Chapter 22. Marketing Applications

Mr. Teeter is a graduate student in the Department of Pharmacy Care Systems at Auburn University's Harrison School of Pharmacy. He received a B.S. in Public Health from Indiana University and is currently working toward his Ph.D. in Pharmacy Care Systems. His teaching interests include pharmacy management, managing organizational change, and the US health care system. His main research interests include quality improvement in community pharmacy, adoption, implementation, and sustainability of innovations, and how community pharmacies adopt and market patient care services to their clients.

Dr. Westrick is an Associate Professor in the Department of Pharmacy Care Systems at Harrison School of Pharmacy, Auburn University. She received her B.S. in Pharmacy from Chulalongkorn University, Bangkok, Thailand, M.S. in Industrial Technology from Illinois State University, and Ph.D. in Social and Administrative Sciences in Pharmacy from University of Wisconsin-Madison. Her primary research interests are innovation adoption and program evaluation in community pharmacies.

After completing this chapter, readers should be able to

1. Describe the role of marketing and its importance in the practice of pharmacy.

2. Describe the essential steps when preparing to market goods or services in a pharmacy.

3. Distinguish between the micro- and macroenvironment of an organization.

4. Conduct a situation analysis for a given organization.

5. Differentiate between mass marketing and market segmentation.

6. Analyze a target market.

7. Apply marketing-mix components to various scenarios.

8. Describe the importance of marketing control.

Murray Rockefeller earned a Pharm.D. degree 7 years ago. Upon graduation he was presented with the opportunity to become a junior partner of Community Care Pharmacy in Weagle, AL. This pharmacy fills prescriptions, provides compounding services, offers a full line of durable medical equipment, and prepares unit dose blister packages of medications for residents of a local nursing home. For the first 5 years of Dr. Rockefeller's employment, he worked closely with the senior partner and learned about running a pharmacy business. Working side by side with the senior partner ensured the smooth transition of the pharmacy ownership when Dr. Rockefeller became the sole owner of Community Care Pharmacy 2 years ago. Since Dr. Rockefeller assumed ownership of the pharmacy, he has reflected that much of his effort has been focused on maintaining existing services provided by the pharmacy rather than planning for goods and services they might offer in the future.

During the past year, Dr. Rockefeller has realized a significant increase in competition from community pharmacies in the area, as well as lower profit margins from dispensing prescriptions. He knows that he must investigate options to seek additional revenue sources for his pharmacy. These options include offering new goods, as well as developing new services that are needed and wanted by his patients. He also knows that before launching any new good or service he must do extensive planning and evaluate marketing options to ensure success.

1. Why is it important that the goods and services a pharmacy provides be consistent with the pharmacy's mission and vision statements?

2. Why is conducting a Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis important, and how can it be used to help shape a pharmacy's marketing efforts?

3. How does setting goals and objectives benefit a pharmacy?

4. What are the characteristics of a good target market?

5. How are the Four Ps applied to a specific marketing effort?

6. Describe pros and cons of each method of advertising.

7. Compare and contrast the four forms of promotion.

8. Describe why monitoring the performance of marketing activities important to a pharmacy's success?

For the past 30 years, health care costs have increased faster than the costs of other goods and services. This has forced the payers of health care (e.g., patients, insurance companies, employers, government agencies) to seek ways to control the costs of health care. These cost control measures have had a direct impact on the practice of pharmacy, as pharmacy benefit managers have been aggressive in reducing their reimbursement rates for prescription drugs (see Chapter 19). Because of reduced reimbursement rates, profit margins generated from dispensing prescriptions, and in turn profit margins for the entire pharmacy's operations, have decreased over time. The reduction in profitability from dispensing, as well as increases in costs of drugs, pharmacist and other employee salaries, and other operating expenses, have forced pharmacies to seek alternative revenue sources. Pharmacies have generated additional revenues in a variety of ways, including selling different lines of goods, and establishing patient care services such as immunizations, health and wellness screenings, and medication therapy management (MTM) services.

Marketing is a necessary and essential function in a highly competitive and resource-constrained environment. To successfully launch any new good or service, a deep understanding of the organization, environment, and market is crucial. This chapter describes how marketing principles (see Chapter 21) can be applied in pharmacy practice, as illustrated through Dr. Rockefeller's scenario. Specifically, this chapter discusses several marketing concepts including situational analysis, market segments, target markets, and the marketing mix, and illustrates how these concepts are applicable in pharmacy practice.

Strategic planning in pharmacy operations is crucial as it maximizes the organization's future success. Chapter 4 describes the strategic planning process and emphasizes the importance of an organization's vision and mission statement, as they create a sense of purpose and direction for the employees. Also, as previously stated in Chapter 5, a vital step in the development of a business plan is to create a marketing strategy. Therefore, pharmacists should consider what their organization is striving for, as well as the organization's values and overall purpose, and specific steps should be followed in preparing to market a good or service.

The following steps should be taken when preparing to market a good or service in a pharmacy (Hillestad and Berkowitz, 2004; Holdford, 2007). These steps are illustrated in Fig. 22-1. First, the micro- and macroenvironment are analyzed to identify strengths and limitations of the organization's capacity, as well as opportunities and threats in the environment. Second, goals and objectives are formulated using the information compiled in the previous step. The goals and objectives must be consistent with the organization's vision and mission statements. It is possible that the first two steps have already been conducted as part of the strategic plan and business plan development processes. Third, market segments and the target market are identified. At this point, having the organization's goals, objectives, and possible target markets identified, a specific product or service can be developed. Fourth, the organization proceeds to formulate and design the marketing mix for each target market. The last step is to evaluate the extent to which marketing strategies are successful. Information gathered during this final step is crucial as it helps inform the organization and identifies if changes in any components of the marketing process are needed.

Dr. Rockefeller now knows that before he can develop new goods and services that his pharmacy should offer to customers, he must consider the vision and the mission of Community Care Pharmacy and ensure that these goods and services are consistent with the organization's overall strategic plan. After reviewing the existing mission and vision statements, he realizes that they do not reflect the direction he would like to take the pharmacy under his ownership. He has also come to realize that the pharmacy does not have a strategic plan in place. Dr. Rockefeller schedules a meeting with all of the pharmacy's employees to develop a strategic plan. Soon afterward, Community Care Pharmacy has the strategic plan in place, including updated mission and vision statements.

Situational Assessment

Before making a decision regarding what goods and services to offer and how to offer them, it is important for managers to analyze their organization's market environment. In essence, organizations interact with two types of environment: the microenvironment and the macroenvironment (Kotler and Armstrong, 2004) (See Fig. 22-2). Specifically, the microenvironment consists of the organization's internal and external environment. The organizational structure, culture, personnel, and resources are the internal environment whereas the organization's suppliers, customers, and competitors are the external environment. The characteristics of the microenvironment affect the organization's ability to serve its customers. Further, in addition to the microenvironment, organizations should also pay attention to the dynamics of the macroenvironment, as factors embedded within the macroenvironment can influence demand for the organization's goods and services. These factors include demographics, economics, nature, technology, politics, and culture (Kotler and Armstrong, 2004). For example, when considering the demographic environment, an aging population creates demand for chronic care services such as anticoagulation management. Further, at times of economic downturns, there is a need for pharmacists to help patients reduce their overall costs of care. Finally, because technological developments affect how patients interact with health care providers, as well as how patients manage their conditions and illnesses, pharmacists should be aware of both opportunities and threats presented by new technologies.

The situational assessment is an analysis of the organization's environment and of the organization itself (Berkowitz, 1996). This assessment process starts with an analysis of the Strengths and Weaknesses of the organization, followed by the Opportunities and Threats relevant to the organization's future strategy. This process is referred to as the SWOT analysis. Similar to how SWOT analysis can be used in the strategic and business planning processes (see Chapters 4 and 5), SWOT analysis may also be used to develop new goods and services that respond to the opportunities and threats of the organization's environment while recognizing their inherent strengths and weaknesses (Ferrell et al., 2002).

Dr. Rockefeller and the employees of Community Care Pharmacy took some time to evaluate the pharmacy's microenvironment and macroenvironment. Community Care Pharmacy is located in the city of Weagle, which is located in Monet County, Alabama. Weagle is the principal city of this county. The county's economy is centered in Weagle as many employers, businesses, schools, and service organizations reside in the city. In fact, the city of Weagle is the largest city in Eastern Alabama. About 15 percent of the population is considered elderly (>65 year old). Weagle is one of the fastest growing metropolitan areas in the South, and has recently been voted as one of the best retirement cities for active adults. The results of their environmental scan of the demographic characteristics of their communities are summarized in Table 22-1.

In reviewing the pharmacy's prescription records, as well as health facts about Alabama [obtained from the Kaiser Family Foundation Web site (www.kff.org)], Dr. Rockefeller discovered that a wide variety of chronic diseases are prevalent among current pharmacy customers, and that state-level health statistics on some health risk factors are concerning (see Table 22-1).

Monet County has a total of 29 community pharmacies. Specifically, there are 10 independently owned pharmacies, 10 chain pharmacies, five grocery store pharmacies, and four mass merchandise pharmacies. Most of these pharmacies (22) are located within the Weagle metropolitan area. Given the growing economy in the area, several chain pharmacies have expressed an interest in expanding their businesses in the area.

Strengths and Weaknesses Assessment

To complete an assessment of an organization's strengths and weaknesses, the organization should consider both the current and potential capacity to compete in the market (Holdford, 2007). A strength is a resource or capacity of the organization that can be used to achieve its objectives, while a weakness is a limitation within the organization that hinders the organization from achieving its objectives. An organization must assess various factors internal to the organization including resources (e.g., financial resources, intellectual resources, location), relationships with patients, reputation among patients, relationships with other healthcare providers, staff, workload, efficiency, management, and culture.

Table 22-2 describes the SWOT analysis for Community Care Pharmacy. Dr. Rockefeller and the pharmacy staff agreed on several strengths of the pharmacy. One is that the pharmacy has loyal customers. In fact, 60 percent of Community Care Pharmacy's new patients have been referred to the pharmacy by other patients. The pharmacy has been in business for more than 25 years, and every patient receives medication counseling when they pick up their medications. The pharmacy also has a large customer base as it provides a wide range of services including medication dispensing, compounding, serving a local long-term care facility, and providing durable medical equipment. Another strength is that the pharmacy was remodeled 3 years ago; thus it emanates a professional image. Next, all five staff pharmacists at Community Care Pharmacy have excellent clinical skills and knowledge of pharmacotherapy. Three out of the five pharmacists have a Pharm.D. degree and one has completed a community pharmacy residency. All pharmacists are certified to administer vaccines. The excellent skills and knowledge of the pharmacists along with their dedication to patient care have led to positive relationships with physicians and nurse practitioners in the community.

Dr. Rockefeller and his colleagues also recognize the weaknesses of Community Care Pharmacy. Although a wide range of services are provided, much of what pharmacists do is product oriented (e.g., dispensing medications). The pharmacy does not currently offer any patient care services beyond counseling about the medications they dispense, and aside from the pharmacist who completed the residency, the rest of the staff has limited experience in the delivery of patient care services. Furthermore, regarding relationships with prescribers, working relationships with pediatricians in the area have not yet been developed. Lastly, due to low profit margins on prescription dispensing, the pharmacy's financial resources are somewhat limited. Specifically, the pharmacy was forced to lower operating costs by reducing technicians' hours 6 months ago. This has affected pharmacists' workload.

Opportunities and Threats Assessment

An organization must conduct environmental analyses of opportunities and threats. In scanning the environment, the likelihood and implications of relevant opportunities and threats can be identified. In essence, an opportunity analysis identifies gaps between market demand and what is currently available, as well as changes in the market that enhance the prospects for the organization's goods and services (Holdford, 2007). In contrast, conducting a threat analysis will help the organization identify factors that may prevent the organization from achieving its intended objectives, as well as changes in the market that may reduce the demand for the organization's goods or services. To help the organization identify opportunities and threats, the following questions can be asked (Berkowitz, 1996; Holdford, 2007):

1. What are the changes and trends?

2. How will these changes affect the organization?

3. What opportunities do these changes present?

4. What needs are not being met in the current marketplace?

5. How is the environment changing to the organization's advantage or disadvantage?

6. What potential problems might threaten the success of the organization's plans?

Dr. Rockefeller and colleagues analyzed the environment and have identified several opportunities for Community Care Pharmacy (Table 22-2). First, a large number of people are enrolled in a traditional Medicare program with Medicare Part D plans. Since the city of Weagle has been cited as one of the best cities to retire, there has been an influx of relatively healthy, active patients in their 60s and 70s to the area. This group of patients has chronic conditions and needs preventive care services (e.g., immunizations, health screening services). Given Community Care Pharmacy's strengths, they feel that they could easily develop new goods and services that meet the needs and wants of this population. After meeting with the local health department, many people in the area are at risk for influenza, pneumonia, and shingles. However, the ability of local physicians to provide immunizations is limited by their busy schedules, and access to nontraditional immunization providers is limited. The pharmacy staff has also recognized that more than half members of the local population are overweight, many of whom are obese. This group of the population is at high risk for developing heart disease, hypertension, and diabetes and therefore may also be a good group to target new pharmacy goods and services. Based on the discussion with members of the local Chamber of Commerce, many local businesses are self-insured employers and have expressed a strong interest in reducing their healthcare costs. Dr. Rockefeller and his colleagues agreed that these businesses can be targeted as new pharmacy services may help improve their enrollees' health, and therefore reduce health care costs in the long run.

Dr. Rockefeller and his colleagues identified four primary threats to Community Care Pharmacy. A prominent threat is that there has been an increase in competition among community pharmacies in regard to dispensing services. A national mass merchandiser has a 160,000 square feet store two miles from the pharmacy. The mass merchandiser has begun offering many generic prescriptions for $4 for a month's supply, making it difficult for Community Care Pharmacy to compete for price-conscious consumers. The competition for medication dispensing is likely to increase, as a large chain recently purchased two independently owned pharmacies in Weagle and have announced plans to expand their stores in the county. Also, Community Care Pharmacy may lose some patients to mail-order pharmacy in the near future. This is because a large, self-insured employer in the area incentivized their employees to obtain their chronic medications from a mail-order pharmacy by waiving the co-payment on generic medications. Lastly, some local physicians have expressed concerns with pharmacy-based disease state management services, feeling that these services may not be in their patients' best interests.

Now that Dr. Rockefeller and colleagues have completed the SWOT analysis, they realize that additional sources of revenues are needed. They are now ready to identify new goods and services to bring to the market.

Goals and Objectives Formulation

Results of the SWOT analysis should be used to inform the organization in the development of new goods and services. Plans to bring new goods and services to market are commonly described in business plans (see Chapter 5). Business plans should contain a set of goal statements that lead to objectives that an organization wants to accomplish. Goal statements are usually general and abstract (Rossi et al., 2004). They describe a desired state the organization strives to accomplish. Each goal statement may include several objectives. In contrast to goal statements, objectives are specific statements detailing the desired accomplishments of the plan (Rossi, et al., 2004). In other words, objectives are quantitative measures of accomplishment by which the success of marketing strategies can be measured. Objectives might include retention, sales growth, and gains in the organization's share of their market (Berkowitz, 1996). When the organization determines its objectives, it is important that they formulate SMART objectives (Doran, 1981). That is, objectives should be specific, measurable, attainable, relevant, and timely. A specific objective is one that describes exactly what the organization is going to do, with whom, and for whom. A measurable objective is one that can be assessed to determine whether or not the objectives are being met. The objectives that are formulated for the pharmacy should be attainable (reasonable/realistic), considering the pharmacy's availability of resources. Next, the objectives should specify relevant outcomes. Lastly, the objective should be time specific, meaning that each of the objectives has a deadline for its achievement.

Dr. Rockefeller and his colleagues utilized the information gained from the SWOT analysis to formulate goals and objectives for Community Care Pharmacy (see Table 22-3 for an example). They agreed that given the degree of competition in the dispensing business, Community Care Pharmacy needs to capitalize on its strengths and offer a new service to provide a new revenue source. These objectives will be used to measure the success of the new service.

Determining the Target Market

After an organization's goals and objectives are identified, the next step is to determine the target market. The purpose of identifying the target market is to determine what population the organization is trying to attract (Berkowitz, 1996). Various factors can be used to identify target markets including the organization's capabilities, the competition within the market, the cost of capturing market share, and the potential financial gain from the target group (Berkowitz, 1996).

Targeting the entire market as one target market is referred to as mass marketing. This is when an organization attempts to attract every eligible person to its use of the good or service (Kotler and Clarke, 1986). An organization that utilizes mass-marketing strategies pays little or no attention to differences in consumer preferences (Kotler and Clarke, 1986). However, for most products and services, it is difficult to reach and appeal to all consumers, as they commonly have a variety of needs and may be geographically scattered across a wide area. Because of the limitations presented by the mass-marketing approach, organizations often focus on specific segments of a market, referred to as target markets. In this way, an organization can focus its resources on specific market segments and develop strategies that are tailored to meet the needs of the consumers whom they are aiming to target.

The process to identify the target market includes two steps: market segmentation and target marketing (Kotler and Clarke, 1986). Market segmentation is a process in which a market is divided into distinct and meaningful groups of consumers based on their profiles. For example, the market can be segmented by demographic variables such as income, age, disease categories, sex, health insurance coverage (e.g., cash payers, third-party payers), or buying behaviors. There is no single best way to segment a market, and a market can be segmented in a number of ways. The organization should segment the market in a way that makes the most sense and reveals the most of market opportunities for the types of goods and services they plan to introduce. Once the organization identifies the market segments, they then can evaluate the attractiveness of each segment and choose one or more segments that are desirable (Holdford, 2007). Desirable market segments should be identifiable, accessible, of sufficient size, and responsive to targeted marketing mix strategies (Holdford, 2007).

Dr. Rockefeller and colleagues identify target markets for Community Care Pharmacy by reviewing the existing customer databases (e.g., patient profiles, insurance coverage). With the characteristics of desirable market segments in mind, two desired target markets were identified (Medicare enrollees and young, cash-paying customers). Table 22-4 describes characteristics of each group.

After selecting the target markets, an organization must formulate and design elements of the marketing mix that position a good or service in the minds of targeted consumers. Positioning a good or service in this manner is achieved through use of each of the four elements of marketing mix. Since Community Care Pharmacy ultimately aims at attracting two different target markets, elements of the marketing mix may have to be customized for each market in order to yield the optimal benefits.

After completion of an organizational SWOT analysis, creation of goals and objectives, and identification of target markets, Community Care Pharmacy is ready to plan the details of the marketing mix. The marketing mix is defined as the set of controllable variables that an organization can manipulate and use to reach its goals and objectives (Berkowitz, 1996). These variables are often viewed as the Four Ps: product, price, place, and promotion (described in Chapter 21). The forthcoming sections explain how Community Care Pharmacy can apply each of the Four Ps to position themselves in the eyes of their target markets and reach their goals and objectives.

Product

Products are defined as the goods, services, or ideas that are offered by an organization. Goods are tangible and can be touched or examined, while services are intangible and are seen as activities or processes that are offered to help patients solve problems. In pharmacy, over-the-counter pharmaceuticals and prescription medications are examples of goods that are normally sold to consumers. Being that they are tangible, many of their attributes can easily be understood by consumers. On the other hand, marketing services often requires additional effort because their attributes are not as easily examined or understood.

The five key components of services that differentiate them from goods are commonly referred to as the Five Is (Berkowitz, 1996). Since a service is intangible, the marketing of a service needs to somehow portray the tangible benefits the patient will receive from the service. Inconsistency refers to the fact that services are delivered by individual providers to individual consumers, resulting in inherent variability each time that the service is delivered. Inseparability means that a service cannot be separated from its provider. Consumers who feel they are disrespected during the delivery of a service are likely to have a negative impression of the service even if the provider delivered the service correctly. Unlike physical goods, services cannot be inventoried and stored until they are ready to be delivered or received. Therefore, attention must be paid to scheduling service delivery at a time and in a manner that is both consistent with an organization's operations, yet meets the consumer's needs and wants. Finally, consumers often evaluate a service based on the interaction they have with the person providing the service. Each person a consumer interacts with while receiving a service molds their overall satisfaction with the service. Therefore, each person interacting with consumers has a responsibility to make these interactions as pleasant as possible.

Community Care Pharmacy has decided that they are going to address the opportunities the two target markets have provided. With their SWOT analysis, goals, and objectives in mind, Dr. Rockefeller and his colleagues have decided that a vaccination service is aligned with the strengths outlined in the SWOT analysis. For example, all pharmacists are already certified to administer vaccines, and a private area is available in the pharmacy. In addition, a vaccination service seems to be a good fit considering their limited financial resources and workload. The community offers tremendous market opportunities as the elderly population (Target Market #1) in the area has a need for influenza, pneumococcal, and zoster vaccines. Hence, Dr. Rockefeller and his employees decide that Community Care Pharmacy will provide influenza, pneumococcal, and zoster vaccines for this elderly target market. If the service is successful, Dr. Rockefeller believes they will be able to expand the type of vaccines they provide.

Dr. Rockefeller realizes that this service is difficult to classify as purely tangible or intangible. Although the delivery of the service is intangible, the benefit one gains from receiving a vaccination is tangible. Because of this, Dr. Rockefeller concludes that this service is more of a hybrid and believes he can promote the service through advertising. He also realizes the risk of inconsistency in the delivery of a service. For example, while all pharmacists may be certified to administer vaccines, one may have much more experience in providing the service and therefore is much more thorough. He believes his pharmacists are well trained to provide a consistent high-quality service in a polite and respectful manner that is representative of the pharmacy's image and therefore, inconsistency should not be a major issue. His technicians and store employees are also kind and respectful so he is not worried about interactions with patients. Dr. Rockefeller currently has optimal staffing levels but understands that this service may require him to hire another part-time pharmacist. As previously stated, elements of the marketing mix may differ among different market segments. In the case of Community Care Pharmacy, the young population market (Target Market #2) would desire a different product from the elderly market. For example, an influenza vaccination service could be the focus for this target market.

Price

The next step in marketing Community Care pharmacy's new vaccination service is to establish a price for the product. In order to ensure the success of any new good or service, organizations must offer them at an appropriate price. There are many factors to consider when setting a price, including the costs of providing the good or service, overall consumer demand for the good or service, competition from other organizations offering similar goods or services, and the use of pricing strategies that appeal to consumers.

Costs of Providing a Good or Service

The first thing to consider when pricing a new good or service is the costs the organization will incur to provide them. In the case of Community Care Pharmacy's new vaccination service, they must purchase vaccines, syringes, needles, a refrigerator, cotton swabs, alcohol wipes, band-aids, and the proper medical waste disposal supplies to comply with state and federal disposal laws. Also included in the cost of providing the vaccination service is the salary and benefits they have to pay their pharmacists, technicians, and other employees involved in providing this service. If Community Care Pharmacy plans to offer this service using an outsourced model (i.e., contracting with another vendor to come to the pharmacy and provide immunizations to their patients), an agreement between their pharmacy and the organization contracted to provide the vaccinations must be made related to how the revenues from this service will be shared. If they plan to provide this vaccination service using their own employees, a decision must be made that relates to how they will compensate their pharmacists. Will they offer their pharmacists additional monetary or nonmonetary rewards? Or will they require their pharmacists to provide vaccinations in addition to their normal dispensing activities without additional compensation? These are important questions that will need to be addressed when pricing the service. Overhead expenses must also be considered when pricing the new vaccination service. The principles used to calculate a pharmacy's cost to dispense a prescription can also the applied to calculate their costs to provide any service, such as the costs to provide an immunization (see Chapter 19).

As seen in Community Care Pharmacy's SWOT analysis, consumer demand for vaccination services appears to be high. The SWOT analysis also shows that there is little competition from other providers in the area when it comes to providing these vaccinations. These two opportunities allow the pharmacy to consider how much profit they aim to gain from providing vaccinations. To merely breakeven from providing the service is not the goal. That being said, pricing the service high may result in failure due to low utilization and an increase in competitors who see the high price as an opportunity to provide the service at a lower cost.

Pricing Strategies

For many goods and services offered in pharmacies, reimbursement rates depend on contractual agreements between third-party payers and the pharmacy. For instance, pharmacies that provide medications and MTM services to Medicare Part D plan enrollees are reimbursed at levels stated in the contract. In this case, pharmacies have limited flexibility in determining prices for services they provide. On the other hand, pharmacists have greater flexibility setting prices for services offered to out-of-pocket payers or services offered through a contractual agreement with self-insured employers.

There are many pricing strategies to consider when determining an optimal price for a new good or service. One pricing strategy that is commonly used is known as odd pricing. Odd pricing is the practice of pricing a service just below whole dollar amounts (Berkowitz, 1996). In the case of Community Care Pharmacy, let us assume that their costs of providing an influenza vaccination (including overhead costs and the cost of the vaccine itself) are $20.00. Taking into consideration government regulations regarding the pricing of the service, the usual and customary charge for a similar service by other providers, the pharmacy's cost to provide the service, and the profit desired, Community Care Pharmacy needs the price of influenza vaccination service for cash payers to be at least $20.00. Using the odd pricing strategy, the pharmacy can price this service for out-of-pocket payers at $24.99, just under $25.00. The rationale behind this strategy is that consumers believe products and services priced just under whole dollar amounts ($24.99) are priced at the lowest possible price or that the product or service has been discounted from a higher price.

A second pricing strategy is bundled pricing. Bundled pricing is the practice of selling several items or services together for one total price. This is becoming a very common strategy in health care and can be very appealing to consumers (Berkowitz, 1996). If Community Care Pharmacy chooses to do this, the amount of savings to the patient must be seen as a real advantage. For example, because their influenza vaccine is priced at $24.99 and their vitamin supplements are priced at $11.99, bundling them and selling them for $36.98 would not be beneficial. The pharmacy would need to bundle them and sell them at a discount while still covering their costs. A reasonable bundled price for both the good and the service at the pharmacy would be $29.29 (assuming that the cost of the vitamin supplement is under $10). In addition, Community Care Pharmacy can apply a similar strategy by offering a bundled price for influenza and pneumococcal vaccines for those who need both vaccines.

Discounts are another strategy used in the pricing of goods and services in pharmacy. A functional discount can be given to a large organization by offering vaccination services to its employees for a lower price than the general public (Berkowitz, 1996; Kotler and Armstrong, 1994). As seen in Community Care Pharmacy's SWOT analysis, there are several large, self-insured organizations in Weagle to whom they could offer such a discount. By offering a functional discount to all employees and retirees of these self-insured employers, Community Care Pharmacy can increase the utilization of their vaccination service. Seasonal discount is another pricing strategy commonly used to increase utilization of services. These discounts are given to consumers who purchase goods or services when they are out of season (Berkowitz, 1996; Kotler and Armstrong, 1994). For example, many people wait until the spring and summer months to purchase gym memberships and get in shape. A seasonal discount would offer the same gym membership during the off months for a discounted price. In the case of vaccination service, flu shots are usually offered between September and November and seasonal flu season generally starts in December and lasts through the spring. Even though it is ideal to get vaccinated early, a flu shot in January can still be helpful as there are still 2 or 3 months left in the flu season. To apply this seasonal discount strategy, Community Care Pharmacy may offer influenza vaccine at a discounted price in January or February, if they still have a supply.

Place

The third P in the marketing mix is place. This component refers to the distribution of the good or service. In other words, place refers to how and where the product or service is accessed by the consumer. For a chain community pharmacy, the locations and hours that each pharmacy will offer a service are examples of distribution considerations. Some organizations focus on the convenience of accessing their goods and services by providing multiple locations in the area where they compete with the goal of having no customer go out of their way to access what they have to offer. Chain pharmacies such as CVS, Walgreens, and Rite Aid are examples of organizations that employ this strategy. Community pharmacies have also extended their hours of operation to increase access. Many pharmacies are now open 24 hours a day and in most cases, those that are not open for 24 hours have extended their hours of operation and have begun offering their goods and services on weekends.

Intensity of distribution is a key concept that should be understood when thinking about the place component of the marketing mix. Intensity refers to how available the service is to the consumer. The three forms of distribution intensity are intensive, selective, and exclusive (Berkowitz, 1996). Deciding which form of intensity to utilize with a new good or service is vital to its success.

Intensive Distribution

Intensive distribution is a strategy used when the good or service is available from a large number of locations. Everyday products that community pharmacies sell such as toothpaste, eye drops, aspirin, and ibuprofen are examples of products that are intensively distributed. These products can be found in many different locations and therefore consumers will not go out of their way to patronize a specific organization to purchase them. The same is true about automatic blood pressure machines in pharmacies. Since a patient can check their blood pressure for free in many pharmacies around the country, charging a patient to use a “do-it-yourself” automatic blood pressure cuff without pharmacist consultation would result in a service failure.

Exclusive Distribution

Exclusive distribution is the opposite of intensive distribution, and is the strategy used when a good or service is only offered in very few locations. In the Weagle community, most pharmacy goods and services are offered at multiple locations. This is not the case with Community Care Pharmacy's compounding service. Since other pharmacies in the area do not provide compounding services, consumers of this service are required to patronize Community Care Pharmacy to take advantage of this service. This is an example of a service that is exclusive to their pharmacy and therefore, consumers that want to access this service will not find this service at Community Care Pharmacy's competitors' locations.

Selective Distribution

Selective distribution is the strategy used when a product or service is offered in multiple locations, but fewer locations than an intensive distribution approach. It is known as the selective approach because the consumer has the option to shop around and select the location where they purchase the product or service based on the level of support they perceive they will receive. An example of this in the retail setting is designer clothing. Many premier designer clothing brands select high-end retail stores that match the image they want to portray with their brand. This is considered selective distribution because although a consumer may be able to purchase a particular designer brand at a few different stores in their area, they will not find the product everywhere clothing is sold. The consumer has the op-portunity to choose which location they purchase the designer clothing based on their evaluation of the options.

For a patient to receive vaccination services in the Weagle area they have the option to be vaccinated at Community Care Pharmacy, their primary care physician's office, or the local hospital. The patient has fewer options than an intensively distributed service, but more options than an exclusively distributed service, and therefore will choose the option that best fits their needs and budget. By offering this service in the evenings and weekends (when physicians' offices are closed), and by offering this service on a walk-in basis (most physicians' offices require appointments), Community Care Pharmacy can increase access and utilization of their vaccination service. They also have the opportunity to increase access to this service by occasionally providing vaccinations at a public place such as the local mall, church, or at events like the Monet County Fair in October.

Promotion

The fourth P in the marketing mix and the next step in marketing Community Care Pharmacy's new vaccination service is promotion of the service. There are four primary methods used to promote and communicate any good or service to potential consumers. These are advertising, personal selling, publicity, and sales promotion (Berkowitz, 1996). These methods can be used in individually or in combination to promote and communicate goods and services to target markets. In the following section, the four methods will be defined and applied to the marketing of Community Care Pharmacy's new vaccination service to better understand the use of promotion in the pharmacy setting.

Advertising

Advertising can be defined as any directly paid form of nonpersonal presentation of goods, services, and ideas (Kotler and Armstrong, 1994). Traditionally, there have been two primary outlets for advertisements: broadcast media and print media. Broadcast media consists of television and radio advertisements, while print media includes newspaper, magazine, direct mail, and outdoor advertisements. In recent years, Internet marketing has evolved with the emergence of Web 2.0. Web 2.0 refers to the increased number of online applications that are social and participatory. Examples of Web 2.0 applications are Facebook, Wikipedia, YouTube, and Twitter. This new advertising venue has become increasingly popular among health care organizations. It is important to determine where to place advertisements for a new good or service based on the amount of the budget an organization plans to spend and what the organization plans to gain from each venue. Although many pharmacy managers often work with their corporate marketing departments or even an advertising agency to develop advertising materials, it is important to understand the benefits of each form of advertising as well as what makes an advertisement effective.

Broadcast Media

Television advertisements have the ability to incorporate both visual images and sounds with the potential to reach a vast number of consumers. In North America, the majority of advertising dollars are spent on television advertising (The Nielsen Company, 2011). While the costs of television advertising have begun to decrease, it is still considered an expensive form of promotion. The costs of producing television advertisements and purchasing airtime to show them are usually higher than that of other advertising mediums. Advances in technologies, particularly by local cable systems, have made the use of television advertising feasible for many community pharmacies. Community pharmacies now have the ability to select the channel and time of day they would like their advertisements to air. This is the most difficult part of television advertising for many organizations because, to be effective, the organization must know the media habits of their target markets, including what times of day they watch television, and when they do watch, what channels and even programs they view. An advertisement run at 11:00 a.m. will most likely reach a different market than the same advertisement run at 11:00 p.m. The same is true about an advertisement run on a sports network versus an advertisement run on a news network.

Radio advertisements are a popular form of promotion in community pharmacy because radio stations are highly segmented (i.e., the listeners to any particular station often share demographic characteristics) and the production of radio advertisements is relatively inexpensive (Kotler and Armstrong, 1994). Another advantage of radio advertisements is that they can usually be produced in a short amount of time so that the advertisement can be broadcast as soon as possible. For example, if the goal is to reach the most working age consumers, an organization may choose to place a radio advertisement on an early morning or early evening talk show because these are the peak listening times as people drive to and from work. The disadvantages of radio advertising are its lack of a visual component, and given the market segmentation among radio stations, the stations used for advertising must be carefully chosen to assure that the desired target markets are being reached (Berkowitz, 1996).

After discussing their options for broadcast media advertising, Dr. Rockefeller and his colleagues believe that a television advertisement is a good investment to promote their new vaccination service. Since one of their target markets is the local elderly population, they have decided to pay to have their advertisement aired during the 5:00 p.m. local news broadcast. Although this is one of the more expensive time slots, they believe that a large portion of the elderly population in the area views this program regularly.

Print Media

Newspaper advertising is used to promote pharmacy goods and services around the world. Newspapers are a good source for health care advertisements because they are seen as highly credible sources of information (The Nielsen Company, 2011). Another advantage of newspaper advertising is the ability to geographically select who will see the advertisement. Even in metropolitan newspapers, the creation of zone editions allows advertisers to target specific geographic locations within a city. The costs associated with newspaper advertisement are also relatively inexpensive compared with broadcast media. A disadvantage of newspaper advertising is its poor production quality and the lack of flexibility and creativity relative to other types of media. Many newspapers require that advertisements fit a particular template and format, limiting a marketer's ability to make their advertisements eye catching and unique.

Magazine advertisements are becoming a popular medium for health care organizations. The number of specialized publications that allow an organization to target specific market segments has increased dramatically. Large chain pharmacies can target health-focused magazines, such as Men's Health and Fitness for national advertisements. Smaller community pharmacies can target regional magazines as well as national magazines that publish zone and geographic editions. An advantage of magazine advertisements is that they have a longer shelf life than other types of print media. Some consumers choose to keep magazines for weeks, months, or even years, meaning the advertisement may be seen and read multiple times before the magazine is discarded. Another advantage of magazine advertisements is that magazines produce high-quality, colorful ads that attract the reader's attention. As with other forms of advertising, magazine advertisements have their disadvantages. One major disadvantage is the amount of time before the advertisement is seen. Magazines may require that advertisements be received 4–6 weeks before the publication will be on the shelf for consumers to read. This makes magazine advertisements a good option for long-running goods and services, but not so viable for short-term offerings.

Direct mail advertising is the most utilized form of print advertising in North America. It is widely used because of its ability to target very specific markets, such as consumers who live in a specific neighborhood, or patients who are known from pharmacy records to have a particular characteristic or condition. Direct mail advertising allows an organization to target potential consumers by age, income, prior purchasing habits, geographic location, and many other identifiers (Berkowitz, 1996). For direct mail advertising to be effective, the list of recipients must be both well conceived (reaching people known to be part of a pharmacy's target markets) and accurate (a large percentage of direct mail never reaches the intended target due to inaccurate addresses). A disadvantage of direct mail is that many consumers view this type of advertising as junk mail. With multiple organizations using this method, it is hard to make one direct mail advertisement stand out among others. It also has a disadvantage because of the high costs associated with printing these advertisements with bright colors to attract attention, as well as the high costs of postage. Given the costs of both printing and postage, the costs per person reached can be higher than other forms of promotion.

Outdoor advertising, such as billboards and transit ads, is useful as a reminder or introduction to a new product or service. Health care organizations often use this medium to create awareness, but many consumers view this type of advertisement as visual pollution. There are many regulations that affect the availability of billboards in the United States and therefore this form of advertising is most used in metropolitan areas on public transportation.

Dr. Rockefeller and colleagues at Community Care Pharmacy believe that a print advertisement in the local daily newspaper that is also available online is a good way to reach both target markets (elderly and young population). Further, a print advertisement can reach those who may not be existing customers of their pharmacy. The cost of the advertisement is low and there is a large percentage of the population that receives the daily newspaper and frequents the newspaper's Web site. The local newspaper does not require purchasers of ad space to use a specific template with the design of their advertisements, allowing Community Care Pharmacy to design an advertisement that best fits their needs. Dr. Rockefeller and colleagues have designed a print advertisement (Fig. 22-3) to promote Community Care Pharmacy's new vaccination service with some help from a patient who is an advertising consultant.

There are five main components of an effective print advertisement (Ladd, 2010). The headline is the print in the largest font and usually bolded to grab the reader's attention. A headline should be short, direct, and clear so the reader knows exactly what is being advertised. The copy further elaborates the headline and explains important information such as price and benefits of the good or service. The illustration can be a photo or drawn image that gives the reader a visual portrayal of the good or service. The sub-headline can be used to explain specific information that may not be clear in the headline. A common example of a subheadline is an offer of an item for free with the purchase of another item. Finally, the signature is the branding of the organization that produced the advertisement including logos, slogans, and trademarks. This helps the organization to build brand recognition and helps the reader to associate the advertisement with the organization.

Web 2.0 and Internet Marketing

With the increased use of the Internet and the emergence of Web 2.0, organizations have begun utilizing new methods of advertising. The Internet now allows users to collaborate with colleagues, share information with others, and build new business and social relationships that were much more difficult to create in the past. The use of social media outlets like Facebook, Twitter, and YouTube have increased dramatically. A survey conducted by the Harris Initiative found that almost 9 of 10 (87 percent) of Americans use social media. A similar study conducted by the Pew Research Center found that over a period of 1 year from 2009 to 2010, social media use among Internet users aged 50 and older nearly doubled from 22 percent to 42 percent. Further, 47 percent of Internet users 50–64 and 26 percent of users 65 and older now use social media sites (see Fig. 22-4).

Health care organizations have begun to see this increased Internet social media use as a great opportunity to get their message to their target markets at a relatively low cost (The Nielsen Company, 2011). Social media is not only used widely by large chain pharmacies, but is also a great opportunity for the smaller independent pharmacies to level the playing field. Promotion of Community Care Pharmacy's new vaccination service through social media could be very beneficial as a supplemental advertising strategy. On Facebook, the pharmacy can post “what's on their mind” and let their “Facebook friends” see and share the announcement of their new vaccination service. Twitter can be used with hashtags like “#Pharmacy” or “#flushot” to spread the news when influenza vaccines are being offered. Twitter can also be used to advertise sales taking place at the pharmacy, keeping in mind that Twitter users still tend to fall into their “younger, cash-paying customer” target market. YouTube is a video-sharing site that Community Care Pharmacy could use to create their own commercials explaining the benefits of getting vaccinated. The possibilities are endless when it comes to the use of social media to advertise, and since the majority of these Web sites are free to use, the cost of this form of promotion is relatively inexpensive (primarily the time and effort of staff to create and post the information).

Community Care Pharmacy decided to use Facebook and Twitter to spread the word about their pharmacy and vaccination services. Customers and patients of Community Care Pharmacy can sign up to be “friends” and “followers”. Announcements of new goods and services offered will be made through these media. Community Care Pharmacy will ensure that their logo appears in both Facebook and Twitter pages to build brand recognition and help readers associate their posts on these sites with their organization.

Personal Selling

Personal selling differs from advertising in that it is a direct, personal form of communication. Advertising is a form of mass communication and therefore it is more difficult to control who receives the message, while personal selling allows the organization to directly target the intended audience (Berkowitz, 1996). Community Care Pharmacy could use personal selling in the form of a salesperson who makes calls to referral physician offices or large self-employed insurers in Weagle to introduce and “sell” the new vaccination service. The advantage of this method is that any questions the receiver of the call may have can be answered immediately, and the service can be fully explained to avoid any confusion. It is also an opportunity to build relationships in the community. A disadvantage to personal selling is the cost, both in time and in money. Employing a salesperson is costly, and if they can only make a few calls per day, the impact the calls have on developing the market may be small.

Personal selling can also be utilized by pharmacists and other pharmacy personnel when they interact with their patients. Any patient who has a prescription filled at Community Care Pharmacy presents an opportunity for the pharmacy staff to describe the benefits of the new vaccination service and answer any questions the patient may have. If the staff identifies a patient as someone who would benefit from the vaccination service, they can offer the service to the patient, schedule an appointment, or provide supplemental information that can be reviewed at the patient's convenience. If the patient elects not to utilize the service, the relationship that the staff and patient have built is still beneficial in that the pharmacy has learned something about why the patient is not interested in receiving the service. This information can be used when developing and marketing future goods and services.

After realizing the importance of personal selling, Dr. Rockefeller agrees to visit several physicians' offices (especially those who do not offer vaccination services) to introduce their new vaccination service and request that they refer their patients to Community Care Pharmacy. Further, all pharmacy staff agrees that the vaccination service will be offered to all patients when they pick up their prescriptions.

Publicity

Publicity is a form of communication of goods, services, and ideas that is not paid for directly by the organization (Berkowitz, 1996). Dr. Rockefeller can encourage local newspapers, television, and radio stations to report stories about the importance of vaccinations and places to get vaccinated (such as Community Care Pharmacy). The benefit of publicity is that the audience who reads a newspaper article or watches a report on the local news does not realize that Dr. Rockefeller had to contact these outlets and ask for this coverage. This leads the consumer to believe that the message is coming from a credible source and is unbiased. The limitation of publicity is that there is very little control on who receives the message. There is no way to know when the local news will air the story about the pharmacy or what day the newspaper will print the article. Therefore, it is difficult to know if the target audience is reached. There are costs of using publicity, as someone from the pharmacy typically has to reach out to media outlets to encourage them to produce these stories, requiring resources (especially time) that could be used elsewhere.

Publicity can also work negatively against an organization. A customer who has a bad experience at Community Care Pharmacy can alert the press with negative information about the pharmacy. Web sites like Yelp, Kudzu, and BooRah are used to review organizations and can be sources of good or bad publicity for the pharmacy. It is important for pharmacy managers to monitor these reviews and have a response plan if their pharmacy receives negative publicity.

Sales Promotion

Sales promotions are temporary efforts to encourage consumers to purchase a good or utilize a service. These promotions come in the form of coupons, sweepstakes, rebates, or samples. In health care, the use of promotions such as a free trial of a medication is common, but the use of promotions to influence consumers to utilize a service is not. Community Care Pharmacy may be able use a sales promotion in the form of a rebate by offering patients who utilize their vaccination service some in-store credit to be applied to other purchases in the pharmacy. It is important to maintain the professional image of the pharmacy and to ensure the message that a sales promotion portrays does not negatively impact that image.

It is important for an organization to put methods to evaluate the effectiveness of their marketing efforts in place, just as the organization would put methods to evaluate the outcomes of the service in place. Marketing control is defined as the process of measuring and evaluating the outcomes of marketing strategies and, if necessary, taking action to correct the four Ps to ensure that marketing objectives are met. For a control process to be successful, it is necessary that the regular collection of marketing performance data (e.g., Web site hits, patient questionnaires) be a part of normal pharmacy operations. Specific indicators should be developed and used to track actual performance, such as tracking hits on a pharmacy's Web site and asking new patients where they heard about the pharmacy's services. By tracking actual performance, the pharmacy will be able to compare these measures with expected performance and make corrections to their marketing mix to reach its goals. If need be, corrections can be made to the goals to make them more attainable.

To evaluate the effectiveness of their marketing mix, Dr. Rockefeller and his colleagues at Community Care Pharmacy have put in place methods of collecting data on performance indicators to track the performance of their marketing effort. One of the methods they have chosen to employ is a brief questionnaire (see Fig. 22-5) that they request their vaccination service patients to complete. Their plan is to analyze the responses to the questionnaire and evaluate the effectiveness of their marketing mix and determine if/how their marketing efforts should be modified.

Dr. Rockefeller and his colleagues at Community Care Pharmacy have developed a strategic plan, analyzed their market environment by conducting a SWOT analysis, formulated goals and objectives, determined their target markets, selected their service, prepared their marketing mix, and put controls in place to evaluate the success of their marketing efforts. Although this service is a good start and will put Community Care Pharmacy in a position to reach their additional revenue goals, the competition from other pharmacies in the area will not dwindle. Dr. Rockefeller and Community Care Pharmacy can use everything they have learned through this process to further expand their patient care services and address the market segments they have already identified.

In the ever-changing health care environment, it is vital for pharmacists to expand the scope of their professional services. Pharmacists are in a unique position to provide patient care services in a highly accessible venue and move toward a more influential position in the health care system. Those who chose not to embrace this shift from a dispenser role to a provider role will find it difficult to remain legitimate and keep their businesses viable. Community Care Pharmacy has made an important first step in the continuous effort to stay ahead of the competition and be successful.

1. To address the overweight and obese population in Weagle, would it be beneficial for Community Care Pharmacy to offer a weight management service? Why? Why not?

2. On the basis of the SWOT analysis presented, what are other viable opportunities and target markets?

3. What strategies could be used to encourage the working-age (18–65) population to utilize the influenza vaccination service? Would advertising to this population be different from the elderly population? How?

4. Some argue that the use of social media by health care organizations to advertise is unprofessional. Do you agree or disagree? Why?

5. Describe circumstances or examples when sales promotion or discount strategies may negatively impact the professional image of pharmacy.

6. Community Care Pharmacy used a questionnaire to evaluate their marketing effort. What are other ways that can be used to monitor the success of a marketing effort?