE
1.7.1. Very Short Answer Type Questions
1 ) Define marketing.
2) List any two importance of marketing.
3) Give the concept of marketing environment.
4) What is competitor analysis?
5) State the term consumer behaviour.
6) Give any two nature of industrial buying behaviour.
DYADIC EXCHANGE
Payment
Drugs
COMPLEX EXCHANGE
Manufacturer and merchant will surely earn profit if they buy products in an
economic and efficient manner. Therefore, the sellers which offer good quality
products at most reasonable price with best terms and conditions should be
preferred.
2.I.3.2. Selling
The term “Selling” and “Marketing” should not be used interchangeably as these
two terms explain two different concepts. The difference between these two
terms should be understood by the manager. Selling has always remained in
question due to the difference that prevails between the quality promised and
quality sold.
The sale of the particular brand in pharmaceutical marketing totally depends
upon physicians or medical practitioners. Thus, medical reps are appointed by
pharmaceutical manufacture to approach physicians. Medical reps persuade
physician to prescribe manufacturers medicines.
70 Pharma Marketing Management
2.I.3.3. Transportation
The main function of transportation is to carry the products to different markets,
which may be at different geographical locations. Apart from transporting the
goods, the additional values that transportation provides to the customers are
providing the products on time, in the quantities demanded, and in the
undamaged form. The utility that transportation provides is called ‘place utility’
and the utility which is created by the storage is regarded as ‘time utility’. ‘Time
utility’ cannot be provided to a customer without the help of transportation
activities as the speed and the consistency by which a product is moved from one
point to other is determined only by the transportation activities. The activity of
transporting something or someone from one point to other or the activities
involved in being transported is termed as transportation.
2. 1.3.4. Storage
Storage is another important function of marketing process. In storage, goods are
stored in a warehouse until they are distributed in the market. Maintaining ample
stock of goods for meeting the demands of consumers is vital for retailers,
manufacturers and wholesalers.
Firms can store their goods either in their own warehouse or can share third
parties warehouse. As compared to third party arrangement, firms own
warehouse offer them greater designing flexibility, greater control over
operation, lower per unit cost, and effective market feedback. No fixed
investment is required for third party warehouse. Third party warehouse is
attractive as they offer flexibility in location and space utilisation. This approach
helps in improving services offered to customer. Warehouses are sometimes
called distribution centres.
2.I.3.5. Finance
It is an important function of marketing. The provisions of funds are essential for
the meeting of the various requirements of marketing. The marketing concerns
require both fixed and working capital. The wholesaler, retailer, commission
agent, broker, cooperative undertakings or sales department of a manufacturer
need relatively large amount of capital for the purchase of goods, for re-sale,
paying of wages and salaries, extending credit facilities to the consumers and
other operative expenses. The capital required for this purpose is called the
‘working capital’.
Similarly, fixed capital is required for the purchase of land, building, machinery,
furniture and other office appliances. The fixed capital required for this purpose
may be small because land and building are generally taken on rent.
2.I.3.6. Grading
Grading is an important part in the function of standardisation. Standard of a
product is decided on the basis of its shape, colour, size, strength, taste, content,
etc. Grading of pharmaceutical product is done on the basis of standards
maintained as per the pharmacopoeia. Products can be graded as IP (Indian
Pharmaceutical Market Aspects (Chapter 2) 71
Following are the two sources through which information related to market
trends can be collected:
1) Internal Sources: Transport costs, advertising expenditure, sales turnover
statistics are those internal sources that can be analysed in order to obtain
market trend information.
2) External Sources: Primary and secondary sources are two types of external
sources through which information can be obtained.
Market Size
Indian pharmaceutical sector is expected to grow to US$ 100 billion, while medical
device market is expected to grow US$ 25 billion by 2025. Pharmaceuticals export
from India stood at US$ 16.3 billion in FY20. Pharmaceutical export includes bulk
drugs, intermediates, drug formulations, biologicals, Ayush and herbal products
and surgical. As of October 2020, India exported pharmaceuticals worth US$ 13.87
billion in FY21. Pharmaceutical exports from India stood at US$ 16.28 billion in
FY20 and US$ 2.07 billion in October 2020.
74 Pharma Marketing Management
India’s domestic pharmaceutical market turnover reached Rs 1.4 lakh crore (US$
20.03 billion) in 2019, up 9.8% y-o-y from Rs 129,015 crore (US$ 18.12 billion)
in 2018.
The drugs and pharmaceuticals sector attracted cumulative FDI inflow worth
US$ 16.54 billion between April 2000 and June 2020 according to the data
released by Department for Promotion of Industry and Internal Trade (DPIIT).
In case if the objective is patient welfare then the presence of too many marginal
pharmacies and me-too drugs are the proof that pharmaceutical marketing system
is inefficient. Pharmaceutical marketing will be considered ineffective where
there are lot of drugs present for treating a single disease and no drug present for
known diseases.
Gujarat and Tamil Nadu which prefer clothes and food-items based on their
regional culture and food habits. Marketers must be very much conversant with
regional languages. Also, places known for extreme climate conditions affect the
need as well as the buying behaviour. For example, in cold climate, there is
permanent need for woollen garments and heating systems whereas for hot
climate, air-conditioners are needed.
The analysis of these variables helps in developing the market segments. These
derivatives are described below:
1) Occasions: The marketers do recognise the occasions that are helpful in
developing needs. The household items are regularly purchased by the
salaried people on every first working day of the month. Festivals, family
functions or celebrations for specific events develop needs for purchase. The
companies can plan to enhance the supply of products based on these
occasions. Two types of occasions are common:
i) Regular: These include occasions like Republic Day. Holi, Diwali,
Dushehra, Eid, Christmas, Independence Day, etc.
ii) Special: These include marriage, anniversary or any happy occasion like
winning an award, promotion, etc.
2) Benefits: The market is also segmented on the basis of benefits derived by
the consumer. A consumer may purchase a watch as an essential need to
know the exact time or to gift someone or use it as a status symbol, wear it to
match with the dress or even wear it as a jewellery item. The marketers do
recognise this fact and provide different brands of the product to take care of
each segment separately.
Pharmaceutical Market Aspects (Chapter 2) 81
3) User Status: The market can also be segmented on the basis of user status.
For example, the users for deodorant can be categorised as:
i) Non-user: This category is not interested in using the given product. For
example, children and aged people generally do not use deodorants.
ii) Potential User: This category heavily relies on given product
consumption. For example, deodorants are frequently used by
fashionable teenagers and corporate executives.
iii) First Time User: There are consumers who use a new product for the
change. For example, deodorants used by college going students.
iv) Regular User: There is a section in the society who leads a lifestyle
which requires regular use of deodorants or other cosmetics like film
stars, models, corporate big-wig and fashion conscious ladies.
v) Ex-user: Some people give up using a particular product (like
deodorants) because of allergy or medical advice.
4) Quantity Consumed/Usage Rate: The quantity consumed or the rate of
consumption of a product is also an established basis for segmentation of
market. This segmentation is commonly used in tea, coffee and soft drink
markets.
There are three categories:
i) Light: The frequency of consumption of the consumer is not constant
but occasional. For example, use of cosmetics by a housewife who is not
so fashionable.
ii) Medium: The frequency of consumption of product is frequent. It is
observed that teenagers frequently use cosmetics.
iii) Heavy: The consumption of product is regularly made in large quantity.
For example, the celebrities working in the film industry, models, etc.,
use cosmetics regularly since it is a part of their profession.
5) Buyer Readiness Stage: There are different readiness stages of consumers
regarding a product purchase. Some consumers may be unaware, others may
not be interested, and some might be interested while some might be ready to
buy the product definitely. The market is segmented as per the readiness of
the consumers.
6) Loyalty Status: There are different levels of loyalty of consumers for
specific brands as described below:
i) Hard Core Loyals: Such consumers always buy the same brand of
product, like newspaper, coffee, certain brand in clothes and sarees. They
get hooked to these products due to their long experience and develop a
sort of addiction and do not switch to other brands.
ii) Soft Core Loyals: Such consumers limit themselves to two or three type
of brands of the product. For example, a consumer using Sony, LG,
Voltas products is a soft core loyal consumer. Such consumers need to be
motivated by marketers to stick to one brand so that they could be turned
into hard core loyalist.
82 Pharma Marketing Management
iii) Split Loyals: Such consumers shift their loyalty for a change. For
example, majority of customers prefer Colgate tooth paste but some also
use Pepsodent or Close Up.
iv) Switchers: Such consumers never stick to a brand rather they enjoy
switching to new brands for experience and thrill.
7) Attitude: Attitude is the principal driver behind a product purchase. Some
people lose interest in life due to some sad events, while some lead a very
simple life as directed in scriptures. Such people do not indulge in fun or
luxuries of life and behave differently. However, normal persons want to
enjoy their life to the fullest and have fun. Keeping these things in mind, the
customers are categorised as enthusiastic, positive, indifferent, negative and
hostile.
The first step is performed at consumer level (patient) and the second step is at
customer level (doctor). These two levels of segments are described below:
|Patient|
G.P.Presriptions I Hospital Doctor
who are likely to purchase the products and services of the company. This is
done in ways where some companies can cater to the entire market while others
can focus on developing products and services for small niche markets which are
profitable. Targeting is undertaken by companies of all sizes in order to retain
and maintain their customers.
The company already chooses a target market and then decides on what
products and services it has to offer. Marketing is all about understanding the
customers’ needs and wants, and developing the products that satisfy them.
Both market segmentation and targeting is practised by all organisations,
ranging from the small corner book store to large MNCs. A successful
marketing plan can be developed by the company only when there is complete
synchronisation between what the customer wants and what can be provided by
the company.
The marketing strategy comprises of target market and the four elements of the
marketing mix - product, price, place and promotion, which are most crucial for
the success of a product in the market. After deciding the group of customers, the
company can develop a marketing mix strategy to satisfy its target market. Thus,
the market targeting process involves the following steps:
1 ) Evaluating the market segments to target, and
2) Selecting the target market.
While deciding on the market segments, the firm must consider three factors,
such as:
1 ) Segment Size and Growth: The potential of the segment can be assessed by
using forecasting techniques. Market segmentation analysis involves demand
forecasting for each element of the product market other than for the product
market as a whole. The potential of the entire market can be identified by
Pharmaceutical Market Aspects (Chapter 2) 85
where,
=
MP Market potential for the product market,
SPi = Segment potential in the ith segment,
n = Number of segments formed for the product market.
2) Segment Structural Attractiveness: The structural factors influencing the
attractiveness of the segment must be assessed along with its size and
growth. For example, if the segment already has many powerful
competitors, then the market becomes less attractive. These competitors offer
potential substitute products and may also limit prices and profits that one
can earn.
Buyers with strong bargaining power also influence the attractiveness of
market segment as they force the company to slash down their prices,
demand for more products and services, and try to raise disputes among
competitors all at the expense of seller’s profitability Similarly, some strong
and aggressive suppliers demand for lowering of prices or compromise on
the quality of the product. This again leads to destruction of structural
attractiveness.
3) Company Objectives and Resources: If a company is satisfied with its
market size, growth and structural attractiveness, then it must not
compromise with its objectives and resources. Some segments of the
market can be terminated if they are not appropriate for fulfilling long¬
term objectives of the company. Even if a segment fits the company’s
objectives, the skills and resources required for the company’s growth
must be ensured.
For example, Mahindra and Mahindra in automobile market, Pepsi and Coke in
beverages market and Hindustan Unilever in FMCG industry are practising full
market coverage targeting.
The best example of this is Coke and Pepsi who use same pricing,
advertising and packaging means throughout various consumer segments and
geographic areas.
(a) Undifferentiated
Marketing
The basic version of the model has certain basic features but customers
can opt for upgraded models having features like power steering, airbags,
GPS services, etc., by paying more.
In this way, the company can achieve economies of scale and large
market share. All this depends on the type of strategy adopted by the
marketer so as to achieve high market penetration.
The market segmentation maps can be used for viewing different income
levels of customers residing in different areas. Such information is very
important for the marketers to position their outlets in relevant areas.
Apart from this, the changing tastes and preferences of customers also
depend upon the geographical locations. With the help of target
marketing, the organisation can also address these varying preferences
effectively.
2.4. SUMMARY
1) Pharmaceutical marketing is all about “generating a prescription for the
products”. Here doctor plays very important role as he writes the
prescriptions. Hence the pharmaceutical marketing efforts are concentrated to
influence and educate doctors about the products.
2) The sale of the particular brand in pharmaceutical marketing totally depends
upon physicians or medical practitioners.
3) Grading of pharmaceutical product is done on the basis of standards
maintained as per the pharmacopoeia.
4) Pharmaceutical industries are involved in research, development, production
and marketing of pharmaceutical drugs.
5) Pharmaceutical markets are influenced by both qualitative and quantitative
forces. The macro-environment determines the overall framework of
situations and mutual effects which determines the behaviour of market
actors.
6) India is the largest provider of generic drugs globally. Indian pharmaceutical
sector supplies over 50% of global demand for various vaccines, 40% of
generic demand in the US and 25% of all medicine in the UK.
7) Pharmaceutical market segmentation helps in minimising waste and allocates
resources efficiently. It provides many opportunities to pharmaceutical
companies. A pharmaceutical industry will achieve success if it focuses its
attention towards market segments.
8) In market targeting, the product positioning is done beforehand and only
decisions related to choosing of suitable target market has to be made.
9) With the help of targeting, the marketer can predict and analyse the features
of products and services which are of utmost importance to the target
customers.
Pharmaceutical Market Aspects (Chapter 2) 91
2.5. EXERCISE
2.5.1. Very Short Answer Type Questions
1 ) What is pharmaceutical marketing?
2) List any two barriers of pharmaceutical market.
3) Give the behavioural segmentation of pharmaceutical market.
4) Define market segmentation.
5) What is target market?
6) List any two benefits of targeting.
India being very vast geographically, consumers here are naturally scattered over
a vast territory. As the country is also marked by great diversity in climate,
religion, language, literacy level, customs and calendars, lifestyles and
economies status, here consumers present a complex and bizarre group. The
heterogeneity holds many implications for a marketer, especially to those going
in for national marketing.
more and spend more. Thus Indian consumers today are a part of growing
economy which has increased their spending power. Modern Consumers
in India are using their spending power to improve their living standards.
iv) Better Sex Ratio: Although sex ratio has declined gradually after
independence, it has experienced rise is the recent past. It has increased
from 933 (in 2001) to 940 (in 201 1) as per the census of India. However,
there is contrasting difference in sex ratio in rural (947) and urban (926)
areas as per 201 1 census. This growth trend is also a valuable feature to
be kept in the minds while conducting marketing activities.
v) Employment: India has experienced rise in the rate of employment with
2% annual rise for four decades since 1972-73. The annual rise in global
rate of employment in the past decade i.e. 2001-10 was 1.5%. The fair
picture of India in terms of employment rate not necessarily means the
same in in terms of labour growth. The Indian employment scenario
shows a sorry figure in the following ways:
a) The rate of employment has declined.
b) The sectors which can show high employment growth have shown
only sluggish progress.
c) Although agriculture sector has shown a steep decline in contribution
to the GDP, yet it is the major employer.
d) The employment growth is mainly visible in those sectors which are
unorganised and informal, and are marked with low income and poor
working conditions.
e) The organised sector show little bit rise in the employment rate,
however it is mainly confined to casual and contractual workers.
2) Socio-Economic Features: The socio-economic features of Indian
consumers can be defined in the following ways:
i) Change in Way of Living: The traditional joint family system has been
replaced by the nuclear families in the cities. Similar trend in visible
even in the rural areas. Today people believe in spending more and
saving less. The urban people like to spend more on consumer durables,
education, entertaining activities, etc. However, the trend in opposite in
the rural areas. The Indian urban population also like to spend on
clothing, food, heath care and on time saving devices.
ii) Rise in Income: As far as per capita income is concerned; India stands
at 142th position among the world countries. The figures indicate about
the living standards of the people. The per capita income is calculated by
dividing the national income by the total population of the country. India
has experienced almost double rise in the per capital income from 2005-
05 to 2010-11 reaching ?54,835 per year. The states with the highest
level of per capita income are Delhi, Haryana, Goa, and Maharashtra.
iii) Aspirational Levels: The Indian consumer is becoming aspirational day
by day. They have developed a refined taste that matches with those of
the developed countries. Hence, Indian consumer is demanding the
products at par with those in the developed countries. Hence, there is
demand for more aspirational products.
Analysing the Market and Consumers (Chapter 3) 94
There will be ready markets for the products of those marketers who prepare
their offerings on the basis of the identification of needs of customers. The
consumer buying behaviour is affected by different psychological factors. The
customer’s perceptions of his needs, wants, and status in life have a direct
influence on his buying decisions. There will be some consumer behaviours
resulted from the sub-conscious behaviours while others are resulted from the
conscious decisions which are taken by the customer for fulfilling some specific
objectives.
Figure below depicts the four main psychological factors which can affect the
buying choice of a person:
Analysing the Market and Consumers (Chapter 3) 96
3.I.3.I. Motivation
It is a reason to act in a particular way. The reasons can be physiological or
psychological, which usually arise out of human needs and wants. These
physiological needs can be hunger, thirst, and discomfort while the psychological
needs can be self-esteem, recognition, or belongingness. A need acts as a motive
when it reaches a certain level of intensity then it pushes a person to act in the
same direction.
It is widely believed that consumer behaviour is aroused and directed by
consumer motives. This arousal of interests engages consumers both physically
and mentally. Thus, it is important to understand the influence of motivation on
consumer behaviour which is explained as follows:
1) Defining Basic Strivings: Motives enable the consumers to understand,
recognise and form their fundamental strivings and goals like safety,
achievement, affiliation, etc. These strivings decide how the consumer will
behave in a variety of situations and activities.
2) Recognising Goal Objects: As a general rule, people regard products and
services as means to satisfy their inner needs and desires. Many times,
consumers consider some products as their ultimate goals and forget that
such products are actually means of fulfilling their motives.
3) Influencing Choice Criteria: Motives influence the ways in which
consumers design the criteria of evaluating any product/service. For
example, if the underlying motive behind car purchase is economy then the
consumer will evaluate all the options that are available and gauge on this
parameter before reaching a decision. In this case, the economy as a criterion
will be more important than other criteria like looks or speed.
4) Directing Other Influences: Motives influence other psychological
variables like perception, learning, personality, attitudes, etc. They also
impact the way people process product information. Motives thus have an
impact on information processing which in turn determines how consumers
interpret the environment and how they respond to various stimuli.
3.I.3.2. Perception
It is a process or a way of looking at a person or a thing. It not just depends on
the physical stimuli rather it also involves the reactions received from the
surroundings and thinking process within the individual. All these factors
combine to form a perception. Under mentioned are some influences that
perception has on consumer behaviour:
1) Forms Decision about Company or Product: In order to determine
whether or not, any kind of value if delivered by a company, various
information about that firm is continuously combined and processed by the
customers. Firms mostly present their best selves in order to influence the
perception of customers. For example, quality and convenience of a product
or service are highlighted in the advertisements in order to improve the
perception of the customers which can be advantageous to the firms in the
form of improved sales. But sometimes, they make use of deception, fraud
and dishonesty to manipulate the customers.
97 Pharma Marketing Management
3. 1.3.3. Personality
Personality is the collection of all possible ways in which an individual reacts
and communicates with others. Conversely, it can also mean how people
influence others as well as how they understand and view themselves. It includes
their pattern of internal and external measurable traits and the interaction
between person and situation. The impact of personality on consumer behaviour
can be understood as follows:
1) Generalised Self-confidence: A person having generalised self-confidence
is open towards making purchasing decisions. Usually, the consumers having
low self-confidence do not act as first adopters or innovators and like to pick
the popular brands instead of new ones. In the same way, people with high
self-confidence dare to try the products of a new brand.
2) Self-consciousness: Consumers usually are inclined towards knowing
themselves in various situations. Self-conscious people are very careful about
the image they portray in front of others. Under such overstated awareness,
people try to use the goods which help them portraying the desirable image
in front of others.
3) Self-monitoring: Self-monitoring is a term which is similar to self¬
consciousness. It is the way in which people adjust to varying situations and
are able to give the desired impression in front of others. People with low
level of self-monitoring are emotional and are conscious about their feelings,
outlooks and opinions. Their own instinct such as their personal values and
beliefs play a major role in affecting their behaviours. Hence, they seldom try
to alter their behaviour in varying situations.
Analysing the Market and Consumers (Chapter 3) 98
3.I.3.4. Learning
It is a process of acquiring skills, knowledge and experiences. Learning leads to
changes in one’s behaviour mainly with the increasing knowledge and
experience. It generates out of the drives, stimuli, responses, cues and
reinforcements. Learning enables one to take wise decisions. Under mentioned
are some influences that learning has on consumer behaviour:
1) Recognition and Recall: An advertisement intends to attract the attention of
consumers towards its certain elements, features or parts and then relate them
with the advertised brand and therefore, different amount of awareness is
experienced by consumers once they are exposed to an advertisement. The
components of the memory of the consumers for information advertised, are
represented by recognition and recall, however, the recognition can only
make use of the outermost or surface level of memory (similar to multiple¬
choice questions) when correlated with recall measures (similar to essay type
questions). The ability of the consumers to identify a similar advertisement
as a one already seen by them earlier is referred to as recognition. The first
goal of any ad is to get observed which is measured by the recognition tests.
They can be used to inform the advertiser about the manner in which the
consumers remember the different components of an ad.
2) Cognitive Responses to Advertising: The extent to which the intended
advertising message is understood by the consumer correctly is one more
influence that learning has on the consumer behaviour. Different media use
different tests to measure this influence, however, in order to have a
complete understanding of the effectiveness of an advertising campaign,
advertisers consider evaluating all the different parameters of advertising
alongwith different media together.
For example, there can be a chance that a single advertisement can perform
well on recognition and bad on attitude and purchase intention. Therefore, by
performing complete tests on the effectiveness of an ad campaign, from
awareness of the product to purchase, such differences and irregularities can
be identified which will eventually enhance the performance of the ad.
3. 1.3.5. Attitude
Attitude is a certain way of feeling or acting towards a particular thing or a
person. People have different attitude towards areas like religion, politics,
clothes, music, and food. Attitude is a like or dislike for a particular object which
99 Pharma Marketing Management
assists the buyer to decide about a certain product. The following heads help us
understand the impact of attitude’s on consumers:
1) Negative Learned Attitudes: Attitudes are developed within individuals
from birth; possibly some of them are learned from parents. A learned and
admirable person can act as a strong influencer of attitudes and leaves a long
lasting effect on attitude change. For example, a salesperson selling a new
detergent launched in the market may find it troublesome to convince
individuals who are a staunch believer that whatever brand their mothers use
is the best. These well-informed attitudes, from the marketer’s point of view,
are negative ones as they have the power to impact the interests of customers
towards the product.
2) Positive Learned Attitudes: Marketers can find an involuntary consumer
franchise in terms of consumers who have positive learned attitudes. These
consumers are likely to display trustworthiness and buy the product quite
often. Also, they suggest it to other people who may denounce it. They take
criticism as a negative impression of the person from whom they gained such
attitude. There is a directly proportional relation between the consideration
they hold about the original opinion holder and attitude towards a product or
service held by opinion holders.
3) Negative Experience Attitudes: Nearly all consumer attitudes arise from
experience with products and services. For example, a person who had a bad
experience with a particular shoe might never be convinced to buy that shoe
again, even though a very attractive price is being offered by the dealer. There
is a high probability that buyers can generalise a negative attitude towards an
entire class of products or services or even specific groups or communities.
The consumers of organic foods may tend to develop a negative attitude
towards the ones who consume non-organic food items. Thus, consumer
perspectives are critically influenced by negative experiences.
4) Positive Experience Attitudes: Positive experiences prove beneficial to the
marketing personnel. As the name suggests, such attitudes are developed
through the positive experiences consumers have enjoyed in past associated
with the products and services. For example, if a person uses a car of a
particular company for 20 long years, then it is quite obvious that he will
once again go for the same brand during his next purchase. Thus, a positive
behaviour is similar to having a favourable approach. There is a strong
attempt of every marketer to make experiential attitudes as effective as
possible.
3. I .4. I .
Drivers of Change in Indian Consumer Behaviour
Numerous factors which affect Indian consumers are as follows:
1) Shifting Demographic Trend: It is estimated that at the end of 2020, there
will be more than 50% people below 30 years. It is considered to be a golden
opportunity for marketers. Hence, marketers need to devise their marketing
strategies which mainly concentrate on changing demographic trend.
2) Small Families: The urban families are nuclear families in comparison to
joint families in the rural areas. There is also a rising trend towards “Double
Income No Kids” ( DINK ) family . It has led to a new trend where there is
rising demand for lower pack size and Stock Keeping Unit (SKU).
3) Rising Awareness: Today both conventional ( text message, newspaper,
pamphlets ) and novel social media (internet, whats app and social platforms)
are helping in making consumers aware about numerous options. Presently,
advertisements are created in a manner to leave a permanent impression on
the consumers' mind regarding a specific brand . Sometimes advertisements
are designed in a way to let consumer emotionally relate with a specific
brand. Latest development in telecom sector has enabled marketers to easily
connect with the consumers. Generally speaking, modern innovations such as
SMS, whatsapp, social media marketing have enabled the marketers to
effectively convey their message to the target group.
4) Impact of Western culture: Westernisation has influenced urban Indian
families through mass media. The urban India has westernised in terms of food
habits, clothing, cosmetics, automobiles and other apparent items. For
example, Indian families are opting for low calorie breakfast cereals such as
oatmeal, corn flakes instead of tradition parantha, puri, dosa , idli, sambhar, etc.
5 ) Organised Retail Stores: One of the most prominent development in retail
sector since 1990s is the development of retail stores and shopping malls as
in case of western countries. Several malls offer one stop solution in form of
ATM, food joints, kids’ zone, parking facilities, pub, grocery store, etc .
Many big stores such as Reliance, Big Apple, Spencer, and Easy Day are
101 Pharma Marketing Management
opening their outlets in different parts of the country. The endeavour of these
retailers is to create a complete shopping experience for the high end society
and upper middle class.
6) Celebrity endorsement: Consumer behaviour is highly influenced by what
their favourite celebrity is using. For this reason, celebrities are widely used in
advertisement to influence the brand with their charismatic personality. The
increasing use of Visual media has helped in supporting celebrity endorsement
of the products. Celebrities are the news makers. The actions and movements
of celebrities are admired and imitated by their fans as a result product
endorsed by them exhibit heavy sales. Undoubtedly, this is the primary reason
for which celebrity is commonly used in advertisements. In a country like
India, it is quite obvious to use celebrities in advertisements. Indians are great
fans of their favourite stars and cricketers and like to follow them.
7 ) Quality Directed Stores: The consumers of India are obsessive about
quality products, they attach value to brand and consider high price as a sign
of quality. Anyhow if the product is not of a popular brand , they try to
purchase it from well -known retail store thinking that these will deliver
products with good quality only. These retail stores can be a good venture for
the Malaysian companies which want to capture Indian market as these don’t
believe in heavy investment in advertising.
8) Free Gifts: Indian consumers are easily swayed by free gifts and discount offers.
These free gifts are given to the consumers on purchase of certain products or
buying above certain limit. Generally such offers are given along with consumer
durables such as refrigerator, television, mobile, etc. The products which are
offered as a free gift include soaps, shampoo, creams, oil, etc.
9) Product Features ( such as Colour, Size, Designing, and Shape): Product
features have a huge impact on Indian consumers. It is evident through
numerous examples. For example, the rural India was reluctant to accept Tata
Sumo in white colour. However, when the same model was renamed and
introduced with new bright yellow colour with more space for seating and
transportation, it received warm welcome by the rural population of India.
Hence, sometimes product makeover can help in popularising the product.
10 ) Change in Saving/Investing Trend: The recent trend in India is not toward
saving money for future use or investing in property or gold but in mutual
funds, insurance policies, etc. which are likely to bring heavy returns.
The trend is further advanced in case of affluent and elite class as affluent
class don’t mind spending 5 times and affluent class don ’t mind spending
nine times than ordinary people when it comes to female cloth line. Similar
trend is visible in case of dining out. Affluent class is likely to spend 13
times and elite class is likely to spend 35 times more than ordinary people.
Mainly three factors are responsible for this changing trend, viz. increase in
spending per purchase, increasing market penetration and increase in
frequency of purchasing.
6) Digital Explosion: There has been tremendous rise in internet usage in the
recent past, where it has reached from eight percent in year 2010 to twenty -
five percent in the year 2016. It is estimated to go beyond 55 percent by the
end of the year 2025 as the internet users are likely to grow to 850 million.
Even the composition of users is likely to change in the next decade and will
have more than half people from the rural areas. Moreover, the internet users
of today are mature. The internet users consist of more than 50% people in
the age group 24 years or below. However, it is likely to go to 65% above 24
years by the end of 2020. The trend is towards virtual shopping with the rise
in number of online shoppers reaching 7 times from 80 million to 90 million.
The trend is likely to go further with opening of more virtual stores and
further internet penetration. It has also been assumed that there will be 300-
350 billion internet users by 2025.
Moreover, e-commerce is likely to reach $150 billion by 2025 from $130
billion at present. The figures include not only virtual shopping but also e-
transfers which are $45-50 billion per annum at present and are likely to
become 10 times to $500-550 billion by the end of the year 2025.
7) Rise in E-commerce: The concept of e-commerce has revolutionised the
Indian business scenario. The e-commerce of India is likely to grow from
US$38.5 billion in 2017 to US$ 200 billion in 2026. The rise in internet
usage and Smartphone has served as catalyst for the growth of the industry.
The digitalisation is likely to raise the internet user base from 560.01 million
in September 2018 to 829 million by the end of year 2021.
The internet economy of India is likely to become twice from US$125 billion
in April 2017 to US$ 250 billion in 2020, which has mainly endorsed e-
commerce. The e-commerce revenue of India is likely to become the highest
in the world with 51% growth rate per annum from US$ 39 billion in 2017 to
US$ 120 billion in 2020.
and cleaning the utensils. People also like to stock up goodies in one go
instead of visiting to the super markets again and again .
2 ) Occasional Affordable Buying: The changes in values and income level
have resulted in self -control to occasional affordable buying. Although
Indians always believed in shunning extravagance yet now they don t mind '
distinguishing needs other than house wives. The peculiar features are less
frequent shopping, little time in shopping, brand/store loyalty. This group are
likely to shop after office hours i.e. generally in evening.
Lynn J . Jaffe has observed the response to financial services and has found that
the modem position strategy where the product primarily focuses on family and
career is found to be more efficient in comparison to traditional positioning
strategy where the woman primarily focuses on nurturing and family.
8) Traditional v/s Modern Food : India is a diverse country as far as food
habits are concerned . The staple food of North India is wheat and that of
South India is rice. The gravies of the South India predominantly have
coconut and tamarind while that of North India have pulses. The rural India
also depicts similar trends. Anyhow the Indian food habits are getting a
complete makeover with people turning towards western dishes such as
chowmein, pizza, burger, momos, etc.
There are following factors which affect the choice of patient for retail
pharmacists:
1) Convenience: Convenience plays an important role for the selection of retail
pharmacists. Patients prefer those pharmacists that are convenient for them .
Convenience is perceived as easily availability of public transport, friendly
environment, wide parking space, etc.
2 ) Physical Environment: Physical environment can be described by the
physical characteristics of a store. A patient will choose those pharmacists
which have all types of physical stimulants such as, store decoration, product
display, ventilation, lightening, appearance of staff and their attitude, etc.
Physical environment of store is an important factor to gain competitive
advantage It influences patients’ choice as it has positive effect on the
purchasing behaviour of patient .
3) Sales Promotions: Sales promotion is more effective than any other
advertising media. It is mainly used to attract the patient. It helps the
pharmacist to reach the right customer at right place and time. With the help
of sales promotion , a pharmacist can directly influence the patient.
4) Qualification and Experience: Pharmacies arc considered as the primary
health service providers. They provide medicines to the patients by
counselling them about the health. Pharmacist provides advices to the
patients about drugs and illness.
Thus, pharmacist must be qualified and experienced. The pharmacist should
provide patient -oriented service and should continuously improve the quality
of their pharmacies.
5) Customer Service: Customer service is the ability of pharmacists to meet
the requirements of the patients. Attention , enthusiasm, communication,
patience, sincerity, understanding, appreciation, etc. are included in customer
service. Although it is difficult to make a plan for customer service but once
107 Pharma Marketing Management
it is effectively planned then it will build positive image of the store and
retain patients. In retail store, customer service strategy is tailored to provide
unique services to the patient.
6 ) Branded Pharmacies: Branded pharmacies means the pharmacies consist
of two or more branches. The services provided by these stores are
different from other local stores. There is standardisation in pharmacies.
Standardisation means that customer will get same type of service and
product quality in all the branches of same brand . Thus it is easy for
brand pharmacies to build the reputation in local markets through
standardisation .
7 ) Demographic Variables: Demographic factor includes gender, age,
lifecycle stage, occupation, interest , opinion , personality , self -concept
activities. These demographic factors play a very important role in the
selection of pharmacist.
According to Green and Tull, “Marketing research is the search for and
analysis of information relevant to the identification and solution of any problem
in the field of marketing”.
With the help of market research, pharmaceutical firms collect the data ( which
encompasses facts and figures ) and build a database of information which in turn
helps in directing the strategic decisions of the business. Market research is a
continuous process and not a one-time activity. An effective market research is
one where the value of the conclusions reached goes beyond the conducting cost
of the research process.
order to validate its cost of development , in case the current drugs can treat a
certain number of patients. Continuous evaluation of drugs has to be carried
out by the pharmaceutical firms in the process of research . Moreover, funding
the trials of drugs requires more investment . Several pharmacies carry out the
testing of a drug in the initial phase in order to cure a rare symptom. This is
done so that competing against the outcomes from the current treatments can
be avoided .
3.3. SUMMARY
1) The profile of an Indian consumer for the inevitable reason that India is
gradually moving up as a global emerging economical force and is already
considered as an international hub for information technology, automobiles,
malls - both of Indian and foreign companies, and textiles, particularly
synthetic.
2) Understanding psychological state of the customer is very important for
marketers to clearly understand the concept of buying behaviour. It is not
easy to analyse the psychological state of a customer.
3) There has been drastic change in consumer behaviour in the past few years.
Internet and special media has resulted in dramatic change in consumer
behaviour.
4 ) The consumer behaviour of upper class and middle class India is largely
influenced by the western culture. The consumer of today is open - minded
and experimental .
5) Patients choose physicians when they have some health issues. They choose
physician on the basis of their previous experience, distance to the physician
or primary physician referrals.
6) Patients choose physicians when they have some health issues. They choose
physician on the basis of their previous experience, distance to the physician
or primary physician referrals.
7 ) Patient satisfaction is one of the essential measures for the selection of retail
pharmacists. Both patient and pharmacists have different opinions regarding
potential pharmacy services.
Analysing the Market and Consumers ( Chapter 3 ) 112
3.4 . EXERCISE
3.4. 1 . Very Short Answer Type Questions
1 ) What do you understand by consumer profile?
2) Give any two objectives of market research.
3) Define market research.
4) What is attitude?
.
According W Alderson, ‘A product is a bundle of utilities consisting of various
features and accompanying services”.
According to Philip Kotler, A product is a bundle of physical services and
symbolic particulars expected to yield satisfactions or benefits to the buyer”.
It is the sole responsibility of product managers to manage the products. The
product management activities comprise of planning, forecasting and marketing
of products or services at all stages of the product lifecycle. Broadly, it is a wide
range of activities carried-out to deliver a particular product in the market.
It is associated with the top line ( gross revenue generation ) and sales team and
bottom-line targets of a pharmaceutical company .
4 ) Sales and Support: It is important for the product manager to act like a
dignified partner for the sales and support and must provide help in developing
the sales training and collateral and choosing the correct sales channel. The
road map of sales includes the determination of prospects, meeting scheduling,
needs recognition, delivery of proposals, and price negotiation.
5) Project/Release Management: The portfolio of the product has been
designed by the product manager. There are several stages in the product life
cycle similar to any other product. Monitoring and controlling the timeline
are the most efficient methods. The risks related to various product phases or
sub-phases can be identified and controlled with the help of this.
6) Process: For idea generation and the selection and to realise the new products
and new features, it is important for the project manager to have a better insight
of phases of the project/ sub-project phase. Customer Development/Lean
Startup, Business Model Generation are also included in this.
The starting point of marketing process of any organisation is the decision about
product, which it wants to cater to the target customers. Apart from fulfilling the
needs and wants of the consumers, a product is also an essential factor which acts
as the source of profit for the organisation . Both for-profit and non -profit
organisations use their respective products differently.
For-profit organisations sell their products to earn profits and to meet the
stakeholders’ requirements, whereas, non -profit organisations use their products
for self -sustenance. In order to earn favourable outcomes in the long run, a
marketing organisation needs a professionally designed product strategy,
developed in accordance with the target market. The various kinds of product
decisions are enumerated below:
Major Product Decisions
Branding Packaging
Labelling
Product Decisions (Chapter 4) 121
The number of products that are used to cure same type of disease or are
promoted to the same medical profession segment is defined as the product line
in pharmaceutical marketing. For example, a large variety of antihypertensive
drugs is carried by Merck Sharp and Dhome ( MSD) with some changes in the
profile, prices, and action. These are promoted under the brand of Renitec,
Hyzaar, and Cozaar and all of these have the identical action that is to lower the
blood pressure by various action modes and have different prices.
A company might be having a high -priced product , on the other hand , may
decide to make the share of low-priced product as well. This is known as
downwards product line stretching. Moreover, if a company finds it significant to
have a long product line then it may even go for both -side stretching. The
product line filling is when the company launches the product in the middle of
the low and high-end products.
in terms of the technology used for the production of the product or the
appearance or style of the product. Many companies have adopted the
modernisation process.
3) Product Line Featuring Decisions: This is all about deciding which
product(s) to feature in the organisation s product line. The manager deciding
'
the product line strategies picks up one or more products from the product
line to represent as a flagship product or a prominent item of the line to
increase the demand. This kind of decision is taken in case of presence of
several non-profitable items in the product line. Thus, line featuring is
helpful in elevating the sales volume of the organisation.
4) Product Line Pruning Decisions: This strategy finds out the products which
are poor performers in terms of profit earning potential in the product line
and removes them from the line to increase the earning potential of the
company. This process decreases the length of the product line. This process
is adapted by the company when it is unable to earn the expected profit levels
or when a specific pattern is not well received by the customers or not being
beneficial for the growth of the organisation. Pruning decisions can be taken
to make physical or human resources available for other capable models
which are being utilised by the unproductive model .
are some organisations that favour focused strategy and specialise in a certain area
and may opt to have a narrow product mix. For example, only immune-logical is
being offered by the Serum Institute of India. It is essential for the companies to keep
in mind that the marketing programme quality tends to identify the degree to which
that potential is achieved while the upper limit for corporate profitability is
determined by the opportunities for the product-mix of the firm.
Many marketing-oriented firms, on the other hand, tend to sell their goods under
brand names, which help them to properly place and advertise their products. It is
worth noting that, over time, drugs like Panadol for Paracetamol , Brufen for
Ibuprofen, Voltaren for Diclofenac Sodium, and so on have become synonymous
with their generic names. There are hundreds of brands available for some of
these generics, but not all of them are easily identified for their generics.
goods and services of one seller or groups of sellers and to differentiate them
from those of competitors”. In India, some of the leading brands of the
therapeutic group called B-complex oral ( solids) are Cobadex, Becosules and
Basiton Forte. A trademark is a name that has been lawfully protected, meaning
that it can only be used by one vendor. In order to gain legal rights, a name must
be registered with the Registrar of Trademarks. In India ' s pharmaceutical
industry, filing a trademark will take anything from two to three years.
I.2.4.2.
• Advantages of Branding
Branding has the following advantages:
1 ) To Consumers
i) Easy to Recognise: The existence of the brand name allows the
consumers to identify the brand in the market clutter. This is because the
brand has a distinctive packaging, colour, design , etc.
ii) Availability of Quality Products: A brand is an assurance of quality.
Even the producers have to make constant efforts to invest in R & D etc.,
so that they offer quality product and fulfil the brand promise.
Consumers therefore get an assurance of quality when they buy a brand.
iii ) Minimum Fluctuations in Price: It has been seen that price fluctuations
do not occur in brands. Consumers therefore get assured prices.
iv) Improved Packing: The packaging of the brands is given lot of
importance. The name of the brand and other details are included in the
brand packaging. The packaging itself has to undergo a constant
innovation in terms of look and feel so that the quality perception of the
brand is maintained.
v ) Mental Satisfaction: The use of brands by consumers also gives lot of
satisfaction to the consumers as it gives them a feeling that they are using
a superior product. For many consumers it can often be the feeling of
pride like owners of Mercedes and Harley Davidson.
2) To Producers
i ) Easy to Advertise: Having a proper brand helps the organisation to
develop advertising strategies as the brands vision, target markets and
value propositions are clearly defined. The name of the brand can be
used by the organisation in its advertising campaigns.
ii) Easy to Identify the Products: The brand name helps consumers to
identify the products. This helps in advertising the products easily.
iii ) Creation of Separate Market: The brand helps the company to develop
a value proposition for a particular market . This also helps it to develop a
separate market for its products.
iv ) To Get More Price: Branding attracts and retains customers. They
become loyal to the brand and are ready to pay any price for the brand.
Product Decisions ( Chapter 4) 129
Normally, primary packaging uses pet bottles and Blister strips because these
are formed of non -reactive materials like aluminium and PVC. Similarly, in
place of glass, high-quality plastic is utilised for liquid doses in order to
avoid spilling or damage during the transportation from pharmaceutical
factories to hospitals and medical clinics. Following are the most common
plastic types used for packaging pills and tablets:
i ) Polyethene terephthalate ( PET ).
ii) Polyvinyl Chloride ( PVC ).
iii ) Polycarbonate
iv) Polyethene ( PE)
v) Nylon ( polyamide )
2 ) Secondary Packaging: The pharmaceutical product is ready for secondary
packaging once the airtight primary packaging is done. Generally, it is
nothing but the other packaging layer which includes cartons or boxes, i.e.,
the printed material.
Active and inactive ingredients, manufacturer’s name and address, type of
medicine, and warning precautions are commonly mentioned on these boxes
in order to help the people to differentiate between the two different boxes
having the different pharmaceutical product. The use of secondary packaging
is smart because it gives the product a manufacturer’s brand appearance
while still making it seem less impervious.
3) Tertiary Packaging: Tertiary packaging is the last one that is basically used
for the purpose of shipping or transportation. Typically this type of
packaging is not observed by the customers as before showcasing the
products for the sales in the clinic, retailers remove this type of packaging
material.
However, the main objective of the tertiary packaging is to ensure the safety
of the central product by facilitating the protection of the primary and
secondary packaging material from any type of external pressure while it is
in transport. Cardboards, plane boxes, and shrink wraps are commonly used
as tertiary packaging.
4.2.5.2. Types of Packaging
Following are the common types of packaging used in pharmaceutical industries:
1 ) Ampoules Packaging: In order to package the smaller quantities of liquid
drugs, ampoule packs are used. These are smaller in size in comparison to
the vials packaging and commonly used to contain the single -dose medicine
and glass or plastic material is commonly used for it.
2) Vials Packaging: Glass and plastic are used in the case of vial containers but
in comparison to ampoule containers, these are larger in size. These
containers have larger capacity and are used to store powder, liquid or solid
drugs.
3) Blister Packs: A thermoformed plastic cavity is built, the drug is held in the
cavity in the shape of a tablet or pill, and the cavity is sealed on the open side
with plastic or aluminium foil . The basis of the form and chemical
Product Decisions ( Chapter 4 ) 131
composition of the drug will determine the use of the packaging. Blister,
Strip, and Alu - Alu are widely used for the packaging of capsules and tablets.
Inert pharmaceutical packaging materials such as aluminium and PVC are
used in these packaging.
i ) The packaging of solid drugs such as tablets and capsules and lozenges,
blister packs are widely used . Thermoformed plastics are commonly used
for its production and it is produced with aluminium foil or plastic lid
that is easily tom with the hands. A basic coat of aluminium or robust
paper or plastic alongwith a transparent plastic film is mainly utilised for
the state-of -the-art blister pack that can be used to squeeze the different
tablets one by one.
ii ) This is quite cost-effective for production and has less wastage in
comparison to the other packaging due to fewer material requirements.
iii ) Easy removal of tablets and to dose hence facilitating greater satisfaction
to the patients.
iv ) Easy product recognition due to transparent files and also improved the
advertising effect at the point of sale.
v ) Due to design flexibility and high productivity delivered by this process
for the packaging of the oral solid, there has been worldwide acceptance
of the blister packs in the pharmaceutical industry in the past 40 years.
vi ) Perfect sealing is provided by the blister packs alongwith the greater
stability and reliability for the pills. It is gaining more popularity as it
also enhances the aseptic solution.
vii ) The different types of medication mistakes can be prevented using
dosing accuracy. Due to their smart features, the popularity of blister
packaging is improving as it will facilitate the taking of the pills on time.
Nowadays, a sensor is also used with the blister packaging that will send
a signal to the smartphones and thus the medication mistakes can be
reduced.
4) Bottles: Two types of glass and plastic bottles are used in pharmaceutical
packaging. Most commonly available colours are orange and light brown as
these are colours that protect drugs from UV lights.
4 ) Directions: It gives the instruction to the consumer about the usage of the
product.
5) Other Information: This contains some other important information . For
example , tamper protection technique. This informs the consumer to know
the various steps taken by the manufacturer for protecting the container.
Another example is instructions on how to store the product .
6) Inactive Ingredients: These are ingredients that are not medicinal in nature.
FDA rules specify the packaging material that can be used for particular drugs.
This is very important to safeguard the product from contamination.
It is necessary for both packaging and labelling to have 100% adherence to FDA
rules and requirements. In other words, for the continuous growth of the
pharmaceutical industry, it is important that every step should be carefully
monitored by the regulatory bodies.
The label should contain all possible information like the ingredients - both
active and inactive, the name of the product, the facts table, any side-effects like
allergic reactions, etc.
136 Pharma Marketing Management
Also, it is required that all the information should be as per the FDA format. The
font style and size should not impact the readability of the content. There should
be no misleading information. The material used for labelling can be flexible and
can range from normal white paper to holographic films.
Labelling can also help the pharmacies to avoid errors regarding drug storage.
For example, using an easily identifiable label for providing information to the
pharmacists regarding the storage temperature of a drug can be helpful for the
pharmacist.
4.3.1. Introduction
All the products have a particular duration of life, similar to human beings. As
human has different stages of life ( like birth, growth, aging, and death ), product
also passes through several definite stages, which can be easily identified by
marketers. Right from the time of concept generation, during product
development , and upto the time of product launch, the product is said to be in its
pre-initial stage.
The life of the product starts with its introduction into the market. It then
experiences a rapid expansion in its market. This stage is followed by steady
growth of the product resulting in its maturity.
Subsequently, there comes a stage, when the market for the product decays and
finally its life ends. Product life cycle can be defined as “the change in sales
volume of a specific product offered by an organisation, over the expected life of
the product . ”
According to Phillip Kotler, “The product life-cycle is an attempt to recognise
distinct stage in the sales history of the product”.
According to Arch Patton, “The life-cycle of a product has many points of
similarity with the human life-cycle; the product is born, grows lustily, attains
dynamic maturity then enters its declining year”.
According to William J. Stanton, “From its birth to death, a product exists in
different stages and in different competitive environments. Its adjustment to these
environments determines to great degree just successful its life will be”.
The concept of product life cycle ( PLC ) is used by marketers to design a series of
strategies for dealing with each and every stage, the product passes through. For
a product , market conditions change with the change of its position in the PLC,
therefore, it must be managed through effective strategies.
Product Decisions ( Chapter 4 ) 137
key feature of this growth stage. As the organisation attains economy of scale
in the production, it is able to generate profit from the sales of the product.
This profit margin keeps on increasing as the organisation maintains the
economy of scale. This growth enables the organisations to invest more in
promotional strategies to get the best from the growth stage.
Total market
profit
+ 0
Time
The marketing strategies at different points of the FLC can be framed after
considering the various competitive actions, strategies of the company, product
position, the sales and distribution expenses of the company and consumer
loyalty.
Therefore, drug product life cycle is an important activity for the pharmaceutical
companies. It is a particularly important function for domestic drug companies.
There are following reasons which explain the importance of drug life cycle:
1) High market competition in the pharmaceutical industry.
2 ) The low level of purchasing capacity of the people who buy pharmaceutical
products.
140 Pharma Marketing Management
As per BCG matrix, the business units can be classified as high or low on the
basis of Relative market share and the Market growth rate. These are described
below:
1) Relative Market Share: According to this model , the more is the relative
market share of a firm, more is the return. It says that the firm that produces
more, enjoys higher economies of scale due to which the experience curve is
higher for them , hence these firms exploit the benefits of higher market
share. However, sometimes, higher profit is also achieved by those firms that
have low production market share.
2 ) Market Growth Rate: If market growth rate is high, then there are
opportunities for higher returns. However, it also takes more capital to be
invested for future growth. Thus, it can be said that those business firms that
operate in industries that have a higher growth rate, invest their capital when
there are opportunities to grow further.
Market
Invest
Growth
Rate
Liquidate
Low
High Low
1 ) Stars: In this block those businesses are placed which enjoy high growth rate
as well as higher market share. These businesses are most likely to be in the
growth stage of the product life cycle ( PLC). These firms pursue an
aggressive strategy to expand the market and gain maximum penetration in
consumer segments. For example. In India sectors like telecommunications,
fast foods, retail, petrochemicals, etc., are some of the businesses which are
having a very high growth .
2) Cash Cows: Cash cows are those business units which generate a lot of cash,
but the growth rate of these business units is less. These businesses
correspond to the maturation stage of the product life cycle, which enjoy the
benefits of its high experience curve. The capital needed to reinvest in the
business is quite less than the profit returns. To sustain in this position, the
firm needs to implement stability strategies. In this stage, the firms focus on
beneficial long-term opportunities and limited expansion.
Since, these are pretty mature firms, hence they gradually lose their market
share as well as their growth rate decline. Due to this, the profitability also
decreases. At this point , retrenchment strategies are appropriate for these
firms. The profit generated from cash cows can be reinvested into ‘star’ firms
and ‘question mark’ firms, both of which require high resource investment .
Some examples of cash cows in India are Scooters for Bajaj Auto, toothpaste
for Colgate, etc.
3) Question Marks ( Problem Child or Wild Cat ): These are the business
units which have a low relative market share even when the industry growth
is high. These firms require huge amount of capital to sustain that market
share. These are generally those firms that introduce new products or
services in the market with high growth opportunities. According to the
concept of experience curve, the firm that gains early profits can achieve the
cost advantages as well as market leadership. This will create entry barriers
for other firms in the industry. In this phase, the firms need to decide their
future plans. If they feel that they can gain market share, they need to adopt
expansion strategies. Retrenchment strategies would also be appropriate in
this phase. If sufficient investment is made in the growth of these firms, then
these may convert into ‘star ’ firms, or else can also become ‘dog’ firms if
sufficient attention is not provided. In India industries like e -commerce can
be called as question marks. These are growing at a very fast rate, but for the
majority of players the relative market share is very less. Another example is
holiday resorts.
4) Dogs: These are the firms which have slow growth and have relatively less
market share. These neither earn profits, nor require investments. If
correlating with the stages of PLC, these firms remain at the stage of late
maturity or decline.
Instead of considering market growth and relative market share as the basis for
portfolio analysis, this model considers industry attractiveness and business
strength as the basis for classifying the firms. These two factors are further split
into three categories, making it a nine cell grid . These cells classify business
firms as winners, losers, question marks, average businesses, and profit
producers. This model is shown in figure 4.4. The strategies for all the kinds of
firms are different, such as, the organisations should invest its resources in
winners and question marks, since the industry attractiveness and business
strength both are in favour.
Organisations should also maintain the market position of average businesses and
profit businesses though their industry attractiveness and business strengths are
average. Moreover, the business units that are at loss should be sold-out as the
industry attractiveness and business strength both are not favourable.
Green Invest/Expand
Yellow
Select/Earn
2 ) The GE model analyses the variables at three levels, i.e., high, medium, and
low , whereas the BCG model considers only two levels, i.e.. high and low.
-
Zones of GE 9 Cell Model
The nine cells of the GE matrix are divided into three zones and represented by
the colours green , yellow and red, which are similar to the traffic signals. Hence,
these colours are interpreted in the similar ways, i .e ., green represents ‘go’,
yellow represents ‘waif , and red represents ‘stop’ Due to this similarity, GE
model is also called as the “spot-light strategy matrix”. Each of these zones
suggests a particular strategy to be followed by the organisations, which are as
follows:
1 ) Invest /Expand: This is the first zone, which is represented by green colour,
and hence called as “green zone”. In this zone, firms have both the industry
attractiveness and business strength in different degrees. This is the
favourable situation for business units, but the business units do not remain
in this situation for a long time as other firms get attracted to the industry.
But this can be maintained by creating some entry barriers.
The important strategy for the firms in this zone is to invest and expand their
businesses. It is clear from the figure that in the upper left comer, both the
industry attractiveness and business strengths are high, which is an ideal
position. However, the other two cells represent realistic business situations.
The middle cell of the top row indicates high industry attractiveness and
average business strength. The firms which belong to this cell would grow in
the long-term. Though , if the firm does not improve its strength, then the
situation may prove to be unfavourable in future.
2) Select /Eam: This situation represents the middle or mixed situation for the
company. Not much growth opportunity exists, but the organisation has the
opportunity to do selective earning. This happens because either one of two
parameters of business strength and industry attractiveness are at high or
middle level. The two situations of average strength and medium
attractiveness and strong strength and low attractiveness indicate a strategy
of hold i.e., to earn the profits at existing capacity with no additional
investment. In the situation of high industry attractiveness the company has a
flexible option . High industry attractiveness, low strength indicates an
opportunity for the organisation. However, if the organisation is not able to
build its business strength, then it makes sense to leave the business as the
business is likely to turn into a ‘question mark’. Similarly, in case of strong
strength and low industry attractiveness, the company can opt for backward
or forward integration. A company can also diversify into other industries
where it is able to utilise its business strengths.
3) Harvest/Divest: This is the third zone also called “red zone”. The cells,
which come under the zone have average strength and low attractiveness, or
average attractiveness and weak business strength . For these firms,
harvesting is the appropriate business strategy. In harvesting, the company
quits the business but withdraws gradually. In this situation, the initial
emphasis is on reducing the costs by stopping those activities that have long-
term business influence, such as research and development , advertising, etc.
Product Decisions ( Chapter 4 ) 145
The entire thrust of the organisation in these cases is to earn short term
profits as the business does not have a long-term horizon. One thing that
should be kept in mind that the business units with low strength and low
industry attractiveness should immediately be stopped and the company
should divest its capital.
The corporate parenting methodology therefore seeks to address one of the major
weaknesses of the corporate portfolio technique.
The corporate portfolio evaluates the business units on the basis of industry
attractiveness and looks at individual businesses in terms of their financial
contribution. While corporate parenting technique looks at the organisation as a
group of different businesses and tries to identify the synergies that are created
through the interactions between the parent firm and its business units.
In order to identify the appropriate strategy for every business unit , following
steps should be completed:
1 ) Estimate each business on the basis of its critical success factors.
2) Identify the areas of where there is a scope for improvement in each business
unit.
3) Scrutinise the strategic fit between the parent firm and its business units.
These three steps allow the development of a matrix called the ‘ parenting-fit
matrix ’ as shown in figure 4.5. This matrix has two variables:
1 ) Positive Contributions: The positive contributions arise when there is a fit
between parenting opportunities and parenting characteristics.
2 ) Negative Effects: The negative effects arise when there is a misfit between
the critical success factors of the business units and the parenting
characteristics.
146 Pharma Marketing Management
Ballast
=
'
Alien territory
High
Low
Fit Between Parenting Opportunities and Parenting
Characteristics
-
Figure 4.5: Parenting Fit Matrix
This analysis gives rise to five strategic positions, each of which has their own
ramifications for the corporate strategy. Unlike the portfolio technique which
uses factors like the growth potential of the individual businesses and the
competitive position, the corporate parenting technique focuses on the strategic
fit achieved between the corporate parent and the SBUs.
The five positions are as follows:
1 ) Heartland Businesses: Heartland Businesses are those in which the parent
has a very good understanding about the CSFs of the business unit and it can
thus utilise its expertise to make improvements in a particular SBU.
Expansion strategies are suitable for the heartland business units.
2) Edge-of -Heartland Businesses: In edge-of -heartland businesses there is a
partial fit between the parenting characteristics and the businesses. There are
some characteristics which fit and some which do not. The level of
engagement between the parent and the SBU increases with the
understanding between business units and the parent company. For these
business units, expansion strategies will be appropriate if the parent firm can
contribute its resources for the development of these SBUs.
3) Ballast Businesses: Ballast businesses are those business units that have a
mutual fit with the parent firm, but have rare chances of improvement , in
which the parent firm can invest. In a way these are similar to cash cows in
the BCG matrix , which are the mature businesses. Which can still survive,
but have little potential to achieve success and can become a constraint for
the parent corporation since it can do anything to improve them. It is better to
shut down these businesses at the time when it is realised that the cost of
production is exceeding the realised profits.
4) Alien Territory Businesses: Alien territory businesses are those in which
there is very little scope of improvement by the parent firm because of the
existing misfit between the parents’ characteristic and the success factors of
business units. Many a times this situation occurs because of unwise
diversification strategy implemented in the past. Retrenchment is the
appropriate strategy for these businesses.
Product Decisions ( Chapter 4 ) 147
Thus, it can be said that the corporate parenting technique works with the implicit
assumption that the parent has an important role in value addition to the business units.
-
2 ) Complex and Time Consuming: Acquiring new businesses and removing
the older ones can be both a difficult and time-consuming activity. The costs
involved in these can be substantial and should be taken into account before
acting on the suggestions based on portfolio analysis.
6) Forecasting: Portfolio analysis depends upon the past financial data on the
basis of which future of the business units is forecasted. Heavy reliance on
the financial data may lead to erroneous results.
In the case of pharmaceutical products, perceptions also play a very big part.
Tetracycline is one of the examples in this regard. It is advised to not to give this
medicine to the children of age below 10 years. This is because of its side effect,
i.e., discolouration of teeth. This was published in many medical journals and the
regulatory bodies also highlighted this fact relentlessly.
There is also the example of a famous company which wanted to get a good
market share of the market for hypertension products with its product - a new
drug with an ace- inhibitor. Instead of the smaller segment of those hypertension
products with renal complications, the company chose to target the wider
segment of mild to medium hypertension patients.
The claimed advantage of this product was that it needed to be taken only once a
day which was offered by various competitors. And thus the ultimate result for
this was that the physician as well as MRs forgets the name of the medicine and
failed to explain its actions. There is no wonder that they are unable to meet the
targets of sales. This could one of the disadvantages of avoiding positioning.
Positioning is not just the choice of a few words. It is based on that aspect of a
product that differentiates it from its competitors. Also, this benefit needs to be
something that can be sustained by the organisation and something that can be
measured.
In the case of pharmaceutical products, marketers often use the medical world to
identify the main differentiating benefit of a product. Very often this is also based
on extensive marketing research. It is best that positioning is done by the
marketers though they can refer to the opinions of the doctors.
150 Pharma Marketing Management
drug is originated from. To this many doctors gave the suggestion - MIT.
This made the company realise that the doctors perceived the product to be
technically better than other products. This helped the company to develop a
unique positioning option for this product.
8 ) Conduct Quantitative Market Research to Refine Insights about
Positioning Options: Quantitative research makes use of Statistical
techniques and mathematical models. This helps in creating a different
perception of positioning and helps in quantifying responses and representing
them on a plane. This research is, generally, conducted online.
-
9) Craft the Final Statement and Ensure Buy in from all Internal
Stakeholders: Once the various outputs from the research have been
received, it is easy for the marketer to generate the various positioning
options. One must try to make the final selection as simple as possible. Many
people may want to add more data on clinical trials and other procedures to
make the content more elaborate. However, this can make the
communication process more complicated.
Simplicity is the essence of positioning communication. The details can be
added at a later date. Once the final positioning theme has been decided
upon , the finer details can be added. A nice format which can be used for
creating positioning statements is:
“Brand X” is the ( add descriptor here, e g., “only ” or “first” ) treatment for
( indication goes here ) that provides ( benefit goes here ) because of ( state the
reasons why ).
10) Write the Creative Brief: The creative team can then get into the act of
creating a brief for the concept once the marketer has cleared the positioning
theme. In terms of management, the creative team implements what the
marketer as created ( strategy ).
brands having specific positions. A new product can take hold of the space
by replacing the existing brands from their position. A brand position in the
customer’s mind can be achieved through several ways. Placing a brand
against another existing brand or against certain expectations raised by the
consumers may seek a position in customer’s mind .
5 ) Providing Competitive Advantage: Positioning of a product is the finest
method for providing a competitive advantage to a product or service. This
helps the marketer to determine the competitor’s potential moves and
responses so that appropriate steps can be taken, such as:
i ) Providing the target markets the motive to buy the services and then plan
the entire strategy.
ii) Providing the guidelines to device the marketing mix , such that every
element is aligned with the positioning.
6 ) Better Serving and Covering the Market: Here, the marketer identifies that
every consumer or group of customers has different requirements and
belongs to different market categories. In this approach, the main aim of
marketer is to recognise the potential market segments, monitor the market in
those segments and offer the customers’ with their desired needs and wants .
all MNCs of any stature already have their local offices in almost all developing
countries and instead of joining hands with local partners they choose to sell their
goods from them. There are some examples of an agreement between a foreign
company and a local company exist, but they make up a very limited portion of
the overall production of the business. This leads the businesses with no option
other than developing a new product. However, given the size and resources
available to local industry, there is no possibility of development of new product
at present.
3) Sourcing of Raw Material: The need to imitate the standard parameters all
the time is one of the specific features of the pharmaceutical product. Every
pharmaceutical possesses its unique feature such as shelf life, stability in
form, dissolution in time, physical appearance, etc.
A company should perform pilot batch research within a specific time period,
generally 3 to 6 months to ensure that the product quality is upto the mark if it
wishes to switch sources in order to maintain all these. A company is required
to be more careful while purchasing the raw materials from the company will
ensure quality consistency and fulfil the demands regularly because this is an
important matter. Most of the companies perform an elaborate vendor
evaluation programme apart from conducting a pilot batch testing.
Product Decisions ( Chapter 4) 157
number of patients in the clinical trial is one of the major reasons that lead to
product failure. Moreover, one -third of the publicly funded trials fail to attain
the initial enrolment goals and required a time extension.
5 ) Additional Costs Associated with Recruitment: The additional cost
associated with the enrolment of patient, even in the same region of
investigation, is highly fluctuated and difficult to estimate apart for
remuneration . This could be one of the reasons of the market failure of the
pharmaceutical product.
6) Respecting the Patient's Concerns: Instead of getting active study drug,
when patients are more concerned about being assigned to a control group,
the retention and enrolment of patients get negatively affected. This negative
impact may result from the poor knowledge of the patients regarding the
samples or treatment being offered in a control group. The concern may
revolve around not having effective and efficient treatment at all for the
patients with poor diagnosis.
7 ) Poor Recruitment, Dropouts, and Underpowered Trials: A recurring
problem trend in the research is that fewer qualifying patients than predicted
are identified by research centres. Historically, research centres with a track
record of good results are most likely to achieve enrolment expectations.
Results from research in which multiple study sites struggled to reach
enrolment or failed to enrol any topic at all are considerable research
reporting results.
The trials may become underpowered ; either they are based on actual or
projected enrolment, when they go through too many dropouts. There are
several issues that may arise from underpowered clinical trials. By extending
the number of sites raising funds allocated to the study in an attempt to reach
minimum enrolment , the sponsor may respond to low enrolment .
As a result, this often involves the termination of some proposed experiments
in order to reallocate the funds available. This, in turn, some endpoints have
inadequate sample size to estimate the crucial outcomes.
8 ) Patient’s Financial Burden: Given the immense issue of clinical trials that
struggle to complete because of the inadequate recruiting, registration , and
retention, it is of primary importance to consider the strain each patient
undergoes in the design and execution of clinical trials, with the assumption
that retention is adversely associated with patient burden.
While focusing on the other aspects such as goals, endpoints and other
significant factors related to any specific trial , the financial burden of the
patients can be easily overlooked. While participating in the clinical trials,
the patients may become out-of -pocket. This includes commuting expenses
and employment cuts, but also treatment costs for further research. Beyond
what is called routine, insurance cannot provide medical treatment. Even
where it is, deductibles are always very large and it might not be practical for
a particular patient to continue to join .
160 Pharma Marketing Management
4.7. SUMMARY
1 ) A product is the item that is developed and refined for sale in the market. It
aims to meet the customers’ needs and wants.
2 ) A product can be perceived by sense of touch. It also has features like to be
..
seen, felt, etc. e g , car, computers, t-shirt, etc.
3) Products in pharmaceutical can be divided into two categories. The
pharmaceutical products are categorised on two bases, i.e., on the basis of
products that are sold to customers directly and on the basis of products that
are sold to medical professionals.
4) In pharmaceutical industry, product management plays crucial role as it
relates to both company 's product marketing strategy and its implementation.
5 ) It is important for a manager to develop the relationship between the product
roadmap and strategy and supervise it constantly to make frequent changes as
per required.
6) The number of products that are used to cure same type of disease or are
promoted to the same medical profession segment is defined as the product
line in pharmaceutical marketing.
7) The term branding’ is a very broad concept It comprises of the entire effort
in creating a unique space in the mind of the consumers for the product of the
company, through consistent advertising and promotion campaigns.
8) Packaging is the material used to cover and safeguard the product. Whereas,
the method of enfolding or covering products into packages is called as
packing.
9 ) Pharmaceutical labelling is a process of adding labels in the pharmaceutical
products so that the correct information is given to the consumer. The FDA
( Food and Drug Administration ) plays a big role in regulating the labelling
standards for pharmaceutical, medical , dietary and nutrition-based products.
10 ) The concept of product life cycle ( PLC) is used by marketers to design a
series of strategies for dealing with each and every stage, the product passes
through. For a product, market conditions change with the change of its
position in the PLC, therefore, it must be managed through effective
strategies.
11 ) Portfolio analysis is a technique or tool which allows the company to analyse
and select the products and businesses and make the necessary strategic
decisions regarding them.
12 ) Unlike positioning of consumer products, it is more challenging to position
pharmaceutical products. The basic difference is that pharmaceutical
products deal with the lives and safety of human beings.
4.8 . EXERCISE
4.8. 1 . Very Short Answer Type Questions
1) Define product.
2) What do you mean by product decisions?
3) What is product mix?
4) Define product life cycle.
5) What do you mean by product positioning?
6) What is product branding?
7) Give any two benefits of pharmaceutical packaging .
8) What is pharmaceutical labelling ?
9) What is labelling decision?
CHAPTER Promotion
5
5.1. PROMOTION
5.1. 1 . Introduction
The process, through which consumers ( or potential consumers) are attracted
towards the products and services of different producers or manufacturers, is
called Promotion or Marketing Communication . This process informs and
reminds the potential consumers about the products and services of the
manufacturers. It is also used to request and persuade the consumers to buy these
products and services. However, this promotion may either be performed in the
presence of the product , or even before its market introduction.
Pharmaceutical companies are actively involved in the promotion of drugs or
medicines in all over the world. The objective behind this is to modify the
prescribing patterns of the doctors and to encourage patient for self- medication.
Thus, all the informative and persuasive activities of the pharmaceutical
industries are referred to as drug promotion. It aims to convince the patients,
doctors and other health professionals to purchase the medicines. Advertisement
of drug to doctors, medical representative’s activities, direct -to-consumer
advertisement, telemarketing, scientific meetings, symposium, provisions of
samples and gifts, etc., are the activities which are involved in the promotion of
drugs. Promotional labelling and advertising are the two common ways in
which drugs are promoted.
According to World Health Organisation ( WHO ), pharmaceutical promotion
means “all informational and persuasive activities by manufacturers and
distributors, the effect of which is to induce the prescription, supply, purchase
and /or use of medicinal drugs”
Marketing Communication
popular methods from strategic point of view. The predefined goals of sales
are accountable here. The promotional budget is distributed according to the
targets and is prepared in accordance with product sale plan.
-
6) Push Led Strategy of Product Promotion: Every local company use this
strategy because their product promotion is solely based on the trade margins
provided to the retailers. However, generic products are being pushed into
the market on a wide scale. This strategy has been extensively used in the
marketing of generic drugs.
On the other hand, many health professionals believed that if new medicines are
promoted only in medical journals then doctors will not know about medicines
for many years. However, those patients who are in need of new drugs will be
deprived of the recent developments in healthcare.
Personal selling builds the relationship between sellers and the customers, which
in turn makes it a unique form of selling. It is an only method of direct sales
promotion. Although, it is a flexible and efficient method of sales promotion , it
also incurs a huge cost.
Personal selling is one of the most reliable methods used in the promotion of
pharmaceutical products. In highly competitive market personal selling plays a
very important role. Medical Representatives ( MRs) are the focal resource of
personal selling. Pharmaceutical companies sell the same or identical products so
personal selling is used as a method which makes the difference between the
products. Brochures, information of drug, drug samples, personalised gifts,
giveaways, etc., are the tools used in the process of personal selling.
and their needs and wants. In this step, the sales personnel also try to gain the
knowledge about market, product , its features, products of competitors, and
methods of selling. The sales personnel should know the benefits and
disadvantages of their own product as well as the products of their
competitors. This step is carried out to ensure that sales personnel are having
the knowledge about important aspects related to selling. This knowledge
helps the sales personnel in persuading the customers, by providing them
useful information and handling their queries.
2) Prospecting: The next step in the personal selling is prospecting. It is concerned
with the identification of potential customers. The next step in the personal
selling is prospecting. It is concerned with the identification of potential
customers and vendors who are willing to buy a product. This step involves the
formation of portfolio sales. Portfolio sale is a list of pharmaceuticals
pharmacies, wholesalers, etc. They can also be the potential buyers of the drugs.
This step also identifies the customers who are willing to buy a product .
3) Conquest of Arrangement the Client : This step is based on the first
impression of the customer towards seller’s attitude, his behaviour and
appearance. Presentation is one of the most important stages of personal
selling. It aims to create a personal contact between the buyer and seller which
provided some relevant information to the buyer about the new medicine. This
helps in convincing the buyer so that they can purchase that medicine.
4) Presentation: Attention, Interest , Desire and Action ( AIDA ) is the function
of any presentation. Mechanical approach and targeted approach are the two
methods of presentation. Targeted approach is used by the sales
representatives and other health professionals to identify the specific needs of
the potential buyer. On the other hand, mechanical approach is used by the
beginners in which memorised information regarding drugs are repeated.
5) Overcoming Objections: Overcoming personal sales objections is the next
step of personal selling. Usually, indication of consumer’s interest is
considered as objection. It provides an opportunity to develop new ideas.
Approaches to overcoming objections are as follows:
i ) Asking counter-questions to the sales representatives.
ii ) Providing responses to the objections of the customers.
iii ) Resolving the issues by careful consideration .
6) Completion of the Sale: Whenever a customer takes decision to buy a
product then it is called as stage of completion of sale. After the completion
of the sale, it is important for the seller to contact with the customer and
collect feedback from the customer regarding the product .
2 ) Allows Modifying the Message: The direct communication allows the seller
to modify the message for better understanding by the buyer. It helps the
seller to understand the specific problems and needs of customers. Personal
selling also helps the sales personnel to decide the time to proceed for the
next stage of selling.
3) Less Distraction: Due to direct communication, the chances of distraction
are reduced as the buyer pays more attention to information provided by the
seller. It is less distracting even when there are more than one salespeople
involved in the presentation or more than one buyer is involved. The process
of personal selling allows lesser distraction than mass-media.
4) Provides Information: For an organisation, where the marketing and sales
departments are well -structured, the sales force can play an active part in
gathering updated information about the competitors and their strategies such
as their products, pricing, promotion, etc., that will help the marketing
department in formulating competitive strategies. They also act as a medium
to know the needs and wants of the customers to address them more
efficiently.
5.4. ADVERTISING
5.4.1. Introduction
A promotional tool, which stimulates the prospective customers to take or
continue a particular decision, with the help of a commercial offering, is called
Advertising The title ‘advertising’ is taken from a Latin word ‘advertere’
meaning ‘to turn toward’. The advertisements are capable of diverting the
attention of the viewers, listeners, readers or the onlookers towards a particular
brand , product , service or an idea. Thus, any piece of information that diverts the
attention of the target customers towards a brand/product/service/idea, can be
called ‘advertising’.
According to American Marketing Association, ‘Advertising is any paid form
of non-personal presentation of ideas, goods or services by an identified
sponsor”.
According to Wheeler, “Advertising is any form of paid non -personal
presentation of ideas, goods or services for the purpose of inducing people to buy”.
In the era of advertising debate, advertising of the pharma products is of specific
interest. The nature of pharmaceutical markets is not like the other markets. This
is because the decision-makers in pharmaceutical markets are not necessarily the
customers. Professionals in healthcare industry ( physicians ) suggest a medicine
and the patients follow the suggestion ( by buying the medicine ) as well as the
suggested course of medication.
Depending upon the ad target , the advertisements in the pharmaceutical market
are either oriented towards the customer or the physician. The ones towards the
physician are considered as the heart of pharmaceutical advertising.
Promotion ( Chapter 5 ) 175
In 1980s and 1990s, with the expiry of patent drugs some generic medicines
became available from competing manufacturers. Earlier, the prices of generic
medicines were lower than branded medicines thus pharmacists passed laws that
substitute branded products and generic products.
colours must not be used while attracting the target audience. Simple colour
scheme is advised for a serious advertisement. In the last, a colour scheme
completely depends upon the type of advertisement and the firm.
6) Be Informative: A message must be delivered through an ad . An
advertisement is a pictorial representation of a message.
7) Be Memorable: Two important elements of an effective advertising message
are memorability and uniqueness. Therefore, a good advertisement should be
unique and entirely different so that it becomes memorable.
8) Show Not Tell: An advertisement can be called effective if it demonstrates
but not tells. Using pictures/skit is advised to demonstrate a concept rather
than using simple text.
9) Use Humour (a Metaphor ) : Adding humour to the advertising message is
also a way of attracting audience. Humour can be added by using metaphors
to the ad message. Humour is not applicable all the time, sometimes, it does
not even match with the company or brand. Therefore, they should be used
judiciously.
of the customers. There are following ways of using direct mail marketing to
the patients:
-
i ) Create Walk In Traffic: When a physician wishes to promote walk-in
traffic then he/she should approach people to his/her office. They should
welcome patients into their clinic, in educational session on health
problems, or in free consultation.
ii ) Insider Tips: A physicians should position themselves as opinion
leaders to remain at the forefront of their heads, and provide health -
related advices and updates to existing and potential patients.
iii ) Reviews and Testimonials: Word-of - mouth is one of the effective tools
of marketing. A physician may combine the direct mail efforts with the
digital efforts. Almost 84 per cent patients use online reviews for
selecting a physician. Thus, it is important for physician to encourage
patient to leave testimonials on digital platforms.
iv) Use Demographics to Generate Leads: Whenever a physician customises
direct mail on the basis of patient’s demographics then it will create greater
probability of conversions. For example, doctors may send direct mail to
those women who are between the age of 40 to 45 and who have not yet
begun regular mammograms. The doctors can remind them about the
importance of early cancer detection by sending a direct mail.
v ) Trigger Data Targets Behaviours that Lead to Patients: The size of
mail should be smaller but more focused . When physicians may find
behaviours that suggest a particular timing or medical needs then in that
case direct mail should be more targeted. Trigger programmes are used
to focus on the internal and external reaction of the patients.
vi ) Thank You Cards and Announcements: A thank you card should never
be underestimated especially when it includes the signature of a doctor or
office staff. It will create a long lasting impression in the mind of the
patients. On the other hand , official announcement such as, addition of a
new doctor, new location of the office, is another opportunity of direct
mail which puts an impression on the patient ’s mind .
These journals are served as the basic methods for primary care physicians or
doctors through which they get information and practice.
5.4.8. Exhibition
Many companies exhibit their products in international trade fairs and
exhibitions. This serves as a platform for direct negotiations between the sellers
and the buyers. Buyers from various countries visit major international trade
Promotion ( Chapter 5 ) 183
fairs. The sellers also have the advantage of showing their products to the sellers,
which often enables the sellers to make on -the-spot buying decisions. Even if the
deal is not closed, a lot of international leads are generated , which can be further
contacted either personally or through mail.
Though people do use these two terms namely , ‘exhibition’ and ‘trade fair’
inter-changeably, there is difference between the two. ‘ Exhibition’ is in effect, a
congregation of show-rooms of different manufacturers under a single roof. It is
a huge gathering of manufacturers for the purpose of displaying, demonstrating
and booking orders for their latest products. Exhibitions are non-conventional in
the sense that they do not provide entertainment. If at all , it would be the part and
parcel of their pavilion activities. Exhibitions are normally organised by trade
associations and chambers of commerce.
Trade shows are organised events that bring both industry buyers and sellers
together in one central location . Spending on trade shows is one of the highest of
all sales promotions. Marketers are attracted to trade shows since these offer the
opportunity to reach a large number of potential buyers in one convenient setting.
At these events most sellers attempt to capture the attention of buyers by setting
up a display area to present their product offerings and meet with potential
customers. These displays can range from a single table covering a small area to
erecting specially built display booths that dominate the trade show floor.
Trade shows and exhibitions are other promotion vehicles that are
increasingly important in the promotional mix , especially for industrial
products and in the international marketplace. At two recent international
packaging trade shows, the percentages of international companies were 33
per cent and 40 per cent. International trade shows offer businesses the
opportunity to identify and recruit importers/exporters and agents and to
make contact with trade bureaus of foreign governments. They also offer an
inexpensive and efficient way to meet - potential customers from other
countries. Trade shows differ from country to country .
The trade fairs, or exhibition, industry is an exciting one because of the
complexity of trade show plans, the excitement of travelling to exotic locales,
and the pressure of managing the details necessary to pull a show together.
An interesting trend is that regional does not mean domestic; some regional
shows are international , drawing visitors from other country depending on
the show’s location . Choosing a regional , national , or global show depends
on one's market and marketing strategy .
3) Vertical versus Horizontal: A vertical show is one that focuses on one
industry or profession. Horizontal shows or shows that include many
industries and professions. The trend , though, is to vertical shows that
narrowly define their target market. The narrower the audience, the more
efficient trade show dollars can be because, with proper show selection, a
larger percentage of the audience is more likely to be prospects.
Determining the method of distributing the sample is important from the point of
view of costs. This also makes an impact on the consumers to whom the samples
are offered. The best prospects will receive the products through the best or
appropriate methods of sampling distribution.
1 ) Door - to- Door Sampling: This refers to the approach in which the products
are delivered to the residence of the prospect customer directly. Door-to-door
sampling is quite an expensive method as it consists of labour costs however
this can be compensated if the prospect customer resides in a geographically
prominent area or/and if the marketer has sufficient information that can
determine the target market . An affordable way is to deliver the sample,
alongwith newspapers, to the place of the customers.
2 ) Sampling through the Mail : This includes targeting specific market areas
as where the sample has to be delivered . Usually the samples used here are
lightweight , small in size and non-perishable. Here the marketer has control
over the location and timing of sample delivery.
3) In-Store Sampling: This method is extremely popular, particularly when
talking about food products. Temporary demonstrators are hired who meet
the customers and passers-by in small booths and handover small sample
product packets to them. This method of sampling has been quite effective
for food products as the customers instantly get to know the taste of the food
item as well as get all the necessary information from the demonstrator
simultaneously. The demonstrator gives away certain discount offers or
coupons that enhance immediate trial purchase. However, besides being
highly useful, this method is quite expensive and requires a sound planning
and cooperation from the retailers.
4 ) On - Package Sampling: This method of sampling involves attaching the
sample with another product. Considered widely as one of the most cost
effective methods of sampling, this is helpful especially in case of multi -
product brands because they can attach a sample of the new product with the
existing ones.
Promotion (Chapter 5 ) 187
5) Event Sampling: This method has emerged as the fastest growing and
highly popular methods for sample distribution. Sampling programs are used
as a part of integrated marketing programs that feature events, tie-ups with
media , and other activities. Through these events it becomes easy for the
customers to understand the product completely rather than just tasting as
happens in case of food and beverages. These events take place in concerts,
sporting events and other relevant venues.
5.5 . RETAILING
5.5. 1. Introduction
The origin of word ‘retail is related with the French word ‘ retaillier ' which
7
means ‘to break the bulk’ or ‘to cut a piece off . In the process of distribution, the
products move from the manufacturers to the final customers. Several
intermediaries or middlemen are involved in this process and the retailers are the
last ones. Retailers directly offer the firm’s product to the customers, and thus,
link the customers with the manufacturers.
They collect feedback from the customers directly and convey it to the
manufacturers. The comprehensive combination of different activities or steps
which are used to sell a product or a service to the consumer for self or family
consumption is termed as retailing. Individual demands of target customers and
supplies of available producers are effectively matched by the retailers.
Over the past few years, the Indian pharmacy retail industry has undergone
substantial growth due to an epidemiological transition and favourable
demographic trends. The selling of pharmaceutical products which includes
prescription and OTC products is defined as the pharmacy retail. Pharmaceutical
retail stores sell pharmaceutical products and their related services alongwith
various other FMCG products.
The pharmacy retail is an autonomous avenue that sells generic medicines with
or without prescription to the general public that they carried already while they
visit to the retail pharmacy store. These stores can be a part of big corporations or
an autonomous body.
In order to ensure the correct and healthy operation of retail pharmacies,
governments and medical authorities have implemented different legislation.
While the units were originally set up by entrepreneurs and pharmacists, large
companies displayed interest in the segment as they are in the process of
developing a national network. In an effort to catch the consumer ’s attention,
they adopt a corporate way of positioning their brand.
5.6. 1 . Introduction
A group of individuals having a definite impact or likely interest in an
organisation’s capability , to attain its targets, is termed as public. Public
relations ( PR ) comprise of various events or shows, created to foster a better
image of the organisation or of the products offered by the organisation.
190 Pharma Marketing Management
565
I I « Limitations of Public Relations
Few limitations of public relations are as follows:
1 ) May not Appear in Media: The different communication vehicles of public
relations may not be featured in media , particularly those which are to be
scrutinised by media personnel.
2 ) Incapable to Link Messages: The messages given by PR communication
mechanisms are not linked with the organisation even if those being heard,
seen or read by the public.
3) Fail to Achieve the Objectives: These tools can fall short of the
expectations or goals set, for which they were formulated by the
organisation . In such cases, it may remain unknown to the organisation, as
determining the efficacy of public relations is quite a complex process.
4 ) Brief Life: These tools have a brief life, as for having desired impact on the
target audience, frequent changes are made though providing new and better
information.
5) Incapable of Changing Perception: Altering the perception of potential
customers about a particular product or service or any other business dealt by
the organisation is quite complicated. Number of communication tools need
to be used for a considerable amount of time in order to change the
perceptions of consumers.
There are following Indian OTC drugs which promote brand on television :
1 ) Analgesic or Cold Tablet
i ) D’cold ii ) Stopache iii ) Disprin
iv ) Vaporub v ) Triaminic vi ) Crocin
vii ) Vicks
2 ) Antiseptic Cream or Liquids
i ) Boroplus ii ) Borosoft iii ) Dettol
3) Balm or Rubs
i ) Amrutanjan Joint Ache Cream
ii) Emami Mentho Plus
iii ) Himani Fast Relief
iv) Iodex
v) Moov
4 ) Cough Lozenges
i ) Halls
ii ) Strepsils
iii ) Vicks Cough Drops
5) Digestives
i ) Dabur Hingoli
ii) Eno
iii ) Hajmola
iv ) Pudin Hara
5.8. SUMMARY
1) The process, through which consumers ( or potential consumers ) are attracted
towards the products and services of different producers or manufacturers, is
called Promotion.
2 ) Pharmaceutical companies are actively involved in the promotion of drugs or
medicines in all over the world. The objective behind this is to modify the
prescribing patterns of the doctors and to encourage patient for self -
medication.
3) Increase in sales is the final measure of a successful promotional strategy.
4 ) When market intermediaries of the distribution channel are targeted to design
the promotional programme, it is called push strategy.
5) In the pull strategy customers are encouraged to purchase the product from
the retailers through promotional programmes,
6) Promotion Mix or Marketing Communication Mix involves the combined
use of different promotional tools ( like advertising, sales promotion, personal
198 Pharma Marketing Management
5.9. EXERCISE
5.9. 1 . Very Short Answer Type Questions
1 ) What is promotion?
2) Define pharmaceutical promotion.
3 ) What is personal selling?
4 ) List the principles of advertising.
5 ) What do you mean by trade journal ?
Promotion ( Chapter 5 ) 199
CHAPTER Pharmaceutical
6 Marketing Channels
Fulfilling the demands by creating place and time utility is the main concern of
distribution management .
Distribution Management = Physical Distribution + Marketing Channel
Pharmaceutical Procurement
Port Clearing
Receipt and Inspection
Inventory Control
Storage
Requisition of Supplies
Delivery
Dispensing to Patients
Consumption Reporting
buyer and a seller. The buyer can either be an industrial consumer or the end
customer. Other than the buyer and seller in the marketing channel , various
middlemen are also involved in the supply chain. Here, middlemen may be
distributors, wholesalers, retailers or dealers.
Broadly, a distribution channel involves the movement of goods and services
from the manufacturer to the ultimate consumer passing through various
intermediaries. Therefore, the key actors in the distribution channel are
manufacturers, intermediaries and consumers.
Channel of distribution is one of the major concerns of the pharmacists in
pharmaceutical industries. In pharmacy, the term ‘channel ’ is commonly used to
describe the routes which are used to communicate with the patients. In
pharmaceutical distribution channel , information flows in both inward and
outward direction, i.e., both customers and distributor collects the information
about the patient. In pharmaceutical industries, distribution channels are used for
distribution of medicines, payment of medicines and protection of the medicines
from any kind of risk. It also facilitates the appropriate usage of the medicines.
A pharmaceutical company is not only responsible for research , production and
medication of drugs but it is also responsible for distribution of drugs to the
patients and the physicians. Manufacturer of company must ensure that the
quality of the medicines should not be compromised. Indian manufacturers have
no control over the multi -layered distribution system thus cold -chain
management process continues to be complicated and expensive. However,
manufacturers are constantly realising the importance of effective distribution
channel. Thus, overcoming the problems of distribution process will be helpful
for both patient and the healthcare system.
According to American Marketing Association, “A channel of distribution or
marketing channel is a structure of intra-company organisation, units and intra-
company agents and dealers, wholesalers and retailers through which a
commodity product or service is marketed ”.
According to Philip Kotler, “Every producer seeks to link together the set of
marketing intermediaries that best fulfill the firm ’s objectives. This set of
marketing intermediaries is called the marketing channel ( also trade channel or
channel of distribution )”.
-
5 ) Value Added Resellers (VARs ): They are intermediaries who purchase the
basic goods from manufacturers, then add value to it or modify it on the basis
of product attributes, and finally resell the goods to the end consumers. VAR
is a firm where new and attractive features are added to the existing product
transforming it into a unified product or turn -key solution . This is very
common in the electronics industry where a software application might be
combined with the hardware.
I Stockist | | Retailers I
Figure 3
| Hospitals
Manufacturer Pharmacists |
Exclusive
Manufacturer Marketing
Company Retail Stores
Marketing
Manufacturer Franchise
Company
Market Dimensions
Product Dimensions
Company Dimensions
Intermediary Dimensions
Environmental Dimensions
Behavioural Dimensions
Pharmaceutical Marketing Channels ( Chapter 6 ) 213
1) Market Dimensions: Marketing concepts act as the basis for underlying the
philosophy of marketing management including channel management, which
largely focuses on customer ( market ) orientation. At the time of formulating and
adapting the marketing mix, the marketing managers should keep in
consideration the needs and wants of customers which is their prime motive.
Therefore, the products offered, the prices charged, and the promotional
messages employed by the company should clearly define the needs and wants
of customers. Thus, market variables are the bases for designing the marketing
channel. These market variables are basically of four types, which are as follows:
i ) Market Geography: The geographical size, location and distance of
market from the manufacturers is termed as ‘ market geography ' . From
the view point of channel design, market geography is crucial for
developing an appropriate channel structure that serves the market
effectively and ensures timely supply of goods and services to the
markets.
ii) Market Size: Market size can be determined by the number of
customers that form a marketplace. From the view point of channel
design , the numbers of customers are directly proportional to the market
size. Hence, it can be said that the greater the number of customers,
bigger is the market size of the product.
iii ) Market Density: The market density can be identified by evaluating the
number of customers per unit of land area. Here, the cost of distribution is
inversely proportional to the market density and vice -versa. This
particularly applies in the case of flow of goods and services to the market.
iv) Market Behaviour: Market behaviour is concerned with four types of
buying behaviour:
a ) How Customers Buy: Usually, customers tend to buy in small
quantities.
b ) When Customers Buy: The buying behaviour of customers is
highly seasonal in nature.
c) Where Customers Buy: Customers largely tend to shop at home.
d ) Who does the Buying: Both , husband and wife are involved in the
buying activity.
2 ) Product Dimensions: The product characteristics also influence the
decisions related to channel design . Some of the important product variables
are bulk and weight , perishability, unit value, technical versus non -technical
and newness of the product.
i ) Bulk and Weight: Products which are heavy and bulky in nature have
high handling and shipping costs. The manufacturer of such products can
reduce their cost by shipping goods in large quantities and to the selected
possible destinations only. Subsequently, the channel structure for heavy
and bulky products should be short or direct, i.e., from the manufacturer
to the customer . In some exceptional cases, where customers buy small
quantities and prefer quick delivery, the company needs to appoint
intermediaries.
214 Pharma Marketing Management
Channel Alternatives
1 ) Defining the Customer Needs: The first and foremost step in designing the
channel structure is to recognize the service output level on the basis of the
customers' requirements. Therefore, it is very important to capture the
customer demands at the time of designing marketing channels. The channel
generates the following service outputs:
i ) Product Information: There are certain types of products for which
customers seek more information. These products can be new products,
technically complex products or those products that have a fast changing
technological element.
ii ) Product Customisation: There are some products that essentially
require technical adjustment . Then it becomes crucial for the company to
customise the product so as to meet the customers’ expectations. Even a
standardised product may have to go under customisation process to
fulfill a specific target customer like in terms of size or variants.
iii ) Product Quality Assurance: The quality of a product is the foremost
priority to customers. The consequences related to a defective or low -
quality product may affect the customer’s operations. Therefore, it is
essential for the company to emphasise more towards the product
integrity.
iv) Lot Size: The lot size indicates the number of units that the channel
normally sells to a customer. A lot size determines the financial decision
of the customer and also leads to the final purchase decision.
v ) Product Variety /Assortment: The product variety indicates the range of
products that are available with the channel , which is termed as the
‘assortment breadth’. A greater assortment involves more choices which
increases the chances for the customer to get what they are seeking for.
Sometimes the customer may also need a broad range of products
available at one place.
For example, a customer who is an electrical contractor may require
different electrical codes, to find out the most suitable code for his
project work.
vi ) Spatial Convenience/Availability: There are some customers that
require the channel to support a high degree of product availability.
Pharmaceutical Marketing Channels ( Chapter 6 ) 217
The channel design objectives can also be framed considering the customer
service deliverables. The channel objectives should be such that the company
is able to meet the expected service level outputs at the least possible cost.
The company may have different service levels for the same product in
different segments.
218 Pharma Marketing Management
example, while sales maximisation and thus profit maximisations are the
main goals of wholesalers whereas, market share and profit maximisation in
the long-term are the main goals of manufacturers. The wholesalers prefer to
work on short term profitability and at higher margins. This results in
conflicts between the wholesaler and manufacturer as wholesalers argues that
the manufacturer squeeze their margins whereas manufacturer argues the
wholesaler of being fair weather partners.
2 ) Role Ambiguity: Most of the time, role ambiguity is the reason of channel
conflict. In general, multi -channel conflicts occur because of the role
ambiguity. For example, in some companies , often, the roles and duties of
salespeople of manufacturer and product selling dealers to major accounts or
organisational customers in the territory are not clear. This, it turn, results is
conflicts between the relationships with the channels in these companies.
3) Differences in Perceptions of the Market: Conflicts between the
manufacturers ansssssssssssd intermediaries may also arise from the different
perceptions of the economy and market. For example, new products,
multiple brands are introduced by the manufacturers and also new dealers are
appointed when manufacturer may see an opportunity in the booming middle
class market of India whereas existing dealers found it as weakening of their
control over the market because of the multiple dealers appointed and
downsizing of their territory.
broker’s therefore insurance companies can sell their products at a much lower
premium. This has made insurance agents/brokers unhappy. Selling products by
themselves is the primary challenge for insurance companies as most of their
sales are conducted by agents/brokers. The job of these distributors is to generate
business for the insurance company.
They find the customer and sell them the products of the insurance company.
These agents or brokers stop conducting business with the insurance
company with which they are not satisfied. It is a challenge for insurance
companies to sell their product directly to the customer without upsetting
their brokers or agents.
3) Franchisee Conflict: Conflict may arise between different franchisee of a
pharmaceutical company. Price- setting can be one of the reasons behind
such conflict. The price can be fixed by franchisees. They are not bound to
follow the prices recommended or published by the franchisor.
organisation. And because most of the channel roles are defined at the
channel design stage, it is therefore very critical to take care of these
things at the stage of designing channel . Differences in expectations,
beliefs that what is going to happen next, regarding what might happen
in future also give rise to the attitudinal conflicts.
ii ) Structural Causes of Conflict: Since these causes are well -articulated
and tangible, these causes are easy to recognise and understand .
Following are the main reasons of structural conflict:
a ) Divergence in Goals: It is one of the basic reasons of conflict. For
example, dealing with new products found to be risky by the
distributor as unknown commodity investment is included in it while
by introducing new products; manufacturers might wish to expand
its market share.
b ) Drivers for Autonomy: In making decisions that specifically affect
them, all channel participants strive to exercise their anatomy . There
would be a natural indignation towards certain acts of coercion
whenever the channel leader or other channel participants are
deemed to be infringing on this autonomy .
c ) Fights over Scarce Resources: Mostly between the same level
channel members in a channel distribution, conflicts because of the
scarce resources arise. It is also known as the horizontal conflict.
When an organisation practises intensive distribution , these conflicts
can be seen very often . There will be a definite competition for
customers between the dealers when more dealers are appointed by
the manufacturer in a particular market resulting in subsequent
conflict and a serious competition .
2 ) Felt Conflict: The underlying causes of conflict are only the basis of the
future behaviour of conflicts. . If these are not resolved these can manifest
into conflicts of large proportions where there is tendency for the channel
members to outwit the others. Once the basis of the conflict has been created,
the next stage is the affective conflict stage. This is also called the felt
conflict stage. The affected people give vent to the various expressions like
frustration, anger and other regressive feelings at this stage.
When the specific disagreement level is crossed and emotions of the individual
concerns get affected, a phase of felt conflict occurs. However the member
does not indulge in any act which can impact the functioning of the
organisation. The other members should understand the cause of grievance and
try to resolve it at the earliest. However if the problem is left unresolved, then
the felt conflict can turn into a much more ugly form - the manifest conflict.
3) Manifest Conflict: In the manifest stage the conflict assumes damaging
proportions. The channel members resort to practises like boycott. There is a
major trust deficit between the parties. Very often there is a serious effort
made to come to some kind of a compromise between the warring parties.
Very often the conflict gets resolved. If not then this leads behind a major
trail of devastation in the organisation. Also if the conflict is resolved, there
226 Pharma Marketing Management
is still a lingering feeling of distrust between the parties and this can cause a
major attitude transformation in the members. The future actions of the
members are often taken with a big feeling of suspicion by the other
members. In this manner there is a vicious cycle of conflict . One act of
conflict cascades into a series of conflicts - all of which has a very bad
impact on the organisation .
6.5 . SUMMARY
1 ) Place or distribution is a critical element of marketing mix. It is the location
where goods are made available for purchase.
2 ) The decisions related to place activity is majorly dominated by distribution
channel.
3) Managing the flow of material and goods, from raw material to finished
product is known as Physical Distribution Management
4) It is important for a company to generate revenue on large scale. Distributor
plays a very important role in large scale revenue generation because they
cover all the potential market of the company.
5) A distribution channel involves the movement of goods and services from the
manufacturer to the ultimate consumer passing through various
intermediaries. Channel of distribution is one of the major concerns of the
pharmacists in pharmaceutical industries.
6) The “ pharmacist” in the distribution channel could be either a retail
pharmacist , who is commonly known as a retail chemist or druggist, or a
hospital -pharmacist.
7 ) Logistics is considered as a source of core strategic advantage. Logistics
services are properly managed by the distributors.
8) In the activities of pharmaceutical marketing and pharmaceutical marketing
channel , a very decisive role is played by the physicians.
9 ) Direct marketing channel is one of the primary distribution channels. In this
type of channel , a pharmaceutical company manufactures and markets its
product by its own.
10) Indirect marketing channel is a type of distribution channel in which only
manufacturing functions are performed by the manufacturer. However, drugs are
sold and marketed by an intermediary agent called as marketing company.
11 ) Many Indian pharmaceutical companies have recently used the franchisee
system for sales, distribution and marketing of the drugs.
12 ) Channel design decisions are significant to the company because they define
the market presence and buyer’s accessibility to the product . In addition,
channel design is of great importance as it involves long -term investments by
the company.
Pharmaceutical Marketing Channels ( Chapter 6 ) 229
13) Market size can be determined by the number of customers that form a
marketplace. From the view point of channel design, the numbers of
customers are directly proportional to the market size.
14) The behaviour of one channel member founds to be obstructing by the other
channel member in achievement of goal or effective operations is defined as
the channel conflict .
15 ) Latent conflict stage is the initial stage from where the conflict starts.
6.6 . EXERCISE
6.6. 1. Very Short Answer Type Questions
1 ) What do you understand by physical distribution management ?
2) List the criteria for effective channel designing.
3) What is channel conflict?
4) Who are retailers?
5 ) What is direct marketing channel ?
For boosting the sales and attaining highest sales target, the pharmaceutical
companies should focus on hiring best sales force. The pharmaceutical
companies should also be aware about the ways to incorporate the strategic
business objectives with selected program strategies. The roles associated with
sales force have also undergone changes due to the changing pharmaceutical
market environment. In top companies, the sales representatives are held
responsible for effectively communicating the marketing messages. They are
Professional Sales Representative ( Chapter 7 ) 231
responsible for the recruitment and selection of the new sales force. Pharmacists
( sales representatives ) are recruited by following a defined set of legal processes
and activities. These processes are used to hire required number of pharmacist by
ensuring that their job needs and interests are given appropriate consideration .
The main objective of recruitment here is to hire a pool of potential candidates who
qualify the job requirements. Different ways such as job advertisements in
newspaper, career/professional journals, websites, etc., are used by the pharmacy
managers for recruiting the pharmacists. Other methods of recruitment may include
hiring of candidates through various placement service providers. These placement
agencies keep in touch with employers who require fresh pharmacy graduates and
experienced pharmacists to fill the on-going vacancies in the pharmaceutical
company. Similarly, top management executives ( like directors and managers ) in the
pharmaceutical companies are recruited through executive search firms. Recruitment
is done on local and regional basis depending upon the required category of
candidate, i.e., if a pharmacist or clinical specialist or clinical pharmacist is required.
Sources of Recruitment
Recruitment of a proficient sales force helps in successful operation of the
pharmaceutical company. It also helps in forming a pool of right candidates forming
the sales force. There are mainly two sources of recruitment which are as follows:
1 ) Internal Sources: When recruitment is done choosing the right candidate
from within the organisation, it is known as internal source of recruitment.
Following are the different types of internal sources:
i) Employees Already Working in the Organisation: Individuals who are
already working in one of the departments are hired for filling the new
vacancy. This is the most feasible way of recruitment involving less risk as
the organisation is already aware about the potential of the existing candidate.
Professional Sales Representative (Chapter 7 ) 233
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ix ) Web Sources: Web-based service providers are also considered as a best
source for recruitment by pharmaceutical and other industries. These web
providers allow accessing their database against which they charge some
commission or fee. The candidates seeking job usually update their
resumes on such websites and the employers can find them here. In
today ’s time of digitisation, mostly all companies rely or use online job
portals and sites for finding suitable candidates. They further do the
screening of the resumes which the candidates upload on the online
websites and call the selected ones for the interview.
Recruitment Procedure
The recruitment procedure for a pharmacist involves different activities through
which competent potential candidates are searched as specified by human
resource planning, job description and job specification. Recruitment procedure
is shown in figure 7.1:
Identifying Selection
Recruitment Contacting Application
Recruitment Process
Planning Sources Pool
Sources
4) Application Pool: The final aim is to attract more and more candidates so as
to maintain flexibility in selection , no matter what method of recruitment is
used. The organisation starts receiving applications from potential candidates
as soon as the sources of recruitment are contacted . The type of organisation,
kind of jobs, and the conditions in specific human resource markets
determine the number of applications.
5) Selection Process: The process of classifying applicants, in order to hire
those who are more competent for the job, is called selection. Selection
process requires extremely specialised techniques. Thus, the selection
process involves expert employees who are proficient in using selection tests,
conducting interviews, etc.
6) Evaluation and Control: It is necessary to enhance the efficiency of
recruitment attempts in future. It should be kept in mind that recruitment is
an expensive process, involving costs such as the recruiter’s salary,
advertising costs, managers’ salaries and various other costs. It is thus
necessary to evaluate the process of recruitment .
The process for selection of candidate must be well planned and prepared in
advance. This preparation for selection builds a good image of both the employer
and pharmaceutical firm on a whole. Whereas, an unorganised system of selection
could form a bad image in the minds of applicants. Applicants have a perception to
build a long-term relationship with the firm; hence, they assess both management
and pharmacy in the similar way like employer appraises their employees.
Selection Process
The process of selection must be standardised till the level possible and it should
also be easy to implement. The process of selection consists of following steps:
Step 1: The candidates should be given a form which they need to fill as
application for the post they are applying.
Step 2: The application form filled by the applicants must be reviewed and those
applicants whose eligibility criteria matches should be called for a personal
interview.
Step 3: The reference provided by the candidates in their application form must
be verified and while checking this, it must be kept in mind that candidate should
not have any criminal case pending in court.
Professional Sales Representative ( Chapter 7 ) 237
Step 4: The recruiter must arrange for skill and personality test. This could help
the organisation in getting better candidates.
Step 5: The recruiter must also make sure that applicants are physically fit or not.
For this, they must make their applicants to pass through physical and drug test.
Step 6: In case, organisation finds a suitable candidate for the post then that
applicant must be hired immediately.
Training and development is the next step that is to be taken after putting efforts
in hiring the right pharmacists. Training motivates the pharmacists, develops
their skills and guarantees respect to them.
Contents of Training
The training contents are prepared in order to transform the raw employees to
fully skilled pharmacists. Some of the contents covered in training are as follows:
1 ) Training of Anatomy & Physiology: The Normal and Abnormal: Doctors
usually conduct such training sessions. In this, an extensive training in
physiology and human anatomy is provided. The training is provided
regarding different parts and functions of the organs and if these organs does
not perform normally then what would be its consequences.
2 ) Training about Diseases: Training is given to the trainee pharmacists on
various diseases for which the company offers medicines. The symptoms of
various diseases and its future effects are also explained in this training
session.
3) Training about Drugs: Trainee pharmacists are also trained regarding the
availability of the drugs for particular disease and how those drugs helps in
the curing the disease. Various indications and contraindications associated
with the drugs are also explained in the training session . A pharmaceutical
specialist gives such kind of training.
4) Sales Process: After the medical training is completed, trainee pharmacists
are given training on the complete sales process. This includes training about
company ’s products as well as on sales and promotion of the firm .
This training helps the pharmacists in communicating effectively with the
doctors; therefore, they are also offered training on soft skills. A senior sales
trainer delivers this training.
5) Handling Objections: Pharmacists are provided training to tackle the
objections of the doctors without being aggressive with them.
6) Training about Sales Policy: In training about sales policy, the pharmacists
are trained about the channels of distribution in pharmaceuticals and the
channel policies.
For example, selling through company branches or involving middlemen .
7 ) Training about Reporting Systems: Medical representatives or pharmacist
sales personnel act as the reporting system ’s nose, eyes and ears . The
activities that take place in the market determine the existence of a sales
manager. This is because market is the place where the actual competition
takes place.
In this training period the pharmacist trainees should always be motivated and
supported in order to maintain their productivity. After the training is completed ,
they are ready to face the market and perform their jobs.
240 Pharma Marketing Management
Methods of Training
There are two different methods of training the pharmacists. These methods are
as follows:
1 ) Group Training Method: There are various methods of group training.
They are given below:
i ) Lecture Method : The lecture method is an oral form of training in
which a lecturer or an expert explains about the different aspects that are
involved in selling. This method of training is most commonly used. It
involves two-way communication as trainees listen to the lecture and can
also raise their doubts.
ii ) Audio- Visual Method: Audio-Visual method acts as a supplement to
the lecture method. In this, audio-visual aids like, slides, films, posters,
etc., are used to develop the interest of the trainees.
iii ) Discussion Method: This method helps in enhancing the problem-solving
skills of the trainees. Under this method , cases ( which can be real or
hypothetical ) are provided to the various groups of sales representatives.
The groups have to solve the case and come up with a solution.
iv ) Conference Method: Sales meetings and conferences can be held once
in a week/ month where the concerned parties get together. This is a
motivating and an effective training method as all the members of
meeting are given equal opportunities to express their ideas and they get
involved in the creative thinking process.
v ) Role Playing Method: In this method, medical representatives are given
a situation and are asked to prepare a role play. They are asked to
perform the roles of various characters like, customers and salespersons.
The problems are artificial on which trainees have to act.
vi ) Panel Method: Under this method of training, a problem is given to the
panel groups to discuss and offer a solution. The sales trainee groups are
then provided with the solutions of the panel groups so that they can carry
on the discussions. However, this method of training is not effective.
vii ) Round Table Method: In this method, few members are involved to
have a discussion of the real cases. The discussion leader and sales
personnel sit around the table and take part in the discussion of the
problem in order to offer a solution. It is like the discussion method . One
of the advantages of this method is that new ideas also come from the
side of sales personnel or pharmacists.
viii ) Brain Storming Method: This method is quite alike the round table
method. In this method, pharmacists and leader sit around the table and
leader offers the problem in front of the pharmacists so that they could
discuss it and provide a solution .
2 ) Individual Training Method: Various training methods come under the
individual training method . These are described below:
i ) Training on the Job: This method is one of the most common and
popular training methods. Under this method of individual training, the
medical sales trainee works alongside senior supervisor and gains
Professional Sales Representative ( Chapter 7 ) 241
experiences regarding the overall process. Until and unless the senior
supervisor is satisfied that the pharmacist is ready to work independently,
he/she works with the trainee. Other names for this type of training are
‘coach and pupil training’ and ‘training within industry’ .
Therefore, sales force compensation is the sum total of monetary and non -
monetary expenditures incurred on the organisational sales force for
recompensing its services. This implies that compensation is the sum total of
contractual ( wages and salary ) and non-contractual payments ( welfare services).
The sales manager in accordance with the HR department of the organisation
determines the level of such payments for each individual appointed in the sales
force. Pharmaceutical companies generally adopt a comprehensive compensation
philosophy across their workforce, including the full range of positions.
Compensation is a key for retaining good people on professional positions, such
as pharmacists or medical representatives in the competitive marketplace.
In past, pharmaceutical companies were able to attract a good sales team with the
help of competitive compensation packages and these packages included many
components like, basic salary, bonuses, recognition programme and other benefits.
Whereas, now a days, pharmaceutical companies have tried to build a balance
between compensation and budgetary challenges with the help of planning the
variable pay system ( which involves greater compensation ratio) and also by
offering high return for high performing members. The main objective for
effective compensation philosophy in an organisation is to make effective use of
its fund for motivating, attracting and retaining employee in organisations.
Similarly, the main function of marketing managers of pharmaceutical companies
is to recognise the reasons that tend to high turnover of employees and pay
attention towards the compensation policy of the firm. Such compensation will be
based on the compensation philosophy and methods of the firm.
Since, companies make adjustments in their compensation plans, there are some
rules which need to be followed for boosting sales:
1 ) Develop a Compensation Plan while Keeping Product Offerings and
Sales Force in Mind: The Company ’s plan for compensation must be
designed in such a way that it raises firm ’s drug portfolio and it also makes
the firm strong by providing a pool of talented and highly skilled sales force.
There are different types of products that pharmaceutical companies sell,
therefore, management must keep in mind the type of product medical
representatives are discussing with physicians or doctors. Accordingly, the
stipulated compensation against sale must reflect the key skill needed to sell
the specific product. The plan for payment must have a close relation with
sales strategies, experience needed for sale, and field forces personalities.
Professional Sales Representative ( Chapter 7 ) 243
Monetary Compensation
Non - Monetary Compensation
— Straight Salary Method
— Straight Commission Method — Promotions
— Recognition Programmes
— Combination of Salary and — Fringe Benefits
Commission
- Travelling Expense Account
— Commission
Drawing Account and
Plan — Perks
Sales Contests
1 ) Monetary Compensation: Among the several kinds of compensation plan, the
most popular is the monetary compensation. In this, a fixed and a variable
component are attached to the productivity, fringe benefits, and expenses of a
244 Pharma Marketing Management
salesperson. The fixed component is reserved for supporting the family needs of
the individual, whereas, the variable component ( like bonus, commission,
shared profit, etc.) is used by the sales manager to improve his/her productivity.
Additionally, reimbursements are also provided to the sales force to recompense
their expenses (on travel and other activities ) which incurred while making the
sales. Following are the sub-types of monetary compensation plan:
i ) Straight Salary Method: It is the oldest and most common compensation
method. In this, a pre-set amount is given to the salespersons at the end of
every month , as salary , i.e., irrespective of the sales made by the
salesperson, a fixed amount is given as compensation. Once the salary is
fixed , no variation occurs. This amount is fixed for a particular time-scale
and in case of continued service, annual increments are also made.
Generally, dearness allowance, HRA, basic salary, travel allowance and any
other business expense made by the employee are included in the salary.
ii ) Straight Commission Method: Straight commission method is just
opposite to the straight salary method as it is not based on time. The
basis of this commission method is the volume of sales, i.e., the
outcome. A particular percentage of the total sales volume is paid to the
individual as commission. Hence, the amount paid to the sales personnel
does not remain fixed. This commission is paid in two ways, either flat
or differential . Under differential system, the individual is paid a certain
rate upto a fixed level of performance and the rate tends to increase
above that level of performance.
iii ) Combination of Salary and Commission: To draw the benefits of
salary and commission methods, a combined method is used comprising
the features of both the above methods. Under this method , the
employees are assured of economic stability through fixed salary and can
also enjoy an extra sum of money as commission for the amount of sales
volume achieved by them.
iv ) Drawing Account and Commission Plan: This plan has emerged after
a few modifications in the straight commission method. In this method,
the amount of commission to be given to the salesperson is credited
every month into a drawing account opened by the company in his/her
name. A limit to withdrawal is set. If there is a credit balance at the end
of the month, the amount can be withdrawn by the sales person. While
on the contrary, the amount is written off if there is a debit balance. The
amount written off is considered to be his remuneration for that month .
2) Non-Monetary Compensation: Another type of sales-force compensation is
the non - monetary compensation. This compensation plan motivates the sales
force to contribute towards the long-term organisational objectives. Some of
the non -monetary compensations are promotions, fringe benefits,
recognition, perks, etc. However, these compensation plans are non -financial
in nature, but they directly or indirectly influence the financial status of the
salespeople. Following are the major non- monetary compensation benefits:
i ) Promotions: When an individual is entitled to increased responsibilities at
the job, it is termed as promotion. Every sales personnel who is working in
Professional Sales Representative ( Chapter 7 ) 245
the organisation for a long period of time and is committed towards his
services needs recognition in form of promotion. Subsequently, higher
positions in the organisation have limited openings therefore the
management must plan its promotional programme in such a manner that
the position appears to be aspiring and challenging to the salespeople.
ii ) Recognition Programmes: Promotions alone cannot help in retaining
employees in an organisation . Their hard work and commitment must
also be recognised by the organisations. Thus, recognition programmes
are organised by many organisations to acknowledge the extra -ordinary
contribution and outstanding performance of individuals.
These programmes whether formal or informal , are held on the annual
days, foundation days or conferences of the company. The awardees are
also featured in companies’ bulletins and websites.
iii ) Fringe Benefits: This type of benefit is very common in the
organisations for compensating the salespeople. Fringe benefits are the
employment benefits which are awarded to the salespeople in addition to
their wages and salary. These benefits include retirement benefits,
medical benefits, life insurance, sharing of profit and stock options.
Some of the retirement benefits under this plan include pension plans,
provident funds, and gratuity. The medical expenses comprise of
reimbursement of hospitalisation costs in case of emergency and
compensation for all running medical expenditures. Other fringe benefits
involve paid vacations, sick leaves, medical leaves, maternity leaves,
leave travel concessions, etc. All these benefits are used by almost all
companies in different forms.
iv) Travelling Expense Account: If the travel expenses are paid by the
salesperson himself out of the commission he receives, the organisation
does not have to be concerned regarding his conveyance.
However, in cases where the organisation pays the travel expenses
incurred by the salesperson , there the reimbursement systems must be
formulated cautiously and looked in that the reimbursements are subject
to business purposes only. These reimbursements are time -specific and
have certain expense limits. The travel expenses can be of two types:
a ) Local Travel Expense: Under this system, those expenses are
reimbursed which are incurred by the salesperson for travelling the
town of allotted territory where he is positioned to meet the customers,
associates and dealers. It can be in the form of fixed daily allowance,
fixed fuel expenses, total mileage covered, conveyance expenses, etc.
b ) Upcountry Travel Expense: Under this system, those travel
expenses are reimbursed which are incurred while travelling to other
towns of the allotted territory. These expenses are of two kinds, i.e.,
the expenses for travelling to another town and expenses for
travelling and staying in that town for the period of time.
v ) Perks: This compensation comes under a special category of company ’s
compensation programme. Perks are given only to those salespersons
246 Pharma Marketing Management
who are experts in a specialised field or hold a special status. This type
of compensation includes entitlement to a car, driver, house, gardener,
club membership, educational and training opportunities, etc. Perks can
be categorised into following types:
a ) Status: These perks are based on the individual ’s performance and
are far more effective than any other perks. These are noticeable
rewards like job title, cabin, assigned parking space, etc.
b ) Financial Perks: The highest motivating financial perk provided by
the company, is the use of company ’s vehicle to a salesperson . In
addition , other financial perks include expenses of their support staff
like drivers, cooks, gardeners, membership of clubs, vehicle fuel
expense, maintenance and insurance cost to the salespersons.
c) Personal Growth: These perks involve paying for higher education
and training programmes of a salesperson.
vi ) Sales Contests: These compensation plans are not permanent and their
sole motive is to increase sales. Sales contests are organised to tackle the
competitors, to stimulate sales force commitment among the sales
personnel for a new product launch, and to sell off the stock in an off -
season. Sales contests are provided to the sales force for gaining their
support in the most crucial stage of the product life cycle, i.e., maturity
stage. Sales contests motivate the sales force to increase sales and are not
included in the usual compensation plan.
Along with providing territory, compensation package and training to the new
sales representatives they should also be supervised properly. Commission based
representatives receive less supervision as compared to salaried reps. Companies
establish guidelines regarding the ways in which the customer or prospects
should be approached by the sales representative. These companies helps reps in
utilising their sales time efficiently.
How many calls per year does a business make on a specific account ? Studies
indicate that more profits are usually generated through increased calls, but
businesses also need to decide that the increase in sales justifies the increase in
sales costs. Experiences and studies have suggested that the time which should be
spent by sales reps on selling to more profitable people are utilised in selling to
less profitable people. Norms should be established in such a manner that the call
made justifies the profit payback for that account.
For example, Spector Freight needs its sales representatives to spend 25 percent
of their time prospecting and avoid calling after three unsuccessful calls on a
prospect.
Some organisations have established prospects and consumer standards on the basis
of product sales, for example, 80% time of the sales reps can be spent on selling
already established products whereas the remaining 20% is spent on selling new
products. The reason behind setting prospecting standard is that the unsupervised
and unattended reps spent most of the time with current customers rather than
prospective one. Selling to current people expand the customer base of the sales reps
and increases their sales. Selling to a prospective client is more difficult and time-
consuming as compared to selling to the current customer. This is the reason behind
deploying a special missionary salesforce for opening new accounts.
boosting, motivating for hard work, pushing the slow moving products, to
come out of depression phase of the business cycle, etc. The prizes are given
to the successful salespersons during the contest in the form of merit
certificate, travel vouchers, price money, incentives, etc.
2 ) Incentives: Incentive can be seen as financial or non -financial factor which
motivates a person towards a certain action or it can be seen as a reason
behind selecting a particular alternative over others. It is mainly an official
plan which is aimed to have a certain result or to encourage a particular
behaviour in a group of individuals in a stipulated time period. Motivating
the manpower and increasing the sales to attract and maintain the flow of
customers are the main objectives of incentives programmes.
3) Bonus: The extra pay which is received due to good performance is called
bonus. By facilitating bonus, the performance of sales force can be improved
and company can also ensure retention of loyal employees.
4) Sales Meetings: There is a meeting of all the salespersons at a place. This
form of group motivation enables the salesmen to get in touch with fellow
staff members. Here people share their ideas and opinions. Solution of
problems is found and new policies are formulated in these meetings.
An opportunity to come together and share the experiences, ideas and
resolving the sales related issues with the sales persons working at different
levels is provided by the sales meeting. During a sales meeting, information,
ideas and viewpoints are shared among the sales persons.
5) Recognition and Honour: The sales persons are motivated to perform more
and put their best when they receive recognition and honour - title , e.g.,
“Salesman for the year”, appreciation letters, medal , congratulatory
greetings, trophies, etc. A lot of satisfaction is received by the salesperson
from these recognitions and honours.
6) Personal Meet: With the help of the reports, the performance of the sales
persons can be analysed. In order to boost additional sales, the meeting of
salesmen with the sales manager can be arranged in order to come up with
the solutions to the various issues. Satisfactory solutions to the problems can
be provided by the sales manager or a discussion can be held to come up with
an appropriate solution.
7 ) Promotions: The promotion of a sales person to a higher post and higher
salary can be facilitated by taking account of the experiences and the
abilities. This helps in improving the status, self -respect , compensation and
obviously, it is the best motivation for the sales force.
8) Personal Communication: Writing personal letters by the sales manager to
the salesman is always considered as a good gesture for providing the
solution of the problems faced by the sales person. Goodwill, morale,
confidence and co-operation can be ensured with the help of two-way
communication of ideas, opinions, facts and feelings.
9 ) Freedom: There should not be a high level of control on the sales person
while performing the job. While performing the job, it is important for the
250 Pharma Marketing Management
Today, pharmaceutical companies have strong appraisal system that evaluates the
performance activity or sales as well as the skills possessed by the sales executives.
These systems give the rational assessment of sales or activity performance as well
as the skills that the sales executives bring in with them. When one is working in a
region with three or more person selling a certain product , these evaluation systems
are most helpful. Front-line managers in most of the pharmaceutical companies are
asked to consistently assess the performance of each sales representative. Though
the framework and regularity of such review reports differ from firm to firm, these
reports are commonly employed tools for yearly promotion and evaluation of sales
executive’s capability for future career prospects.
Hence, performance appraisal is very crucial for sales representatives. In case if
the sales representatives do not know the process and timing of the performance
appraisal, he or she should get the information from his/her superior.
Important decision regarding motivation, retention and training are taken on the
bases of assessment of pharmacist. Regular assessment makes available the
necessary information required to decide which medical representative or sales
Professional Sales Representative ( Chapter 7 ) 251
Since the process of selling takes place outside the view of the pharmacy
marketing manager, evaluating performance of sales representative becomes
difficult.
v) Personal Factors: All the internal individual factors that affect the
performance of sales force fall under personal factor, except those that lie
under motivation , role perception , skill level, and aptitude. These
personal factors include age, gender, level of education, marital status,
number of dependents, appearance and height .
vi ) Empathy: Empathy simply means understanding feelings of others.
Sales representatives should be able to relate the feelings of the
customers efficiently. An empathetic sales person has improved
possibilities of recognising the customer’s needs and cultivate a long-
term friendly relation with them .
2 ) External Factors: External factors influencing performance of sales
representatives can be divided into organisational variables, environmental
variable and sales management function.
i ) Environmental Factors: The performance of sales force can be affected
by external environmental factors like demographics, economics and the
terrain of a particular region. These factors can affect the sales force
output , expenses while undertaking sales activities, number of calls made
per day and number of sales order.
ii ) Organisational Factors: Performance of sales force is also affected by
the organisation and its culture. Companies can improve sales force
performance by simplifying the workflow and communication processes
to assisting interaction between sales personnel.
iii ) Sales Management Functions: Sales management functions include
compensation, control , planning territory management and forecasting.
Performance of sales force is also affected by sales force structure, job
description and organisational structure.
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3) Forced Choice Method: In this method of rating, the performance of sales
personnel is compared against the set standards developed for measuring the
performance of sales force. Here, the sales manager is asked to undergo
groups of statements and select the most appropriate statement that best
describes the sales representative. Normally, both or all the statements in a
group are either negative or positive.
The person rating the statement is forced to select a particular statement that
best defines the sales representative from all the positive and negative
statements. Evaluator is not aware of weights given to each statement. The
personnel department evaluates the form and the sales representative
securing the highest score is rated the maximum.
4 ) Ranking: When each sales personnel working in different areas in the
pharmaceutical firm have to be compared, this method is used. It helps in
evaluating the performance of the sales force. All the sales personnel are
arranged in descending order of their performance.
This method is used where other methods (appraisal form, essays, rating
scale ) are not applicable. This method is favoured when sales personnel
working in distinct areas have to be evaluated for doing increment in
compensation or for promotion.
Here, subjective approach is needed instead of an objective approach ( based
on numbers) for the evaluation of sales force performance.
7.2 . DETAILING
7.2.1. Introduction
The most significant method of promotion is personal selling and detailing. But it
requires a lot of expenditure too. Medical representatives and detailment are
employed by pharmaceutical companies. The estimated amount spent on
promotion activity is between 40 and 50 per cent of the overall budget of
promotional activities. Two-way personal communication between manufacturer
and prescriber is established by this method. Detailed information regarding the
products, its use, pharmacological and chemical actions, its chemistry, indications,
dose, side-effects and precautions are provided by representatives during these
visits. The information that is not covered under other promotional means is also
provided to physicians. New products are tried by a physician on the basis of
information that is provided by the company representatives. They give preference
to the information that is shared by reps and not by any other promotional activity.
According to Harold White Head, “The art of presenting and offering that the
prospect appreciates the need for it and that a mutually satisfactory sale follows”.
7.3. SUMMARY
1 ) A professional whose job is to sell the product and services of the company
is known as sales representatives.
2) Pharmaceutical sales reps should remain up-to-date with current technical
research because of the changing nature of pharmaceutical industry.
3) Recruitment is done on local and regional basis depending upon the required
category of candidate, i.e., if a pharmacist or clinical specialist or clinical
pharmacist is required.
4) There are large numbers of applicant available in market to be chosen for a
pharmaceutical firm. Coverage of market and knowledge of market are some
important standards for the selection of sales-person or medical representative.
5) Training is a systematic procedure of providing guidance and teaching in
order to develop the skills and abilities of the pharmacists. Demonstration,
action and evaluation are the key components of the training.
Professional Sales Representative ( Chapter 7 ) 257
7.4 . EXERCISE
7.4. 1 . Very Short Answer Type Questions
1) What is PSR?
2) What is compensation?
3) Define detailing.
4) Give any two advantages of detailing.
5) Explain the term ‘sales meeting’.
CHAPTER
8 Pricing
8.1. PRICING
8.1.1. Meaning and Definition of Price and Pricing
The only component of marketing mix that generates returns is called price,
however, others only generate costs. Price can be easily altered, whereas, other
product aspects like channel obligations and product attributes cannot be changed
so easily. Therefore, price is the most flexible component of the marketing mix.
For a manufacturer, price is that amount of money (or in case of barter trade,
goods or services) which he will receive from the buyer for his product. For a
customer, price is something he sacrifices for owning the product or service and
therefore, it displays his perception for the product value. It can conceptually be
defined as:
Quantity of money received by the seller
Price =
Quantity of goods and services rendered/ received by the buyer
As per this equation, the numerator as well as the denominator is crucial while
taking price decisions. A product’s price is based on the seller’s decision
regarding its monetary worth to the buyer. The method used to convert the worth
of a product or a unit of service into quantitative form ( i.e., rupees and paisa) at a
given time for customers is called ' pricing’.
Medicines demands are one of the driving force behind the pharmaceutical
expenses. The increasing prices of the medicines is the major challenge faced by
health system managers as medicines are gradually being priced at the level that
does not seems to be fair. Price management is the critical challenge for the
manager or pharmacy owner. Extremely high price margin will lose the customer
and too low will not be able to cover up the pharmacy’s operating cost .
Over 55 million individuals are pushed into poverty every year because of the
costly healthcare facilities of India. The prices or cost of medicines has been a
delicate topic in India. Out of total expenses incurred on healthcare more than
50% is utilised for purchasing medicines only. When the poor section of the
society is able to purchase medicines then one can say that the prices of the
medicines are reasonable in the country.
Price control is the only option available for government to make drugs
inexpensive. As per AIOCD-AWACS, approx. 14% of drugs by value and 25%
by volume are under price control strategy of government. Till September the
worth of India’s pharmaceutical industry was ?1.36 trillion.
Pricing ( Chapter 8 ) 259
Profit Maximisation
Price Stability
Facing Competition
Achieving a Target -return
The point of importance here is that rather than allowing cost to decide the
price, it is better to use price as a strategic tool. If an organisation has a product
that is better than the competitor’s, it should make it known in the market and
charge higher price for it. Then, it will be able to earn more profits.
-
1 ) Cost based Pricing: The most important variable as well as the basis of
pricing a particular product, is the production cost of that product . Costs may
be of different kinds like total cost, variable cost, fixed cost, marginal cost,
average cost , etc. These costs must be critically analysed in order to set a
product s price. Methods for finding out the cost oriented price are as
follows:
- -
i ) Mark up/Cost plus Pricing: This method requires the marketer to
approximately calculate the total production or manufacturing cost of the
product and after that adding a mark -up or the margin ( that the firm
intends to earn ) to it. This is the most basic pricing method which is used
to price a number of projects and services. The below mentioned formula
can be used to calculate the mark- up price:
Mark up price =
large firms operate or where there is extreme competition and the firm
works with the sole aim of establishing itself in the market . The firm
adopts this pricing method when it:
a ) Encounters intense competition,
b ) Focuses on a new market, and
c) Possesses unexploited capacity.
iv) Break Even Point/B.E.P. Pricing: The sales volume, where the total
cost becomes equal to the product’s total sales revenue is known as
break-even point’. In other words, the sales volume of the product,
which neither witnesses profit nor loss, is break-even point. Hence, this
method is also called ‘No Profit No Loss Method of Pricing’. In order to
calculate price using this method, total production cost is divided into
fixed and variable cost. The final price is same as the product’s
production cost. It is believed that the firm will not earn any profits in the
short -term, but in the long -term it will begin earning profits. The price of
a competitive product can be easily calculated by using this method.
B.E.P can be calculated by the formula mentioned below:
Fixed Costs
B.E. P. ( InUnits ) =
Selling Price per unit - Variable Costs per unit
Fixed Costs x Total Sales
B.E.P. ( In ) =
Total Sales - Total Variable Costs
v) Target Pricing/Rate of Return Pricing: In this pricing method , the
company needs to calculate the desired rate of return on the capital it has
invested in producing the product . This rate of return helps in calculating
the desired quantity of profit. This ‘quantity of profit’ and ‘production
cost’ are summed up to find the ‘ per unit price’ of the product . A
company can employ this pricing method, when it needs to get a specific
return on the capital it has invested. This method can be used only in
markets with no competition at all .
-
2 ) Customer Demand based Pricing: The fundamental aspect of the
demand oriented costing is that the cost involved does not have an impact
on the profits but on the demand . This method, contrary to cost -based
pricing, begins by finding out the price that the consumer market intends
to pay for the product . Then , a backward estimation of the level of cost
and profit ( that the organisation can afford due to that price ) is
undertaken . Following methods are used to determine the customer
demand - based pricing:
i ) ‘What the Traffic Can Bear’ Pricing: Using this method , the seller
charges the customer with the maximum possible price that they will pay
willingly under the present situation. This method is far from being
sophisticated and is followed by retail traders and few manufacturers. In
the short-run, it provides the company with large profits but is an unsafe
method in the long-run. Error in judgments can easily take place as it is
based on trial and error. But in markets with monopoly/oligopoly and
price-inelastic demand , it can conveniently be applied.
264 Pharma Marketing Management
=
d ) Price Value>Costs: A condition may also occur, where production
cost is lower than value offered. A reasonable amount of profit is
generated by setting the price equal to the value offered.
-
ii ) Affordability based Pricing: The basic commodities that are used by
every section of the society are priced using this method of pricing. The
prices are set in such a manner that the people from every section of the
society are able to purchase and consume the products to a required
level. The cost involved has no impact on the price, but many times,
some aspect of state subsidy is considered while pricing the product.
-
iii ) Prestige based Pricing: Customers do not openly admit that their
purchase is prestige-oriented. At times buyers are not even able to realise
that they might be driven by prestige when they strongly intend to
purchase a particular product . This is also termed as ‘ psychological
pricing' .
Sale
Figure 8.1: Graphical Illustration
of Prestige Pricing
Figure 8.1 depicts a demand curve that describes ‘ prestige pricing’ ,
-
iv ) Market and Demand based Pricing: An effective pricing understands
the way, a customer’s perception of value, impacts his/her willingness to
pay a particular price for a particular product . Generally, the price of a
product is balanced against the benefits associated with it . Hence, the
marketer must comprehend the relation between demand of a product
and its price, before setting the final price.
Years
Figure 8.2: Business Cycles and Cyclical Pricing
The price of the tablets is gradually decreased by the company . Per strip of
10 tablets is charged for 199 and within six months approx. 30 to 40 new
^
brands of the same medicines was launched by different companies in the
market. The company lost its first position in the market as soon as they
further decreased the price to ?39 per strip of 10 tablets. According to the
ORG-MARG report the company landed at sixth position in March 2002.
NPPA
8.2. 1. Introduction
National Pharmaceutical Pricing Authority, under Department of
Pharmaceuticals, Ministry of Chemicals and Fertilisers administers whether
or not drugs are priced according to the provisions of the Drug Price Control
Order ( DPCO ) and National Pharmaceutical Pricing Policy .
“Scheduled drugs” or “scheduled formulations” are the drugs that are listed in
schedule I of Drug Price Control Order ( DPCO ). These kinds of drugs are
applicable to price control. The Government of India issues these orders from
time to time.
Pricing ( Chapter 8 ) 271
The word “Scheduled formulation ” is used in the latest DPCO 2013 for the
medicines specified under its first schedule because the bulk drugs that are used
as single ingredient also acts as formulation.
From the viewpoint of pricing regulation, these drugs are still termed as
“scheduled drugs”. After 2013, the “Essential Medicines” announced by the
Government through its National List of Essential Medicines ( NLEM ) are
covered under scheduled formulations.
NPPA was established with an aim to revise and fix the price of controlled bulk
drugs and formulations and to ensure that the drugs available in the country are
priced in accordance with the orders passed under the Drugs ( Prices Control)
Order, 1995. NPPA also recovers the overcharged amount that the manufacturer
charges from consumer for the controlled drugs. The decontrolled drugs prices are
also monitored by NPPA so that they can be sold at reasonable and affordable
prices.
However, this policy also provides equal chances of making innovation in the
medicines which instantly improves the health of a person. It also provides scope
for the chances of increasing competition in order to aid in the development of
pharmaceutical industry.
Hence, by these objectives both ( i.e. the drug owner and the economy ) are
benefited.
The comprehensive rationale for implementing the above three principles can be
known from NPPP-2012.
1) According to the provisions of NPPP-2012, the entire producers who are
producing the medicines as prescribed by the NLEM -2011 will fall in the
category of price control. The prices of these medicines will be equal to or
lower than the ceiling price i.e. maximum retail price ( MRP ) in addition with
the local taxes as prescribed by the government for the required medicines.
2 ) According to the provisions of DPCO-2013, the ceiling price of the drugs is
set at average retail price of the drugs produced by the pharmaceutical
companies involved in producing the medicines with the market share of less
than 1% of the total market turnover and by adding 16% of profit to the
stockist.
Pricing ( Chapter 8 ) 273
In September 1994, modifications were made in Drug Policy 1986. Following are
the objectives of drug policy according to such modification :
1) To make sure that lifesaving essential and prophylactic medicines are
available in abundance.
2) It tries to strengthen the quality control system and promote correct use of drugs.
3) To strengthen indigenous capability for producing drugs.
4) To create an environment that is suitable for attracting investment in
pharmaceutical industry. It aims to promote large size inexpensive
production. Introducing new technologies and drugs are also one of its
objectives.
DPCO mainly focuses on the rules regarding the Drug policy and the objective of
DPCO is to make sure that there is equality in the distribution of bulk drugs, to
ensure that bulk drugs are obtained at low price and to have increased supply.
274 Pharma Marketing Management
.
8.2.4. I Pricing of Bulk Drugs
“ Bulk drug” means any substance including pharmaceutical , chemical,
biological or plant product or medicinal gas conforming to pharmacopoeia or
other standards accepted under the Drugs and Cosmetics Act , 1940 ( 23 of 1940),
which is used as such or as an ingredient in any formulations.
“ Formulation ” means a medicine processed out of , or containing one or more
bulk drugs or drugs, with or without the use of any pharmaceutical aids for
internal or external use for, or in the diagnosis, treatment, mitigation or
prevention of disease in human beings or animals.
The First Schedule of the order contains the prices of 76 bulk drugs regulated by
DPCO, 1995. The following are the method by which fixation of the prices of
DPCO-controlled bulk drugs are done:
1 ) The government must give a post -tax return of 14% on net worth or a return
of 22% on capital employed at the time of setting the highest sale price of
bulk drugs.
2 ) Every pharmaceutical firm have the freedom to select any one of the above
two methods. Hence, the selection of the method is company -specific rather
than the product-specific.
3) After this, an elaborative analysis regarding the prices of different bulk drugs
is submitted by every pharmaceutical company to the government on the
basis of the chosen method.
4 ) The prices of various bulk drugs submitted by the companies must include
the profits of the company ’s i .e. the final price submitted by companies must
have the desired profits.
5) Before, the fixation of final price of the bulk drug, the government thoroughly
analyses all the applications submitted by various medicinal companies and also
take into consideration the cost audit reports of the retailer.
6 ) After the price of bulk drug is analysed, the government fixes the price and
that price must be followed by each of the retailer without considering the
actual cost incurred at the time of production i.e. it is mandatory to consider
the price quoted by the government.
The National Pharmaceutical Pricing Authority ( NPPA ) has set the retail and
ceiling prices of 22 formulatioas in the local market useful in the treatment of
different diseases such as HIV , bacterial infections and cardiac condition, among
others. The NPPA has fixed the retail price and ceiling price of various drugs
such as co-trimoxazole sulphamethoxazole and trimethoprim tablets for which
ceiling price is fixed and this is beneficial in treating bacterial infection.
CC = Conversion Cost
It is incurred based on the formulation costing method and it is fixed as the rule
for every year by making the announcement in the official gazette.
PC = Packing Charges
It is incurred based on the formulation costing method and it is fixed as the rule
for every year by making the announcement in the official gazette .
On the basis of the above provisions, the retail price of scheduled formulation is
fixed by the government. Once, the retail price of the formulation is fixed by the
government then it is not allowed to increase on the part of the manufacturer with
the exception of having the prior approval of the government. Hence , the fixation
of retail price of the drugs is on the basis of the provisions of DPCO, 1995 and it
also consists of ceiling price.
Pricing ( Chapter 8 ) 277
8.3. SUMMARY
1) The only component of marketing mix that generates returns is called price,
however, others only generate costs.
2 ) It must be ensured that prices remain as stable as possible. When a pricing
policy is stable, it gains customer confidence and enhances the reputation of
the company .
3) The fundamental aspect of the demand oriented costing is that the cost
involved does not have an impact on the profits but on the demand.
4 ) Skimming pricing is the commonest pricing method. In this method, the
companies by selling at premium prices fulfil their desire of skimming the
market.
5) Under monopolistic competition condition, no single prevailing market price
is present. Different buyers and sellers are engaged in trade of differentiated
commodities with different prices.
6 ) Pricing commodities according to the cyclical changes in the economic
events over time is called as ‘cyclical pricing’ or ‘cycle -based pricing’
7 ) The most prominent impact of pricing on business is an increase or decrease
in the volume of sales. Price elasticity and how consumers react to a change
in price are studied by economists.
8) The complex nature of price charged by pharmacy is explainable. Price of a
drug depends upon its manufacturing, researching and other costs.
9) An independent body of expert known as National Pharmaceutical Pricing
Authority ( NPPA ) was established on 29th August 1997 in compliance with
the decision made by the Cabinet committee in September 1994 while re-
examining Drug Policy.
10) The National Pharmaceutical Pricing Policy -2012 came into effect on 7 th
December, 2012 for helping in directing the rules and regulations for drug
price control.
11 ) In India , the Drugs Prices Control Order ( DPCO ) was first established in
1970 in order to regulate the prices of drugs. After 1970, the DPCO was
further amended in 1979, 1987 and 1995. The present Drug Price Control
Order was passed on 6th January 1995.
278 Pharma Marketing Management
8.4 . EXERCISE
8.4. 1 . Very Short Answer Type Questions
1) Define pricing.
2) Give any two objectives of pricing.
3) What is schedule drug?
4) State the full form of DPCO and NPPA.
Vertical channel integration combines two or more levels of channel which are
managed by one management . This type of situation may occur when a channel
member takes over the functions of another channel member or simply carries
out the functions of another member, therefore eliminating that intermediary
from the distribution channel .
Vertical integration is the situation where the companies across health care value
chain such as pharmacy benefit managers, health insurance companies, etc.,
combine together with an aim to develop more effective cost containment
strategy, to make health care systems available and to enhance patient
involvement and connection. In order to cut cost the landscape is being
280 Pharma Marketing Management
Only participants and market share increases in horizontal integration and the
scope of the business remains unchanged. For example, when Sun
Pharmaceuticals acquired Ranbaxy its product portfolio, customer-base and
profit got increased.
9.1.5. Consumerism
Consumerism can be seen as an organised movement of the government and
citizens for reinforcing the power and rights of customers with reference to
284 Pharma Marketing Management
2 ) Wearable Tech: Wearable tech also allows people to track their health status
in real time by themself . Patients are able to collect their real - time data to
present their doctors. In some patient monitoring programme, Fitbit activity
tracker can also be used.
As pharmaceutical industries did 10 years ago, several pharma and life sciences
companies are already approaching global activity ; defining global objectives
that set the stage for local planning. Indian pharmaceutical industries have
opportunities to play significant role in the international supply -security of drugs
with the help of financial and policy incentives. Indian pharmaceutical has only
5% of market share in the Indian market while the major 95% was occupied by
the global pharmaceutical in 1969. But , in 2020, the situation is just opposite.
The global pharmaceutical has only 15% of market share in the Indian market
while the major 85% is occupied by the Indian pharmaceutical itself.
Over the past five decades, Indian pharmaceutical firms have achieved great
success, both in terms of meeting local needs requirements of the customers and
building significant position in the landscape of global pharmaceutical. In terms
of value, India now contributes more than 20% to the global generics industry,
with Indian products contributing more than 40% ( by volume ) of US medicines.
Indian pharmaceutical gets opportunity to play more important role in the global
healthcare because of the coronavirus pandemic.
Emerging Concepts in Marketing ( Chapter 9 ) 289
By 2023, the worth of global pharmaceutical industry will be USD 1.57 trillion
according to the research. The various factors such as current and upcoming
trends, market challenges, market drivers and current growth patterns are the
several factors considered for the growth of this sector.
By 2023, with the total global market share of 45.33% , North America is
expected to maintain its top position in the global pharmaceuticals market. On
contrary, Europe is expected to have a market share of 20.24% by 2023 in global
pharmaceutical , i.e., a decline in its market position in global pharmaceutical as
compared to 2017.
With a market share of 24.07% by 2023, Asia Pacific is expected to retain second
position in global pharmaceuticals market . In 2023, Latin America and the
Middle East and Africa ( MEA ) are estimated to hold 7.53 per cent and 2.96 per
cent of the global pharmaceuticals industry, respectively.
Ageing and growing population in key markets are the basic reasons for this
massive growth in the pharmaceutical industries. The global population would
likely to cross 9.3 billion by 2050, including 21 % of this population is expected
to be aged of 60 and above according to the United Nation’s World Population
Prospects.
The growth in buying power and access to quality pharmaceutical and healthcare
to middle-class and poor families across the globe could be other reasons for this
massive growth in the global pharmaceutical markets. Increasing focus of
pharmaceutical companies to tap the speciality and rare diseases market is
another leading aspect for the growth of this sector. Even non -pharmaceutical
firms like Facebook have drawn investment in nucleic acid therapeutics,
experimental biologies, cell therapies and bioelectronics and implantables.
9.2 . SUMMARY
1 ) Vertical channel integration combines two or more levels of channel which
are managed by one management.
2 ) Horizontal channel integration refers to the process of combining firms of
similar functional level in the marketing channel under one management .
3) Rural marketing is a process of developing, pricing, promoting and
distributing rural specific goods and services leading to desired exchange
with rural customers to satisfy their needs and wants and also to achieve
organisational objectives
4 ) Consumerism can be seen as an organised movement of the government and
citizens for reinforcing the power and rights of customers with reference to
sellers.
Emerging Concepts in Marketing ( Chapter 9 ) 293
9.3 . EXERCISE
9.3. 1 . Very Short Answer Type Questions
1) Define rural marketing.
2) State industrial market.
3) What is global marketing?
4) Define consumerism.
Index
A E
Advertising 174 . Economic Environment 28 .
-
Affordability based Pricing, 266 Evaluation of PSR , 250
Attribute Positioning 152 . .
Exhibition 182
Audio-Visual Method. 240 .
Exhibitions 183
Augmented Product 114 . Expected Product 114 .
B External Marketing Environment 26 .
Bargaining Power of Buyer 38 . F
Bargaining Power of Suppliers 38 . Feedback Information , 71
Basic Product 114 . Finance, 70
BCG Matrix 140 . - .
Forced Choice Method 253 .
Behavioural Segmentation, 80 Form Utility 19
Benefit Positioning, 153 .
Formulation 274
Bonus 249 . Fringe Benefits 245 .
Brain Storming Method, 240 Full Cost/ Absorption Cost Pricing, 262
Brand Endorsement Positioning 153 . G
Break Even Point/B.E. P. Pricing 263 .
Bulk drug. 274 GE 9 Cell Model 142 .
Geographic Segmentation. 78
c Global Marketing 288 .
Category Positioning, 153 Going Rate Pricing/Parity Pricing, 264
Changing Indian Consumer Behaviour 99
Channel Conflicts. 222
. Goods-Services Continuum 18 .
Group Training Method, 240
Channel Design 212 . H
Channels of Distribution 203 .
Classification of Pharmaceutical Products, 115 Habitual Buying Behaviour/Routinised Response
Combination of Salary and Commission 244 . Behaviour/ Straight Rebuy/ Brand Loyalty 48 .
Compensation to PSR. 241 Horizontal Marketing Systems ( HMS ), 280
Competitive Parity Method 170 . I
Competitive Positioning, 153
Consumer Buying Behaviour 46 . Incentives, 249
Incremental Cost/Marginal Cost Pricing, 262
Consumer Profile, 92
Consumerism, 283 Indian Consumers, 92
Core Benefit. 114 Individual Training Method , 240
Corporate Identity Positioning, 153 Industrial Buying 54 .
Corporate Parenting Analysis. 145 Industrial Buying Behaviour 54 .
Cost Structure in Pharmaceutical Products, 261 Industrial Marketing 285 .
-
Cost based Pricing. 262 Industry Analysis 32 .
Customer Delight 20 . Internal Marketing Environment 25 .
Customer Demand based Pricing 263 - . Internship Training 241 .
Customers, 27 L
-
Cycle based Pricing, 267
Labelling Decisions. 133
D Lecture Method. 240
Demands 18 . Legal Environment, 31
Legal Requirements in Price Control on Drugs 270 .
Demographic Environment, 30
Demographic Segmentation, 78 Limited Market Coverage Targeting 85 .
Detailing, 254 M
Differentiated Marketing, 88 Macro Environment, 28
Direct Mail 178 . Major Product Decisions 120 .
Direct Mailing 177 . Manifest Conflict 225 .
Direct Marketing Channel ( Zero Level ), 210
Discussion Method, 240
Manufacturer 208 .
Market and Demand-based Pricing, 266
-
Dissonance Reducing Buying Behaviour/Limited
Market Intermediaries 27 .
Problem Solving/ Modified Buy 47 . Market Research 107 .
Downward Stretch 122 . Market Segmentation 77 .
DPCO ( Drug Price Control Order ) 273 . Market Specialisation , 87
Drawing Account and Commission Plan 244
Duties of Pharmaceutical Sales Representatives, 231
. Marketing, 15
Marketing Environment, 23
- -
Mark up/Cost plus Pricing, 262
Mass Marketing 87 .
Index 295
Bibliography
Martin Bischoff , Successful Pharmaceutical Selling. TMH
Philip Kotler, Kelvin Lane Keller, Abraham Koshy, Mithileshwar Jha,
Marketing Management ( A South Asian Perpective ) 13 th Edition, Pearson
VS Ramaswamy, S Namakumari , Marketing Management , Planning,
Implementation and Control , Macmillan
Tapan Panda , Marketing Management , Excel Publications
Richard R Still , Edward W Cundif Norman A Govoni , Sales Management
( Decision, Strategy and Cases ) 5th Edition , Pearson
Charles M Futrell , Sales Management , Thomson
George E Belch, Michael A. Belch, Advertising and Promotion , McGraw Hill
S H H Kaztni , Satish K Batra , Advertising and Sales Promotion , Excel Books
Subba Rao Changanti , Pharmaceutical Marketing in India , Excel
Publications .
Selected Sites
• http: //www.scribd .com
• http: / /nsdl .niscair. res. in
• http:// www. pharmainfo. net
• http: //www. slideshare. net
• http://www. pharmpress.com
• http://www.authorstream. com
• www. managementparadise .com
• www. wise geek , com
• www. clijfsnotes.com
• www. enotes.com
• www. ehow. com
• www. management studyguide , com
• www. books . google .co.in