Health Services Marketing 4-6 Discussions

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Topic

Narration

1

Introduction

Welcome to Health Services Marketing. In this lesson, we will discuss shaping and managing product and service offerings and ways of developing and branding New Offers

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2

Objectives

Upon completion of this lesson, you will be able to:

Describe the various tools of the marketing mix available to health care providers.

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3

Distinguishing Product types and Levels

Let’s begin this lesson by defining what a product is. A product is anything that can be offered to a market to satisfy a want or a need. This includes physical goods, services, experiences, events, places, properties, organizations, information and ideas. There are five product levels that a health organization needs to address:

Core benefit level is the fundamental level that the customer is really looking for. If a person has a headache, then she may be looking to buy aspirin for headache relief.

Basic product is the second level that come from the core benefit. A hospital bed in the maternity ward that can be also used as a delivery table, a scale, and a recliner are examples of basic products.

Expected product is the third level in which is a set of attributes and conditions buyers normally expect when they purchase a given product. For example, an expectant mother can expect clean gowns, fresh bedding, working lamps, acceptable food, and some degree of quietness while in the hospital.

Augmented product is the fourth level which is an offer that exceeds customer expectations. In the United States, augmented products may have the following features: access to care, coordination of care, information and education, physical comfort, continuity, and transition to home, emotional support, family and friends involvement, and so forth.

And, potential product is the fifth level that includes all the possible augmentations and transformations the product or offering may undergo in the future. This is when companies search for new ways to charm customers and distinguish their offerings.

Products are classified on the basis of durability, tangibility, and service. These three classifications can be grouped according to their durability and tangibility or lack thereof:

Nondurable goods are tangible goods normally used up in one or few uses such as bandages and aspirins.

Durable goods are tangible products that are normally used often such as imaging equipment, operating tables, hospital beds, and wheelchairs.

And And, eservices are nondurable and intangible goods.

These three groups are often used in combination such as a radiologist may:

One. Find a suspicious mass in a woman’s breast while performing a diagnostic mammogram;

Two. Performs a stereotactic procedure with ultrasound technology.

And three. Uses gel for the ultrasound machine to locate the mass for a biopsy. The radiologist’s procedures are services that use nondurable good that is the gel.

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4

Services Characteristics

There are four distinctive characteristics in health care services:

Intangibility. Services that cannot be seen, tasted, felt, hear, or smelled prior to purchase as physical products. A person getting a breast enhancement cannot see the results prior to the purchase.

Inseparability. Services that are usually produced and consumed simultaneously.

Variability. Services that depend on who provides them, and when and where they are provided make them variable. Service providers usually try to standardize their products to address quality concerns. However, the circumstances that require each delivery are unique, so the service is never exactly the same every time. Quality can be increased by service firms taking the following three steps:

One. Invest in good hiring and training procedures.

Two. Standardize the service performance process throughout the organization.

And three. Monitor customer satisfaction.

And the final distinctive characteristic of service is

Perishability. Since services cannot be stored, you can only build capacity to perform them when they are needed. However, ensuring capacity is always available in health care and it can be very expensive.

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5

Product Mix

A product system or product line is comprised of a group of diverse but related items that work in a compatible way. A product mix or a product assortment is the set of all products and items a particular seller offers for sale. It is comprised of various product systems and independent services. An organization’s product mix has:

Width refers to how many different product lines the organization has.

Length refers to the total number of items in the mix.

Depth refers to how many variants of each product in the lone are offered.

And, consistency refers to how closely related the various product lines are in such features as end use, production requirements, or distribution channels.

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6

Product Lines Mangement

These dimensions allow the organization to expand its business in the following four ways:

Add new product lines and widen its product mix;

Lengthen each product line;

Add more product variants to each product and deepen its product mix;

And, pursue more product line consistency.

In order to know the purpose and the sales and profits of each item in a product line to determine which items to build, maintain, harvest, or divest, a product line analysis is used. It assist in making these product and brand decisions. The purpose and role of a product line must be understood prior to considering sales and profits. A report of a sales and profit analysis for the different product lines should be developed.

A measure of the sales revenue and profit market for each product in the line is a simple approach. A market profile can be realized by reviewing how a line is positioned against the competitors’ lines. Product mapping to compare competitive offerings can be used with individuals products potted on a group with two or more dimensions that represent the product attributes that are most important for buyers. The benefits for using product mapping is that an organization may be able to:

Forecast strong unmet demand;

Produce and price a product at low cost as well as consider adding that item to the line; or

Identify market segments.

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7

Check Your Understanding

8

New Offering Development Process

Health care organizations must increase their revenue by developing products and expanding into new markets. Marketers play a role in the new product development process by identifying opportunities, measuring the size of the opportunity, suggesting needed features, and working with R&D and others in every stage of development.

New products can be added to a health care organization’s portfolio through

One. Acquisition. This route can take three forms: the organization can:

Buy other organizations ;

Acquire patents; or

Buy a license or franchise .

Two. Development. In developing new products, an organization can create themself or contract with independent research or new product development firms. Six categories of products can be identified:

New to the world products;

New product lines;

Additions to existing product lines;

Improvements and revisions of existing products; Repositioning and

Ccost reductions

Or Three. Cooperative venture with another organization .

Organizations can engage in cooperative ventures that may be in a variety of forms: join product development, joint venture, co-marketing, and provision of complementary expertise.

Market strategies for current products include:

Expanding use in the product category;

Implementing new uses for the same product;

Improving the same product;

Expanding the market for eligible consumers.;

And combining an existing product with a new and innovative product.

There are factors that hinder new product development . These are:

Shortage of important opportunities in certain areas;

Fragmented markets;

Social and governmental constraints;

Cost of development;

Capital shortages;

Faster required development time; and

Shorter product life cycles;

The following are reasons why new products fail :

Negative market research findings are ignored or misinterpreted;

The idea is good, but the market size is overestimated.

The product is not well designed.

The product is incorrectly positioned in the market, not advertised effectively or overpriced.

The product fails to gain sufficient distribution coverage or support

Development costs are higher than anticipated.

And, competitor response is stronger than expected.

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9

Check Your Understanding

10

New Product Development Process Steps

There are eight main stages involved in new product development:

First, idea generation. Ideas for new products can come form various sources such as top management, scientists, competitors, suppliers, distributors, inventors, patent attorneys, university and commercial laboratories, industrial consultant, advertising agencies, marketing research firms, industrial publications, and lead customers. Idea screening is used to reduce the cost of the development stages.

Second, concept development . Once the attractive ideas are turned into testable product concepts, it becomes a product concept. A product concept can be turned into category concepts which defines the product’s potential competition. A product positioning map can be prepared to illustrate each alterative and how it would compete with others on product attributes. The chosen product concept can be turned into a brand concept using a brand positioning map that reflects the positioning of specific competitors.

Thrid, concept testing. This is when the product concept is presented to the appropriate target consumers and their reaction is obtained. The concepts can be presented symbolically or physically. Organizations have used methods such as rapid prototyping and virtual reality programs to design, produce models and test concepts to include services. Next, research measure the product concept’s viability by having consumers respond to the following:

Communicability and believability. Are the benefits evident and believable?

Need level. Do you see the product solving a problem or filling a need?

Gap level. Do other products current meet this need and satisfy the consumer?

Perceived value . Is the price reasonable in relation to the value?

Purchase intention. Would you buy the product?

And User targets, purchase occasion or, purchasing frequency. Who would use this product, under what circumstances, and how often?

A conjoint analysis can be performed to measure consumer preferences for alternative product concepts. It is a method of deriving the utility values that consumers attach to different levels of a products attributes.

Fourth, marketing strategy development. This is for introducing the new product into the market. The plan consists of three parts:

One. A description of:

The target market’s size, structure, and behavior;

The planned product positioning; and

The sales, market share, and profit goals sought in the first few years.

Two. It outlines:

The planned price;

Distribution strategy; and

Marketing budget for the first year.

And three. It is a description of :

The long run sales and profit goals; and

Marketing mix strategy.

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11

New Product Development Process Steps, continued

The Fifth new product development process step is, business analysis. The proposal’s business attractiveness can be evaluated. In order for this to be done, management needs to prepare sales, cost, and profit projections to determine if they satisfy the organization’s objectives. A business analysis will be revised and expanded as needed. A break even analysis is the simplest method to evaluate the financial success of ventures. It estimates how many units of the product the organization needs to sell to cover its fixed and variable cost. Some organizations use the net present value analysis to determine whether an investment needs targeted rates of return through the use of discounted cash flows. Risk analysis simulations is a complex method of estimating profit. It, in essence, generates probability distributions of possible outcomes and computes an expected rate of return.

Sixth, product development. If and when the product concept passes the business analysis test, it is developed into a prototype that does the following:

One. Embodies the key attributes described in the product concept statement.

Two. Performs safely under normal conditions.

And three. Can be produced within the budgeted manufacturing costs.

Target customer requirements are translated into a working prototype is achieved via quality function deployment or QFD. This methodology takes the desired customer attributes or CAs generated by market research and turns them into a list of engineering attributes or EAs that the engineers can implement. This method allows measuring the trade offs and costs of providing customer requirements.

Seventh, market testing. There are several forms of consumer testing: from bringing consumers into the laboratory to giving them samples to use at home. After the functional and psychological performance satisfies management, then the product is ready for branding, packaging, and market test. The product is introduced into an actual setting to enable the makers to learn how large the market is and how patients, physicians, hospital personnel, and others react to handling using, and repurchasing it. Health care consumer good market testing is when the organization seeks to estimate four usage variables: trial, first repeat, adoption, and purchase frequency. In many organizations, full test marketing programs are skipped and seek faster and more economical methods such as smaller test areas and shorter test periods. Business goods market testing is beneficial for expensive medical equipment such as CT scanners.

Trade shows are common method to introduce the new product.

The eighth and final step in new product development is:

Commercialization. It involves large cost and include advertising, promotion, and other communications during the first year.

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12

Brand Building

A brand is a name, term, sign, symbol or design. It can be a combination of these that are intended to identify the goods or services of one seller or group of sellers and to differentiate them from those competition. It identifies attributes of the seller or maker.

In many health care service organizations, branding is not strategic. It is only tactical and is frequently limited to controlling the use of the corporate identity. Hence, health care organizations do not pay much attention to branding like product firms.

Brands have six levels of meanings:

Attributes;

Benefits;

Culture;

Personality;

And user.

In order to develop a brand , the health care organization have to begin by choosing a brand name. The desirable qualities for a brand name include the following:

It suggests something about the product’s benefits.

It suggests product qualities.

It is easy to pronounce, recognize, and remember.

And. it should be distinctive.

Creating a brand identity include choosing a name, logo, colors, tagline, and symbol. The process goes beyond the visual cues.

Branding offers a contract to the customer concerning how the brand will perform. The contract must be honest. Hence, the branding strategy varies in accordance to whether the brand:

Is functional or it meets the customers needs;

Has image or have features that consumers differentiate from other choices based on attributes such as quality; or

Is an experiential brand. That is, it involve the consumer beyond simply acquiring the product.

By increasing brand awareness , it will create name recognition, brand knowledge, and maybe some brand preference. However, it does not create brand bonding. Brand bonding occurs when customers experience the organization delivering on its benefit promise.

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13

Assessing Brand Equity

Brands differ by the power and value they have in the marketplace. They exist on a awareness spectrum from low to high brand awareness. Brands that have a high awareness are further segmented by the value of their acceptability or brand acceptability and brand preference. The goal is to have a high level of brand loyalty. In looking at a brand equity, Aaker indicates five levels of customer attitude toward brands:

One. The customer will change brands, especially for price reasons. There is no brand loyalty.

Two. The customer is satisfied. There is no reason to change the brand.

Three. The customer is satisfied and would incur costs by changing brand.

Four. The customer values the brand and perceives it as a friend.

And, five. The customer is devoted to the brand.

In looking at this framework, brand equity is highly associated to how many customers are in numbers three, four, and five . It is important to have an understanding of the associations consumers make among the brand’s main perceived attributes as well as the strength of these connections. The links can be displayed graphically in brand concept maps. These maps can provide a clear image of a brand’s strengths and possible weaknesses. Brand equity is often tracked with a set of metrics such as awareness, acceptability, preference, market share, and relative price compared to competitors. However, brand valuation refers to estimating the total financial value of the brand. The relevance of this value is that it has important implications for stock pricing and the financial terms of mergers and acquisitions.

A tool that can be used to audit an organization’s brands’ strengths and weaknesses is Keller’s brand report cared. It can assess whether a brand has the following ten characteristics of a strong brand:

It excels at delivering the benefits that customers truly desire.

It remains relevant to customers over time.

Pricing truly reflects consumers’ perceptions of value.

It is properly positioned.

It stays consistent.

Subbrands relate to one another in an orderly way within a portfolio of brands.

A full range of marketing tools is employed to build brand equity.

The brand’s managers understand what the brand means to customers.

The organization gives the brand proper support and sustains it over the long term.

The organization consistently measures sources of brand equity.

The same scorecard is applied to the competitors’ brands in order to understand their relative strengths and weaknesses.

At times, an organization has to reposition a brand due to the competition or customers changing preferences. This has been seen in the pharmaceutical industry in 1982, when McNeil’s Tylenol brand was the target of random retail poisonings. McNeil quickly withdrew its product from the market, repackaged it to prevent tampering, and repositioned its brand to make safety its major selling point.

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14

Product Life Cycle 4 Stages

The health care industry is dynamic. As it changes, health care organizations must change its marketing strategy as the product, market, and competitors change over time. We will now discuss the product life cycle and the changes that health organizations make as the product passes through each stage of the life cycle.

The following four things are asserted when a product has a product life cycle:

One. They have a limited life.

Two. Its sales pass through distinct stages, each posing various challenges, opportunities, and problems to the seller.

Three. Profits rise and fall at different stages of the product life cycle.

And

Four. Products require various marketing, financial, manufacturing, purchasing, and human resource strategies in each life cycle stage.

Product life cycles can be used to assess a product category, a product form, a product, or a brand. The product life cycles are divided into four stages:

Introduction. This is the period of sales growth as the product is introduced in the market. Costs are usually high due to low adoption and heavy production, distribution, and promotion expenses. Promotion cost are high due to the need to build awareness, secure distribution channels, and generate trial purchases. Profits are negative or low.

Growth. This is the period of rapid market acceptance and substantial profit improvement. If new products satisfies market needs, sales will begin to climb. New competitors enter the market introducing new product features and expand distribution. During this stage organizations must be mindful of any changes from an accelerating to a decelerating rate of growth. They can use any of the following strategies to sustain rapid market increases:

Improve product quality, add new product features, and improve styling.

Add new models and flanker products such as products of different sizes, flavors, and so forth that protect the main product.

Enter new market segments.

Increase distribution coverage and enter new distribution channels.

Shifty from product awareness advertising to product preference advertising.

And-or

Lower prices to attract the next layer of price sensitive buyers.

Maturity. This is a period of slow down in sales growth due to the product achieving acceptance by most potential buyers. This stage normally lasts longer than the growth stage. This stage is further divided into three phases:

Growth;

Stable; and

Decaying maturity.

In the growth stage, the product begins to decline with no distribution channels to fill. During the stable phase, sales flatten on per capita basis due to market saturation. And during the third phase, decaying maturity, the absolute level of sales begin to declined and customers begin switching to other products. Sales slowdown creates overcapacity which leads to intensified competition. Then competitors begin to scramble to find niches, begin to mark down prices, and increase advertising and consumer promotion. There may be an increase in R&D budgets to develop product improvements and line extensions as well as make deals to supply private brands. When a shakeout begins, the weaker competitors withdraw. Eventually, the industry consists of well established competitors whose basic drive is to gain or maintain market share. An organization may elect to expand the market for its mature brand by work with the number of brand users- times- the usage rate per user by using the following methods:

Converting nonusers;

Entering new market segments; and

Winning competitors’ customers.

Organizations may elect to modify the product’s characteristics through quality improvement, feature improvement, or style improvement. Another option is marketing program modifications. Product managers may try to stimulate sales by modifying other marketing program elements.

And the last stage is Decline. This is a period when sales demonstrate a downward drift and profits erode. Sales may decline for various reasons to include technological advances, shifts in consumer tastes, and increase domestic and foreign competition which lead to overcapacity, increased price cutting, and profit erosion.

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15

Building, Maintaining, and Terminating a BRand

The presence and extent of industry exit barriers such as legal or moral obligations, contracts with joint venture partners, lack of alternative opportunities, and government restrictions can have a significant impact when organizations leave declining markets. There are five strategies that an organization may implement:

One. It could increase its investment in order to dominate the market or strengthen its competitive position.

Two. It could maintain the firm’s investment level until the uncertainties regarding the industry are resolved.

Three. It could decrease its investment level selectively, by dropping unprofitable customer groups, while simultaneously strengthening its investment in lucrative niches.

Four. It can harvest its investment to recover case quickly.

And finally.

Five . It could divest the business quickly by selling or disposing of its assets as advantageously as possible.

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16

Summary

We have now reached the end of this lesson. Let’s take a look at what we’ve covered.

First, we discussed the definition of products and services. Products can be seen on five levels:

Core benefit;

Basic product;

Expected product;

Augmented product; and

Potential product.

They also have distinguishable characteristics:

Nondurable products;

Durable products; and

Services.

Services have the four characteristics:

Intangibility;

Inseparability;

Variability; and

Perishability.

In addition, health care organizations can describe its product mix by the following:

Width;

Length;

Depth; and

Consistency.

These can change as the organization:

Add;

Enlarge;

Reduce; and

Terminate different products and services based on performing a product line analysis.

Geographically;

Demographically;

Psychologically; and

Behaviorally.

Next, we discussed developing and branding new offerings. We discussed the risks of new product development and the risks of not changing with the times. There are eight steps of a new product development:

Idea;

Generation and screening;

Concept development;

Concept testing;

Market strategy development;

Business analysis;

Product development;

Market testing; and

Commercialization.

Next, we discuss that each new product needs a branding strategy that includes:

Name the product;

Developing a logo, tagline, color, and symbols.;

The success of the branding will reflect the brand equity.

Finally, we discussed the four stages of product life cycle:

Introduction

Growth;

Maturity; and

Decline.

Different set of strategies are required for each stage.

This concludes this lecture.