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Running head: INTRODUCTION AND SITUATION OVERVIEW 1 INTRODUCTION AND SITUATION OVERVIEW 2 Introduction and Situation Overview Introduction The basis of the marketing plan is the provision of quality patient-centered care to all the clients. It will offer the services through different departments. There are other advantages of the ECRH services that the plan has not outlined. The merger of the East River Medical Center, the Northern Mountain Hospital Consortium, and the Archway Hospital to form East Chestnut Regional Health System (ECRH) resulted in different marketing issues and opportunities. For instance, there is a need to address the deterioration of the ERMC. The purpose of the marketing plan is to increase the number of clients that are visiting the health institution hence, the need to enhance the market share profitability. I. Situational Overview There are other players in the industry that competes with ECRH in the provision of the products and services. Although there are many players in the industry, the primary concentration is on the Banford Medical Center who is the strong competitor with a current occupancy rate of 85%. BMC has a more significant market share compared to ECRH and increased proportional gains. For example, the management of BMC increased the optimization of performance due to the weaknesses of ECRH. The implication is that ECRH will have to compete directly with other medical centers in the market. (Rivers & Glover, 2008) The building of the new facilities is relatively one of the new development and product categories. Although pioneered by the ECRH, there are more opportunities for the new entrance as shown by BMC. Another contentious issue to consider in the assessment is the improvement of the reputation of the medical school. Creating positive goodwill is essential for the success of any INTRODUCTION AND SITUATION OVERVIEW 3 business. The firm will benefit from building a reputation through increased referrals and increase in value. If the organization pushes on with its current plans of acquiring Chestnut academic center, then it will pay less. II. Goals and Objectives Even though the organization has high levels of employee diversity, there is increased competition for workers due to the reduced unemployment rate in Chestnut County. It implies that the institution has to engage in marketing strategies to attract more qualified workforce and retain the experienced ones. (Devers et al., 2003) The organization should increase the marketing of the practices of new physicians to enhance the growth of their patient volumes. When it comes to technology, ECRH has performed exceptionally. For instance, the adoption of the EPIC system has played key role management of the patient’s data. The technology provides the opportunity for entry and growth in the new markets. The CEO wants one of the many goals for the ECHR to be is focusing in on women’s health service from both of the spectrum varying in different ages. The performance benchmark needs to meet with merging all closing facilities to able to accommodate the needs and wants of the community especially women and help the overall decrease in the unemployment rate. The whole marketing strategy and objective for this change is how to brand a strategic move and merging of all facilities to combine into ECHR entities in specializing in the women services such as breast care, general gynecology services, having access to female doctors, being able to get and retain services in one area and annual physicals for women. The different tactics that can be used current and new physicians coming aboard to this healthcare system one strategy could be to leverage previous and current patient reviews on their experience with the attending physician about information on how their visit and encounter was INTRODUCTION AND SITUATION OVERVIEW 4 regarding their healthcare treatment. Another strategy can be improving the search engine optimization (SEO), which includes but not limited to completing the original context for a social blog or website (Zocdoc, 2018). A consumer having complete access to your professional information from a link from other sites is significant in gaining new clients. Social publicity is a more suitable way to obtain and retain clients to a more up to date speed on the progression of the healthcare business. III. Action Overview Currently, there is a significant deterioration in the provision of women health services (WHS) due to the syndication of BMC. The institution should improve the quality of services provided in this section and develop a neonatal intensive care unit for addressing emergencies of WHS. (Cohen & Coco, 2011) one of the strongholds of ECRH is a strong cardiology service. However, over the past years, there has been an increase in the aging levels with more than half cardiologists retiring in the next five years. There is a need for the firm to recruit other cardiologists to counter the competition from Greenbranch Medical Center through advertisement and from the medical school. The ECRH will provide services that incorporate all the payer mix; commercial, Medicare, and Medicaid. The institution believes that they have facilities and a product portfolio that can leverage and position Chestnut Care for growth. IV. Conclusion It is evident that there is a need for East Chestnut Regional Health System (ECRH) to address the marketing issues to increase its market share and competitive advantage. There is a need for the management of ECRH to improve the optimization of performance to increase the occupancy rate. Therefore, the marketing department of ECRH should put in place strategies to keep abreast with the changes and growth in the industry. INTRODUCTION AND SITUATION OVERVIEW 5 V. References Cohen, D., & Coco, A. (2011). Trends in the provision of preventive women's health services by family physicians. Family Medicine-Kansas City, 43(3), 166. Devers, K. J., Brewster, L. R., & Casalino, L. P. (2003). Changes in hospital competitive strategy: a new medical arms race? Health services research, 38(1p2), 447-469. Rivers, P. A., & Glover, S. H. (2008). Health care competition, strategic mission, and patient satisfaction: research model and propositions. Journal of health organization and management, 22(6), 627-641. Zocdoc. (2018, March 19). 12 Best Marketing Strategies for Medical Practices. Retrieved from https://thescript.zocdoc.com/best-marketing-strategies-for-medical-practices Topic 4 Write a 175- to 265-word response to the following: • Drug companies are pursuing collaborative efforts with other companies to manage in the world of pharmacogenomics and individualized medicine. What are some examples of these collaborative efforts by pharmaceutical companies (e.g., Accelerated Medical Partnership (AMP) program)? Topic 4-1 Write a minimum of 2 pages for the Tactics and Implementation portions for your Marketing Plan to address the situation in the case study. Cite at least 3 reputable references to support your assignment (e.g., trade or industry publications, government or agency websites, scholarly works, or other sources of similar quality). Please see the attachment to complete this one Topic 5 Write a 175- to 265-word response to the following: • Identify one or two health care organizations that have a negative brand image. What event or series of events led the organizations to this situation? • What branding strategy(s) would need to be implemented to restore a tarnished brand? Topic 5-1 Create a matrix that contrasts the differences between marketing in for-profit and not-forprofit health care organizations. Include the following in your matrix: • Centralized versus decentralized format of management • Strategic goals of the organizations • Variation in the access to the capital market • Strategic marketing differences between these two types of organizations • Quality attributes of the two types of organizations • The management of pricing and volume Cite at least 3 reputable references to support your assignment (e.g., trade or industry publications, government or agency websites, scholarly works, or other sources of similar quality). Topic 5-2 Team Assignment: Control and Exhibits Assignment Content Write a minimum of 2 pages for the Control and Exhibits portions for your Marketing Plan to address the situation in the case study. Cite at least 3 reputable references to support your assignment (e.g., trade or industry publications, government or agency websites, scholarly works, or other sources of similar quality). Format your assignment according to APA guidelines. Market Plan Template MHA/506 Version 2 Marketing Plan Template Executive Summary • • • • • Introduction Situation Overview Goal Action Overview Conclusions Situation Overview • • • The big picture Company overview Market overview Goal/Objectives • • • Goal focus Performance benchmarks Market objectives Marketing Strategy • • Target market o Target customers o Company o Collaborators o Competitors Value Proposition o Customer value o Collaborator value o Company value Tactics • • • • • • Product Service Brand Price Incentives Communication Implementation • Defining the business infrastructure o Physical infrastructure o Organizational infrastructure Copyright © 2018 by University of Phoenix. All rights reserved. 1 Market Plan Template MHA/506 Version 2 • • The business process o Strategic plan implications o Resource management o Product and service management o Brand management o Communication management o Distribution management Set the schedule for implementation Control • • Performance evaluation of the plan o Adequate goal progress o Performance gap management Environmental Analysis o Opportunities o Threats Exhibits • • • • Market data exhibits Value analysis exhibits Marketing mix exhibits Organizing the exhibits o Label o Title o Overview o Body o Notes o Source Additional Considerations in a Marketing Plan • Brand Management • Communication Plans Copyright © 2018 by University of Phoenix. All rights reserved. 2 Case Study: East Chestnut Regional Health System MHA/506 Version 2 1 CASE STUDY: EAST CHESTNUT REGIONAL HEALTH SYSTEM History Within the last 10 years, East Chestnut Regional Health System (ECRH) was formed from the merger of three organizations: the East River Medical Center, the Northern Mountain Hospital Consortium, and the Archway Hospital. East River Medical Center (ERMC) ERMC is the anchor hospital for the system. The medical center resides along the east side of the Chestnut River. Historically, ERMC was recognized as the location of choice for medical care. However, this reputation has deteriorated over the last 3 to 5 years. As the city of Chestnut has grown, ERMC has found itself on the edge of an urban blight. Safety has been a concern for patients, visitors, and physicians who use and serve the medical center. The technology offered at the medical center has been maintained at an excellent level of proficiency. At the same time, the medical staff is aging with the average age of the physicians being 57. There are younger primary care physicians who serve the specialists, but the specialists are aging as well. ERMC boasts a Level 1 Trauma Center with an air service. The total number of licensed beds for ERMC is 550. On any given day, the occupancy rate is 300 heads on the beds. Northern Mountain Hospital Consortium (NMHC) NMHC was originally formed in response to the migration of patients to Chestnut. Due to the rather aggressive strategies carried out by the hospitals in Chestnut, these rural hospitals decided to create a consortium of rural hospitals so that they could gain economies of scale in a number of areas, which include group purchasing, benefit administration, and physician and staff recruitment. Additionally, they worked together to stem any further deterioration of their market share. Patients were selecting to go to the larger community for services and leaving the smaller communities that collared the Chestnut metropolitan area. NMHC represented individual hospitals in four counties that circled Chestnut County: Walnut, Butternut, Oak, and Maple. Walnut and Butternut Counties had good employment with Oak and Maple Counties being mostly rural. In each county, the inpatient facilities averaged about 20 years of age. The upkeep of these facilities has been sketchy. No facility needs any major upgrades, but modernization is needed. The state does not have a Certificate of Need (CON) process. The medical staff makeup varies each location. The hospitals in Oak and Maple Counties are critical access hospitals. Further details will be provided regarding these organizations later in the case study. Archway Hospital (AH) AH is located directly in the community of Chestnut. It fully resides in the urban area of the community. The hospital has 200 registered beds, but on any given day there are only 50 to 75 patients in this facility. This hospital was a Doctor of Osteopathy (DO) hospital; therefore, most of the physicians that worked out of this facility were DOs. The payer mix for this hospital was heavily burdened with Medicare and Medicaid. This payer mix composed nearly 85% of the reimbursement. The facility is aging and needs considerable repairs. It is questionable if it will be worth the investment in this facility. Leadership and Organizational Culture The original merger that created the East Chestnut Regional Health System (ECRH) occurred 10 years ago. This merger was between ERMC and AH. AH had a rather dynamic leader who was about 57 years old at the time of the merger. The AH CEO became the new President and Chief Executive Officer of Copyright © 2018 by University of Phoenix. All rights reserved. Case Study: East Chestnut Regional Health System MHA/506 Version 2 2 ECRH after the merger. Since this CEO had only worked in a smaller organization, he had not experienced the cultural changes and demands that occur after the merging of a large organization. Additionally, he began to change the culture of the organization such that decisions were made on a decentralized basis. He trusted the management team at AH to do the right things and make the right decisions with low supervision. However, the Chief Operating Officer (COO) who was put in charge was originally from AH but left 2 years after the merger with a new COO being put in place. This COO developed a rather poor reputation and was known to want to build his own empire at AH and to be dishonest at times. This reputation created a culture within the traditional AH that lacked a cohesive team effort to create a system. This positioning of the COO was left unattended by the President and CEO of ECRH since he was actively pursuing the acquisition of NMHC. The hospitals of NMHC were doing okay, but those in the consortium realized that their ability to stand alone was becoming difficult in today’s market. When the leadership of the consortium assessed the market as to a partnership, they decided that ECRH would be the best choice. The other option was to develop a for-profit hospital that also resided in Chestnut. The leadership was attracted to what they saw happen with AH. They liked that the central leadership of the system allowed AH to continue on as their own entity without a lot of centralized control. By the time all of this was put together, the President and CEO of ECRH was near retirement. He retired about three years after all of the merger activity was complete. During those three years, he became lax in his leadership role. ECRH deteriorated in market share and profitability during this time. Upon his retirement, the Board of ECRH performed a national search for a replacement. They employed Hunter Brown as the new President and CEO. Mr. Brown was the CEO of a smaller health system and had been in that position for nearly 10 years. Therefore, he had limited experience from other markets in the art of strategic implementation. However, he was also well trained, bright, and articulate in expressing his knowledge. He has now been the President/CEO of ECRH for nine months. As for the remainder of the leadership team for ECRH, there is a newly hired corporate counsel. She has 15 years of experience and is extremely competent in the work that she does. The CEO also hired a new Chief Financial Officer. He has taken good strides in managing the accounts receivable throughout the system as well as extracting exceptional dollars from high quality supply chain management. The Chief Operating Officer (COO) is new and has three years of previous experience from the same organization where the CEO departed. The Chief Medical Officer (CMO) has been retained from the old leadership team. His reputation is excellent, and he works well with other physicians, including the medical staff and the employed physicians. The Chief Nursing Officer (CNO) is three years away from retirement. She is known for not getting along with the medical staff and will always defend nursing when at times this is not appropriate. The Senior Vice President for Human Resources is competent and respected by management and staff throughout the organization. The remainder of the leadership team was retained from the old regime. This included information technology, employed physician group leadership, marketing, human resources, and other vice presidents or directors responsible for varying service lines. It should be noted that the IT leadership is just completing the implementation of the EPIC system. The future for this team depends on how well the overall implementation of the system goes. Likewise those in the marketing department will need to be stellar in senior leadership advisement regarding the marketing of complex issues that will be encountered ahead. They have been told if marketing misses the target, then replacements will occur within this department. The new CEO inherited the management team of AH and NMHC. For NMHC the organizational structure Copyright © 2018 by University of Phoenix. All rights reserved. Case Study: East Chestnut Regional Health System MHA/506 Version 2 3 was left intact with the COOs for each of the individual hospitals being retained. It was agreed that this traditional structure would be left intact for at least five years. This agreement was near its end and the new CEO had plans to change the existing structure as well as management. This change was being considered for this year’s strategic plan development. Even if the structure of NMHC was going to be changed to a more direct relationship with corporate leadership, all of the existing COO’s would be retained as they have performed well since the merger. As for the COO of AH, he had been recently terminated. An interim COO is now in place pending the board approved closure of this hospital. Competitive Assessment ECRH was not the only provider of care in the community. There was a for-profit hospital, Banford Medical Center (BMC), that had been purchased by a large publicly traded for-profit health system about 10 years ago. The for-profit health system was the largest in the country. The CEO of this hospital was good at optimizing performance as a result of the weaknesses of ECRH and its leadership. He was an effective opportunist. BMC has 400 registered beds with a current occupancy rate of 85%. They have been effective at taking market share away from ECRH. For each loss of service line market share by ECRH, BMC has shown proportional gains. After the acquisition of BMC, the for-profit immediately moved to build a new facility. This new facility is located on the growing wealthy edge of the community. Additionally, at the time that this new facility was developed, the for-profit syndicated ownership to the physicians. The highest level of syndication occurred with the obstetrics and gynecology physicians in the community. Therefore, women’s services deteriorated at ECRH. It should be noted that this physician syndication occurred before the Affordable Care Act was passed, which precluded hospital ownership by physicians. It is important that additional information is provided regarding ECRH. ECRH recently purchased 100 acres of land across the interstate from BMC. This land is located northwest of Chester. The intention is to eventually build a new medical center on this location. The initial planning of this land has occurred and it has been approved to build a regional oncology center on this site. The construction of the project is already underway with an anticipated completion in 6 months. In addition, ECRH has an orthopedic hospital attached to the current ERMC site and a behavioral health hospital at this same location. ECRH also has two ambulatory surgical centers that are conveniently located on the growing northwest and southwest side in the community. The one surgical center is located on the 100 acre development site. The orthopedic hospital has done well and has been listed in the top 100 orthopedic hospitals. However, the behavioral health hospital is losing significant dollars, so the Board of Directors for ECRH has decided to close down this hospital. ECRH has also developed a joint venture imaging center with the radiologists. This center resides across from a major shopping area in the community. It is conveniently located near heavily populated neighborhoods and shopping. The only downside is the location is not close to physician offices that would refer to this center. However, if a new facility is built on the 100 acres, which would include physician offices, the imaging center will be in an ideal location. Leadership is developing a free standing emergency center on the 100 acre site, which is on the northwest side of Chestnut. The last competitive issue is the location of a medical school and hospital in the city of Chestnut. The facility resides in a downtown location. This medical school had been established by the state nearly 45 years ago and is associated with Greenbranch University. It mostly serves the indigent community in Chestnut and the surrounding area. This academic center has a rather negative reputation in the surrounding area. There are four other medical academic centers in the state as well as a medical center with a world renowned reputation. There have been ongoing rumors that this world renowned organization was planning on assuming the responsibility of the Chestnut academic center. This change would substantially alter the complexion of the local medical community if it were to occur. Speed in ECRH dealing with some of its market issues is an imperative. Copyright © 2018 by University of Phoenix. All rights reserved. Case Study: East Chestnut Regional Health System MHA/506 Version 2 4 Additional Market Information: Population Demographics Chestnut County • • • • • With 433,689 people, Chestnut County is the 6th most populated county in the state. The largest Chestnut County racial/ethnic groups are Caucasian (70.1%), African American (18.5%), and Hispanic (6.5%). In 2015, the median household income of Chestnut County residents was $41,777. However, 21.1% of Chestnut County residents live in poverty. The median age for Chestnut County residents is 37.7 years old. Employment is strong in Chestnut County. Unemployment resides at 4.5%. Employer diversity is strong since the community is not dependent on singular large employers. Employment includes some high-tech jobs, general manufacturing to support the automobile industry, and there is a large university, Greenbranch University, located in the community. The university has 25,000 students and offers most majors, which includes engineering and nursing. Walnut County • • • • With 42,537 people, Walnut County is the 57th most populated county in the state. The largest Walnut County racial/ethnic groups are Caucasian (89.8%), followed by Hispanic (7.2%) and African American (3%). In 2015, the median household income of Walnut County residents was $55,120. However, 10.8% of Walnut County residents live in poverty. The median age for Walnut County residents is 39.8 years old. Butternut County • • • • With 38,352 people, Butternut County is the 65th most populated county in the state. The largest Butternut County racial/ethnic groups are White (87.0%), Hispanic (9.5%), and African American (1.7%). In 2015, the median household income of Butternut County residents was $50,663. However, 13.4% of Butternut County residents live in poverty. The median age for Butternut County residents is 39.7 years old. Oak County • • • • With 37,120 people, Oak County is the 66th most populated county in the state. The largest Oak County racial/ethnic groups are Caucasian (93.3%), Hispanic (4.0%), and African American (1.1%). In 2015, the median household income of Oak County residents was $42,492. However, 14.9% of Oak County residents live in poverty. The median age for Oak County residents is 46.6 years old. Maple County • • • • • With 27,816 people, Maple County is the 79th most populated county in the state. The largest Maple County racial/ethnic groups are Caucasian (90.8%), Hispanic (7.1%), and African American (1.0%). In 2015, the median household income of Maple County residents was $39,353. However, 15.4% of Maple County residents live in poverty. The median age for Maple County residents is 48.2 years old. Both Oak and Maple Counties are rural with an older population. Many patients have Medicare and Medicaid that come from these two counties. Likewise the hospitals located in each of these counties have been designated as critical access. Like many rural counties, Oak and Maple have Copyright © 2018 by University of Phoenix. All rights reserved. Case Study: East Chestnut Regional Health System MHA/506 Version 2 5 been blighted with younger people using drugs, including methamphetamine. Employed Physicians ECRH employs 400 physicians throughout its system. The breakdown for each location is as follows: Chestnut County • • 135 primary care 100 specialists Walnut County • • 40 primary care 10 specialists Butternut County • • 30 primary care 12 specialists Oak County • • 27 primary care 10 specialists Maple County • • 25 primary care 11 specialists There have been ongoing complaints from the newly recruited physicians that their practices have not been marketed well; thus, their patient volumes have been slow to grow. Service Line Performance Information The following is a list of bullet points regarding service line performance by ECRH and issues of operational concern. 1. Women’s health services deteriorated significantly since the syndication by Banford Medical Center. Obstetrical deliveries are down 20% across the system. BMC has done an excellent job of creating attractive facility and services for women. This includes nurse navigation, women’s breast center, and a series of other amenities. BMC has also started a neonatal intensive care unit, which rivals the services of ECRH. 2. The cardiologists at ECRH are aging. This has been a traditionally strong service for ECRH, but 50% of the cardiologists will be retiring within the next 3 to 5 years. All cardiologists who serve ERCH are employed by the health system. Cardiology is a service that is gaining strength within the Greenbranch Medical Center, particularly since they brought in a renowned cardiologist to rebuild their program. 3. The orthopedic volumes are down 7%. ECRH does jointly operate an orthopedic hospital with an independent orthopedic group located in the community. There have been some internal problems within the orthopedic group where the old guard of orthopedic surgeons has forced a low retention with younger, and to some degree better trained, surgeons. Retention is becoming a growing concern regarding the status of this group with consideration of ECRH hiring their own surgeons. The joint venture hospital does not exclude other surgeons from working in this hospital. Copyright © 2018 by University of Phoenix. All rights reserved. Case Study: East Chestnut Regional Health System MHA/506 Version 2 6 4. Emergency department (ED) volumes are down 5%. The hospital uses an emergency physician group to supply physicians to cover all of the EDs within ERCH. These physicians are known for poor customer service and making rude comments to patients who are self-pay or Medicaid. 5. The ambulatory visits and services are up 3%. This volume increase is from the younger primary care physicians who have been employed by ECRH. This young group of physicians has become great support for ECRH and refer patients loyally to the organization. 6. General surgery cases are down 4%. The aging surgeons are starting to retire and it is difficult to recruit new surgeons to replace past demand. Some of this work is going to Greenbranch since they have good general surgeons. 7. The oncology services for ECRH have increased in volume and revenue by 4%. ECRH’s development of the new oncology center has created a magnet for referrals to the oncologists. The oncologists are very enthusiastic about the development of this new center and have begun to shift work to ECRH. 8. ECRH has the regional burn center. ECRH works with Greenbranch Medical Center for training residence in the burn setting. This includes the plastic and general surgeons. The downside of this service is that it is losing money. A decision has been made to close down this service with Greenbranch starting their burn center. 9. ECRH is a Level 1 Trauma Center, and this designation has been a historical positive for the system. The helicopter service is well recognized by the community as well as first responder professionals found in the region. They historically have been top of mind for major trauma cases. The usage of this service is down 5% since the for-profit has established a similar service. BMC however only has a Level 2 Trauma Center. They have worked diligently to acquire ambulance services in some of the outlying communities. This has helped feed patients to BMC. 10. The ECRH Board of Directors decided to close down the behavioral health hospital. It is uncertain where patients will be able to receive inpatient care. An active out-patient service will still be provided by ECRH. Payer Mix The payer mix for ECRH has deteriorated. The current inpatient payer mix for the entire system is as follows: • 55% Medicare • 15% Medicaid • 30% Commercial There has been a long standing joint venture relationship with a national insurance company for commercial insurance. Administratively this venture has not developed as anticipated; however, in some of the regional markets, the Chestnut Care insurance has a strong presence. Of the 30% commercial pay, 20% is Chestnut Care based. The national insurance company in the venture is Aetna. The next strongest product is Anthem. It is the expectation of the CEO that Chestnut Care be leveraged and positioned for growth. The 15% Medicaid has helped the hospital gain additional disproportionate share dollars, which does help the bottom line of the hospital. Copyright © 2018 by University of Phoenix. All rights reserved. Case Study: East Chestnut Regional Health System MHA/506 Version 2 7 Historical Strategic Initiatives Accountable Care Organization When the Affordable Care Act was passed in 2010, ECRH decided to get into the one-sided model of an accountable care organization (ACO). This venture has not gone well, and ECRH has decided to leave the ACO business. However, they are concerned about the public image of this decision. The details of the termination are under discussion with a need to determine how to minimize the public perception of termination, particularly since there was so much marketing of their getting in this venture. The regulatory requirements of the government regarding the timing of terminating an ACO venture further complicate this decision. Primary Care Medical Home The employed primary care group has been active in establishing accredited primary care medical homes within all of the primary care offices throughout the ECRH system. This initiative is a positive emerging strategy for ECRH. It has also been an attractive draw for the family practitioners from Greenbranch Medical Center residency program since Greenbranch has established an accredited medical home for their family practice residency program. American Nursing Credential Center Status (ANCC) ECRH has been working on becoming a magnet status for ERMC. This work has stalled out as an initiative. Some of this is due to the nursing leadership within ERMC. The CEO intends to move this priority up in the organization’s goals. Information Technology ECRH has invested heavily in their information technology infrastructure. This investment became a requirement just to be able to gather the data needed for the ACO development. This cost has become significantly greater than anticipated. ECRH fully implemented EPIC as their core information technology system. There have been implementation problems since the ECRH was operating off of multiple systems before the decision to consolidate to one platform. The implementation of EPIC required considerable retraining for the staff and physicians. Data conversions have gone well. The difficulties have been more human-related relative to the effective use of the system. One of the major issues has been the lack of ECRH not meeting meaningful use requirements which has cost ECRH significant lost revenue from not meeting these goals. Legal Actions Pending for ECRH Federal Trade Commission Investigation With the merger and acquisition of NMHC, questions of antitrust have been raised. In the service lines of cardiology and oncology it has been found that ECRH controls 60% of the cardiology market and 52% of the oncology market. Chestnut Care in some markets has been strong in steering patient volumes to ERMC. Union leaders for the varying trades were instrumental in precipitating this investigation. At the time that this issue was raised, the President and Executive Branch of the federal government were very pro-labor, thus, their interest in pursuing this matter. As to the projected disposition of this case, it is anticipated that a negative determination will be made due to the market share control in oncology and cardiology. This could force ECRH to divest their ownership in the Chestnut Care insurance venture. Another option might be that certain hospitals of NMHC be divested. It is not anticipated that both determinations would occur. This case has cost ECRH considerable money to stave off investigation of this allegation. Copyright © 2018 by University of Phoenix. All rights reserved. Case Study: East Chestnut Regional Health System MHA/506 Version 2 8 Predatory Collections and the Loss of Not-for-profit Tax Status for NMHC NMHC negotiated that they would continue to act independently. The consortium leadership set policies that included predatory collections for the patients that would be served in the NMHC hospitals. In a recent evening news report, an investigative reporter interviewed an elderly patient that had her home taken from her to pay for her medical bills. This home had been in her family for over 100 years. This story prompted the state’s Attorney General’s Office to investigate the predatory collection policies of ECRH and NMHC. The state has already taken an aggressive stance to investigate the status of not-for-profits not fulfilling requirements (e.g., charity care, research, and education). The state is in economic trouble and is seeking revenue from wherever they can find it. The outlook is dim regarding the anticipated final decision of the Attorney General’s Office. If NMHC is required to pay taxes, this would wipe out the bottom line for these hospitals and many of the needed services supplied to the indigent population by ECRH would be reduced or eliminated. Faith & Main Consultants Report Within the last year, ECRH contracted with Faith & Main to study the market perception of their women’s services. The following is a summation of the findings of Faith & Main. Interest in a Women’s Center Crosses County Lines • 36% of women in the service area would travel across county lines to receive excellent women’s health services • 72% of women in Chestnut County would consider using the women’s services of East Chestnut Regional Medical Center • Women in all counties were most interested in these services: o Breast care o General gynecology services o Female doctors o Services in one area o Physicals for women Interest in a Heart Care and a Health Information Line • • A physician approved source of information A nurse help line that could be a resource for women’s care in heart health as well be a source for health navigation. Clear Expectations Regarding Getting Appointments with Their Primary Care Physician • Women expect same-day appointments o In the collar counties to Chestnut County, women ranked this in the top 28.7% o Chestnut County women ranked this in the top 37.7% Copyright © 2018 by University of Phoenix. All rights reserved. Case Study: East Chestnut Regional Health System MHA/506 Version 2 o • • 9 Expectation of same-day appointments ranked highest for women of childbearing age Percent expecting same-day appointments o 42.9 % of Chestnut County women of childbearing age o 31.3% of collar county women of childbearing age Willingness to be Seen by a Nurse Practitioner Overwhelmingly “Yes” o 75.7% of Chestnut County women of childbearing age o 76.1% of collar county women of childbearing age Respondents Expressed How Health Care Could Be Improved • 24% of all Chestnut County women, and 26% of all collar county women named adding more primary care doctors and more children’s care with urgent care outranking any other single topic. Respondents of Childbearing Age Widely Represented in Study: • 86% of women respondents of childbearing age in Chestnut County had children under the age of 18 • 76% of women respondents of childbearing age in the collar counties had children under the age of 18 Willingness to be seen by nurse practitioner was viewed as favorable by those in this study. This data from Faith & Main will be used to ramp up improvements in the women’s services for ECRH. Strategic Plan Goals for the Upcoming Year • Women’s service line improvement o Increase obstetrical deliveries by 20% over 3 years o Establish nurse navigation system for the entire system o Facility improvement and development for women’s services o Improve access standards for women’s care ▪ Assist in the marketing of the implementation of the consultant’s report regarding women’s services • Oncology Center grand opening • Mature the retail strategy with the primary care employed physician group • Assess the market impact of the lawsuits and develop marketing strategy to counteract the Copyright © 2018 by University of Phoenix. All rights reserved. Case Study: East Chestnut Regional Health System MHA/506 Version 2 10 negative impact if decisions are made against ECRH • Aggressively recruit new physicians to reduce the average age of the medical staff and strategically enhance service line development • Use lean management processes to correct service issues found in the ED. Improve ED visits by 6%. o Review physician contracts to enhance physician service performance o Investigate the fast track ED concept o Implement the free standing ED strategy • Abandon the Accountable Care Organization (ACO) • Re-establish relationships with regional emergency medical services to raise the utilization of the medical air service. Growth goal is to get back to the previous level of utilization within 18 months • Decision to close the regional burn unit and let those cases go to the academic medical center • Implement the decision to close the behavioral health services of ECRH • Implement the decision to close AH CEO Instruction to Marketing Team The marketing department for East Chestnut Regional Health System will be asked to step up their game to develop a marketing plan for the regional health system. The CEO has had some concerns regarding the ability of the marketing department to keep up with the rapidly moving strategic environment that he has created. So he established a time line for the department to develop a system wide marketing plan over the next six weeks. The VP of marketing has been in all of the senior leadership cabinet meetings so she is aware of all of the details. Therefore, the learning curve regarding the institutional strategic goals is of no concern. The following are elements that the CEO wants in the marketing plan. 1. A consultant, Faith & Main, was used to test the impression of the women in the key service markets for East Chestnut Health System. The summary of the consultant’s report can be seen above. The survey covered all aspects of women’s care. The marketing department will need to develop a marketing campaign to match the recommendations of the consultant’s report. a. It is recognized that the age span for communicating with women consumers will be quite variable. On one end of the spectrum you have the younger child bearing age women, next are the women that are middle aged followed by women that are pre-elederly then those that are elderly. Therefore, a communication plan using social media to conventional marketing techniques will be required. 2. A communication plan will need to be developed for the closure of the regional burn center as well the exiting the accountable care organization and the closure of the behavioral health hospital. 3. A communication plan will be needed to deal with the closure of AH. 4. A branding strategy will need to be developed to overcome the current weak brand identity that is in place for the combined ECRH entities. Copyright © 2018 by University of Phoenix. All rights reserved. Case Study: East Chestnut Regional Health System MHA/506 Version 2 11 5. Develop marketing strategy for new physicians being recruited to the system. The ideal situation would be to have a common identity for all marketing material. In the past the marketing material has been local hospital based. 6. Develop marketing plan for the Primary Care Medical Home strategy as well the retail strategy for the primary care network. 7. Proactively lay out a framework of communication to manage any negative outcomes of the legal matters that the health system is now confronting. a. The Federal Trade Commission investigation of the anti-trust issues for ECRH. b. The predatory collections occurred as part of NMHC. It is felt that this case will force these rural hospitals to move to a taxable entity with the loss of their not-for-profit status. The development of this problem came as a result of poor leadership within the consortium. 8. Develop advertising campaign for the opening of the new oncology center. 9. Develop advertising campaign for the ED/Trauma services of ECRH. Copyright © 2018 by University of Phoenix. All rights reserved. FUNDAMENTALS OF MARKETING Marilyn A. Stone and John Desmond With a contribution by J.B. (Ian) McCall FUNDAMENTALS OF MARKETING Fundamentals of Marketing provides a sound appreciation of the fundamentals of the theory and practice of marketing. It critically evaluates the effectiveness of different marketing strategies and approaches using case studies drawn from a cross section of sectors. Case studies include: Coke’s distinct image in Trinidad Role of guanxi in Chinese buying negotiations Technology development: Apple Mac to iMac and iPod Brand personality: image of FCUK Virgin’s use of direct sales in financial services New product global success of dumpy bottles Rebranding New Zealand merino wool Online retail pricing Changing image of Dyson cleaner Dyno-Rod franchising Charity shop achievements Introducing Stoats Porridge Bars Internet competition with traditional channels: Amazon.com versus Barnes & Noble Featuring a website to run alongside the text providing student and lecturer resources, this text conveys the main principles of marketing in a challenging yet accessible manner and provides the reader with insights into the workings of marketing today. Marilyn A. Stone is Senior Lecturer and Director of the International Management degree at Heriot-Watt University, Edinburgh. John Desmond is Reader in Management at St Andrews University, Scotland.Marilyn A. Stone and John Desmond With a contribution by J.B. (Ian) McCall FUNDAMENTALS OF MARKETINGFirst published 2007 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Ave, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group, an informa business This edition published in the T a ylor & F rancis e-Librar y , 2 0 06. “ T o pu r chase y our o wn co p y of this or a n y of T a ylor & F rancis or R outledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © 2007 Marilyn A. Stone and John Desmond All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Stone, Marilyn A. Fundamentals of marketing/Marilyn A. Stone and John Desmond. p. cm. Includes bibliographical references and index. 1. Marketing.I. Desmond, John, 1952–.II. Title. HF5415.S872 2006 658.8–dc22 I S B N 0-203-030788 Master e- b ook I S B N ISBN10: 0–415–37096–5 (hbk) ISBN10: 0–415–37097–3 (pbk) ISBN10: 0–203–03078–8 (ebk) ISBN13: 978–0–415–37096–7 (hbk) ISBN13: 978–0–415–37097– 4 (pbk) ISBN13: 978–0–203–03078–3 (ebk) 2006015003Marilyn Stone dedicates her contribution of this work to her family, Phil, Juliette and Anthony, and to her parents, Nuala and Robert, in recognition of all the support that they have given to her in pursuit of an appreciation of international marketing. She also wishes to acknowledge gratefully all those at the Western General Hospital, Edinburgh whose efforts enabled the book to be completed. John Desmond dedicates his contribution to his wife, Fiona, to thank her for her patience and encouragement.List of illustrationsxi List of tablesxiii List of case studiesxv Preface xvii Acknowledgements xviii List of abbreviationsxix Introduction xxiii 1Marketing: development and scope of the subject1 Introduction 2 The study of marketing2 A managerial approach3 Developments in marketing theory8 Conclusion 18 2Strategic marketing and the planning process20 Introduction 21 The marketing environment21 Conclusion 41 3Consumer buyer behaviour43 Introduction 44 Economic theory44 Freud and psychoanalysis46 Freud’s legacy: changing social characters53 Gender identity57 Behaviourism 61 Cognitive Information Processing76 Consumer involvement87 The behaviourist explanation of involvement94 Conclusion 96 CONTENTS4Industrial buyer behaviour98 Introduction 99 Types of organizational markets99 The organizational buying centre101 The B-to-B buying process102 Comparison between B-to-B and consumer buyer behaviour106 New approaches to B-to-B buying behaviour107 Strategic use of technology in buying: intranets and extranets108 Conclusion 113 5Marketing research114 Introduction 115 The structure of the marketing research industry120 The marketing research process125 Marketing research methodology125 Sampling methods142 Questionnaire design147 Attitude, beliefs and behaviour147 Definition of the marketing mix156 Marketing research industry controls166 Conclusion 169 6Segmentation, targeting and positioning172 Introduction 173 Market segmentation174 Selecting target markets190 Positioning 195 Conclusion 200 7Branding 201 Introduction 202 Brief modern history of branding202 Brand decisions205 Mainstream explanation of branding206 Behaviourist view219 Brand loyalty221 Conclusion 224 8Product 225 Introduction 226 Characteristics of the product life cycle and their marketing implications229 viii CONTENTSFacets of the PLC236 New product development (NPD)239 The market diffusion process258 Organizing for new product development259 Conclusion 263 9Pricing 265 Introduction 266 Price and the marketing mix267 Pricing objectives268 Factors affecting pricing decisions269 Setting a price271 Pricing industrial goods279 Pricing and information technology281 Conclusion 289 10Promotion 290 Introduction 291 Relations between corporate and marketing communications291 The communications process291 The marketing communications process302 Planning marketing communications campaigns308 Communications contact techniques322 IT influence on advertising media332 Conclusion 335 11Place: channels of distribution337 Introduction 338 Channel constraints338 The structure of channels of distribution344 Intermediaries within channels of distribution348 Types of retail franchise agreements349 Developments in retailing352 Development in information technology359 International expansion of the retail industry364 Conclusion 366 12Virtual marketing369 Introduction 370 The Internet370 The World Wide Web371 Consumer behaviour on the Web374 ix CONTENTSMarketing and the Internet378 Other issues relating to promotion388 Conclusion 392 13Marketing planning and implementation394 Introduction 395 Setting out the mission, aims and objectives399 Conclusion 415 Notes 417 Answers to review questions419 References 446 Index 460 x CONTENTS1The structure of the bookxxiv 2.1The firm (organism) in relation to its environment21 2.2Trends in urbanization25 2.3Population aged 65+25 2.4Gross domestic product per capita30 2.5Carbon emissions per capita 31 2.6The marketing planning process32 2.7SWOT: creating a fit between organization and environment33 3.1Relations between key terms in later Freudian theory51 3.2Summary of classical, operant and cognitive learning processes62 3.3Example of ‘reason why’ copy64 3.4Example of anxiety appeal66 3.5Foxall’s behavioural perspective model72 3.6Contingencies of consumer choice74 3.7Simplified cognitive information system79 3.8The theory of reasoned action83 3.9Cognitive model of the consumer buyer decision process84 3.10The relationship between involvement and complexity91 3.11The purchase decision process: high involvement92 3.12Decision making for brand-loyal customers92 4.1The decision process for choice of supplier102 5.1Marketing information system116 5.2The marketing research process126 5.3Decomposition of Joe’s hierarchy of beliefs about the Seychelles150 5.4Decomposition of Joe’s hierarchy of beliefs, indicating strength of belief151 6.1The VALS segmentation system182 6.2Process of target market selection194 6.3Target market selection194 6.4Perceptual map of financial services196 7.1Differences in brand personality207 7.2Referent system for perfume products213 7.3Brand from drawer of meaning to brand as signifier of meaning215 7.4Marketing and the brand community217 8.1The Product mix, Procter & Gamble228 xi ILLUSTRATIONS8.2The product life cycle model230 8.3The product life cycle for established products238 8.4The product life cycle for fad-type products238 8.5Stages in new product development240 9.1Approaches to price setting272 10.1Simple model of the mass-communication process292 10.2Development of the model of the mass-communication process294 10.3Industry structure: marketing communications303 10.4Planning the process for integrated marketing communications311 10.5‘Push’ and ‘pull’ strategies314 10.6The Foote Cone & Belding grid315 10.7The creative brief324 10.8Social advertising333 11.1Consumer and industrial channels of distribution345 12.1Internet penetration372 12.2Primary uses of the Web375 12.3Traditional marketing communications386 12.4Internet-based communications386 13.1An example of a Gantt chart used in marketing planning398 13.2Stoats Porridge Bars mobile unit406 13.3Summary of Stoats Porridge Bars’ website visitors411 xii ILLUSTRATIONS1.1Marketing orientation6 1.2Relations between efficiency and effectiveness7 2.1One hundred technical innovations likely in the next thirty years23 2.2Marketing strategy process: problem-solving process32 3.1Key relations between different explanations44 3.2Mean involvement profile88 3.3Differences between low and high-involvement styles89 5.1Top global research organizations, 2003–2004122 5.2World marketing research expenditure, 2002122 5.3Top ten marketing research markets in Europe, Asia Pacific and Latin America, 2002123 5.4UK marketing research agency turnover, 2003124 5.5Research methods used by UK marketing research agencies, 2002 125 5.6Decomposition of Joe’s hierarchy of beliefs for level 1151 5.7Decomposition of Joe’s hierarchy of beliefs for level 2152 5.8Example of Osgood scale155 6.1The ACORN consumer targeting classification176 6.2Mean equivalent income of age group as proposition of overall mean, selected countries, mid-1980s177 6.3Socio-economic classification (JICNARS)181 6.4Typical market segments visiting a UK supermarket185 8.1Top world’s most valuable brands, 2004234 8.2Top ten ranked brands in the UK, 2004235 8.3Marketing responses to the product life cycle236 8.4Idea-screening criteria242 8.5Approaches to new product development259 8.6Top ten toys, 1988–1997261 9.1Stages of the product life cycle271 9.2Computation for each projection combination278 10.1Denotation and Connotation293 10.2Meanings of the colour red295 10.3The world’s top ten core advertising agency brands, 2002327 xiii TABLES10.4UK total advertising expenditure by medium, 2003327 10.5Top ten advertisers in the UK, 2003328 10.6Advertising expenditure by medium in selected European countries, 2003329 11.1UK franchise operations, 2003350 11.2Top ten gobal retailers, 2004352 11.3Top ten UK retailers, 2004353 11.4The structure of the retail grocery trade in Great Britain, 2002355 11.5Concentration of turnover among the retail grocery trade in Great Britain, 2002355 11.6Grocery retailer market share in the UK, 2005356 11.7Top twenty European retailers, ranked by turnover, 2003357 12.1Differences between traditional and multimedia communications381 13.1Summary of Stoats Porridge Bars’ website visitors, August to December 2005410 13.2Festivals and events attended, June 2005 to January 2006412 xiv TABLESMarketing within the sex industry14 Who held back the stone?16 Drinking Coke in Trinidad26 The role of guanxi in Chinese buying negotiations37 Apple computer: from Mac to iMac and iPod38 Buying a computer system for a hospital110 Baxi looks to Europe for expansion112 Developments in qualitative research methods132 Developments in television audience rating measurement159 Marketing research’s strategic contribution to the expansion of carbonated soft drinks markets in emerging economies160 Segmentation applied to the Tiberias Hotel198 Shaping brand congruity: Midland Bank brands208 Brand cult: who needs enemies?218 Brand personality: FCUKed?223 Virgin’s approach to direct sales in financial services231 Crayola crayons232 Butlin’s holiday camps233 Test marketing chocolate252 Successful innovation in the flat glass process256 Feeding the Furby fad260 Dumpy bottles for baby prove a world beater262 Product rebranding related to merino wool in New Zealand262 Pricing the Ford Mustang274 The price of vodka276 Online retailing pricing282 The dust is settling on the Dyson market clean-up283 Car price war looms in China as Shanghai Volkswagen cuts prices285 Rover drivers and dealers face substantial losses in the value of their cars and related financing286 The role of pricing in the cashmere knitwear industry287 BAE Systems sells defence subsidiary at knock-down price due to national security288 Madame Tussaud’s seeks star partners321 xv CASE STUDIESSocial advertising333 Franchising for DynoRod351 Charity shops358 The Internet competing with traditional channels: Amazon.com versus Barnes & Noble389 Internet ethics: the Danish consumer ombudsman identifying hidden advertisements on the Net390 Introducing Stoats Porridge Bars404 xvi CASE STUDIESPREFACE This book aims to provide a comprehensive introduction to the subject of marketing. While it covers most of the topics found in other texts it also provides a solid theoretical background which can act as a springboard to discuss contemporary issues and controversies within marketing theory and practice. The text is focused on the mainstream functionalist account based on psychological theory, rather than alternative sociological and anthropological texts on offer. As psychology acts as the bedrock of most explanations of consumer behaviour, a range of psychological theories have been examined, with limited discussion of the associated controversies. In this respect Freudian theory, behaviourism and cognitive learning theory are detailed in an early chapter. This preliminary exposition informs the subsequent coverage of involvement and brand loyalty, where different theoretical explanations, such as cognitive and behaviourist theories, are discussed alongside synthetic accounts. The overall aim is to disabuse students of the belief that there is only one way of understanding marketing activities and to enable them to compare and contrast different accounts. While the text is written from a European perspective, reflecting the point of origin of its contributors, it is intended for use by students from any country or background. The text has been developed and written by Marilyn Stone, Heriot-Watt University and John Desmond, St Andrews University, ably supported by J.B. (Ian) McCall and by Sarah Dougan. Although all the others have discussed at length the text, particular responsibility for the individual chapters has been as follows. John Desmond: Chapter 1, ‘Marketing: development and scope of the subject’, Chapter 2, ‘Strategic marketing and the planning process’, Chapter 3, ‘Consumer buyer behaviour’, Chapter 4, ‘Industrial buyer behaviour’ (supported by Marilyn Stone), Chapter 5, ‘Segmentation, targeting and positioning (supported by Sarah Dougan)’, Chapter 6, ‘Branding’, Chapter 7, ‘Product’ (supported by Sarah Dougan and Marilyn Stone), Chapter 9, ‘Promotion’ (supported by Marilyn Stone), and Chapter 11, ‘Virtual Marketing’. Marilyn Stone: Chapter 5, ‘Marketing research’ (supported by John Desmond), Chapter 10, ‘Place: channels of distribution’, and Chapter 13, ‘Marketing planning and implementation’. J.B. (Ian) McCall and Marilyn Stone: Chapter 8, ‘Pricing’. Once the draft chapters were prepared, the authors read each other’s contribution to link the chapters of the text. Examples have been drawn from a range of countries and situations, which it is hoped will help students to relate to the issues being discussed. Marilyn Stone undertook the overall editing of the text. xviiACKNOWLEDGEMENTS Much appreciation is given to others who have supported the preparation of the marketing text, including Professor Chris Eynon, Managing Director of TNS (System Three), and Professor John Fernie, Director of Heriot-Watt University, School of Management and Languages. Thanks are due to all the others who encouraged the authors to complete the book. In particular, thanks are due to Francesca Heslop and Emma Joyes for their encouraging editing support. Hazel Loeb gave useful research assistance in the preparation of the initial draft of the distributed learning material. Thanks should also go to our students over the years who, with their enthusiasm, have encouraged and stimulated our interest in teaching marketing in its various guises. Finally, thanks go to our families and friends, who have supported the process of getting the text to press. Despite all the support and effort made to prepare a fair assessment of the topic of marketing as opined by myself, John Desmond and J.B. (Ian) McCall, the ultimate responsibility for what has been written rests with the authors. While it is intended that this should be as accurate as possible, any mistakes or omissions that may have been made are of our own making and not of those others who have supported us in the task. Marilyn A. Stone John Desmond xviiiABBREVIATIONS A&R ABC ABMRC ACORN ACS AGB AIDA AMSO ARG ARS ATM ATR BBC BEUC BMRA BMRB BRAD BSA BSE CAPI CASI CATI CAWI CD CEE CIM CIP CIS CJMR CME CS CSD DAGMAR artists and repertoire Audits Bureau of Circulation Association of British Market Research Companies A Classification of Residential Neighbourhoods Association of Charity Shops Audits of Great Britain Awareness, Interest, Desire and Action model Association of Market Survey Organizations Argos Retail Group Audience Reaction Service (British Broadcasting Corporation) Automatic teller machines (cash machine) Awareness, Trial and Reinforcement British Broadcasting Corporation European Consumer Organization British Market Research Association British Marketing Research Bureau (market research agency) British Rate and Data British Sandwich Association bovine spongiform encephalophy computer-assisted personal interviewing Computer-assisted self-interviewing Computer-assisted telephone interviewing Computer-assisted Web interviewing compact disc Central and Eastern Europe Chartered Institute of Marketing cognitive information processing Commonwealth of Independent States Carrick James Market Research (market research agency) computer-mediated environment conditioned stimulus carbonated soft drinks Designing Advertising Goals; Measuring Advertising Response model xixABBREVIATIONS DJ DVD DVR ECR EDI EDP EFAMRO EFTPOS EPOS ESOMAR EST EU FCB FMCG disc jockey digital video disc digital video recorder effective consumer response electronic data interchange electronic data processing European Federation of Associations of Market Research Organizations electronic funds transfer point of sale electronic point of sale European Society for Opinion and Market Research Erhard Seminar Training European Union Foote, Cone & Belding (advertising agency) fast-moving consumer goods FRUGGINGFunding under the guise of marketing research (for charities) FTC Federal Trade Commission FTP GB GCC GDP GELS GI GRP GUS H&M HBA HBOS HERO HOG HTML HTTP IMRG INTV IPA ISP ITCA JICNARS JICREG JIT JND KFC LP xx f ile transfer protocol. Great Britain (England, Scotland and Wales) Gulf Co-operation Council gross domestic product General Electric Lighting Division glycemic index (diet) gross rating points (of US television) Great Universal Stores Hennes & Mauritz (Swedish youth fashion clothes retailer) Health and Beauty Audit Halifax and Bank of Scotland health experience research online (YouGov panel) Harley-Davidson Owners’ Group hyper-text markup language hypertext transfer protocol Interactive Media in Retail Group international television research group Institute of Practitioners in Advertising internet service provider Independent Television Companies’ Association Joint Industry Committee for National Readership Surveys Joint Industry Committee for Regional Press Readership just-in-time just noticeable difference Kentucky Fried Chicken long-playing (record)ABBREVIATIONS M&S MEAL MCIF MIS MNC m.p.h. MRP I MRP II MRS MUD NFS NHS NOP NRS OECD OFT P&G PBG PCB PDA PETV POS POSTAR PR PSP PSYBT R&D RAJAR RBS RDU ROI SAFE SEU SIC SMR SOS SRI STAMP sUGGING SWOT TARIS TNS Marks & Spencer Media Expenditure Analysis marketing customer information files marketing information system multinational corporation miles per hour materials requirements planning manufacturing resource planning Market Research Society multi-user domain network file system National Health Service National Opinion Poll (market research agency) National Readership Survey Organization of Economic Co-operation and Development Office of Fair Trading Procter & Gamble Pepsi Bottling Group printed circuit board personal digital assistant Pan-European Television Research (consortium of cable and satellite operators) replaced by INTV point of sale Poster Audience Research body public relations PlayStationPortable Prince’s Scottish Youth Business Trust research and development Radio Audience Joint Advertising Research Royal Bank of Scotland remote detection unit return on investment Sustainable Agriculture Food and Environment subjected expected utility Standard Industrial Classification Sender–Messenger–Receiver model (communications) Scottish Omnibus Survey (TNS) Stanford Research Institute Satellite Television Audience Measurement Partnership selling under the guise of marketing research strength and weaknesses/opportunities and threats (analysis model) Television Audience Research and Information System Taylor Nelson Sofres (market research agency) xxiABBREVIATIONS TNS SOS TVR UCS UN URL US USP VALS VAT VF VOIP VSS WAN xxii TNS Scottish Opinion Survey television response rate unconditioned stimulus United Nations uniform resource locator United States (of America) unique selling proposition Values and Lifestyles value added tax Vanity Fair voice over Internet protocol. Veronis Suhker Stevenson (US private equity firm) wide area networkINTRODUCTION A functionalist approach to marketing Bell (1966) discusses marketing’s debt to systems theory, in particular to cybernetics, ‘the science of control and communication in the animal and in the machine’, first developed by Norbert Wiener. This focuses attention on marketing as part of a social system. Generally, the approach used in this text is managerialist, focused on the perspective of the firm rather than that of the customer. Both firms and customers are considered in relation to the environment in which they seek to survive. The view is that firms can best survive when they seek to ensure the survival and satisfaction of the customers on whom they depend. This approach enables the following concepts to be explored: The role played by marketing in helping firms control and successfully adapt to the environment by means of a focus on customer needs. Customer orientation plays a key role in the satisfaction of organizational goals, usually profit. The behaviour of firms when competition is intense and survival is the goal. A focus on competitors including the destruction of a competitor may best ensure the continued existence of the organism (Bell, 1966: 65). The role of marketing in its wider social and environmental context. This functionalist approach follows the managerialist focus of the marketing ‘mainstream’ orientation. It helps to understand why marketing has a paradoxical orientation both to the customer and to warfare; however, it also enables looking outside of the relatively narrow context to those wider issues which are the concerns of macro-marketing, social marketing and ‘new’ approaches such as relationship marketing. The approach taken in the text is to focus on traditional marketing while incorporating aspects of relationship marketing and internal marketing. Figure 1.1 summarizes some of the relationships between these with respect to the different types of relationships that can exist between marketers, other organization members and customers. This book concentrates on the traditional marketing activities summarized in side 1 of the triangle in Figure 1. Theme: introduction to marketing theory and practice: Chapter 1: Marketing development and scope of the subject. Chapter 2: Strategic marketing and the planning process. xxiiiINTRODUCTION Figure 1 The structure of the book. 1 traditional marketing, 2 relationship marketing, 3 internal marketing Marketer Customer 12 3 Theme: understanding and analysing customers: Chapter 3: Consumer buyer behaviour. Chapter 4: Industrial buyer behaviour. Chapter 5: Marketing research. Theme: constructing the offer: Organisation Chapter 6: Segmentation, targeting and positioning. Chapter 7: Branding. Following this there are four key chapters, each of which is devoted to one item of the ‘4 Ps’, otherwise known as the marketing mix: Chapter 8: Product. Chapter 9: Pricing. Chapter 10: Promotion. Chapter 11: Place. Then there is a chapter on virtual marketing discussing contemporary developments: Chapter 12: Virtual marketing. The text concludes with a chapter bringing together the material covered throughout the text as it relates to marketing planning: Chapter 13: Marketing planning and implementation xxiv1 MARKETING: DEVELOPMENT AND SCOPE OF THE SUBJECT LEARNING OBJECTIVES LEARNING OBJECTIVES By the end of this chapter you should be able to: have a feel for the diversity of the subject of marketing and its historical development; distinguish between different schools of thought in marketing; know what the marketing concept is; understand what is meant by the ‘functionalist’ approach by which this text is organized; have a grasp of the major contemporary environmental trends in marketing; appreciate the adaptive role of marketing strategy.FUNDAMENTALS OF MARKETING INTRODUCTION The greatest difficulty in writing an academic book about marketing is that people already know much about the subject. The rather dry academic text can seem a poor substitute for the excitement of shopping, or working out what a particular advertisement is saying, telling friends about the latest new product you have bought. Even complaining about the poor level of service received from a shop, the local transport company or perhaps the bank can seem more relevant. Typically, people associate marketing with advertising or selling but while there is no doubt that marketing practice definitely encompasses both, there is much more to the subject than a narrow focus on either advertising or selling might suggest. The true scope of the subject is astonishing and a central aim of this book is to provide a flavour of the diverse nature of marketing. Another key aim is to ensure that your knowledge of marketing is built on solid foundations. For this reason, the approach generally follows the traditional managerialist focus on the ‘4 Ps’ (product, price, promotion and place). Additionally, there is an overview of other perspectives, including social marketing, green marketing and relationship marketing. THE STUDY OF MARKETING There are many different approaches to the study of the marketing subject. Sheth et al. (1988) suggests that there are no less than twelve schools of marketing thought. While the variety of approaches contributes to the dynamism of marketing scholarship, the same diversity may confuse readers who expect marketing to be a unified subject. Readers may think that marketers are being contradictory when actually they represent different approaches to the subject. To discuss this diversity it is useful to outline key issues in the historical development of the study of marketing. To begin with it is important to distinguish the practice of marketing from its academic study. From earliest recorded history markets have existed as a means of bringing producer and consumer together. Likewise individuals have sought to influence the perceptions of others in favour of the goods that they offer. One might also point to medieval courtiers as being early consumers (McCracken, 1990). On the other hand, it can be argued that it is wrong to reach back into history in order to label practices that had a particular meaning and function in earlier times as being ‘marketing’ practices. According to American academics, the study of marketing first began in the US in the late nineteenth century. The following is a simplified account of some of the major developments in the academic study of marketing during the course of the twentieth and twenty-first centuries. Product-centred approaches As the study of marketing developed during the early 1900s, academics focused on understanding and classifying the profusion of products that were coming on to the market. 2MARKETING: DEVELOPMENT AND SCOPE Much effort was expended on building a product classification which in a revised form is still used today and is reflected in the division between convenience, shopping and speciality goods. The idea is that consumers behave in different ways when purchasing convenience products, relatively inexpensive and frequently purchased goods, compared with shopping products, e.g. consumer durables such as stereos, bicycles and furniture. Speciality products possess a single unique characteristic which buyers are willing to expend a considerable amount of effort to obtain, e.g. a Cartier watch. In our text this work is integrated into the section on Product, one of the ‘4 Ps’ of marketing. You should also be able to detect its influence in the discussion of consumer involvement in Chapter 3. Another group of academics focused on what marketers do. This research yielded up a classification of marketing activities, e.g. in assembling goods and storing them, assuming risk, rearranging commodities by sorting, grading and breaking up large quantities into smaller units, selling and transporting. This work is integrated into the discussion of place or distribution (Chapter 11), which is another of the ‘4 Ps’. In the 1930s researchers turned to explore another kind of problem; the spatial separation between producer and consumer – especially the distances consumers might be prepared to travel and the role played by distance in consumer decision to patronize one store rather than another. This work is integrated into the marketing links with logistics, physical distribution and retail location, again as part of the ‘place’ element of the ‘4 Ps’. Functionalism The functionalist approach was a major development in marketing and is the approach which has been used for the design of this book. The functionalist approach differs from the functional approach mentioned earlier in that it develops a systems approach to marketing, whereby behaviour is considered to be systemic and goal-driven. The functionalist approach derives in large part from the theories of the biologist Charles Darwin. Within this view the goal of marketing is to effectively match firms’ supply with household demand. Functionalism is important because it views firms and households as organisms which must f ind some point of equilibrium ( homeostasis ) in relation to each other and the environment on which they both depend. This ecological view forms the basis of several approaches to the study of marketing, including the managerialist approach, which considers those activities which are best suited to ensuring the successful adaptation of the firm to its environment: macro-marketing, which focuses on the macro environmental impact of marketing, and green marketing, which seeks to bring the activities of firms into a new and more harmonious relation with the environment. A MANAGERIAL APPROACH This book takes a traditional managerial orientation to the study of marketing. This began at Harvard University in the US in the late nineteenth century but did not really become 3FUNDAMENTALS OF MARKETING significant until the 1950s. According to Sheth et al. (1988) this was because there was excess capacity in the US after World War II when it was becoming harder to sell what was being produced. The development of the managerial approach is important in that it is partisan. Other schools of thought do not take sides between households and firms but study each in its own right. By contrast, as its name suggests, the managerial perspective views the subject from a manager’s point of view, which influences the sorts of questions which marketers ask. A major concern to managers is to understand consumer behaviour. In order to gain the necessary insights into such behaviour marketing research techniques were developed. Following from this Chapter 3 on consumer buyer behaviour is central to the text. Marketing orientation and the marketing concept The appropriate orientation of the firm to the household is an important issue for those who take the management perspective. Prior to the 1950s the idea that marketers needed to create customers for mass-produced products was the norm (Drucker, 1955: 52). However, during this period this notion began to be supplanted by a new idea, that of customer orientation. This deceptively simple formulation warns the marketer that to be successful in ‘competing successfully in the quicksilver of modern markets’ they should ‘not so much be skilful in making the customer do what suits the interests of the business as to be skilful in conceiving and then making the business do what suits the interest of the customer’ (McKitterick, 1957: 78). In some respects this formulation is paradoxical as, given consumer sovereignty, the firm should ideally have no long-term interest other than that of acting in the customer’s interests. This paradox may be answered by Levitt’s famous ‘marketing myopia’ (1960). In Levitt’s view managers in firms confuse false (short-term) desires with their real (long-term) interests through being blinded by a belief in the power of their product, technology or production process, or through the perceived need to get rid of ‘product’. Levitt argues that such thinking can only ever hold true in the short term as in the long run consumer sovereignty would prevail. McKitterick’s formulation of customer orientation has clear political and moral implications. The political implication is that if business attended to its long-run interests there would be little need for state regulation. This is tied to the moral dimension whereby managers are told that by acting selfishly they ultimately damage the long-run survival potential of the firm. In this way the marketing orientation seeks the internal regulation of the f irm on the justification that managers will seek to come to believe that it is in the firm’s interests to adopt a marketing orientation. Over the years the idea of the marketing orientation has been subject to elaboration, e.g. by the creation of a range of definitions of the marketing concept. The current definition of the marketing concept offered by the British Chartered Institute of Marketing (CIM) defines marketing as ‘the management process responsible for identifying, anticipating and satisfying customer requirements profitably.’ This definition could be described as wanting 4MARKETING: DEVELOPMENT AND SCOPE in that it fails to focus on the long-run interests of the firm. It can be contrasted with Kotler’s more completed definition: ‘The marketing concept calls for a customer orientation backed by integrated marketing aimed at generating long-run customer satisfaction as the key to attaining long-run profitable volume’ (Kotler, 1972b: 54). In focusing on the long-run interest of the firm, and in calling for an integrated marketing programme, Kotler recognizes that a key problem for marketing, which is the external face of the organization, is the motivation, co-ordination and control of internal resources. Davidson, writing on marketing warfare, adopts a much blunter tone: The practice of marketing is almost as old as civilization, and its validity has been proved over and over again. The oldest profession in the world used classic marketing techniques: it identified and satisfied a need; it created a market where buyer and seller could meet, in the form of a brothel; and it turned a handsome profit on the operation. (Davidson, 1987: 29) The warfare approach is reflected in Kohli and Jaworski’s definition of the marketing concept which focuses on the notion of marketing intelligence and information gathering in discussing a consumer orientation: Market orientation is the organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organizational responsiveness to it. (Kohli and Jaworski, 1990: 6) Ries and Trout (1981, 1986), who have made the marketing warfare orientation approach their own, place the competition and not the customer as the central problem of the marketer. Within this view, the key aim is to position the product in the mind of the customer and to knock the competitor’s out. Marketing warfare theorists are sceptical about those who might argue that marketers should be the lapdogs of customers. For example, Davidson (1987) describes ‘consumer worshippers’ as one of the ‘marketing perverts’. Levitt (1962: 8) strikes a balance by suggesting that marketing is no ‘do-gooder’ treatise but a ‘tough-minded explanation, outline and example of how to serve yourself by serving the customer better’. 1 While the above definitions are diverse, taking either the customer or the competition as the central focus of marketing, they share the fundamental idea that the interest of the firm, as represented by the need to make a profit, is primary. The ultimate satisfaction of this interest is based on the need to satisfy customer requirements. Table 1.1 summarizes the key distinctions between economic and marketing orientation and also between marketing orientation and production, costs and sales orientations. Levitt (1960) warns against the ‘self-deceiving cycle’ whereby producers can become lured into the illusory belief that the demand for their product will be eternal, or that their success is due to the technical quality of their product, or the efficiency of their operations. As an 5FUNDAMENTALS OF MARKETING Table 1.1 Marketing orientation 6 Type of Orientation CommentHow the moral issue Political implications orientationdetailsis resolved Economic Firm should seek But seeking to Through the Minimal regulation – orientationto maximize its self-maximize short-operations of the the operations of the interest in the run desires can ‘invisible hand’ in the market will sort out market placedamage long-run market place. any inequities that interestsFirms which fail to take arise in the short run consumers’ needs into account will ultimately disappear Marketing The key to maximizing Focuses on the By managers seeking Minimal regulation – orientationself-interest lies in adaptive potential to implement the so long as most firms understanding and of the individual marketing concept. embrace the concept meeting changing organization to Firms which embrace customer needsadjust to environ-this ultimately will be mental changemore profitable Production Blind belief in Levitt (1960) – As aboveAs above orientationtechnical excellence this is a form of as route to long-myopia that will run successlead ultimately to destruction Cost/efficiency Blind belief that Levitt (1960) – As aboveAs above orientationfocus on cost this is a form of reduction to exclusion myopia that will of customer wants lead ultimately to leads to long-run destruction success Sales Blind belief in the Levitt (1960) – As aboveAs above orientationview that selling is this is a form of the only way of myopia that will providing long-run lead ultimately to success destruction Reformist Business dominates Argues that reality One should not rely Need for government critique of consumersis the other way either on the market regulation marketinground to the way or on the marketing marketers describe concept this RadicalBusiness and The marketing One must seek to Need for a critique of government dominate concept is a remove the scales fundamental change marketingcitizens and dangerous from the eyes of in the system consumers ideology citizensMARKETING: DEVELOPMENT AND SCOPE Table 1.2 Relations between efficiency and effectiveness Level of efficiency Ineffective Effective Inefficient Efficient Die quickly Die slowly Survive Thrive example of the former he cites the early twentieth-century millionaire who insisted that his vast inheritance be invested solely in electric streetcars! In relation to technical quality it can be understood how easily an engineer can be lured into thinking that her or his idea of quality is consonant with that ascribed by the consumer. In a personal discussion with some MBA students who worked in the Scottish knitwear industry they heatedly supported their view that UK consumers would prefer the superior technical quality of their product to the inferior quality provided by Benetton. They were motivated by the discussion to conduct research to prove their point. Unfortunately for them, they found that consumers preferred the technically inferior product, especially when they knew the price difference. Levitt (1960) focuses attention on to the double-edged relations between efficiency and effectiveness. While efficiency is good, one should be careful not to under or overengineer a product, as in the knitwear example described above, but instead to give the customer what she or he wants. Related to this is the orientation to technology. Technology, too, undoubtedly can be a good thing, but it may be tempting for managers to implement technological solutions that do not take into account user requirements. Levitt’s insight has been developed into a two-by-two matrix which is illustrated in Table 1.2. A company that is inefficient and ineffective will fail to survive because it produces goods that are relatively expensive, that consumers do not particularly want. Even though a company is efficient and produces goods at a low relative cost, still it will go out of business if it does not produce goods that customers want. Marketers argue that it is only when firms act effectively by making things that people want that the firm stands any chance of surviving into the long term. Implementing a marketing orientation Do marketing managers agree with the academics about what a marketing orientation is? In studying this Kohli and Jaworski (1990: 3) first had to construct a composite definition to describe the academic view. They found that academic definitions of marketing orientation are organized according to three core ‘pillars’ which underpin them all. These comprise customer focus, co-ordinated marketing and profitability. The authors asked marketing managers what they thought of the categories that the academics had decided 7FUNDAMENTALS OF MARKETING upon by conducting a field study. Marketing managers agreed that the marketing concept is about a customer focus; however, they also mentioned something that the academics had not taken account of, which was that they took actions on the basis of market intelligence. In hindsight it seems obvious that a marketing manager will not simply be concerned with the task of ascertaining the current and future needs of customers, but will be doing so within an environment which is regulated and subject to competition. Co-ordinated marketing was not mentioned by many marketing managers, although the co-ordination of market intelligence was seen to play an important role. Finally, managers perceived profitability to be an outcome of market intelligence and customer focus. Are marketing-oriented firms more successful? Over the years marketing academics have sought to ascertain whether firms which are marketing-oriented are more successful than those which are not. Another focus for enquiry has been the overall extent to which firms have embraced the marketing concept. Hooley and Lynch (1985) studied the marketing characteristics of high and lowperforming companies based on a basket of indicators including profitability, market share and return on equity. They found that a number of marketingrelated activities differentiated high-performance companies from their counterparts. Higherperforming companies were more likely to be found in growth markets; to be proactive in planning; to work more closely with other departments, including the finance department, and to spend more on market research. Narver and Slater (1990) took strategic business units (SBUs) in the US as the focus of their study. They sought not only to understand the links, if any, between market orientation and profitability but, furthermore, to see if there were any differences between commodity (raw materials) businesses, such as water and minerals extraction, and non-commodity businesses. Market orientation was operationalized in terms of three components: customer orientation, competitor orientation and degree of inter-functional orientation. The authors found that for commodity businesses those with the highest marketing orientation showed higher profitability than the businesses in the mid-range. Interestingly, they found that those SBUs that were lowest in marketing orientation were also more profitable than the midrange businesses. The authors sought to explain this by arguing that the low marketing orientation companies were highly cost-focused and, consequently, were likely to be more profitable on that basis. For non-commodity companies the authors found that businesses with the highest level of market orientation achieved the highest levels of profitability and those with the lowest orientation the lowest profitability. DEVELOPMENTS IN MARKETING THEORY While the above seems to indicate that those firms that embrace the marketing concept are more successful than others, to what extent has this been embraced by business? At the 8MARKETING: DEVELOPMENT AND SCOPE dawn of the 1960s there was a lot of satisfaction if not smugness among marketing academics amid a general feeling that most firms were identifying and satisfying people’s needs and not merely selling things to them. It was felt that marketing had at last come of age, having moved through a series of ‘phases’ from a ‘mass distribution’ or ‘production era’ to ‘aggressive selling’ and now to a genuine ‘marketing orientation’, such that by the 1960s it was considered unAmerican for a company not to practise the marketing concept (Lipson and Paling, 1974; Stidsen and Schutte, 1972). Imagine then the shock, horror and disappointment of marketing academics to what happened later in the 1960s. It is difficult now to comprehend the scope of the change and, in particular, the widespread disaffection of the young with respect to much that concerned business and marketing in particular. In one year only 8 per cent of Harvard graduates decided to elect for business careers (Gartner and Riessman, 1974). Marketing, especially selling and advertising, was singled out as the most controversial and most criticized single zone of business (Bauer and Greyser, 1967: 2). In addition to this criticism, in the US business (and marketing in particular) attracted considerable attention from state regulatory agencies and by the end of the decade claims were made that industry was being tied up by the amount of consumer legislation passed. 2 Additionally, a large number of consumer affairs offices were opened to investigate consumer complaints. 3 The publication of The Hidden Persuaders (1957) and The Waste Makers (1960) by Vance Packard, Silent Spring by Rachel Carson (1962) and work by Ralph Nader casting doubt on the safety record of General Motors, contributed to the establishment of the consumer movement. The response of marketing academics to the furore of the 1960s was varied. Innovators like George Fisk opened up new avenues for research by exploring macro-marketing processes, the role played by marketing activities in the wider social system. However, the general response of ‘mainstream’ US marketing academics to the wave of protest in the 1960s was much more defensive. Some suggested that the reason for the spate of government legislation was poor communications between government and marketers. Others felt that marketers had been targeted unfairly particularly, with claims about product obsolescence which were really the responsibility of production personnel. Management guru Peter Drucker felt that the growth of consumerism was the shame of marketing, that basically consumers saw manufacturers as people who were not bothered to find out what they wanted. He felt that there was a need to get back down to basics, or the fundamentals of marketing, and look at things from the consumer’s point of view (Drucker, 1969: 61). Philip Kotler suggested that the problem was that while the business community had grasped the spirit of the marketing concept, and, while top management professed the concept, line managers did not practise it faithfully (Kotler, 1972a). Charles Ames (1970) sought to explain why marketing practices were so slow to develop in industrial marketing contexts. His general argument is that while management had adopted the superficial trappings of market orientation through the establishment of marketing departments and advertising budgets, they had not attended to its substance, a matter which required real commitment from the top and continuous effort from all managers. 9FUNDAMENTALS OF MARKETING Marketing academics initially viewed the consumer movement with suspicion, fear and sometimes downright hostility. Kotler poured some water on the flames by suggesting that consumerism was not a danger to marketing and could even be viewed as being promarketing because it helped balance the power of the seller by acting in the interests of buyers. Kotler considered that the consumer backlash was mainly due to marketing managers misinterpreting the marketing concept by equating customer satisfaction with consumer desire. He argued that managers mistakenly had catered to consumer desires for products which while they were pleasing were also harmful to consumers’ long-term satisfaction, e.g. by offering products such as cigarettes and alcohol for sale. For this reason, Kotler suggested that the marketing concept should be modified to add the view that marketers should also generate long-run consumer welfare as the key to attaining long-run profitable volume. This means that marketers should pay attention to ways of reformulating pleasing products such as tobacco (which give high immediate satisfaction but ultimately hurt consumers’ interests) so that they become more socially desirable (Kotler, 1972a). Relationship marketing The long-running battle over the marketing concept became the focus of a new major orientation in marketing which was to gather pace during the late 1970s and into the 1980s. This approach has come to be known as relationship marketing . Christian Grönroos (1996) provided the keynote address for the first online relationship marketing conference. Grönroos attacked the idea of the marketing mix, or ‘4 Ps’ as it is more widely known, which he argues is formulaic and therefore bound to set marketing off track because it is competition and production-oriented. Rather than being in the consumer’s interests, i.e. somebody for whom something is done, the ‘4 Ps’ approach implies that the customer is somebody to whom something is done. Grönroos suggests that the ‘4 Ps’ approach has distanced marketers from the marketing concept and that as a result marketing has become the province of specialists. In this sense he argues that specialization of marketing has resulted in a double alienation (1996: 4). This has had the effect of alienating the rest of the organization from Marketing and with this alienation it is difficult, if not impossible, for Marketing to become the truly integrative function that it should be. The specialists organized within the marketing department may become alienated from customers, because managing the marketing mix means relying on mass marketing. Customers become numbers for the marketing specialists, whose actions typically are based on surface information obtained from market research reports and market share statistics. Frequently such marketers act without ever having encountered a real customer. Grönroos’s concerns echo many of those which have been expressed earlier in this chapter with respect to the creation of distance by marketing processes. 10MARKETING: DEVELOPMENT AND SCOPE Grönroos suggests that these contradictions can be resolved by means of a dynamic and f luid relationship marketing approach which alone can counter the straitjacket of the clinical transaction-based, mass-market approach of the ‘4 Ps’. The aim of relationship marketing is to establish, maintain and enhance relation with customers and other partners, at a profit, so that the objectives of all the parties are met. This is achieved by the mutual exchange and fulfilment of promises. Such promises are usually, but not exclusively, long-term. The establishment of a relationship can be divided into two parts: to attract the customer and to build the relationship with that customer so that the economic goals of that relationship can be achieved. This shifts the ground towards the ‘part-time’ marketer; the recognition that, within organizations, many non-marketing specialists actually are practising marketing functions. Internal marketing is needed to gain the support of these people. Both internally and externally, relationships have to be regulated by means of the exchange of promises to establish trust through the formation of relationships and dialogue with both internal and external customers. While the ultimate objective is to build a loyal customer base, there is no doubt that this refocusing of marketing to emphasize qualities of connectedness, dialogue and trust represents an attempt to uplift the process of marketing. Grönroos’s aspiration that marketing in the twenty-first century would be the era of a new relationship marketing based on the mutual exchange and fulfilment of promises has not so far come to fruition, nor, one might suggest is it likely to. Why? One reason is that, as it has evolved in practice, the umbrella term ‘relationship marketing’ subsumes a number of disparate, even contradictory discourses associated with areas such as services marketing and one-to-one marketing. In services marketing it is quite conceivable to envisage a service provider who seeks to develop more meaningful relations with customers. However, the rhetoric of direct marketing and database marketing has a quite different focus (Peppers et al. , 1999). Through customer databases and mass customization the marketer plans the offers and communications on the basis of customer profile and feedback and can focus on the development of an individual ‘relationship’ with each of a large number of customers. The term ‘relationship’ is used advisedly and in a technical sense to point to two features which are required of the technology: its ability to address an individual and the ability to gather and ‘remember’ the response of that individual by means of a cookie. It is then possible to address the individual once more in a way that takes into account his or her unique response. In retrospect there seems little to suggest that this is any less formulaic and subject to the supervision of specialists than the ‘4 Ps’ approach that Grönroos attacked a decade earlier. The reality of database marketing in the real world to date is that it fails to live up to the ideal mentioned above (cf. Fournie...
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Running head: COLLABORATION IN THE PHARMACEUTICAL INDUSTRY

Collaboration in the Pharmaceutical Industry
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COLLABORATION IN THE PHARMACEUTICAL INDUSTRY

Collaboration in the Pharmaceutical Industry
In today’s world of pharmacogenomics and individualized medicine, the pharmaceutical
industry is under pressure to initiate and maintain collaborative efforts between companies in the
industry and with other related fields such as academia as well. A good example of such
collaborations is the Accelerated Medical Partnership (AMP), a program set up by the National
Institutes of Health (NIH) together with the US Food and Drug Administration (FDA), nonprofit
organizations, and different pharmaceutical and life science companies to develop new
treatments and diagnostics jointly by combining each of the partners’ expertise (NIH). Another
common form of collaboration is the development of independent research centers by
pharmaceutical companies with affiliations to different academic centers to tap into the
innovative culture found at academic institutions but lacking in pharmaceutical companies.
Prominent examples of such projects include the Genomics Institute of the Novartis Research
Foundation (GNF) which is in close proximity to strong academic institutes and the California
Institute for Biomedical Research (Calibr) (Thomas & McKew, 2015). Pharmaceutical and
biotechnological companies are also pursuing collaborative efforts through direct partnerships
with academic institutions. An example is the collaboration between Harvard Medical School
and Boehringer Ingelheim. Such collaborations have proven to be beneficial to all parties
involved, with some resulting in the innovation of new treatments for infectious diseases such as
the meningitis A vaccine according to Expert Opinion on Drug Discovery journal (Palmer &
Chaguturu, 2017). In addition to partnerships between companies within the industry, therefor...


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