Pharmacy

Management
Lecture 10

By

Hesham Shazly, PhD

Semester Two BUE
Marketing Theory (part II)

New Dimension
in Thinking
MARKETING: BCG Matrix
Boston Consulting Group
 MARKETING: BCG Matrix
Boston Consulting Group

Stars: The products that have the best market share and
generate the most cash are considered stars. Monopolies or first
in the market products are stars. Advised to invest in stars.
Cash cows: are the leaders in the marketplace and generate
more cash than they consume. Cash cows provide the cash
required to turn question marks into market leaders, to cover the
administrative costs, to fund research, and to pay dividends to
shareholders.
Dogs: dogs are products that have both a low market share and
a low growth rate. These products s are candidates of divest.

Question marks:
marks
known as problem children.
These products have high growth
prospects but a low market share.
They are consuming a lot of cash
and bringing little return.
They are a potential to be stars;
either to invest or to sell.
 MARKETING: CONCEPTS
Shifting from the 4Ps to the 4Es
 Shifting from the 4Ps to the 4Es
Product -> Experience
Marketing is no longer the product, it is the whole experience about a
product. When you develop strategies about your product, think
about the experience of your customer. What will influence the
decisions
 Shifting from the 4Ps to the 4Es
Place -> Everyplace
Marketing is evolving very fast from traditional modes to the digital
forms like advertising on mobiles, social media, websites etc. the
technology opened up so many ways for customers to find info. This
makes it very difficult to target customers through fixed places. You
need to find out : which channels most of our customers use? so that
you can come up with innovative ways to reach out to them anytime
anywhere.
 Shifting from the 4Ps to the 4Es
Price -> Equity
Price is not the only thing that customers think about while buying a
product. You can price your product at the price it deserves to be
sold, but just make sure that when the customer buys your product,
they get real value for the price. If customers see a higher value in
your product/service, they will be loyal to you. Appreciate the value,
not the cost
 Shifting from the 4Ps to the 4Es
Promotion -> Evangelism
Marketing is shifting from promoting what you sell to Why you sell.
Customers buy why you are selling what you are selling and not
what you are selling. Promotions will not be competitive unless you
influence the customers decision making process.
Find out the emotions related to your product or service, the
motivation or the passion behind it and promote that. This will allow
the customers to connect better with the product and also motivate
them to talk about it to their friends i.e. evangelize for your product.
 Competition
Competition has heated up drastically in the last decade.

Media channels and internet have brought consumers a lot of choices.

The increase in offerings combined with a drop in perceived product

differentiation has decreased customer loyalty.

A common reaction to this challenge is further cost reductions and

price-based competition.
This strategy does not support investments in innovation.

At the KeIlogg Center for Research in Technology & Innovation in

Chicago suggests that cutting price is precisely the wrong approach.

In some circumstances, the entrance of low cost competition is the ideal

opportunity to both lower and raise prices sandwiching - the position of
the competition - with the net effect of growing market share for the
innovator.
Market Pricing and the
Sandwich Strategy
Professor Dipak Jain, former dean of the Kellogg School,
Kellogg Schools the senior executive programs.
Kellogg School of Management, Northwestern University
2001 Sheridan Road, Evanston, Chicago, IL 60208
 A LOGICAL FOUNDATION

An innovator enjoys excellent position with the associated

price and quality (P,Q).

Cost based competition enters the market at time tcost entry.

If the innovator has the ability to differentiate its offering by
launching products / Services with both higher (brand+)
and lower (brand--) Price/Quality

It effectively sandwiches the competition's maneuverability

on the (P,Q) variables, into middle market segments.

The sandwich works for companies that proactively

anticipate cost-based competition (generic) and
companies that are surprised and must react.
 Time, Price and Quality Dimensions of
Sandwich Strategy

Brand
Quality,
Price 5
 THE BODY OF EVIDENCE

AstraZeneca's first-in-class $6 billion blockbuster proton

pump inhibitor (ppi) Prilosec was priced at ($4/pill),

Prilosec was facing patent expiry and aggressive, generic

cost-based competition in 2001.

The sales curve associated with patent expiry

is known in the industry as the "shark fin" curve.

The management (AstraZeneca) challenged how to

survive in loss of monopoly
 MARKET PRICING

Several years before the patent expiry, AstraZeneca formed a team to

examine all tactical options to avoid losing the significant revenue of ppi.
AstraZeneca decided to phase out prescription Prilosec and introduce a ppi
drug of slightly better efficacy (brand+) in early 2001called Nexium.
The price of Nexiurn was increased to $5/pill.
As more generics entered the market in 2003 at price points between
$1.50 to $3.80 / pill,
AstraZeneca introduced Prilosec as an OTC and priced at approximately
$0.71/ pill. omeprozole, substituted the higher priced generic.
With proactive planning, AstraZeneca effectively sandwiched the generics
on price and quality dimensions (P,Q).
Prilosec as an OTC at low price point completely undermined the value
proposition of the generic, cost-based competition. (brand--) Price/Quality
AstraZeneca's sales in the ppi reached $6.4 billion in 2005.
AstraZeneca's succeeded by implementing sandwich strategy, and market
share continues to grow.
AstraZenenca and Sandwich Strategy
applied to PPI market
 FedEx Case
Sandwich strategy can also be reactive or applied after
cost-based competition enters a particular market.
FedEx was the innovator that pioneered the segmentation
of the parcel delivery market based on speed and
reliability of air service (quality).
FedEx built a commanding position when its air courier
services launched in the1970s.
It was more efficient and reliable than the governmental
monopoly, held by the United States Postal Service
(USPS)
 FedEx Case
USPS ,introduced a similar air courier service (Express
mail from the post office at $8.95 rate) priced significantly
below the original FedEx rate of about $12.
In this circumstance FedEx could have lowered its price to
keep and maintain the price sensitive customers.
Alternatively, FedEx reacted by executing the sandwich
strategy, it launched (a brand+) service (FedEx Priority,
guaranteed by 10 a.m. next business day morning) priced
at about $13, and re-launched the initial service as (a
brand-) this service called (FedEx standard delivery,
guaranteed next business day afternoon) at a price of
$9.00.
Additionally, it leveraged the reliability reputation.
FedEx and Sandwich Strategy Applied to
USPS
 FedEx Case
The success of the sandwich strategy in this context was
remarkable.
With price advantage, customer disloyalty to USPS
Express Mail has been achieved.
The 10 a.m. deadline enforced accountability, pushing
internal improvements to overall service.
Many existing FedEx customers even migrated to the
Priority offering to signal quality and care to the parcel
recipient(s).
 MARKET PRICING

As a result of these maneuvers FedEx maintained its

status as the lead innovator.
Differentiating its offerings on dimensions of speed and
reliable delivery.
Eventually USPS was compelled to outsource its Express
Mail operations to FedEx.
They later formed a strategic alliance that yields over $6
billion in revenue for FedEx.
 SUMMARY

The sandwich strategy should be explored whenever cost

base competition enters the market.
If you have advance notice, you can premeditate your
maneuvers like AstraZeneca.
If you are surprised by the competition, you can cleverly
react like FedEx.
The common requirements are cost leadership and a
capacity to launch differentiated products at both the high
and law price points in the market.
Further, advertising must be organized to highlight equally
the two products.