WEEK 5 Designing the Marketing Mix Product Decisions HMGT 355 Health Services Marketing University of Maryland University College 1 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 Week 5 readings • Journal Articles: – Love, Karen. "The Affordable Care Act: Positive Impact For Quality Improvement." Geriatric Nursing 32.4 (2011): 282-284. AgeLine. Web. 14 Mar. 2014. – Lind, Alice. "Coming To Consensus: Developing An Approach To Measuring Quality Of Integrated Care Programs." Generations 37.2 (2013): 54-61. CINAHL Complete. Web. 14 Mar. 2014. – Needham, Brian R. "The Truth About Patient Experience: What We Can Learn From Other Industries, And How Three Ps Can Improve Health Outcomes, Strengthen Brands, And Delight Customers." Journal Of Healthcare Management 57.4 (2012): 255-263. Business Source Complete. Web. 14 Mar. 2014. • Online Text: Core Concepts in Marketing – Chapter 7, “Introducing and managing the product” 2 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 Week 5 Objectives Product: First of the Four P’s in the Marketing Mix By the end of the week you should be able to 1. define a health services product 2. develop or refine health services products 3. map the patient experience 4. differentiate health services products 5. build quality into health services products 6. decide on a brand and the product mix 3 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 1. Define a Health Services Product • physical goods A product is anything that can be offered to a market to satisfy a want or need. Product can be any of the following: • services • experiences • events • places • properties • organizations • information • ideas 4 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 Classifications of Health Services Products Health services products can be classified based on degree of durability, tangibility, and service: • Nondurable goods. Tangible but only used once or a few times, e.g., bandages, drugs • Durable goods. Have tangible aspects to them and used many times, e.g., MRI, hospital bed, crutches, wheelchairs, artificial knees, pacemakers • Services. Both nondurable and intangible, e.g., hospital stay, doctor’s office visit Frequently, a patient/client/consumer will buy all three types of health services products to meet the same need or want. For example, a patient needing a new knee will buy the physician’s services, the prosthetic knee for implant, and the drugs needed to survive surgery. 5 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 Difference Between a Health Service and a Consumer Good • High quality health service is assumed and not part of the consumer’s decision making process • Health care services can’t be touched, harder to convey the quality and other benefits of the health service • The health service organization is inseparable from the health service provider—a bad doctor’s appointment will reflect poorly on the entire practice 6 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 2. Developing New Health Services or Refining Existing Health Services The Patient Experience Beryl Institute 7 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 All health services products, whether new or improvements to existing services, should begin and end with the patient’s or client’s perspective. What need does the service fill and how can the service be structured to best fill that need in a quality and efficient manner? 8 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 3. Mapping the Touch Points in the Patient Experience 9 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 4. Differentiating Health Services Products To be competitive, patients/clients/customers must understand how and why your health service is different from competitive offerings • Product differentiation: if health service includes a physical product, can differentiate on form, features, quality, durability, reliability, style, design • Service differentiation: adding value to the patient experience with ordering ease, delivery methods, training, consulting • Personnel differentiation: a more satisfied workforce has higher productivity and conveys a better image • Channel differentiation: have more convenient locations • Image differentiation: uniqueness of health service organization’s image, brand that delivers emotional value 10 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 5. The Quality Factor in Health Services • Patient/client will assume the health service is quality until proven otherwise • Factors influencing patient/client’s perception of a quality health service o amenities: physical representation of quality in factors such as cleanliness, parking, landscaping, interior design of facility o service: those factors that affect the patient’s outcome such as hospital meals, appointment scheduling, response time, appointment timeliness, o technical proficiency: training of the health service professionals and execution of the technical aspects of the health service 11 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 6. Branding and Other Product Decisions • A brand is a name, term, design, symbol, or any other feature that identifies one seller's good or service as distinct from those of other sellers. • Examples of health services brands that have achieved distinction o Mayo Clinic o Blue Cross/Blue Shield o Cancer Treatment Centers Of America o Betty Ford Center 12 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 Product Mix Decisions • A product mix is the full set of products offered for sale by an organization. The product mix includes all product lines and categories. • Product mix decisions include o Product width. How many different products? Weight Watchers, product lines include the meetings, online tools, food products, cookbooks, and a magazine. o Product depth. How many products within each product line? Cancer Centers of America offers services for adults, children, and specialized services for women. 13 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 Week 5 additional sources • Check out a patient experience mapping toolkit. See if it has application to your health services organization. • Check out this article on health care branding. • Available online at: • http://www.brandtoolbox.com/wpcontent/uploads/2011/03/health_c are_branding.pdf • http://www.patientvisitredesign.co m/docs/Visit_Mapping_ToolKit_2.p df • Available online at: 14 HMGT 335 - HEALTH CARE MARKETING – WEEK 5 Activities for Week 5 • Review this overview and post questions in the LEO discussions • Leo discussion topics o focus on quality issues from the week’s readings o practice mapping a patient experience o identifying and describing a health services brand 15 Week 6 Designing the Marketing Mix: Price and Place Decisions HMGT 335 Health Services Marketing University of Maryland University College HMGT 335 - HEALTH CARE MARKETING – WEEK 6 Week 6 Readings • Journal Articles: – ALEXANDER, SHERI. "Next Steps And New Tools: Transparency And Reference-Based Pricing." Employee Benefit Plan Review 68.5 (2013): 20-21. Business Source Complete. Web. 23 Mar. 2014. – Lambert Paul. Haggard, Mary, “Develop your distribution strategy”, Managed Healthcare Executive. May 15, 2013. Available online at: http://managedhealthcareexecutive.modernmedicine.com/manag ed-healthcare-executive/news/develop-your-distributionstrategy?page=full • Online Text: Core Concepts in Marketing – Chapter 9, “Pricing the product” – Chapter 10, “Channel concepts, distributing the product” HMGT 335 - HEALTH CARE MARKETING – WEEK 6 Week 6 Objectives 1. Second and third element in the marketing mix – “P”rice – copayments, deductible, per diem, fee – “P”lace – pathways of services or benefits from producer or provider to end user 2. Setting a price for a health service 3. Identify ways consumers evaluate health services prices 4. Identify the role of government and private payers in the pricing of health services 5. Understand how health services prices adapt to meet needs of the customer 6. Define a marketing channel system and value network 7. Design a health care delivery channel HMGT 335 - HEALTH CARE MARKETING – WEEK 6 1. Setting a price for a health service • What is the lowest price we can charge? This is the price floor and based on a break-even analysis • What is the highest price we can charge? This is the price ceiling based on the consumer’s perceived value of the service and may be significantly higher than break even. • The price point will be somewhere in between these two extremes factoring in other variables such as: • Third party payer negotiated prices, copays and deductibles • Competition or lack of competition • Organization’s expectation for return on investment • Government guidelines HMGT 335 - HEALTH CARE MARKETING – WEEK 6 2. How consumers evaluate health services prices • Consumers seek utility from their purchases – Time utility – Timeliness of health service (emergency room services, urgent care center, one day teeth whitening, for example. – Possession utility – the ability to own the health service or product, drugs, medical equipment, nutritional products, for example. – Place utility – Convenience of the health service, convenience of getting to and from the health service HMGT 335 - HEALTH CARE MARKETING – WEEK 6 3. Role of government and private payers in pricing health services • Reference-based pricing – payers develop a set of standard prices in a geographic area and establish a cap on that amount. • Affordable Healthcare Act, most significant change to health service pricing ever! • Incentivizes consumers to chose providers who charge at or below the reference price • Punishes consumers who chose providers who charge more than the reference price • Federal Drug Administration (FDA) approves price of proprietary prescription drugs • Other government agencies can impact all four marketing mix elements HMGT 335 - HEALTH CARE MARKETING – WEEK 6 4. Adapting pricing strategy to meet needs of the health services customer • Prices can vary based on regional demand and costs, target market requirements, timing, order levels, frequency, guarantees, contracts and other factors • Price adaption strategies include: • Geographic pricing – based on specific regions • Discount pricing– giving a discount based on a consumer behavior such as early payment • Promotion pricing – a short-term discount of a product/service for purposes of stimulating extra demand. • Differentiated pricing – Different prices for different customer groups, different prices for volume of purchase • Image pricing – Brand name or generic product/service • Channel pricing – Based on the number of members in the value delivery network before service gets to customer • Time pricing – based on calendar events such as day of the week • Location pricing – Services provided in high cost facilities will require a higher price than same service elsewhere HMGT 335 - HEALTH CARE MARKETING – WEEK 6 5. Channel systems and value delivery networks ▪ Marketing channel: An organized network (system) of agencies and institutions which, in combination, perform all the functions required to link health service organizations with end customers to accomplish the marketing task. ▪ Value delivery network: A marketing channel including the organization, suppliers, distributors and customers who partner with each other to ensure ultimate delivery of customer value to meet and exceed customer expectations. ▪ Channel design begins with understanding the consumers’ needs. All members in the value delivery network strive to meet the customer’s needs most efficiently and effectively. HMGT 335 - HEALTH CARE MARKETING – WEEK 6 6. Designing a health services value delivery network ▪ What does the customer of the health service need? ▪ Examples of health services customer needs ▪ ▪ The right number of units ▪ The shortest wait time ▪ Access to information ▪ Variety of services ▪ Ease of purchase ▪ Ease of payment ▪ After purchase service Ideal channel will match the channels with the customer needs HMGT 335 - HEALTH CARE MARKETING – WEEK 6 How many channel members are needed to meet customer needs? • Direct channel: Service provider or product manufacturer directly meets the customer’s needs. Internet sales can be direct channel (e.g. Weight Watchers Online) • Indirect channel: More than one channel involved. • Exclusive distribution: Useful for services and products requiring a high level of technical and medical knowledge, usually involve patented products. Few channel intermediaries. • Selective distribution: Service or products available at a few specially picked distributors. Useful for specialized health services that have some diffentiated feature from competitors, e.g. Mayo Clinic brand image differentiation, Lasik Eye product differentiation. Select number of channel intermediaries. • Intensive distribution: Service or products are relatively the same in the eyes of the consumers and are available wherever such products or services would be expected to be found. Over the counter drugs and health aids and equipment, weight loss programs. Many channel intermediaries. HMGT 335 - HEALTH CARE MARKETING – WEEK 6 Which channel members should be included? ▪ Include only those organizations and intermediaries that absolutely need to be included in a system to deliver the customer’s perceived value, and ▪ Include only those organizations and intermediaries who share the organization’s commitment to providing a quality patient/client experience. ▪ If quality control and cost containment are important, might chose a vertical channel system where organization controls all or most channel functions (e.g. wholly owned health networks or franchise systems) ▪ If specialized expertise or market coverage are important, might chose a horizontal channel system where health service organization partners with other organizations that have the expertise to perform a specific channel function (pharmacies contract with drug manufacturers and logistics providers) HMGT 335 - HEALTH CARE MARKETING – WEEK 6 Week 6 additional sources • Check out this article on 10 characteristics of effective pricing for health care products for transparency • Available online at: • http://www.beckersh ospitalreview.com/fin ance/10characteristics-ofeffective-healthcareprice-transparencytools.html Example of health care channels HMGT 335 - HEALTH CARE MARKETING – WEEK 6 Week 6 Activities • Review the overview and ask questions in the LEO discussion • Participate in LEO discussions on this week’s journal articles on pricing transparency, referenced based pricing and distribution strategy • Prepare and submit Written Assignment 3
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