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Model answer

The marketing mix is a powerful tool that works well not just in consumer markets but also in pharma

A pair of manikinsOf all the models and mnemonics that marketers are taught, perhaps the most famous is the 'marketing mix' of 4Ps (product, price, place and promotion) or 7Ps (adding people, process and physical evidence). The 4Ps are usually attributed to Philip Kotler, but they weren't in the first (1967) edition of his hugely-selling book and only emerged in the third (1976) edition.

The fame of the 'P's model is well deserved. They make up what the customer sees and experiences, sometimes called the value proposition or offer, and are – together with target segment – half the content of a strong marketing strategy.

But, like many models, the 'P's emerged from consumer marketing research and are still taught with a heavy B2C bias. The principle of a consistent set of variables that creates value for the customer applies just as well in pharmaceuticals, but its effective application needs revision before implementation to modern pharma markets.

So what would the 7Ps look like if they were written for today's pharma marketer? And what is the key to applying the marketing mix model effectively in our market?

The obvious starting point is Product, which would be easy to equate to a molecule. But a better inference would be claims, including indications and contraindications. It might also, in some cases, translate into packaging or delivery mechanism. These are the core of the value proposition and, unless the product matches the needs of the target segment significantly better than the competition, the marketer will have to depend on the other 'P's to create value and customer preference, which, of course, is the holy grail of marketing. The most important point about the product in pharma marketing is the essential fit between product claims and the needs of the target segment.

Growing importance of price
Price is the 'P' that, for decades, has been most different in pharmaceutical markets compared to consumer contexts. Since 1957, the PPRS has meant that pharma marketers didn't think much about price as a marketing tool. That's now beginning to change, albeit in the guise of market access and health economics.

In related but less regulated markets like medical technology, pricing considerations include not only price levels, but also pricing structures designed to fit segments and drive segment share. As the pharma market evolves, pricing will become a much more prominent consideration, structured around the value of health outcomes. The essence of pricing design, therefore, is its correlation to buyer value.

Like price, Place has long been a neglected 'P' for most pharma marketers, since the manufacturer-to-pharmacist supply chain was a hygiene factor rather than a differentiator. In markets like the US, however, distribution channels have fragmented as different customer segments seek different kinds of value when they fulfil a prescription. It may seem far-fetched, but increasing cost and perhaps patient co-payments might push other markets that way soon. The design of channel is therefore something that pharma marketers need to start paying more attention to.

Promotion is the 'P' that most laypeople associate with marketing. In consumer markets, promotion tends to be dominated by advertising and sales promotions of one form or another, while B2C markets focus much more on the sales team and its support, such as exhibitions and detail aids. Pharma, with its ABPI regulation and ethical requirements, lies between consumer and B2C and uses both consumer-like branding and B2C-like sales teams. The core promotion choices however are about audiences, messages and media. Information technology has changed this in detail, but the most important point about the choice of promotional approaches is that it matches the buying process. As pharma purchasing continues to evolve from prescriber-driven to a decision-making group decision, pharma marketers will have to adapt their choice of promotional methods accordingly.

When the 4Ps mnemonic was coined in the early 1970s, the world was dominated by product markets, but by the 1980s services began their rise in developed markets. As a result, some marketing researchers found the 4Ps to be a poor description of the way service marketers adapted their value proposition to the target segment's needs. In answer to this, Booms and Bitner suggested the extension of Kotler's ideas to 7Ps. Today, most 'products' have at least some service component and even strongly product-oriented markets like pharma find the extended marketing mix useful when thinking about how they address the market.

The first extension was People, since, in many cases, these are an essential component of the value proposition. For pharma marketers, the key implication of the people 'P' is to challenge the traditional notion that the same therapy area sales team is appropriate for every product and every segment. New, complex and highly differentiated products typically need costly 'product specialists' and managers of key opinion leaders. Older, more established but less unique products may be best supported by key account managers selling to buyers. As with other elements of the marketing mix, the central point is to match the 'P' to the needs of the target segment.

Process, the second of the extensions to Kotler's orginal model, is the one that pulls together some neglected aspects of the pharmaceutical value proposition. It covers the whole set of procedures and flow of activities by which the customer obtains, uses and disposes of the product. In pharma marketing, process captures issues of supply, packaging, compliance and sometimes overlaps with product to consider contraindications. The important point is that, by considering process, pharma marketers might identify ways to create superior value and customer preference, which is especially important as products mature and it becomes harder to claim differential benefits from product performance.

Physical evidence is the 'P' that most traditional, product-oriented marketers have trouble getting their heads around. Originally, it was conceived as a way of making tangible the intangible value delivered by some services. Hence hotel pillow chocolates and 'free' valet with every car service. In pharma markets, physical evidence has been translated in numerous ways. Some companies see it overlapping with promotion in the form of clinical papers. Others, such as those that take on parts of the disease management process for a healthcare provider, use budget reports or health economics outcome research as forms of clinical evidence. Again, the acid test is that physical evidence, like the other 'P', creates value only when it meets the needs of the targeted customer segment.

Three key rules
So the 'P's models, despite their age and their origins in consumer markets, are still useful mnemonics for modern pharmaceutical marketers. There are, however, three key rules for using them effectively and efficiently when preparing your marketing plan.

Firstly, remember that the 4Ps or 7Ps are just an aide memoir, nothing more than that. They were born as an answer to the question: "What levers can I pull to make my offer to the customer more attractive than the competition?" and are meant to suggest things to think about, not a strict to-do list. As I teach some of my clients "they are a serving suggestion, not a recipe!" Inexperienced pharma marketers sometimes fret that they can't think of anything to do under 'process' or get bogged down over whether a clinical paper supporting a new claim comes under product, promotion or physical evidence. The answer is it doesn't matter. The 'P's are there to make sure you don't miss any opportunity to create value, that's all.

Secondly, remember that any design of the marketing mix must come after the strategic decisions about how the market is segmented and which target segments we plan to position ourselves against. Expert marketers therefore understand that they have to define needs-based segments and craft the marketing mix around that. Less capable marketers slice up the market by data sets (e.g. 'high prescribers') who do not all have the same needs and so are impossible to build an attractive, compelling, value proposition for.

Finally, remember that the moment of truth occurs when the customer, be it a prescriber or a decision-making group, evaluates your marketing mix in a competitive context against alternative offers. Objectivity is key, and untrained, gung-ho marketers are notorious for looking at their marketing mix through rose-tinted spectacles. In some company cultures, it is a heresy to suggest that the competitor may be a more attractive proposition. More realistic marketers use independent, external evaluation and a dose of humility to ensure that they get a true picture of what the customer perceives. Only with that picture can we begin to adapt and improve our own marketing mix.

The marketing mix of 4 then 7Ps emerged from earlier models from the 1960s. It's important to remember that it wasn't an abstract, ivory tower, confection by academics. It was invented by effective, practical marketers and those academics merely observed and documented what worked in practice. As such, the marketing mix is a powerful and workable tool that works well not just in consumer markets but also, with suitable adaption and translation, in the regulated, ethical, complex context of pharmaceutical markets. The trick to using it well is not to take the 'P's – which is only an alliterative device – too literally, apply it only after you've segmented and targeted and, even then, with detached objectivity. Then you will realise the magic of the marketing mix.

The Author
Dr Brian D Smith is a visiting research fellow at Open University Business School, Europe's largest. He also runs specialist consultancy, Pragmedic, and is editor of the Journal of Medical Marketing

To comment on this article, email pm@pmlive.com

8th March 2010

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