Confidentiality Agreement

The undersigned reader acknowledges that the information provided by ___________

______________ in this marketing plan is confidential; therefore, reader agrees
not to disclose it without the express written permission of ___________________
______. It is acknowledged by reader that information to be furnished in this ma
rketing plan is in all respects confidential in nature, other than information w
hich is in the public domain through other means and that any disclosure or use
of same by reader, may cause serious harm or damage to _________________________
. Upon request, this document is to be immediately returned to _________________
________. ___________________ Signature ___________________ Name (typed or print
ed) ___________________ Date This is a marketing plan. It does not imply an offe
ring of securities.
Table Of Contents
1.0 2.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . 1 Situation Analysis . . . . . . . . . . . 2.1 Market Summary . . . . .
. . 2.1.1 Market Demographics 2.1.2 Market Needs . . . . 2.1.3 Market Trends . .
. 2.1.4 Market Growth . . . 2.2 SWOT Analysis . . . . . . . . 2.2.1 Strengths .
. . . . 2.2.2 Weaknesses . . . . 2.2.3 Opportunities . . . . 2.2.4 Threats . .
. . . . . 2.3 Competition . . . . . . . . . 2.4 Business Model Description . . 2
.5 Keys to Success . . . . . . . . 2.6 Critical Issues . . . . . . . . . Marketi
ng Strategy . . . . . 3.1 Mission . . . . . . . 3.2 Marketing Objectives 3.3 Fin
ancial Objectives . 3.4 Target Markets . . . 3.5 Positioning . . . . . 3.6 Strat
egies . . . . . 3.7 Marketing Mix . . . . 3.8 Marketing Research . Financials .
. . . . . . . . 4.1 Break-even Analysis 4.2 Sales Forecast . . . 4.3 Expense For
ecast . Controls 5.1 5.2 5.3 . . . . . . . . . . . . . . . . . . . . . . . . . .
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3.0
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5.0
............ Implementation . . . . Marketing Organization . Contingency Plannin
g .
The Discount Pharmacy
1.0 Executive Summary
The Discount Pharmacy is a brick and mortar and mail order pharmacy that sells p
rescription medication at lower prices than other pharmacies. The Discount Pharm
acy is able to sell at reduced prices through the use of operating efficiencies
and the elimination of unnecessary services for customers that self pay their dr
ugs. The Discount Pharmacy does not accept insurance payments which disrupt the
cash flow. By having a larger percentage of their business serviced by their mai
l order arm, The Discount Pharmacy is able to gain economies of scale by selling
larger quantities of drugs with less labor required per order. As more and more
Americans are on a continuous prescription to medicine, this trend will lend it
self to rapid growth as customers can mail order larger quantities of drugs that
they will need over time. Additionally, many insurance companies offer an econo
mic incentive for medicine to be purchased mail order in quantity, saving the in
surance company money. This factor will also help boost The Discount Pharmacy to
profitability. The Pharmacy will increase its market share through targeted adv
ertising to increase the number customers who are looking to save money on a pri
cey, necessary expense.
2.0 Situation Analysis
The Discount Pharmacy is in the first year of business as a start-up operation.
The Pharmacy believes that the market demand for their services will be great an
d are convinced that a cohesive marketing strategy is required for The Pharmacy.
The Pharmacy offers a wide range of prescription medicine for pick up at their
store front or it can be distributed by mail order. The Pharmacy's prices are fa
r better than most pharmacies so their services will be attractive for people th
at just need to buy their medicine at good prices and do not need their hands he
ld during the process.
2.1 Market Summary
The Discount Pharmacy posesses good information regarding their market and the t
arget segments that they wish to serve. The Pharmacy will leverage this informat
ion to better understand who is served, their specific needs, and how The Pharma
cy can better serve them.
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The Discount Pharmacy
Target Markets
Walk-in customers Mail order customers
Table 2.1: Target Market Forecast Target Market Forecast Potential Customers Wal
k-in customers Mail order customers Total
Growth 8% 9% 8.99%
2001 345,887 54,876,345 55,222,232
2002 373,558 59,815,216 60,188,774
2003 403,443 65,198,585 65,602,028
2004 435,718 71,066,458 71,502,176
2005 470,575 77,462,439 77,933,014
CAGR 8.00% 9.00% 8.99%
2.1.1 Market Demographics
The profile for The Discount Pharmacy's customer consists of the following geogr
aphic, demographic, and behavior factors: • • • • • • • Male and female. A larger percentag
f people will be over 50. Many of the people are members of the AARP. Economical
ly conscious of good deals. More than one medication at any one time. Are on a p
rescription that is a continual cycle, not ending once the malady is corrected.
Know what they need and do not require extra services that some Pharmacists prov
ide.
Table 2.1.1: Target Market Analysis Target Market Analysis Market Segments Walk-
in customers Mail order customers
Characteristic -
Characteristic -
Characteristic -
Characteristic -
Characteristic -
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The Discount Pharmacy
2.1.2 Market Needs
The Discount Pharmacy is providing the market with a source of discounted drugs.
This market need is important as many Americans are faced with the dilemma of u
sing their limited income on food or meds. The Discount Pharmacy seeks to fulfil
l the following benefits that are important to their customers. • Selection: The P
harmacy offers a wide range of medication, both originals as well as generic alt
ernatives. • Accessibility: Products are distributed through their conveniently-lo
cated store front, or can be shipped within the U.S. • Customer service: The Pharm
acy recognizes the value of having outstanding customer service. By exceeding al
l of the customer's expectations, they are ensuring repeat customers and many re
ferrals. • Pricing: The Discount Pharmacy's prices will be noticeably better than
local pharmacies.
2.1.3 Market Trends
The market trend for pharmacies reinforces consolidation. The whole medical indu
stry (including doctors, pharmaceutical companies) has pressure being applied to
them from different sides to achieve cost efficiencies and to decrease the cost
of the various products/services. Looking specifically at pharmacies, over the
last eight years, there has been widespread consolidation, done to a large degre
e to achieve costs efficiencies. Now insurance companies are adding pressure to
decrease costs since they are a main party in the payment for meds. The Discount
Pharmacy is able to coexist in this consolidation environment by achieving cost
efficiencies through their unique business model of mail order service and a de
crease in the normal pharmacist offered services.
Market Forecast
80,000,000 70,000,000 60,000,000 50,000,000 40,000,000 30,000,000 20,000,000 10,
000,000 0 2001 2002 2003 2004 2005
Walk-in customers Mail order customers
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The Discount Pharmacy
2.1.4 Market Growth
In 2000, the global pharmaceutical industry as a whole was a $897 billion dollar
industry. The industry is forecasted to continue its record growth. This growth
can be attributed to several factors, the underling driver is scientific progre
ss. As our scientific community continues to make breakthroughs in medical appli
cations, people become more and more reliant on medication to lengthen and impro
ve their quality of life. American society in particular has become increasingly
reliant on medication. This conclusion seems to be fairly intuitive as many ind
ividuals have a vested interest in living longer and more comfortably. This dema
nd applies pressure to the scientists and pharmaceutical companies who are alway
s on the lookout for the next big blockbuster drug which will ensure profitable
returns. While America remains as the largest consumer of medication in the worl
d, to a large degree based on the simple quantitative measurement of GNP, it is
reasonable to expect that the retail distribution of these drugs will achieve ex
traordinary growth rates if they are employing creative business models or if th
ey are one of the "giants."
Target Market Growth
9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Walk-in customers Ma
il order customers
2.2 SWOT Analysis
The following SWOT analysis captures the key strength and weaknesses within the
company, and describes the opportunities and threats facing The Discount Pharmac
y.
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The Discount Pharmacy
2.2.1 Strengths
• • • • A unique, current business-environment-appropriate business model. Excellent sta
ff who are highly trained and very customer attentive. Great prices. The ability
to scale rapidly for the mail order side of the business.
2.2.2 Weaknesses
• The lack of visibility and brand equity of a start-up business. • Lack of true exp
erience running a mail order outfit. • Government intervention/regulation into med
icine is possible.
2.2.3 Opportunities
• Outside pressure on consumers to purchase meds mail order. • The constant growth o
f the number of people taking medication. • Newly formed alliances of insurance co
mpanies and mail order pharmacies.
2.2.4 Threats
• The entry into the mail order market by an established company. • Regulatory legis
lation that curtails the mail order medicine industry. • Some event that cripples
interstate commerce in regards to shipping.
2.3 Competition
Competition takes many different forms in the pharmacy industry. • Chain pharmacie
s: These are state or national chains such as Rite-Aid. The advantage to these c
hains are better prices through economies of scale as well as personalized servi
ce. The personalized service takes the form of the chain having a record of your
medication purchases as well as any allergies that you have disclosed to them. •
Local pharmacies: These are the pharmacies where you typically know the pharmaci
sts and they know your medical history. This option is high in personalized serv
ice and convenience, and high in price. • Mail order and Internet pharmacies: Thes
e are similar to The Discount Pharmacy. • Canadian pharmacies: These pharmacies ar
e located in Canada where the cost of drugs is lower than in the U.S. These phar
macies can be accessed through mail order, the Internet, or via travel. Recently
there has been the trend for trips arranged for senior citizens in northern sta
tes to travel up to Canada for the day to pick up their meds.
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The Discount Pharmacy
Table 2.3: Growth and Share Analysis Growth and Share Competitor Competitor Comp
etitor Competitor Competitor Competitor Other Average Total
Price $0 $0 $0 $0 $0 $0 $0.00 $0.00
Growth Rate 0% 0% 0% 0% 0% 0% 0.00% 0.00%
Market Share 0% 0% 0% 0% 0% 0% 0.00% 0.00%
2.4 Business Model Description
The Discount Pharmacy offers a wide range of prescription drugs to patients base
d in Oregon and nationally. Both generics and name brands are offered. The custo
mer needs to either mail in the prescription, fax it, or email it. Once it is re
ceived and payment arrangements are complete, the meds will be sent out to the c
ustomer via U.S.P.S. or U.P.S. Local customers may stop by the store front to pi
ck up the medications contemporaneously. The Discount Pharmacy will only service
customers who self pay. The self pay customers will be attracted to The Discoun
t Pharmacy because of their superior prices. For many Americans that do not have
drug plans, including the vast majority of Americans over 65, a discount on dru
gs is very welcome on today's increasingly tight monthly budgets. The Discount P
harmacy will be able to survive on lower margins due to operating efficiencies g
ained through mail order and not accepting insurance policy drug plans. With eac
h order a printout will accompany the medications that will provide directions o
n how to take the medications, other drug that should be avoided concurrently, a
nd other useful information. Often times this information is communicated person
ally by the pharmaceutical technician. The Discount Pharmacy will be using compu
ter printouts from industry software to reduce the cost of providing this inform
ation. Note: While the term "self pay" is typically associated with the notion t
hat the customer is paying for the medication out of pocket without insurance, i
t is used in this context as the customer paying for the medications upfront by
themselves regardless if they have insurance. They may be paying for the drugs o
ut of pocket, or they may be paying for the medications upfront and then request
ing their insurance companies drug plan to reimburse them later.
2.5 Keys to Success
The keys to success are: • Repeat customers. • Low overhead and operating costs. • Sup
erior prices and service.
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The Discount Pharmacy
2.6 Critical Issues
The Discount Pharmacy is still in the speculative stages as a start-up business.
Its critical issues are to continue to take a modest fiscal approach, expanding
at a reasonable rate, not for the sake of expansion in itself, but because prud
ent economic analysis dictates to.
3.0 Marketing Strategy
The Discount Pharmacy will have different marketing strategies for the two diffe
rent segmented groups that they wish to reach. The walk-in customers will be tar
geted through advertisements in the local paper, "The Oregonian." The advertisem
ents will raise visibility for The Discount Pharmacy and their discounted prices
. As the price of medication continues to skyrocket, The Discount Pharmacy will
appeal to local people as a way to try to contain these rising costs. The mail o
rder customers will be targeted through an advertising campaign in magazines and
newsletters that have an older (over 55) crowd that regularly needs medication
and knows in advance what their needs are. One of the main newsletters that The
Discount Pharmacy will be visible in is the American Association of Retired Pers
ons (A.A.R.P) monthly newsletter.
3.1 Mission
The Discount Pharmacy's mission is to provide the customer with the best prices
and service for prescription medication. We exist to attract and maintain custom
ers. When we adhere to this maxim, everything else will fall into place. Our ser
vices will exceed the expectations of our customers.
3.2 Marketing Objectives
• Increase repeat customers by 7% each quarter. • Decrease customer acquisition cost
s by 8% per year. • Increase customer awareness of The Discount Pharmacy as eviden
ced by an increase in product requests solely generated by knowledge of The Phar
macy's name.
3.3 Financial Objectives
• A double digit growth rate for the first three years. • Reduce the variable costs
associated with servicing each individual order by 4% a year. • Profitability by t
he end of year three.
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The Discount Pharmacy
3.4 Target Markets
The Discount Pharmacy will have different strategies for the two different group
s. The walk-in customers will be targeted through advertisements in the local pa
per, "The Oregonian." The advertisements will raise visibility for The Discount
Pharmacy and their discounted prices. As the price of medication continues to sk
yrocket, The Discount Pharmacy will appeal to local people as a way to try to co
ntain these rising costs. The mail order customers will be targeted through an a
dvertising campaign in magazines and newsletters that have an older (over 55) cr
owd that regularly needs medication and knows in advance what their needs are. O
ne of the main newsletters that The Discount Pharmacy will be visible in is the
A.A.R.P monthly newsletter.
3.5 Positioning
The Discount Pharmacy will position themselves as the premier, customer-service-
orientated mail order pharmacy in the U.S. The Discount Pharmacy will offer a go
od selection, great service, and better prices than traditional pharmacies. The
Discount Pharmacy will leverage their competitive edge to achieve this positioni
ng. The Discount Pharmacy's competitive edge is superior pricing. Generally, it
is not a sustainable practice to compete on price. This is the case because it i
s based on the assumption that the competition has the same cost structure, so i
n order to compete on price you have to accept smaller margins which over time w
ill erode the business model and profitability. This reasoning does not apply to
The Discount Pharmacy's situation because they are able to maintain similar mar
gins through cost-cutting measures and operating efficiencies. The Discount Phar
macy is able to decrease operating costs by not offering all of the typical serv
ices traditionally offered by pharmacies. The first cost measure is only employi
ng a single pharmacist, in compliance with Federal regulations, and using pharma
ceutical technicians whenever possible. As long as a pharmacist is on-site durin
g the hours of operation, The Pharmacy can use the pharmaceutical techs in all o
ther capacities that most pharmacies use pharmacists for. The Discount Pharmacy
is able to maintain industry margins through the use of other operating efficien
cies. By only having a small store front and doing the bulk of business through
mail order, operating costs are significantly reduced. Lastly, although there is
a pharmacist on hand, The Discount Pharmacy is not designed to hold the patient
s hands when they purchase their medications. The vast majority of The Discount
Pharmacy customers are veteran drug takers and are already aware of how to take
the medication and any side effects or drug interactions that should be avoided.
Regardless, The Discount Pharmacy will provide each patient with a print out of
all the information they need for the consumption of the drugs.
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The Discount Pharmacy
3.6 Strategies
The single objective of The Discount Pharmacy is to establish themselves as the
mail order pharmacy serving the U.S. The Discount Pharmacy will aim to achieve a
30% market penetration within five years. The marketing strategy will seek to f
irst create customer awareness regarding the products/services offered, develop
the customer base, and work toward building customer loyalty and referrals. The
Pharmacy will use advertisements to communicate the message. Advertisements will
be placed in different venues depending on the target segment that is trying to
reached. To reach the walk-in customers, advertisements will be run in The Oreg
onian. To reach the mail order target segment advertisements will be placed in A
.A.R.P's newsletter.
3.7 Marketing Mix
The Discount Pharmacy marketing mix is comprised of the following approaches to
pricing, distribution, advertising and promotion, and customer service. • Pricing:
The Pharmacy's prices will be better than traditional pharmacies. • Distribution:
The products will be distributed throughout the U.S. • Advertising and Promotion:
The most successful advertising campaigns will be targeted advertisements. • Cust
omer Service: Obsessive customer service is the norm. All employees have been tr
ained to ensure that all customer's expectations are exceeded. This will occur a
t any shortterm expense, realizing that this is needed to build a successful bus
iness.
3.8 Marketing Research
During the initial phases of the marketing plan completion, several focus groups
were held to gain insight into the targeted customer's mind and the processes o
f their decision making. These focus groups provided the Pharmacy with a wealth
of information. Additionally, survey were handed out and completed by people tha
t use traditional pharmacies to purchase their medications. The surveys were dev
eloped by The Discount Pharmacy's owner himself, leveraging his statistic skills
that he mastered while pursuing his MBA. Having a carefully designed survey is
paramount to ensuring that the data collected is accurate and applicable. The su
rveys provided insight into the barriers that people face when moving from using
a brick and mortar pharmacy to a mail order pharmacy. The last source of market
ing research is an in-depth analysis of the pharmacy industry, focusing on consu
mer decision models within the industry. Cumulatively, all of this market resear
ch provided the owner with the necessary "kick in the pants" to move forward wit
h his idea.
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The Discount Pharmacy
4.0 Financials
This section will offer a financial overview of The Discount Pharmacy as it rela
tes to the marketing activities. The Pharmacy will address break-even analysis,
sales forecasts, expense forecasts, and how they link to the marketing strategy.
4.1 Break-even Analysis
The break-even analysis indicates that $72,494 will be needed in monthly revenue
to reach the break-even point.
Break-even Analysis
$30,000 $20,000 $10,000 $0 ($10,000) ($20,000) ($30,000) ($40,000) $0 $24,200 $4
8,400 $72,600 $96,800 $121,000
Monthly break-even point
Break-even point = where line intersects with 0
Table 4.1: Break-even Analysis Break-even Analysis: Monthly Units Break-even Mon
thly Sales Break-even Assumptions: Average Per-Unit Revenue Average Per-Unit Var
iable Cost Estimated Monthly Fixed Cost
725 $72,494
$100.00 $53.00 $34,072
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The Discount Pharmacy
4.2 Sales Forecast
The first two months will be used to set up the store front and generate both lo
cal and national visibility. Month three will be the first month with sales acti
vity. During month three through five there will be only a small amount of mail
order business. The reason for this is that it will take time to sufficiently de
velop visibility regarding the mail order operation. Month six will see a jump i
n sales activity for mail order and there will be steady growth in sales activit
y from month six on.
Monthly Sales Forecast
$70,000 $60,000 $50,000 $40,000
Walk-in customers
$30,000 $20,000 $10,000 $0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Mail order customers
Table 4.2: Sales Forecast Sales Forecast Sales Walk-in customers Mail order cust
omers Total Sales Direct Cost of Sales Walk-in customers Mail order customers Su
btotal Cost of Sales
2001 $183,056 $176,994 $360,050 2001 $111,664 $79,647 $191,311
2002 $743,778 $976,543 $1,720,321 2002 $453,705 $439,444 $893,149
2003 $843,540 $1,234,654 $2,078,194 2003 $514,559 $555,594 $1,070,154
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The Discount Pharmacy
4.3 Expense Forecast
Marketing expenses are to be budgeted so they ramp up quarterly. These intervals
are chosen because they are the common intervals that people who are buying sev
eral months of medication at once use.
Monthly Expense Budget
$6,000
$5,000
$4,000
$3,000
Oregonian advertising AARP advertising
$2,000
$1,000
$0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Table 4.3: Marketing Expense Budget Marketing Expense Budget Oregonian advertisi
ng AARP advertising Total Sales and Marketing Expenses Percent of Sales Contribu
tion Margin Contribution Margin / Sales 2001 $8,200 $47,000 -----------$55,200 1
5.33% $113,539 31.53% 2002 $20,000 $55,000 -----------$75,000 4.36% $752,172 43.
72% 2003 $30,000 $65,000 -----------$95,000 4.57% $913,040 43.93%
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The Discount Pharmacy
5.0 Controls
The purpose of the marketing plan is to serve as a guide to the organization. Th
e following areas will be monitored to gauge performance: • • • • Revenue: monthly and a
nnual. Expenses: monthly and annual. Repeat business. Customer satisfaction.
5.1 Implementation
The following milestones identify the key marketing programs. It is important to
accomplish each one on time and on budget.
Milestones
Marketing plan completion
Bi-annual Oregonian campaign
Bi-annual AARP campaign
Bi-annual Oregonian campaign
Bi-annual AARP campaign
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Table 5.1: Milestones Milestones Milestone Marketing plan completion Bi-annual O
regonian campaign Bi-annual AARP campaign Bi-annual Oregonian campaign Bi-annual
AARP campaign Totals Plan Start Date 1/1/01 1/1/01 1/1/01 7/1/01 7/1/01 End Dat
e 2/1/01 6/31/01 6/31/01 12/31/01 12/31/01 Budget $4,200 $4,200 $4,000 $4,000 $1
6,400 Manager John John John John John Department
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The Discount Pharmacy
5.2 Marketing Organization
The Discount Pharmacy's owner, John Unforseea, will be primarily responsible for
the marketing activities. John will rely on an outside firm for assistance with
the creative work.
5.3 Contingency Planning
Difficulties and risks: • Problems generating visibility. • Difficulty developing su
fficient demand. • An entry into the mail order market from an already established
, larger pharmacy. Worst case risks include: • Determining that the business canno
t support itself. • Having to liquidate equipment to cover liabilities.
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Appendix: The Discount Pharmacy
Table 4.2 Sales Forecast Sales Forecast Sales Walk-in customers Mail order custo
mers Total Sales Direct Cost of Sales Walk-in customers Mail order customers Sub
total Cost of Sales Plan Jan $0 $0 $0 Jan $0 $0 $0
Feb $0 $0 $0 Feb $0 $0 $0
Mar $8,765 $2,245 $11,010 Mar $5,347 $1,010 $6,357
Apr $10,987 $5,543 $16,530 Apr $6,702 $2,494 $9,196
May $12,554 $6,543 $19,097 May $7,658 $2,944 $10,602
Jun $16,776 $12,334 $29,110 Jun $10,233 $5,550 $15,784
Jul $18,443 $15,454 $33,897 Jul $11,250 $6,954 $18,205
Aug $20,001 $19,877 $39,878 Aug $12,201 $8,945 $21,145
Sep $21,332 $23,556 $44,888 Sep $13,013 $10,600 $23,613
Oct $22,343 $26,776 $49,119 Oct $13,629 $12,049 $25,678
Nov $25,311 $30,112 $55,423 Nov $15,440 $13,550 $28,990
Dec $26,544 $34,554 $61,098 Dec $16,192 $15,549 $31,741
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Appendix: The Discount Pharmacy
Table 4.3 Marketing Expense Budget Marketing Expense Budget Oregonian advertisin
g AARP advertising Total Sales and Marketing Expenses Percent of Sales Contribut
ion Margin Contribution Margin / Sales Jan $800 $5,000 -----------$5,800 0.00% (
$5,800) 0.00% Feb $800 $5,000 -----------$5,800 0.00% ($5,800) 0.00% Mar $800 $5
,000 -----------$5,800 52.68% ($1,147) -10.42% Apr $800 $5,000 -----------$5,800
35.09% $1,534 9.28% May $400 $2,000 -----------$2,400 12.57% $6,095 31.91% Jun
$600 $3,000 -----------$3,600 12.37% $9,726 33.41% Jul $700 $3,500 -----------$4
,200 12.39% $11,492 33.90% Aug $800 $4,500 -----------$5,300 13.29% $13,433 33.6
8% Sep $400 $2,000 -----------$2,400 5.35% $18,875 42.05% Oct $600 $3,000 ------
-----$3,600 7.33% $19,841 40.39% Nov $700 $4,000 -----------$4,700 8.48% $21,733
39.21% Dec $800 $5,000 -----------$5,800 9.49% $23,557 38.56%
Page 2