Pharma Marketing Management (Thakur Publication)

Pharma Marketing
Management
Pharma Marketing
Management
B. Pharm, Eighth Semester
According to the syllabus based on ‘Pharmacy Council of India’
Dr. Ritu Kataria

M.Pharm., Ph.D
Director/Principal
G.V.M College of Pharmacy, Sonipat
THAKUR PUBLICATION PVT. LTD., LUCKNOW

Ahmedabad Bengaluru * Bhopal Bhubaneswar * Chennai Dehradun Emakulam
* Hyderabad Jaipur * Jalandhar * Kolkata Nagpur Patna * Pune * Rohtak
Pharma Marketing Management
- Dr. Ritu Kataria
Published by:
Thakur Publication Pvt. Ltd., Lucknow
HO: Abhishekpuram, 60 Feet Road. Jankipuram, Lucknow-226021
Mob.: 9235318597/96/95/94/91//22/17, 9335318517 Phone: 0522-3571915
Website: www.tppl.org.in
Email: thakurpublication@gmail.com
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ISBN No. 978-93-90570-06-5

First Edition 2021
Printed at:
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"Dedicated
to
my Family and Students ”
- Dr. Ritu Kataria

Preface
The importance of marketing and management study cannot be over emphasised.
Every business activity requires marketing and management effectiveness. The
profession of Pharmacy is no exception to the rule. Marketing management are
complex processes and cut across all facets of the organisation. They relate to all
activities of the organisation and are undertaken at all levels and is best seen as a
process common to all other functions carried-out within the organisation.
This book is devoted to the analysis and discussion of all aspects of pharma
Marketing Management. The discipline itself is dynamic field, practiced by
pharmaceutical companies. Building on this platform this book aims to shed
light on day to day operating needs and the skills tools, necessary to fulfill them.
The book is designed specifically for the students pursuing degree in pharmacy
and is based on an emerging business perspective, particularly drawn from the
Indian context. Those currently in, as well as those aspiring to positions in
pharmaceutical companies and its domains, would find this textbook a valuable
learning tool and an application resource. The very intention of this book is to
provide the students with the most current, comprehensive analysis of
management and pharmacy field with the help of models and exhibits.
We sincerely believe that students should acquire balanced knowledge of theory

as well as practical aspects of the subject. We have structured the fundamentals
in concise and accurate form. We are expecting valuable suggestions for
improvements from students and lecturers, which will be useful for the next
edition.
Please e-mail us at, thakurpublication@gmail.com

Or Visit at, www.tppl.org.in
Acknowledgement
I am very thankful to my Teachers. Parents and Family members for
encouraging in all the efforts. I make extending their support, guiding at
each and every step.
I thank Almighty God. for showing his infinite mercies on me every day
for achieving all the desire goal of my life.
I would like to thank to Thakur Publication Pvt. Ltd. and their entire
team for their timely assistance and coordination.
- Dr. Ritu Kataria

-6-
Syllabus
PHARMA MARKETING MANAGEMENT
(Course Code: BP803ET)
Module: 1 (10 Hours)
Marketing
• Definition. General Concepts and Scope of Marketing; Distinction Between Marketing &
Selling; Marketing Environment; Industry and Competitive Analysis; Analyzing Consumer-
Buying Behaviour; Industrial Buying Behaviour.
Pharmaceutical Market
• Quantitative and Qualitative Aspects; Size and Composition of the Market; Demographic
Descriptions and Socio-Psychological Characteristics of the Consumer; Market Segmentation
& Targeting. Consumer Profile; Motivation and Prescribing Habits of the Physician; Patients'
Choice of Physician and Retail Pharmacist.
Analyzing the Market
• Role of Market Research.
Product Decision
• Classification. Product Line and Product Mix Decisions, Product Life Cycle, and Product
Portfolio Analysis.
• Product Positioning.
• New Product Decisions.
• Product Branding. Packaging and Labelling Decisions,
• Product Management in Pharmaceutical Industry.
Promotion
• Methods, Determinants of Promotional Mix, Promotional Budget.
• An Overview of Personal Selling. Advertising, Direct Mail, Journals, Sampling, Retailing,
Medical Exhibition. Public Relations, Online Promotional Techniques for OTC Products.
Pharmaceutical Marketing Channels
• Designing Channel. Channel Members. Selecting the Appropriate Channel. Conflict in
Channels. Physical Distribution Management: Strategic Importance. Tasks in Physical
Distribution Management.
Professional Sales Representative (PSR)
• Duties of PSR, Purpose of Detailing, Selection and Training, Supervising, Norms for
Customer Calls, Motivating. Evaluating. Compensation and Future Prospects of the PSR.
Pricing
• Meaning, Importance. Objectives, Determinants of Price; Pricing Methods and Strategies,
Issues in Price Management in Pharmaceutical Industry.
• An Overview of DPCO (Drug Price Control Order) and NPPA (National Pharmaceutical
Pricing Authority).
Emerging Concepts in Marketing

• Vertical & Horizontal Marketing.
• Rural Marketing.
• Consumerism.
• Industrial Marketing.
• Global Marketing.
-7-
Contents
Chapter-1: Concepts of Marketing
1.1. Marketing 15
1.1.1. Meaning and Definition of Marketing 15
1.1.2. Nature of Marketing 15
1.1.3. Scope of Marketing 16
1.1.4. General and Core Concepts of Marketing 17
1.1.5. Importance of Marketing 21
1.1.6. Distinction between Marketing and Selling 23
1.2. Marketing Environment 23
1.2.1. Concept of Marketing Environment 23
1.2.2. Factors Affecting Marketing Environment 24
1.2.3. Internal Marketing Environment 25
1.2.4. External Marketing Environment 26
1.2.5. Micro Environment 26
1.2.6. Macro Environment 28
1.2.6.1. Political Environment 28
1.2.6.2. Economic Environment 28
1.2.6.3. Socio-Cultural Environment 29
1.2.6.4. Technological Environment 30
1.2.6.5. Demographic Environment 30
1.2.6.6. Natural Environment 31
1.2.6.7. Legal Environment 31
1.2.7. Significance of Marketing Environment Analysis 31
1.3. Industry and Competitive Analysis 32
1.3.1. Industry Analysis 32
1.3.1. 1. Factors Analysed in Industry Analysis 33
1.3.1.2. Porter s 5 Forces Model 34
I.3.I.3. Significance of Industry Analysis 40
1.3.2. Competitor Analysis 40
1.3.2.1. Competitor Analysis Framework 41
1.3.2.2. Steps in Competitor’s Analysis 43
1.3.2.3. Benefits of Competitor’s Analysis 45
1.4. Analysing Consumer Buying Behaviour 46
1.4.1. Introduction 46
1.4.2. Buying Role of Consumers 46
1.4.3. Types of Buying Decisions 47
1.4.4. Factors Affecting Consumer Buying Behaviour 49
1.4.5. Buyer Decision Process 50
1.4.6. Importance of Consumer Buying Behaviour 53
1.5. Industrial Buying Behaviour 54
1.5.2. Nature of Industrial Buying Behaviour 55
-8-
1 .5.3. Objectives of Industrial Buying Behaviour 56

1.5.4. Factors Influencing Industrial Buying Behaviour 57
1.5.5. Industrial Buying Process 60
1.5.6. Consumer Buying Versus Industrial Buying 62
1.6. Summary 63
1.7. Exercise 64
Chapter-2: Pharmaceutical Market Aspects

2.1. Pharmaceutical Marketing 66
2.1.1. Introduction to Pharmaceutical Marketing 66
2.1.2. Characteristics of Pharmaceutical Marketing 68
2.1.3. Functions of Pharmaceutical Marketing 69
2.1.3.1. Buying and Assembling 69
2.1.3.2. Selling 69
2.1.3.3. Transportation 70
2.1.3.4. Storage 70
2.1.3.5. Finance 70
2.1.3.6. Grading 70
2.1.3.7. Risk Bearing 71
2.1.3.8. Feedback Information 71
2.1.4. Pharmaceutical Market 71
2.1.4.1. Qualitative and Quantitative Aspects of Pharmaceutical Markets 72
2.1.4.2. Size and Composition of Pharmaceutical Market 73
2.1.4.3. Investments and Recent Developments 74
2.1.4.4. Government Initiatives 75
2.1.5. Barriers to Marketing in Pharmaceutical Industry 76
2.1.6. Motivation and Prescribing Habits of the Physician 77
2.2. Market Segmentation 77
2.2.1. Concept of Market Segmentation 77
2.2.2. Bases of Segmentation for Consumer Goods and Services 78
2.2.2.1. Geographic Segmentation 78
2.2.2.2. Demographic Description 78
2.2.2.3. Psychographic Segmentation 79
2.2.2.4. Behavioural Segmentation 80
2.2.3. Pharmaceutical Market Segmentation 82
2.2.4. Benefits of Pharmaceutical Market Segmentation 83
2.3. Targeting: Target Market 83
2.3.1. Concept of Target Market 83
2.3.2. Process of Targeting the Market 84
2.3.3. Evaluating Market Segments to Target: Bases for Identifying 84
Target Customers
2.3.4. Selection of Target Markets: Targeting Strategies 85
2.3.4.1. Limited Market Coverage Targeting 85
2.3.4.2. Full Market Coverage Targeting 87
2.3.5. Benefits of Targeting 89
-9-
2.4. Summary 90
2.5. Exercise 91
Chapter-3: Analysing the Market and Consumers

3.1. Consumer Profile 92
3.1.2. Characteristics of Indian Consumers 92
3.1.3. Socio-Psychological Characterstics of the Consumer 95
3.1.3.L Motivation 96
3.1.3.2. Perception 96
3.1.3.3. Personality 97
3.I.3.4. Learning 98
3.1.3.5. Attitude 98
3.1.4. Changing Indian Consumer Behaviour 99
3.I.4.I. Drivers of Change in Indian Consumer Behaviour 100
3.1.4.2. Changing Consumer Trends 101
3.1.4.3. New Consumption Patterns of Indian Consumer 103
3.1.5. Patient’s Choice of Physician 105
3.1.6. Patients’ Choice of Retail Pharmacist 106
3.2. Market Research 107
3.2.2. Objectives of Market Research 108
3.2.3. Steps in Market Research Process 108
3.2.4. Role of Market Research 109
3.2.5. Limitations of Market Research 110
3.3. Summary 111
3.4. Exercise 112
Chapter-4: Product Decisions

4.1. Product Decisions 113
4.1.1. Concept of a Product 113
4.1.2. Characteristics of Product 113
4.1.3. Levels of Product 114
4.1.4. Classification of Pharmaceutical Products 115
4.1.5. Product Management in Pharmaceutical Industry 116
4.L5.1. Hierarchical Structure of Product Management in the 116
Pharmaceutical Industry
4.1.5.2. Roles and Responsibilities of Product Manager in the 117
4.1.5.3. Knowledge Areas of a Product Manager 117
4.2. Major Product Decisions 120
4.2.2. Product Line Decision 121
4.2.3. Product Mix 123
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4.2.3.1. Product Mix Decisions 124
4.2.3.2. Product Mix Strategies 124
4.2.4. Product Branding 125
4.2.4.1. General Branding Strategies 126
4.2.4.2. Advantages of Branding 128
4.2.5. Product Packaging Decisions 129
4.2.5. 1. Levels of Pharmaceutical Packaging 129
4.2.5.2. Types of Packaging 130
4.2.5.3. Benefits of Pharmaceutical Packaging 132
4.2.6. Labelling Decisions 133
4.2.6. 1. Labelling Requirements 133
4.2.6.2. Guidelines for Labelling Pharmaceutical and Healthcare 134
Products
4.2.6.3. Importance of Labelling in Pharmaceutical Products 135
4.3. Product Life Cycle (PLC) 136
4.3.2. Characteristics of Product Life Cycle 1 37
4.3.3. Stages of Product Life Cycle 137
4.3.4. Drugs Life Cycle and Corresponding Strategic Plans 139
4.4. Product Portfolio Analysis 140
4.4.2. Portfolio Analysis Techniques 140
4.4.2.1. BCG Matrix 140
4.4.2.2. GE 9 Cell Model 142
4.4.2.3. Corporate Parenting Analysis 145
4.4.3. Advantages of Portfolio Analysis 147
4.4.4. Disadvantages of Portfolio Analysis 148
4.5. Product Postioning 149
4.5.2. Tasks Involved in Positioning: Process of Positioning 150
4.5.3. Positioning Strategies 152
4.5.4. Importance of Positioning 153
4.6. New Product Development Decisions 154
4.6.2. New Product Development Process 155
4.6.3. Why New Products Fail: Failure of New Pharmaceutical 158
Products
4.7. Summary 160
4.8. Exercise 161
Chapter-5: Promotion
5.1. Promotion 162
5.1.2. Importance of Promotion 162
5.1.3. Strategies of Marketing Communication 163
- 11 -
5.1.4. Promotional Mix: Methods of Promotion 1 64
5.1.5. Determinants of Promotional Mix 165
5.2. Promotional Budget 166
5.2.2. Objectives of Promotional Budget 167
5.2.3. Factors Influencing Promotional Budget 168
5.2.4. Methods of Promotional Budgeting in Pharmaceutical Company 170
5.2.5. Promotional Expenditures in Pharmaceutical Industry 171
5.3. An Overview of Personal Selling 171
5.3.2. Features of Personal Selling 172
5.3.3. Process of Personal Selling in Pharmaceutical Industry 172
5.3.4. Importance of Personal Selling 173
5.4. Advertising 174
5.4.2. Advertising Objectives 175
5.4.3. Changing Role of Pharmaceutical Advertising 176
5.4.4. Principles of Advertisement 176
5.4.5. Advertising Techniques in Pharmaceutical Marketing 177
5.4.6. Direct Mail 178
5.4.6. 1 . Types of Direct Mail Marketing 1 78
5.4.6.2. Importance of Direct Advertising 179
5.4.6.3. Effective Ways to Use Direct Mail for Pharmaceutical 180
Marketing
5.4.7. Trade Journal 181
5.4.7. 1 . Advantages of Trade Journals 182
5.4.7.2. Disadvantages of Trade Journals 182
5.4.8. Exhibition 182
5.4.8. 1. Types of Exhibitions 183
5.4.8.2. Importance of Exhibitions 184
5.4.8.3. Medical Exhibition 185
5.4.9. Sampling/ Samples Distribution 186
5.5. Retailing 187
5.5.2. Functions of Retailing 187
5.5.3. Difference between Wholesaler and Retailer in Pharmaceutical 189
Industry
5.5.4. Importance of a Retailer in Pharmaceutical Industry 189
5.6. Public Relations 189
5.6.2. Types of Public Relations 190
5.6.3. Public Relation Strategies in Pharmaceutical Industry 192
5.6.4. Role of Public Relations in Healthcare Industry 192
5.6.5. Limitations of Public Relations 193
5.7. OTC Products 193
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5.7.2. Pharmaceutical Marketing Strategies for OTC Products 194
5.7.3. Promotion of OTC Medicines 195
5.7.4. Online Promotional Techniques for OTC Products 196
5.8. Summary 197
5.9. Exercise 198
Chapter-6: Pharmaceutical Marketing Channels

6.1. Physical Distribution Management 200
6.1.2. Tasks in Physical Distribution Management/ Components of 201
Physical Distribution
6. 1 .3. Strategic Importance of Distribution 203
6.2. Channels of Distribution 203
6.2.1. Meaning and Definition of Channels of Distribution 203
6.2.2. Nature of Distribution Channels 204
6.2.3. Ways to Improve Pharma Distribution Channel 205
6.2.4. Pharmaceutical Marketing Channels 206
6.2.5. Selecting the Appropriate Channel of Distribution 207
6.2.6. Types of Channel Members 208
6.2.7. Types of Distribution Channels 210
6.2.8. Importance of Distribution Channels 21 1
6.3. Designing Channel 212
6.3.2. Dimensions of Channel Design 212
6.3.3. Process of Channel Design 216
6.3.4. Criteria for Effective Channel Design 221
6.3.5. Channel Design Decisions 221
6.4. Channel Conflicts 222
6.4. 1 . Introduction 222
6.4.2. Causes for Channel Conflict 222
6.4.3. Conflicts in Pharmaceutical Marketing Channels 223
6.4.4. Stages in Channel Conflicts 224
6.4.5. Impact of Channel Conflicts 226
6.4.6. Techniques to Resolve Channel Conflict 227
6.5. Summary 228
6.6. Exercise 229
Chapter-7: Professional Sales Representative

7.1. Professional Sales Representative 230
7. 1 .2. Duties of Pharmaceutical Sales Representatives (PSR) 23 1
7.1.3. Recruitment of PSR 231
7.1.4. Selection of PSR 236
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7.1.5. Training of PSR 238
7.1.6. Compensation to PSR 241
7.1.7. Supervising the PSR 246
7.1.7.1. Norms for Customer Calls 246
7.1.7.2. Norms for Prospect Calls 247
7.1.8. Motivating the PSR 247
7.1.8.1. Process of Motivation 248
7.1.8.2. Methods of PSR Motivation 248
7.1.9. Evaluation of PSR 250
7.1.9.1. Determinants of PSR Appraisal 251
7.1 .9.2. Methods of PSR Evaluation 252
7.1.10. Future Prospects of PSR (Pharmaceutical Medical Representative) 253
7.2. Detailing 254
7.2.2. Purpose of Detailing 255
7.2.3. Product Detailing Tips for Medical Representative 255
7.2.4. Advantages of Detailing 255
7.2.5. Disadvantages of Detailing 256
7.3. Summary 256
7.4. Exercise 257
Chapter-8: Pricing
8.1. Pricing 258
8.1.1. Meaning and Definition of Price and Pricing 258
8.1.2. Objectives of Pricing 259
8. 1 .3. Determinants of Price: Factors Influencing Pricing Decisions 260
8.1.4. Cost Structure in Pharmaceutical Products 261
8.1.5. Pricing Methods 262
8.1.6. Pricing Strategies 268
8.1.7. Importance of Pricing 269
8.1.8. Issues in Price Management in Pharmaceutical Industry 270
8.2. Legal Requirements in Price Control on Drugs 270
8.2.2. NPPA (National Pharmaceutical Pricing Authority) 271
8.2.3. National Pharmaceutical Pricing Policy-2012 - Governing Drug 271
Pricing Policy
8.2.3.1. NPPP Regulation for Scheduled Formulation/Drug Prices 272
8.2.3.2. NPPP Regulation for Non-Scheduled Formulation/Drug Prices 273
8.2.4. Overview of DPCO (Drug Price Control Order) 273
8.2.4. 1. Pricing of Bulk Drugs 274
8.2.4.2. Steps of Pricing a Bulk Drugs 275
8.2.4.3. Calculation of Retail Price of Formulation 276
8.2.4.4. Price to Wholesaler and Retailer 277
8.3. Summary 277
8.4. Exercise 278
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Chapter-9: Emerging Concepts in Marketing

9.1. Emerging Concept of Marketing 279
9. 1 .2. Vertical Marketing Systems (VMS): Vertical Integration 279
9.1.2.1. Advantages of VMS 280
9. 1.2.2. Disadvantages of VMS 280
9.1.3. Horizontal Marketing Systems (HMS): Horizontal Integration 280
9.1.3.1. Advantages of HMS 281
9.1.3.2. Disadvantages of HMS 281
9.1.4. Rural Marketing 281
9.1.4.1. Features of Rural Marketing 282
9. 1 .4.2. Challenges faced by the Companies During Rural Penetration 283
9.1.4.3. Guidelines for Pharmaceutical Industries in Rural Markets 283
9.1.5. Consumerism 283
9.1.5.1. Technological Trends in Patient Consumerism 284
9. 1 .5.2. Advantages of Healthcare Consumerism 285
9. 1 .5.3. Disadvantages of Healthcare Consumerism 285
9. 1 .6. Industrial Marketing 285
9.1.6.1. Characteristics of Industrial Marketing 285
9.1.6.2. Consumers in Pharmaceutical Industrial Marketing 287
9.1.6.3. Comparison between B2B and B2C Pharmaceutical Marketing 287
9.1.7. Global Marketing 288
9.1.7.1. Systematic Approach of Entering New or International Market 289
9.1.7.2. Global Pharmaceutical Industry Analysis 291
9. 1 .7.3. Importance of Global Marketing 29 1
9.2. Summary 292
9.3. Exercise 293
Concepts of Marketing (Chapter 1 ) (tppl.org.in) 15
CHAPTER
Concepts of Marketing
1.1. MARKETING
1.1.1. Meaning and Deflnition of Marketing
In a narrow view, marketing is an activity of selling and purchasing of goods or
services. But, the nature and scope of marketing is a much wider perspective.
Along with the fulfilment of needs and wants related to the sale and purchase of
goods and services, it encompasses the whole process of customer satisfaction.
Hence, the process involves identification of consumers’ needs and wants and
fulfilling it to the extent till the customers are pleased and contented. With the
changing marketing environment, the taste and preferences of the customers also
change. Therefore, marketing also considers the changing requirements of the
consumers apart from providing them with basic products or services. In totality,
marketing comprises of all activities like producing, interacting, distributing and
exchanging services which offer value to the public.
According to William J. Stanton, "Marketing is a total system of interacting
business activities designed to plan, price, promote and distribute want-satisfying
products and services to the present and potential customers”.
According to Prof. Malcolm McNair, "Marketing is the creation and delivery
of standard of living to the society”.
According to Cundiff and Still, "Marketing is the business process by which
products are matched with the market and through which the transfers of
ownership are affected”.
According to American Marketing Association (new definition), "Marketing
is an organisational function and a set of processes for creating, communicating
and delivering value to customers and for managing customer relationships in
ways that benefit the organisation and its stakeholders”.
1.1.2. Nature of Marketing

The nature of marketing is as follows:
1) Marketing is an Integrated Process: Instead of being a sole activity,
marketing is a cohesive process of numerous allied activities. The integration
of different activities makes it distinct from other features of marketing. It
comprises of functions related to planning and control. Marketing also serves
the social needs of society by satisfying the consumers’ needs and wants.
2) Marketing is Customer Oriented: Customer is the centre of focus for all
activities related to marketing. The existence of marketing is to identify and
satisfy the needs and wants of present consumers and future prospects.
16 Pharma Marketing Management
3) Marketing is a System: Marketing functions as a system in which several

sub-systems are involved. In marketing, society acts as a source of input and
these inputs are processed into outputs and arc provided to the society.
4) Marketing is Creative: Time, place and possession utilities are created by
marketing. The creation of time utility is done by conserving products for
future use. By delivering products to places where they are genuinely
required, creates place utility. While, possession utility is created by
transferring products and services from producer to customer. However, in
all these marketing activities the most important factor is the exchange
process between buyer and seller.
5) Goal-Oriented: The goal-oriented character of marketing is considered the
most significant. It provides benefits to both, i.e., buyer and seller. They
share mutual benefits by fulfilling the customers’ needs and earning revenue
from customers through sale of products and services.
6) Marketing is Universal: Marketing is not limited to business activities. It plays
a key role in other organisations also. In social and other organisations,
marketing is used to promote programmes and initiatives such as adult
education, family planning, public harmony, environmental protection, national
integration, etc. This form of marketing is known as social marketing.
7) Marketing is a Science as well as an Art: Marketing is closely related to social
and behavioural sciences, though it has developed from economics. It includes
various subject areas like Psychology, Economics, Anthropology. Law,
Sociology, Information Technology, etc. The marketing conditions also depend
upon the factors affecting the target market such as political environment,
philosophy, demographic environment, statistics, mathematics, etc.
8) Marketing is an Exchange Activity: Marketing is an on-going and dynamic
practice. Therefore, it involves exchange of technology, ideas, services and
information. This commercial exchange activity helps the marketers to
produce better and quality products and services for customers.
9) Marketing is a Continuous Process: Marketing is a significant functional
aspect of management. It encompasses continuous planning, implementation and
control. Thus, it is considered as a complex, continuous and inter-related process.
10) Selection of Target Markets: It is just not possible for a marketer to satisfy
one and all in the market. Instead of making an unrealistic attempt, a
marketer has to select target markets.
Therefore, marketing enables marketers to start with market segmentation,
choosing a target market, identifying the needs and wants of the target
market and satisfying these needs more effectively than the competitors
using relevant marketing mix.
1.1.3. Scope of Marketing

The major driving force of marketing is to achieve the organisational goals by
harmonising activities which help to attain customer satisfaction. Therefore,
marketing has wide scope in relation with its universal activities.
The scope of marketing is described below:

1) Analysing Consumer Needs and Wants: Marketing is the study of needs
and wants of consumers. This is necessary to fulfil consumers’ needs in the
best possible way. Finally, production of goods and services is carried out on
the basis of consumer preferences.
2) Analysing Consumer Behaviour: An effectual analysis of consumer
behaviour is essential to identify the pattern of consumer buying. This
enables the marketers to segment and target the market.
3) Product Planning and Development: The marketing process initiates with idea
generation and ends up with product development. Product planning involves
numerous activities such as branding, packaging and product line decisions.
4) Pricing Decisions: Product pricing is also defined by marketers. The pricing
policy varies from product to product. Different factors like marketing goals,
stage of product life cycle, competition level, etc., are considered for
determining pricing policies.
5) Distribution: Designing of an effective distribution channel for improved sales
and profit is also an important scope of marketing. The study of distribution
channels helps to cater large number of customers at low distribution cost.
6) Promotion: Marketing is also responsible for promoting products of an
organisation. Marketers use different techniques like advertising, sales
promotion, personal selling, etc. An appropriate promotion mix is designed
to achieve marketing objectives.
7) Company Analysis: In marketing, company analysis is carried out by
evaluating the cost structure and company’s resources. The actual position of
the company is estimated on the basis of its competitors. Marketers can also
determine the profit earned through different product offerings across
different customer segments with the help of accounting department. Another
technique of company analysis can be brand auditing. This highlights the
market potential of a brand in the market.
8) Competitor Analysis: This analysis is done to determine the strengths and
weaknesses of various competitors in the market. A detailed evaluation of
competitors’ sources of profits, competencies, resources, cost structure, and
differentiation and positioning strategies is done to figure out the most
competitive organisation.
1.1.4. General and Core Concepts of Marketing

The core concepts related to marketing, considered as its elements are given
below:
Marketing Core Concepts
Needs, Wants and Demands | 1 Goods-Services Continuum
| Products | 1 Utility |
|
|
Customer Value |
|—
——| Cost, Satisfaction and Quality
Customer Delight 1 Exchange and Transactions

| Relationship Marketing & Networks |
1 Market |
Marketers
1) Needs, Wants and Demands: Needs refer to the basic necessities of human
beings related to their inherent characters. The need fulfilment criterion
depends upon the cultural and social environment of the society. For
example, shelter is the basic need of an individual, as one cannot reside on
roadside or on footpaths.
Wants refer to the desires for particular things which are unified with the
needs of the individual. For example, for fulfilling the need of shelter, a
person may desire of a house in a clean locality. In comparison with the
needs, individuals have numerous wants.
Demands are those definite wants for any product(s) which are supported by
the willingness and ability to buy them. The purchasing power of the
consumers converts their wants into demands. In marketing, a marketer is
more interested to know about the consumers having the purchasing power
rather than those who only desire to have a product. For example, a person
may desire of a penthouse by the seaside, but due to low purchasing power
his demand remains ineffective.
2) Goods-Services Continuum: In general, organisational products are a
composition of goods and services. According to the goods-services
continuum in figure given below, some products may have either tangible
(e.g., salt) or intangible (e.g., teaching) characteristics. However, there are
some products which provide both goods and services at the same time, like
travelling via airplane. The position of product on the continuum enables the
marketer to spot potential opportunities.
At the tangible (pure goods) end of the continuum, only those goods are
positioned which are not related to services. At the intangible (pure services)
end of the continuum, only those services are positioned which have no
association with physical products. The middle portion of both the ends
consists of the products which have combined characteristics of both goods
and services, e.g., goods like air-conditioners also require services like
installation and delivery, besides being a product in itself.
3) Products: Product is anything that is offered for sale. It is a process where a
thing is produced as a result of labour, growth, thought, or activity. A product
can be anything, a service or even an item. It may be produced immediately
or gradually. It may also be a resultant of mental efforts or an unconscious
effort such as seasonal fruits, by-products, etc. In marketing, product is
anything tangible or intangible in nature, which is offered for consumption in
order to satisfy consumer needs. For example, in manufacturing, product is
brought as a raw material and sold as a finished good, which is further
distributed in the market to satisfy customer needs and wants. While in
retailing, products are known as ‘merchandise’.
4) Utility: In economics, utility is an important concept which is related to
marketing. The term utility is a measure of absolute desirability, or
consumption, or satisfaction towards a particular product. It explains the ability
of goods or services to satisfy the needs and wants of the consumers. The
measure of utility helps to identify the increase or decrease in the level of utility.
It may also be used to explain the economic behaviour in the form of number of
attempts required to increase a product’s utility. They are as follows:
i) Form Utility: The process of product planning and development
combines to create form utility. This involves various stages from
converting the raw material to the development of a finished product.
Finally, the form defines the utility of the product.
ii) Time Utility: Time utility occurs when the product is made available to
cater the consumer’s demand at his/her time of desire. This can be made
possible when the goods manufactured are delivered through proper
channels at right time to the final destination.
iii) Place Utility: Availability of a product at right place, keeping in mind
the convenience of the customer, creates place utility. This can be done
by providing the product at the place, where it is required the most by
using different channels of distribution.
iv) Ownership Utility: When a seller legally transfers his ownership over
products to the buyer through a sales operation, ownership utility is
created. The products remain liable to the producer, retailer or seller until
it is purchased by someone else.
5) Customer Value: Value refers to the worth or usefulness of goods or
services. The best definition of value from consumer’s perspective is the
difference between a potential customer’s evaluation of the benefits and costs
of one product in comparison to others. The value can be generated only
when product and user come together. Therefore, the level of value generated
is determined in terms of high satisfaction, satisfaction or dissatisfaction. It
also affects the customer decision-making and long-term relationship with
the organisation. By using the formula given below, value can be calculated:
„ . . ,, .
Customer Perceived Value =
Benefits Derivingfrom a Product
-
Cost of Acquiring the Product
From the above equation, it can be concluded that the value from a product is
only created, when the perceived benefits are more than the actual cost of the
product. Another crucial factor for value creation is that the value of firm’s
product should also be more than the competitor’s product. Applying this
equation has proved beneficial to marketers.
6) Cost, Satisfaction and Quality: In general, cost is the amount paid to buy or
obtain goods or services. In marketing, cost is the estimated price of the
product which is paid to satisfy one’s needs at the lowest possible cost of
ownership or usefulness. Satisfaction is an attitude towards a particular
product or service after its consumption. A consumer feels satisfied when
his/her needs meet their expectations. Customer satisfaction is the central
focus of all marketers. It also helps to predict the future buying intentions of
the consumers. For example, when a customer feels satisfied after
consuming a particular product, then he/ she shares his/ her experience with
others, also known a positive word-of-mouth. Whereas, an unsatisfied
customer who wants to switch over to another product will also share his/her
experience, which is known as negative word-of-mouth.
Quality is the distinctive attribute of a product or service which is perceived

by the consumers. It is largely based on the level of satisfaction received by the
customer. With the changing trends, many organisations have introduced the
concept of Total Quality Management (TQM). This helps the organisation to
constantly improve their quality and keep satisfying their customers.
7) Customer Delight: A customer feels delighted when he receives more than
what he has expected. It is a situation where the products and services
offered to a customer not just satisfy his needs and wants, but also provide an
unanticipated value. For example, when a customer visits a grocery store
and finds all the products he/she was willing to buy, then he/she not just feels
delighted but also finds the shopping experience faster and convenient from
his/her earlier experiences. Customer delight plays a very important role in
achieving success. It is considered as an outcome of offering products or
services to customers that goes beyond their expectations. A company can
exceed the expectation level of customers only when it provides quality
products or services, which make the customers feel delighted.
8) Exchange and Transactions: The basic nature of marketing activity is the
exchange of products and services with the objective to satisfy consumer needs
and wants. Exchange is the process of acquiring a desired product by giving
goods or services of the same value in return. In terms of marketing, it is a
social concept. Usually, the exchange process takes place when both parties
involved are meant to be agreeable on the terms and conditions related to
exchange. When an exchange gets completed, then it is known as 'transaction'.
Needs-^Wants^Demand^ Exchange Research
Figure 1.1: Needs, Wants, Demand, and Exchange
The basic unit of exchange is transaction. Transaction is an act of

exchanging goods and services between two parties. It can be in form of
money or barter. The transaction activity comprises of several elements like
exchangeable units of value, mutual agreement, time of agreement, and place
of agreement. This agreement is implemented and supported by legal system
under the transaction process.
9) Relationship Marketing & Networks: An integrated marketing activity that
aims to identify, develop and manage long-term relationships with large
number of customers individually is known as relationship marketing.
Relationship marketing is a long-term relation between marketers and
different parties, viz., customers, suppliers, distributors, etc. It acts as a
unique company asset which is also known as a network of mutually
beneficial business relationships. A network is the channel relationship
between the organisation and its key stakeholders. The stakeholders can be in
the form of suppliers, employees, customers, channel members, advertising
agencies, etc. In the competitive environment, more than being competent as
an organisation, one must have an effective marketing network.
10) Market: In general, market is a place where a sum total of all buyers and
sellers of a region or area collect to exchange goods and services, e.g., fruit and
vegetable market In terms of marketing, "market' is a group of consumers or
firms who want to purchase a product are capable of purchasing the same
product and the ownership of such product is permitted by law.
1 1) Marketers: In an organisation, marketer is a person who is responsible for
recognising the goods and services required by the group of consumers and
then marketing those goods and services on behalf of the organisation. A
person, whose duty is to sell goods and services in a market where only
specific commodities are sold, is known as a marketer. In general, marketer
represents an organisation which serves a market of end-users. The relevant
products and services required by the end users are directly sent by the
organisation and the competitors through marketing intermediaries. The
environmental forces and respective intermediaries also impact the relative
effectiveness of the organisation.
1.1.5. Importance of Marketing

Marketing has converted numerous management thoughts and practices into
reality such as flat organisational structure, flexible manufacturing systems, high
involvement towards customer service, etc. Therefore, marketing is important to
different people in different ways. Some of them are as follows:
1 ) Importance to the Marketers
i) Financial Success: The success of an organisation largely depends upon the
effectiveness of marketing the products or services. Other organisational
functions such as finance, operations, accounting are worthless, if the
demand for the product or services is not significant.
Hence, marketing acts towards profit-maximisation while other functions are
cost-based.
ii) Marketing is often the Route to the Top: Like other top positions in an
organisation, people related to marketing are also titled to the post as Chief
Marketing Officer. The CMOs are very much similar to the chief finance
officer or chief strategy officer. Marketing activities and strategies are a part
of every annual report presented by the organisation. Marketing is
considered as the most vital and significant part of the entire organisation.
iii) Enhances Sales: Other than promoting the products and services,
marketing is also responsible for keeping up the sales volume of the
product. It is the role of marketing executives to recognise the
preferences and demands of the consumers and present them the best
product. For all this, marketing integrates with communication mix to
relate with the customers in an effective way.
iv) Develops Company’s Image: Marketing plays a significant role in
building the company’s image. This can be established through brand
name, logo, caption, brand image and tagline which is viewed and
perceived by the customers via television commercials. For example,
McDonald’s name is recognised by its arch design. A well-known name
or image enables a company to expand worldwide and increase its sales-

volume. Through higher sales, they get an opportunity to innovate which
helps the company to gain applauds and recognition.
v) Major Component of Product Pricing: Marketing is an important
component for deciding the price of the product, as a major portion of the
price is related to the marketing activities like promotion, product
designing, market research, etc. One of the biggest issues of product
pricing decisions is to reduce the product cost without compromising
with the marketing objectives.
vi) To Survive in the Changing Market Environment: The sudden changes
in technologies, business models, enhanced mobile workforce have emerged
due to the rapid globalisation, the internet and information transparency.
This has made the companies less predictable, independent and short-term
strategy-makers. Thus, these changes enable the companies to adopt the
prevailing marketing tactics to capture larger share of the market and retain
the existing and gain new customers. The organisations around the world are
struggling hard to develop products and services that are more appealing to
the customers and to segregate their offers in the global market place. Thus,
marketing is no longer identified as a single task; it has become the
organisational strategy for gaining relevant market share and profit.
2) Importance to the Consumers
i) Availability of Global (roods: The integration of marketing activities
with the information technology has aided the consumers to access
variety of products from different countries globally. Different tools like
websites, online communities, e-mails, SMS, e-businesses, etc., are used
by marketers to reach global customers and facilitate exchange. With the
advanced technologies, one can easily compare different global products
and make a final decision for purchase.
ii) Promotes Product Awareness: The main source of product recognition
and awareness is through marketing. This helps the customers to uplift
their standard of living. No one ever thought of technologies like mobiles
phones and laptops to be the part of daily life. Marketers are the initiators
of these innovative products in the market.
iii) Creating Utilities: Different utilities are developed through marketing.
Major utilities are time utility (arranging the product at required time),
form utility (changing the raw material into desired form of final
product), information utility (informing about required product available
at a particular place and at reasonable price), possession utility (by
transferring the ownership authorities), and place utility (making product
available to the customer).
3) Importance to the Society
i) Protection against Depression: Depression is a situation where large
number of sellers offer homogenous products in the market. Marketing
facilitates the availability of variety of products at reasonable prices, thus
avoiding the depression situation.
ii) Job Opportunities: Marketing provides several job opportunities to the

society like advertising, personal selling, marketing research, logistics,
product design, retailing, packaging, media relations, event management,
market analysis, etc. Other than these opportunities, non-commercial job
opportunities also have wide scope such as social marketing, ethical
marketing, advocacy marketing, cause marketing, etc.
iii) Availability of Various Products: Without marketing, there would have
been no customer preferences. Marketing offers a wide range of products
and services to consumers with different tastes and preferences.
1.1.6. Distinction between Marketing and Selling

Basis of Difference Selling Marketing
1 Emphasis
) In selling, emphasis is given In case of marketing, consumers'
to the product. needs and wants are emphasised.
2) Approach Traditionally, selling In marketing approach, first the
approach involves needs and wants of customers are
manufacturing and then sales identified and then the product is
of the product. delivered.
3) Primary and The primary and secondary In marketing, the primary motive
Secondary motive of selling is sales and is to satisfy the customers and
Motive company's satisfaction secondary motive is to meet the
respectively. consumers’ expectations.
4) Orientation It is a sales-volume oriented It is a profit-oriented process.
process.
5) Planning It is a short-term plan based It is a long-term plan based on the
on prevailing products and tastes and preferences of the
markets. consumers.
6) Need Priority It focuses on the needs of It focuses on the needs and
sellers. demands of consumers.
7) Philosophy Business is considered as a Business is considered as a way to
source of profit generation. satisfy consumer needs.
8) Technology Selling process is based on Marketing process is based on
existing technology with superior technology to provide
limited costs. better value and innovative
products to customers.
9) Work Different departments There is common goal to all
Delegation perform individually, with departments and they work as a
distinct objectives. team.
10) Price Price is determined by cost. Cost is determined by price and
Determination price is determined by consumers.
11) Customers In selling, customers are In marketing, customers are
considered as the last link. considered to be the prime link.
1.2. MARKETING ENVIRONMENT

1.2.1. Concept of Marketing Environment
Environment refers to the surroundings, conditions and influences in which
living organisms operate. In the similar way, organisational environment is a sum
total of events circumstances and objects that influence the organisation.
Therefore, it is imperative to understand the influences that the environment has

over the organisation. This is possible by going through the key features of the
market environment. There are various environmental factors which directly
influence the marketing activities and decision-making ability of the
organisation. These factors combine to form the marketing environment. For
example, the marketing environment for a car tyre manufacturer may include
technology for manufacturing, car buyers, manufacturers, dealers, distributors,
competitors, import-export policies, tax system, etc. These are the external
environmental factors which influence the company. Other than this, the
company’s internal environment also affects the marketing activities such as
production system, finance, technology used, sales force, etc.
According to Philip Kotler, “Marketing environment refers to external factors
and forces that affect the company’s ability to develop and maintain successful
relationship with its target customers”.
With the fast changing marketing environment across India, the marketing managers
and business leaders are facing many challenges. They are finding it difficult to strive
with the dynamism of environmental factors. So as to remain competitive, improve
market share or capture new markets, companies are adopting various IT strategies to
make alterations, modifications in their products and services.
1.2.2. Factors Affecting Marketing Environment

Numerous factors affect the marketing environment of an organisation, mostly in
two ways, i.e., positively or negatively. These environmental factors can be sub¬
divided into two groups:
1) Internal environment/ Controllable elements, and
2) External environment/ Uncontrollable elements.
1.2.3. Internal Marketing Environment

The internal marketing environment refers to the factors prevailing inside the
organisation. It also affects the marketing function of the organisation.
Commonly, the internal factors are known as controllable factors, as these
factors can be controlled or regulated by the organisation itself. They can be
altered or transformed as per the changing situations, in form of physical and
personnel facility, functional and organisational means, similar to the marketing
mix. The controllable factors of internal environment have the capability to
control the organisational operations. These factors can be further divided into
two parts, viz., strategy factors and unmarketable factors. Internal marketing
environment enables the marketing managers to effectively utilise the factors
present within the organisation for achieving organisational goals. The major
factors which affect the internal marketing operations are as follows:
1) Top Management: One of the major factors present in internal environment

is top management. It includes organisational setup, level of professionalism
in management, composition of Board of Directors, etc., which affect the
decision-making process of marketing. The organisational mission and goals
determine the philosophy, business areas, business policies, development
plans, preferences, etc., of the organisation. The support provided by the
organisational hierarchy such as Board of Directors, shareholders, and
employees, towards the top management, significantly impact the marketing
decisions and its execution.
2) Finance and Accounting: Finance department of an organisation acts as a
source of funds to be used towards the fulfilment of marketing objectives.
The factors influencing the organisational decisions, policies and operations
comprises of financial situation, capital structure, financial policies, etc.
Whereas, the accounting department determines the revenues and costs
associated, in order to evaluate the organisational performance. Finance and
accounting together constitute an important internal factor affecting the
marketing environment.
3) Research and Development: The R&D department within the organisation
is responsible for the development of new and innovative products with the
help of available technology. This factor defines the ability of an
organisation to compete, innovate and influence the marketing activities.
4) Manufacturing: It refers to the process of producing preferred amount of
goods and services of high quality. The manufacturing activity involves
physical assets, technology, production capacity, machinery and distribution
channels, which affect the functioning of the company.
5) Purchasing: Purchasing is the activity of acquiring goods and services to

attain organisational goals. It is considered as the strategic function and
varies according to the needs of the organisation. Under this, availability of
required raw materials, machines, parts, equipment, or supplies, etc., at
required place and time without compromising the quality and quantity, is
very important for the success of any business.
6) Company Image and Brand Equity: Company image refers to the
company’s reputation or performance in view of the public. It acts as an
internal factor which may influence the marketing function of the organisation
such as finance, strategic alliances, distribution channels, new product launch,
selling or purchasing, etc. Similarly, brand equity also plays an important role
in some marketing activities.
The effectiveness of marketing operations depends upon factors such as brand
equity, channels of distribution, and marketing resources like marketing
organisation and ability of marketing executives. These are also critical for
new product launch and brand extension.
1.2.4. External Marketing Environment

The environment prevailing outside the organisation is known as external
marketing environment. These factors are beyond the control of the
organisation. Hence, they are referred to as uncontrollable factors such as
economic factor, government and legal factor, socio-cultural factor, geo-physical
factor, demographic factor, etc.
Uncontrollable factors exist outside the organisation and influence the marketing
strategies and plans of the organisation designed by the marketing manager.
These factors are uncontrollable in nature because of which marketing manager
faces numerous challenges. As a result, the marketing manager adopts various
techniques to regulate the activities of external environment such as forecasting,
analysis and surveillance. The external marketing environment can be
categorised into two parts:
1 ) Micro environment, and
2) Macro environment.
1.2.5. Micro Environment

The environment in which the company thrives, or the set of factors surrounding
the company itself, is known as micro environment. These factors are
responsible for the organisational ability to develop products and services and
satisfy the market needs. It also consists of those people who directly influence
the growth of the company. Such factors are:
1 ) Suppliers: Suppliers are those factors which affect the marketing potential
and competitiveness of the organisation. These can be the suppliers of raw
material, labour, capital and energy. Michael Porter states that there is a
stable and powerful relationship between the organisation and the suppliers.
This relationship symbolises the interdependence of organisation and
supplier upon each other and their industrial requirements.
2) Market Intermediaries: Market intermediaries are individuals or business

enterprises involved in selling and delivering of organisational products and
services to the target customers. Typically, it is the basic requirement of
every organisation. Various market intermediaries include distribution
agencies, financial institutions and middlemen such as wholesalers, retailers,
3) Customers: Customers are the central focus of the organisation. They can be
categorised into five types like:
i) Ultimate Customers: They can be individuals or groups of people who
use or consume the goods and services of the company.
ii) Industrial Customers: These customers are mainly the small and large
organisations which purchase goods and services to produce other useful
products. Their main aim is to earn profit and attain organisational goals.
iii) Resellers: They can be retailers, wholesalers and distributors. They buy
goods and services from one place and resell them at high prices to gain
profit at some other places.
iv) Government and Other Non-Profit Customers: They buy goods and
services, mostly for the consumption purpose of other people. These
people can be ultimate customers or end users.
v) International Customers: They are the customers across national
borders, who purchase goods and services for industrial purpose or may
be for their own consumption. They can be individuals, organisations,
resellers, or even governments.
4) Competitors: The firms producing and selling identical products and
services in the same market are known as competitors. The competition is
mainly based on price and product variation. In order to manage this
situation, an effective marketing system is very necessary. The use of
marketing system enables improved results and self-reliance within the
organisation. To become competent, the identification and careful analysis of
existing competitors is important. It is also crucial for a marketing manager
to study and note different basic aspects related to competitive atmosphere.
Philip Kotler suggests that a buyer’s perspective is very useful in
determining the level of competition for an organisation.
5) Public: Public is also an important factor of micro environment. The satisfaction
of general public should be the utmost aim of organisation as competitors and
customers are all part of general public. The policies and activities of the
organisations have a significant impact on other groups of the general public. A
public refers to “any group that has an actual or potential interest in or impact on
a company’s ability to achieve its objectives”. Hence, public relation is crucial
for the long-term survival and growth of the organisation.
1.2.6. Macro Environment

The factors which are not immediate environment to the organisation constitute
to form macro environment. These factors are external to the organisation and
uncontrollable in nature. They indirectly influence the marketing decisions but do
not affect the marketing strategies of the organisation. The macro environmental
factors that influence the marketing decisions of an organisation are discussed
1.2.6. 1. Political Environment

Political environment is defined as the governmental actions which influence
the functioning of the organisation. The environment is closely associated with
the economic conditions surrounding the organisation. The factors involved in
this environment may be acts, policies, laws, rules and regulations, related to
business and economy. Different countries have different political environment.
For example, most socialist countries follow a centrally planned economic

system. There are different laws for regulating business activities other than the
financial and technical matters. The business laws consist of standards and rules
set for different products, packaging and promotional activities. The Indian
Government has a widespread restraining impact on different facets of the
business. Various policies related to business involve industrial licensing for
deciding location, production and process, import licensing for acquiring raw
material and machinery, loan financing, pricing policies, growth and expansion
strategies, etc.
Being a democratic country, India has a steady political system in which the
government actively participates as a planner, regulator and promoter of
economic activity. Hence, the businessmen are well aware of the political
environment confronted by their organisations. All the business decisions taken
by the government are based on political considerations and philosophies which
are followed by political parties governing the central and state level. It affects
the rules and regulations formulated by the government under which the
organisations operate. Every organisation needs to abide by the rules and
regulations laid down by the political system as the law of the land.
I.2.6.2. Economic Environment

Economic environment refers to those economic factors which largely influence
the functioning of business organisation. These factors consist of production
process and wealth distribution system. The economic environment also affects
the marketing activities of the organisation. In addition to this, the market size
and consumers’ willingness to spend also plays a vital role in determining the
economic environment. Thus, some of the other economic factors are interest
rates, inflation, disposable income, savings of the society, etc. All these factors
prevailing in the environment influence the purchasing power of the consumers.
While, economic development leads to changes in the tastes and preferences of
the customers.
For example, due to the fall in interest rates of banks, customers find it
favourable to invest in stock markets than opening savings account in banks.
Following factors should be analysed deeply by marketing managers to deal with
economic environment:
1 ) Gross national product,
2) Per capita income,
3) Balance of payments position,
4) The stages of industry lifecycle and the present stage of the company. The
four stages of industry lifecycle comprises of recovery, boom, recession and
depression,
5) Pricing trends of products and services, i.e., inflation or deflation,
6) Interest rate in banks and fiscal policies, as these directly affect the business
investment in banks and indirectly the demands of customers, and
7) Fluctuations in exchange rates, where fall in exchange rate increases exports
while imports become more expensive leading to cost-push inflation.
I.2.6.3. Socio-Cultural Environment

Typically, the socio-cultural environment refers societal forces and institutions
influencing the business or marketing activities. These socio-cultural factors
comprise of social preferences, values, behaviours, education, ethical standards,
social stratification, conflict, cohesiveness, etc.
These factors determine the nature of inter-relationship between society and the
organisation, as well as the functioning of the organisation. This relationship
between the organisation and individuals is determined by ethics, beliefs and
norms of the society. It is not an easy task for the marketer to alter these factors.
Marketers should be trained and skilled enough to measure effects of these
factors on their business.
Following are the factors and influences that are present in the environment:
1) Social issues like environmental pollution, role of business in society,
corruption, consumerism, and utilisation of mass media.
2) Social values and attitudes, like social norms, ideologies, expectations of
society from business, practices and rituals, materialism and change in
lifestyle trends.
3) Changing family structure, family values, attitude towards the family as well
as within the family.
4) Position of children and adults in the family and society as well as the role of
women in society.
5) Level of education, rights and work ethics of members in the society.
Besides the presence of core social values and norms, some flexible cultural
values are also present in our societies which are prone to changes like hairstyle,
outfit, etc. There is a large part of the society which has not accepted these
changes. Different age groups and social classes have diverse ways of perception
and attitude towards socio-cultural changes. The religion of different culture also
affects the marketing of business organisations.
While analysing the effect of socio-cultural factors on marketing, the managers

need to be cautious about socio-cultural elements like beliefs, attitudes, morals,
lifestyles, cultures, cross-cultures and sub-cultures of people. The actual purchase
of the customers from the market can be found out with the help of socio-cultural
factors. They can also be interpreted by the buying pattern, place of purchase,
time of purchase, the seller type and the way of using the products.
I.2.6.4. Technological Environment

Technological environment is the macro environment, which includes factors like
machines, materials, and knowledge for producing various goods and services.
These factors significantly affect the functioning of the business organisations.
The advancements in the field of technology, which is used to make innovative
products and enhance the operational methods which influences the business is
termed as technological environment. Recent technological developments include
mobile phones, computers, laptops, metros, automobiles, and other production
techniques, etc. These developments are also focused towards providing new and
different products and services based on improved production techniques.
It is not just responsible for economic growth but also affects the production
policy of different organisations. In order to be competitive in the market,
different marketers modify their products and production strategies according to
the technological environment. For example, technological factors enabled the
transformation of typewriting machines into keyboards and computers.
In India, technology has changed the face of urban areas and is yet to set its
impact across rural areas. But, it has been introduced in rural areas by launching
‘Green Revolution’. This has enhanced the productivity of farms using mix of
high-yielding varieties, tractors, fertilizers and better irrigation facilities.
Recently, introduction of ‘White Revolution’ in India has launched new
technologies for animal husbandry and institutionalised dairy activities through
cooperatives, which has led to considerable increase in the production and
availability of milk.
I.2.6.5. Demographic Environment

Demographic environment is a fundamental element of macro environment. The
most important thing which is taken into consideration by the marketers is
population, since people combine to form markets. The factors which influence the
business organisation are population growth rate, population size, ethnic mix, age
distribution, household pattern, education level, regional characteristics and
movements. The demographic environment must be analysed by the corporate
planners and extensive features of the population which affect the organisation
must be identified. If the management is attentive, it will be able to gauge the

potential variation in the demographic factor and search for more attractive markets
and better product lines. The most relevant factors in the demographic environment
are trends in ageing geographical shift, size and literacy of population.
L2.6.6. Natural Environment

Natural environment is the group of natural resources which is used by business.
It covers everything from its existing location to weather conditions that affect
production and sales of a business. This natural environment is uncontrollable in
nature. All the operations of the business are influenced by natural factors. For
marketing managers, it is very essential to identify such factors and alter their
business operations. Due to inappropriate and large scale consumption of natural
resources, the ecological balance is affected, which ultimately affects the
business decisions and strategies.
For example, petroleum reserves are not abundant in India that is why these are
imported from gulf countries. Organisations using petroleum products develop
crucial production strategies in such situations.
1. 2.6.7. Legal Environment

Legal environment refers to those factors which are associated with the legal laws
and orders influencing the marketing environment. It is essential for the marketing
environment to follow all the rules and regulations of the Indian Penal Code.
The legal factors may include laws, constitution, legal rights, courts, penalties,
and other legal practices, etc. These factors significantly influence the marketing
operations of different organisations. Different legal factors attached to an
organisation may also include licencing, bribery, copyrights and trademarks, and
jurisdiction for organisation as well as customer related disputes, etc. Arbitration
or local courts are used for dispute settlement.
Business operations are also influenced by State, Central government and local
bodies. There are several laws passed by the Government on matters like wages,
prices, health and safety at workplace, employment opportunities, location, gas
emission, amount of noise permissible, etc. Such laws affect the daily working of
the organisations. Even their strategic choices also affect the activities of the
government as it might create or restrain business opportunities.
1.2.7. Significance of Marketing Environment Analysis

The significance of marketing environment analysis is highlighted below:
1) Providing Marketing Environment Information: Marketing management
largely depends upon the information related to the marketing environment.
Marketing environment analysis is vital because it keeps an accurate balance
between the organisation and the marketing environment by using tools like
marketing mix. This analysis provides the information about the prevailing
trends and changes associated with the environment. Through this
information, the organisation is able to handle such issues and take suitable
actions, if required.
2) Facilitating Strategic Response to Environment: The basic purpose of

environmental analysis is to aid the organisation’s strategic response to the
ever-changing environmental factors. The company needs to remain updated
with alternative strategies and programs that are aligned with actual
environment. This can be done by carrying out accurate environmental
analysis. This environment analysis enables the organisations to identify the
available opportunities in the marketing environment, which are relevant and
fulfil the organisational objectives.
3) Determining Opportunities and Threats: The key role of marketing
environment analysis is to identify the available opportunities and threats
within the marketing environment. This helps the organisation to exploit the
favourable opportunities and meet out the prevailing threats. As a result, the
marketing objectives can be accomplished without any hurdles.
4) Handling the Tasks Related to Marketing Environment Analysis: The
process of collecting, sorting and analysing the data related to marketing
environment is called ‘marketing environment analysis’. It also involves the
tasks like observing environmental changes and finding out opportunities and
threats. All these activities assist the marketing manager to make the future
plans for the organisation.
1.3. INDUSTRY AND COMPETITIVE ANALYSIS

1.3.1. Industry Analysis
A number of environmental factors influence the organisations. It is up to
managers to ensure that this influence is harnessed in a positive way, leading to
organisational success. For the firm to make profit, it must create value for
customers or buyers. Hence, the firm needs to understand its customers. While
creating value, the firm has to obtain goods and services from suppliers. So, it
must value its suppliers and form enduring business relationships with them.
While creating value for its buyers, the firm must closely look at the rivals who
are there in the arena competing for the same ‘space’. Hence, the firm must
understand the competition. Thus, buyers, suppliers and competitors form the
substance of a firm’s industry environment.
Forces from the industry environment directly affect the firm, and the amount of
influence the firm has over its industry is dependent on the dominance of its
competitive position. Most strategic management books utilise Michael Porter’s
Five Forces Model as a framework for analysing the competitive forces within
the industry. As so many other models used to make strategic decisions today,
the implicit assumption of this model is that the industry is operating within an
economy closed to the greater society and ecosystem. From the view of the Five
Forces Model, industry analysis is traditionally portrayed in strategic
management books from the rather static perspective of “what is” within the
industry. This model suggests that strategic managers scan the product market
segments in which they compete for opportunities and threats without much
regard for context.
Their primary focus is on increasing market share within defined industry

boundaries, and the competition is defined as those competitors who directly
compete with them in individual product or service categories. Cooperative
relationships are typically limited to those with direct suppliers and buyers.
Capabilities to create value are viewed as residing in a single firm, and
organisational performance is measured primarily in terms of how well the
individual firm is managed with respect to its economic sustainability. Thus,
within this traditional paradigm of industry analysis, strategic managers engage
in adaptive learning within well-defined industry segments.
13.1.1. Factors Analysed in Industry Analysis

Some of the major factors that are needed to be analysed in the industry analysis
are as follows:
1) Basic Features and Conditions of the Industry: The most basic task is to
analyse the general features and condition of the industry. The basic feature
of an industry involves the size of industry, the products and services offered
by the companies, variants of the products and services, past performances of
the industry, current industry position, future expectation, etc.
2) Industry Environment: Another factor that must be studied in the industry
analysis is the environment of the industry. Environment of industry can be
classified according to Michel Porter as - fragmented, emerging, matured,
declining and global industries.
3) Industry Structure: In order to analyse the industry in a better way, the
structure of that particular industry should be understood. Every industry has a
specific market size, certain number of companies and each company has its
own market share. The firms in an industry compete with each other to capture
the market. These characteristics determine the severity of competition in the
industry, the extent of profitability and attractiveness of the industry.
4) Industry Attractiveness: Industry attractiveness is determined by factors
like industry potential, industry growth, the profitability, future trends for the
industry, the entry and exit barriers in the industry, etc. All these play a vital
role in developing the attractiveness of an industry.
5) Industry Performance: The determinants of an industry’s performance are
its annual production, profitability per year, technological advancements, etc.
6) Industry Practices: The practices of an industry can be defined as the

products or services in which the companies deal in, the type of markets they
share, the business practices they carry-out, such as pricing, promotion,
selling, research and development, etc. All these factors affect the overall
industry in significant ways.
7) Emerging Trends: The trends that are going to define the industry in future
also impact the business practices indirectly. Some of the important factors
like product life cycle, industry life cycle, changes in needs and preferences
of the consumers, changes in laws, possibilities of new entrants, innovation,
changes in technology, etc., are some variables that have a significant impact
on the industry.
1.3. 1.2. Porter’s 5 Forces Model

For analysing an industry efficiently, it is essential to consider various
competitive forces and how they interact with each other to create pressure on
one another. These factors decide the nature of competition in the industry. The
study of these competitive forces is necessary because without scrutinising them,
an industry cannot be analysed thoroughly.
Michael Porter developed a model which explains that the industry of a firm is
affected by five forces. The strategic business manager can use Porter’s model to
analyse an industry on these five forces and then judge the strengths and weaknesses
of his firm based on his industry analysis. The industry analysis will basically
enable the manager to review how strong each force is in that particular industry.
This model thus helps the firm to gain an edge over its rivals in the industry.
An industry can be very loosely defined as a group of firms who are all
producing similar products and services - so that the customer can substitute one
for the other. This five forces model is a widely used technique for analysing the
industry. It also illustrates the nature and level of competition existing in the
industry alongwith the forces that shape a business and its functions. An industry
consists of number of firms that produce and sell similar products or services to
the consumers. Therefore, the five force model is quite significant in
understanding the complex and diverse characteristics of the competition in
different industry areas. The competition faced by a firm is actually much
broader as it includes both current and potential competitors. A company can
face negative consequences by emergence of new technologies and new
competitors as well as the existing competitors. Before analysing the nature and
scope of competition in an industry, it makes sense to define its boundaries.
This helps in the following ways:

1) Define Arena: It helps in defining the arena (or playing field) of the firm.
2) Focus on the Competitors: Setting the industry boundaries helps the firm to
get an idea of its competitors and the firms that are manufacturing substitute
products.
3) Identify Key Factors for Success: This helps in allocating and deploying
the key success factors in the industry.
Concepts of Marketing (Chapter 1) (tppl.org.in) 35
Components of Porter’s Five Forces Model

The five forces of the Michael Porter Model are as follows:
Figure 1.3: Components of Porter's Five Forces Model
1) Rivalry inside Industry: According to perfect competition model, no firm

can enjoy super normal profits, and in the long run the competition drives the
excess profits to zero. In the real market, the competition is not perfect and
the firms are not just the entities interested in charging money from the
consumers, they actually attempt to seek a competitive advantage over their
rivals. The level of rivalry in an industry is of great importance to economists
and strategic analysts. One such ratio which gives an idea of the prevalent
state of competition in an industry is the Concentration Ration (CR).
A high industry concentration ratio means that a very few firms command a
very high market share in that industry. For example, the petrochemical
industry in India is dominated by Reliance Industries and has a very high
concentration ratio. If the concentration ratio is low, then the industry is
considered to be a disciplined one. This discipline might be a result of a code
of conduct or mutual amenability among the firms. This discipline results
trom the history of competition in the industry, the presence of a great
leading firm, an informal or tactical understanding between the players to not

to break rules. However, even in a disciplined industry a rebel firm can cause
havoc with its business activities. Following features of the industry can
influence the intensity of rivalry:
i) Number of Players: As the number of players increase in an industry,
the intensity of competition also rises. The reason behind this
competitive landscape is that greater numbers of firms compete for the
same customers and resources. The situation gets more intense when the
firms with similar market share try to become the market leader.
ii) Slow Market Growth: When the market growth is slow then the
companies have to increase the intensity of the competition to garner
market share. In such cases, a company grows only at the expense of
some other company. On the other hand, when the growth rate is more,
e.g., the initial days of the telecom industry in India, companies can grow
by simply being a part of the growing market.
iii) High Fixed Costs: The competition intensity also increases with the
increase in fixed cost. When the maximum portion of total cost is fixed
costs, then firms try to produce more in quantity to achieve the low unit cost.
This leads the firms to compete with other firms in the market, which in
turn increases competition. A good example of this is the automobile
industry in India.
iv) High Storage Costs or Highly Perishable Products: If the products
manufactured by the industry are perishable or difficult to store then
firms will be under pressure to sell their stock rapidly so that the wastage
is low. This increases rivalry in the industry.
v) Low Switching Cost: When the cost for switching the products is low,
then customers feel free to switch from one to the other. This increases
the competition as every company tries to grab maximum number of
customers.
For example, in the telecom industry, with the introduction of number
portability the customers can switch from one mobile operator to another
without having to change their numbers. This has increased the
competition levels in the telecom sector.
vi) Low Levels of Product Differentiation: If the products in the industry
are not differentiated then there is very high rivalry because all products
seem alike to the customers and companies have to try harder to gain
high market share.
vii) Market Share: When a company is losing its market share or trying to
gain a market share, then there competition is high as the companies
struggle with each other to survive and expand their share of the market.
viii) High Exit Barriers: Exit barriers prevent a company from leaving an
industry even if it is suffering from losses. These barriers impose a high
cost on the companies if they want to exit from the industry.
ix) Diverse Competitors: If the competitor firms are different from each
other in various aspects such as business orientation, culture,
background, etc., then it becomes difficult to anticipate the competitor
strategies. The rivalry in this condition can be intense and unstable.
x) Market Saturation: When the market is growing, then it attracts many
firms to enter in the industry and produce the products. This leads to
increase in the production. The market reaches to a point where it is
crowded with the competing firms and the supply is more than the
demand. Therefore, the market gets saturated and large number of rival
firms trying to target few customers increase the level of competition in
the market.
2) Threat of Substitutes: The substitutes can be defined as the products of
other industries that have the ability to satisfy similar needs. For example,
coffee can be a substitute for tea, as it can also be used as a caffeine drink in
the morning. When the price of a substitute product changes the demand of a
related product also gets affected. When the number of substitute products
increases, the competition also increases as the customers have more
alternatives to select from. This forces the companies to raise or lower down
the prices. Therefore, it can be concluded that the competition created by the
substitute firms is price competition.
The presence of a number of substitutes impacts the ability of the company to
increase the price of its products as increasing the price will make the
substitutes more attractive for the target market. Since, the substitute
products serve the same purpose therefore; a close substitute may act as a
negative competitive force in the market. Hence, the industries which have
no close substitutes are more attractive for various firms as they can charge
higher prices when required. For example, when Coca-Cola came out with a
price of ?5 for its 200ml bottle, it was able to acquire customers from
substitute products like - coconut water, mango and fresh juice, etc.
Some of the conditions in which the power of substitutes is high are as
follows:
i) Low Switching Cost: When there is slight or no switching cost paid by
the customers, they become free to select another similar product
substitute. If all the factors remain constant, such as differentiation,
brand loyalty, brand image, etc., then it becomes relatively easy for the
customers to go for a similar product. The firms must try to design their
product in a way that the switching cost is high.
ii) Low Substitute Price: If a similar product is relatively cheaper, then it
increases the risk of the consumers to go for the attractive substitute. It
also puts a limit on the level of price charged by the companies. If the
companies charge prices more than this limit, they may lose their
customers.
iii) High Quality of Substitute: If the substitute product has high quality
than the company’s product, then the customers will prefer to select the
substitute product.
iv) Better Performance of Substitute Products: If the performance of

substitute products is better than any other product, then it is more likely
that the customers will select the substitute one.
v) Availability of Substitutes: The availability of substitutes also affects the
market share of an organisation. If there are few substitutes, then it will
hardly affect the business, while high number of substitute can have major
impact on the market share. Potential substitute firms can be recognised by
creative thinking and considering other non-traditional rival firms.
3) Bargaining Power of Buyer: The bargaining power of buyers also has a
very important effect on the manufacturing industry. When there are many
producers and there is a single customer in a market, then that situation is
termed as a “monopsony”. In these markets, the position of buyer is very
strong and he sets the price. In reality, only a few monopsony markets exist.
The buyers’ power or bargaining power of buyers compels the firms to
reduce the prices. They may also demand a product or service of higher
quality at low price or may demand added value in exchange of their money.
The buyers have more power in following conditions:

i) When the number of buyers is relatively less.
ii) When buyers purchase in bulk.
iii) Availability of alternate suppliers who can provide the same product or
service at a competitive price.
iv) When the cost of switching from one producer to the other is quite low.
v) When the buyers, i.e., wholesaler, retailer, etc., charge low price from the
consumers and are unlikely to pay high prices.
vi) When the buyers pay the maximum share in the total cost of product.
This may lead the organisations to search for cheaper alternatives.
vii) If the buyer is capable of starting new alliance by integrating backwards
with other firms making itself a powerful supplier.
4) Bargaining Power of Suppliers: Since the company needs raw material for
producing, therefore the producers have to build relationship with its
suppliers. When suppliers have the power in their hands, they can exert
influence on the producing firms by selling them raw materials at higher
prices. For example, Wal-Mart as an organisation survives and grows on the
basis of its relationship with its suppliers.
Bargaining power of the suppliers is their ability to influence and industry
either through individual or group interaction with the company. The
suppliers have a bargaining power with which they can raise the prices of
products or services or force the customers to purchase a low quality product
or service. This empowers the position of suppliers in the industry. The
suppliers can exercise their bargaining power in the following cases:
i) Limited Numbers of Suppliers: The suppliers have higher bargaining
power when they are few in numbers and are more dominant than the
producing firms.
ii) Limited or No Alternatives: If the buyers and producers have few or no

alternatives, then suppliers get an added advantage over the buyers. The
buyers would have to purchase the supplies in the price set by the suppliers.
iii) Less Important Buyers: When buyers are not much important for the
suppliers then they do not consider them. For example, for cement
industry, major companies, construction houses have much more value
than an ordinary man trying to build his house.
iv) Suppliers Selling Critical Products: When the suppliers provide critical
or crucial products, which are rare to find somewhere else, then they
have high bargaining power.
v) Differentiated Supplier Product: If the suppliers supply differentiated
products as compared to other suppliers, then they may have a bargaining
power in their hands. This increases the switching costs of the buyer. For
example, loyalty programmes.
vi) Suppliers' Ability to Enter the Buying Industry : When the suppliers have
the ability to enter in the industry by collaborating with other firms through
forward integration, then the suppliers have a high bargaining power.
5) Threat of New Entrants: The market is full of competition. Not only the
existing firms pose threat to the business, but the arrival of new entrants is also
a challenge. As per the ideal scenario, the market is always open for entry and
exits, resulting in comparable profits to all the firms. But, this is not applicable
in the real picture market. In reality, all industries have some traits that protect
their high profits and help them in guarding off the entry of potential firms in
the market by raising certain entry barriers. Various factors that hinder the
entry of new firms in the industry are called as “barriers to entry”. These
barriers prevent the new firms from entering into the industry.
This helps in maintaining profit levels for the existing firms. These barriers can
either be developed or fully utilised to improve the performance of
organisation. These entry barriers can be a source of competitive advantage for
the firms. These barriers to entry can be developed from following sources:
i) Government Laws and Regulations: Government laws and regulations
are one of the biggest entry barriers. Although the government tries to
keep the competition alive in the market, but it also supports the existing
firms by formulating regulations that encourage market monopolies.
ii) Patents as Barriers: Patents and copyrights also give the owner the
right to prevent other players from using a technology or a product. This
stops other firms from copying and using those ideas, knowledge,
technologies, etc., that give the existing firms a competitive edge.
iii) Asset Specificity Inhibits Entry into an Industry: Many times an
industry requires an investment in a particular asset category. More
specific the asset, the less is its resale value or it is less deployable. This
investment can be in technology or plant and equipment. Hence, asset
specificity may act as an entry barrier because the new entrant may not
want to invest in the exclusive technology at the risk of failure.
1.3. 1.3. Significance of Industry Analysis

Industry analysis is carried-out to identify the strengths and weaknesses of an
organisation in relation to the possible opportunities and threats existing in the
industry. It highlights the level of competition and the attractiveness in the
industry. Along with analysing a particular industry, it also outlines the
competitor’s and their strategies that may have an influence on a company.
Industry analysis is used widely by the marketers for making strategic decisions.
Industry analysis is helpful to the firms in the following ways:

1) Analysis of Industry Attractiveness: Industry analysis studies the level of
attractiveness of a particular industry. It determines whether it is profitable to
invest in certain market or not. It highlights the attractiveness by analysing
the potentials of the industry, scrutinising its profitability, and by identifying
the strengths and weaknesses of competitor firms in the industry.
2) Studies the Competitive Position of a Firm: Industry analysis strives to
understand the competitive position of a firm in relation to other firms in the
market. Analysing competitive position specifies the strengths and
weaknesses of a firm along with the values it can provide to its customers as
compared to the competitors. The firm can use the knowledge to enhance the
products and services and improve its market position.
3) Analyses the Environmental Variables: Analysing industry allows the
marketers to understand the structure of the industry and identifies the
immediate environmental factors as well as the factors that indirectly affect
the business and its operations. It also allows the firms to know about the
rival firms which in turn help in formulating competitive strategies.
4) Helps in Strategy Formulation: Industry analysis acts as a framework
under which the strategists formulate various strategies to compete with the
rival firms in the market. It facilitates a deep understanding about the
environmental forces that are working for and against the organisation.
These characteristics help the firms in identifying their own strengths and
weaknesses which ultimately leads to better strategy formulation and
implementation.
1.3.2. Competitor Analysis

In the field of marketing and strategic management, competitor analysis is a
process of evaluating the strengths and weaknesses of present and potential
competitors. It is considered as a crucial part of company’s marketing plan. By
combining all the important sources of competitor analysis into a single
framework, an effective profiling of competitors can be done in order to
formulate, implement, monitor and adjust the strategy in an efficient manner.
While designing the business strategy, the strategies of company’s competitors

must be considered by the managers. In case of segmented commodity industries,
the strategy of competitors is of less significance compared to the concentrated
industries where analysis of competitor’s strategy is highly recommended.
The two main activities of competitor analysis are as follows:

1 ) Attaining information regarding the main competitors, and
2) Utilising that information to forecast the behaviour of competitors.
There are numerous firms competing in a single market. Therefore, the main
motive of competitor analysis is to determine and forecast the competitive level
and market behaviour of the companies competing in the same marketplace. The
recognition of existing and potential competitors is essential for analysing their
relative strengths and weaknesses or marketing strategies. If a company is only
concentrating on the present competitors’ analysis, then it will not be able to
trace the capabilities and strategies of future rivals. However, the decision of
choosing the right basis for analysing the rivals and the level of competition is a
complex one.
In the company’s potential market, the suppliers of both kinds, i.e., the ones,
which are considered as substitutes and the ones, which supply related products,
must be included in the competitor analysis. The identification of competitors is
an important activity of managers in scrutinising the level of competition,
preparing against the competitors’ moves and building counter strategies.
At the time of preparing a competitive plan, the company must be clear about its
present, potential and indirect competitors. The level of satisfaction that the
consumers are deriving from the company’s products and services and the other
competitive company having similar capabilities also assists in identifying the
competitors.
In recent times, competitor analysis has gained advantage on grounds of various

reasons such as increased competition from sophisticated competitors and foreign
companies, continuously changing business environment mainly technology¬
based and short product life cycles. Many companies are implementing a process
for identifying competitors, tracking their activities, and assessing their strengths
and weaknesses by adopting formalised methods, which is specifically known as
’competitive intelligence' Competitor analysis results in anticipating the moves
and the responses of the competitors towards the strategies implemented by the
company which is conducting the analysis.
I.3.2.I. Competitor Analysis Framework

Michael Porter introduced a framework for analysing the competitors.
Typically, this framework is based on four key aspects of competitors, which are
1) Competitor’s Objectives: A company can anticipate the moves of its

competitors in a better way if it is aware of competitor s objectives. These
objectives are mainly short-term and long-term. A competitor having short¬

term objective would not waste its time and money defending against
competitive strategies and would rather focus on positioning its products
strongly in the market. Whereas, a competitor having long-term objective
ignores short-term profit making and only focuses on price-based competition.
The objectives of competitors can also be financial or of other types like
market share, growth rate, technology leadership, etc. In addition, these
objectives vary at every strategic level, viz., corporate, business unit and
functional level.
The most relevant functions of the competitors can be identified by a
company through their organisational structure. For example, the functions,
which are reported directly to the higher officials, hold much more
importance than others. Other factors, which indicate the competitors’
objectives, are management incentives, tolerance for risk, composition of the
Board of Directors, legal restrictions, background of the executives and some
corporate level objectives. The tendency of the competitor to modify its
strategy is indicated by whether it is achieving the objectives or not.
2) Competitor’s Assumptions: The competitor’s strategies are based upon the
assumptions that their manager has about the industry and the organisation.
For example, if a new product launched by a firm fails to do well in the
market, it is assumed that there is no demand for such product. This type of
assumption may be correct and may be wrong. If it is wrong then this will
block the future opportunities of the firm and create new opportunities for
other rival firms. A product similar to the previous failed product may be
launched by new companies creating a high demand for the product. For
example. US manufacturers made an assumption on their experiences that
there was no demand for small bikes. Then, Honda decided to enter the US
market by launching a small motorbike.
Following are the bases for competitor’s assumptions:
i) Beliefs about its competitive position,
ii) Past experience with a product,
iii) Regional factors,
iv) Industry trends, and
v) Rules of thumb.
Other than the assumptions made by a competitor about a specific market, it

can also make assumptions about its competitors in the analysis. Alongwith
this, it may also assess whether the assumption made is right or not.
3) Competitor’s Current Strategy: ‘What the competitor says’ and ‘what it

does’ are the two main sources of competitor’s strategy. Following points
highlight ‘what the competitor says’ about the strategy:
i) Managerial statements,
ii) Annual shareholder reports,
iii) Press releases, and
iv) Interviews with analysts.
There is sometimes a variation between ‘what the competitor says’ and ‘what
it does’. The following points are the activities indicating what the
competitor actually does:
i) Hiring activity,
ii) R&D projects,
iii) Capital investments,
iv) Promotional campaigns,
v) Strategic partnerships,
vi) Mergers and acquisitions.
4) Competitor’s Resources and Capabilities: The resources and capabilities
of a competitor define its ability to respond against the competitive market
environment. For this, it is important for a competitor to have adequate
knowledge of its competitor’s assumptions, objectives and current strategy.
The strengths and weaknesses of a competitor determine its capabilities in
different functional areas, e.g., SWOT analysis. A competitor’s capabilities
are governed by its strengths. In order to increase the competitor’s
capabilities in specific areas the analysis can be further carried out. The rate
at which the competitor is growing depicts its capabilities. Other than this, a
financial analysis can also be performed to identify its sustainable growth
rate. Since, the competitive environment is dynamic in nature. The ability of
competitor to respond quickly towards the changes must be evaluated. There
are firms who adapt and mobilise things quickly whereas, there are some
firms which have a slow speed and take years to adapt a particular change.
The factors which affect the firm’s capabilities to adapt swiftly can be large
investments in fixed assets, low cash reserves and an organisational structure.
I.3.2.2. Steps in Competitor’s Analysis

The firm must carefully examine the various elements of competitor analysis in
order to transform its competitive analysis activities into the firm’s profitability.
Therefore, the firm must consider the
following steps involved in competitive
analysis:
1) Defining Competitors: The first and
foremost step in this process is to
define the competitors. It is advised
by many business professionals and
consultants that companies should
examine the competencies of its
present and potential competitors.
Some companies offer products and
services which are less similar, while
others may offer the same type of
products or services offered by one’s
own company. Therefore, the
Figure 1.4: Steps in Competitor Analysis
companies have to choose whether
the competition is an opportunity or a threat (either in present or in future) to
the company financially.
2) Analysis of Competitor Strengths and Weaknesses: After defining the

company’s competitors, the company must identify and analyse their
strengths and weaknesses. Here, main focus of the company is on its
competitor’s strengths and weaknesses and partially on the products and
services offered by them. In reality, all the elements of customer preferences
like product's quality, price, distribution, service, etc., are considered as the
first half portion of competitive analysis. While, other half of the analysis is
to examine the internal strengths and capabilities of its competitors. In the
long run, it is difficult for the company, to compete with its competitors who
have substantial financial resources, highly motivated or creative individuals
and have several other operational assets.
3) Analysis of Internal Strengths and Weaknesses: The next important step

in the process is to analysis the internal strengths and weaknesses of the
company. The points to be considered by company while analysing its
internal strengths and weaknesses are:
i) Involvement of highly motivated, confident and creative employees.
ii) Participation of talented marketing and advertising personnel.
iii) Identification of various companies’ processes that provide benefits to
the company in the market environment.
iv) Introduction of updated stock management system.
Once the company’s strengths are identified, then it can further be utilised by
the company to improve and enhance its market position.
4) Analysis of Customer Needs and Wants: In order to be successful in the

competitive market, every company should carefully analyse the needs and
wants of the customers. Customer’s priorities should be considered as the
main priority of the company. Apart from determining the customers’ current
needs and wants, business firms must also anticipate the future demands of
the customers. Moreover, many small organisations alongwith analysing
priorities that is already available in the market, must also focus on new
product development and innovation in services to attain success in the
competitive market environment.
5) Studying Impediments to Market for Competition: The companies that

are willing to enter into new markets have to face several challenges. There
are some challenges which can be dealt easily, while others may prevent
launching of a campaign.
Some of the common barriers to enter a new market are as follows:

i) High Start-Up Costs: High costs for start-up is most challenging and
formidable for companies, especially small companies.
ii) Patents: This protects the new products and processes from competitors.
iii) Market Saturation: It is more challenging to create a niche in a
crowded market than establishing one’s existence in the less competitive
market.
iv) Knowledge: One of the major barriers to make a successful market entry
is knowledge. This may involve lack of expertise in manufacturing,
marketing, technical and engineering areas.
6) Building Strategic Plans to Improve Marketplace Position: The last step
involved in the process for competitor analysis is building various strategic
plans that enhance the small company’s position in the market. A well-
defined strategic plan must cover all the aspects of business processes or
operations like production, pricing, distribution and marketing of various
products or services in the competitive market.
1 .3.2.3. Benefits of Competitor’s Analysis

In the competitor’s analysis, adequate knowledge about competitors is very
essential. It is a systematic process of analysing the strengths and weaknesses of
competitors in order to find out opportunities and threats for their own
organisation. The benefits of competitor’s analysis are as follows:
1) Identifies Competitive Information: It helps to identify the future plans and
strategies of competitors and forecasts possible actions towards various
competitive plans. Alongwith this, it also determines the competitors’
reaction towards the activities and plans of the company.
2) Provides Motivation: Competitor's analysis motivates the company to set¬
up a definite, hostile and proactive standpoint towards several competitive
strategies and the entire business environment.
3) Chooses Competitors: Competitor’s analysis defines the competitor’s
capabilities and strategies and ascertains the most appropriate competitor to
compete with the company. Moreover, it states the weaknesses and inabilities
of competitors.
4) Reveals Hidden Opportunities: There are numerous opportunities which
are present in the market but remain hidden. Through competitive analysis,
companies come across its different functional areas, their visions and
outlooks. This encourages the companies to become more competitive.
5) Develops Strategy: The information about the competitors helps the
company to formulate their strategy in accordance with the competitor’s
moves. By using competitive analysis in an appropriate, brief and timely
manner, an exceptional communication strategy can be developed. This way,
company can design an effective and competent strategy.
6) Strategy Implementation: By analysing the competitors, companies can
apply its offensive strategy towards capitalising its strengths and exploiting
the opportunities available. Likewise, companies can manage its threats and
overcome its weaknesses by implementing the company's defensive
strategies.
Hence, from the above benefits it is clearly understood that the companies
implementing systematic competitor’s analysis and profiling gain substantial
advantage. For having a successful competitive business environment, a
comprehensive profiling capability is very essential.
1.4. ANALYSING CONSUMER BUYING

BEHAVIOUR
1.4.1. Introduction
Buyer behaviour is the study of buyers and the processes they use to select,
purchase and dispose of the goods and services. This process may consist of
areas like psychology, sociology, anthropology and economics. This study
reveals the decision-making process of individuals, groups and organisations.
Buyer behaviour is also termed as consumer buying behaviour, end user

behaviour or consumer behaviour. Broadly, it is decision-making process of
individuals to allocate their potential resources, i.e., time, effort and money for
consumption purpose.
In order to understand the consumers’ tastes and preferences, analysis of their

buying behaviour is the most preferable method.
For example, if marketers want to study the behaviour of consumers in buying

toothpaste, then they should analyse certain points such as variants (gel, regular,
stripped or with a pump), brands (national brand, generic brand, private brand),
reasons for buying (to prevent cavities, to remove stains, to brighten and whiten
teeth, to get rid of bad mouth odour), places of purchase (super market, general
stores, medical stores), usage frequencies (in the morning, after every meal,
before going to bed), and the consumption rates (monthly, biweekly or weekly).
1.4.2. Buying Role of Consumers

Individuals normally play six different roles while purchasing an item:
1) Initiator: The initiator is the individual within whom the thought of buying
certain product develops originally.
2) Influencer: The influencer plays a role of influencing the purchase decision
of some other person. He may be a person of good social status, e.g., a
professor can be an influencer for the purchase decisions of students
associated with him.
3) Decider: The decider is the individual who makes the ultimate decision to
purchase the product. These include the decisions of what to purchase, when
to purchase, how to purchase, from where to purchase, etc.
For example, children are the deciders for some products, such as, toys.
Similarly, housewives decide on the purchase of many household items like
groceries, cosmetics, home appliances, etc.
4) Gatekeeper: The gatekeeper is something or someone who helps the
consumer in deciding to purchase certain product out of all the alternatives
available. Gatekeeper can either be a person, or an organisation, or just a
pamphlet, etc.
5) Buyer: The person who actually purchases the product is known as buyer.
For example, a wife may be the decision-maker on what brand of kitchen
appliance to buy, but the buyer could be the husband.
6) User: The person who actually uses the product or avails the service is
known as user. For example, an infant may not be the buyer of a toy but he
certainly is the user of it.
A marketer has to analyse the buying process, various stakeholders involved in it,
and different roles that they play during the process. He should decide suitable
strategies for influencing each of them to buy his product.
1.4.3. Types of Buying Decisions

The buying habits are very important in decision-making process of customers
and it is also known as buying situations. For example, the purchase of a new
house is one such situation which makes it necessary for each consumer to follow
all steps systematically with complete precautions.
The suitability of location, quality of construction, reasonability of offered price

and the authenticity of seller are some factors which come in the mind of the
consumer prior to finalisation of a purchase deal. In accordance, the levels in
which consumer decision-making can be made, are as follows:
High Involvement Low Involvement
Significant Differences Variety-seeking buying

Complex buying
between Brands behaviour behaviour
Few Differences between

Brands Dissonance-reducing Habitual buying
buying behaviour behaviour
Figure 1.5: Levels of Consumer Decision-Making
1) Complex Buying Behaviour/Extensive Problem Solving/New Task: The

first level of buying behaviour involves extensive problem-solving process.
A substantial amount of time is involved in collecting information and
evaluating the alternatives. Under this process, consumer can go through
cognitive dissonance.
The perceived risk is also high and the products in this category are generally
expensive, e.g., buying a house, a car or an insurance policy. Hence,
marketer should opt for low-key approach with minimum perceived risk.
2) Dissonance-Reducing Buying Behaviour/Limited Problem Solving/
Modified Buy: In this level, a consumer follows all the steps involved in
decision-making process. Here, consumers are more experienced and
knowledgeable than the complex buyers. The products purchased by
consumers are used by them, but not regularly. Therefore, the risk involved is
less. For example, clothes, vacations, gifts, etc. To improve this type of
buying behaviour, a marketer needs to enhance its communication process by
providing more information about the product.
3) Habitual Buying Behaviour/Routinised Response Behaviour/ Straight
Rebuy/Brand Loyalty: In this situation, the customer is habitual to a
particular brand over a period of time and does not spends much time on
decision-making process and skips few steps.
Here, same product of a specific brand is purchased regularly or repeatedly
by the consumer, e.g., groceries, haircut, magazines, etc. The marketer must
understand the buying behaviour of potential consumers and inform existing
consumers about the arrival of superior brands in the market. This will help
in improving the buying patterns of the consumers.
4) Variety-Seeking Buying Behaviour/Brand Switching: In present scenario,
there are several new brands of similar products which are available in the
market. This has brought a change in the behaviour of consumers who seek
variety and do not stick to a particular brand. The brands which are already
leading the market try to ensure that their products are in abundance in the
market to captivate their existing customers and also attract new customers.
The new brands try to attract the customer by lower price, offering discounts
on certain conditions such as bulk purchase, free coupons or free samples for
trial and putting advertisements on social media.
Table 1.1: Characteristics of Consumer Problem-Solving Approaches

Characteristics Routine Limited Extensive
Problem- Problem- Problem-
Solving Solving Solving
Purchase Involvement Low Medium High
Level
Problem Recognition Automatic Semi-automatic Complex
Information Search and Minimal Limited Extensive
Evaluation
Level of Prior Very high Moderate Very low
Experience
Purchasing Orientation Convenience Mixed Shopping
Post Purchase Processes Very limited Limited Complex
Habit Inertia to re¬ Loyalty if
purchase satisfied
Brand loyalty Brand switching Complaint if
if dissatisfied dissatisfied
Frequency of Purchase Very high Moderate Very low
Amount of Perceived Very low Moderate Very high
Risk
Time Pressure Very high Moderate Very low
1.4.4. Factors Affecting Consumer Buying Behaviour

There are various factors and determinants which directly influence the buying
behaviour of customers. They are as follows:
1) Cultural Factors: There are following cultural factors that influence the
buying behaviour of a consumer:
i) Culture: Culture is the key element for determining individual’s buying
behaviour. The cultural factors influencing the features of a society
consists of earned values, norms, rituals, and symbols.
For example, a child attains a defined set of values and behaviours from
his family, friends and key institutions. In U.S., a child is open to adapt
values such as individualism, freedom, external comfort,
humanitarianism, efficiency, practicality and youthfulness.
ii) Sub-culture: A culture has several sub-cultures which assist the
marketers to easily recognise and socialise with its customers. It includes
nationalities, religions, racial groups, and geographic regions. Many a
times, these sub-cultures are defined as a market segment and marketers
offer products based on their needs and wants.
iii) Social Class: Mostly, every individual in the society is a part of some
social class. These social classes are defined on the basis of caste system
which indicates specific roles, which cannot be changed. Often, the caste
system is transformed into a social class. Social classes are
comparatively identical and permanent societies. These classes share
similar interests, behaviour, and values.
2) Social Factors: Following social factors influence the buying behaviour of a

consumer:
i) Reference Group: A person or a group who is identified as a reference
to an individual, defining the fundamental or fixed attitudes, behaviours
or values, is known as a ‘reference group'. Being a social class member,
an individual always compares his abilities and opinions with the defined
abilities of a reference.
ii) Family: Buyer’s behaviour is largely influenced by his family members
Family is the main buying organisation in the society. There are two
types of families, such as:
a) Family of Orientation: An individual attains an orientation from
parents towards their religion, politics, self-worth, etc. It is usually
observed that grown-up children who are living with their parents
signify them as their ideal reference group.
b) Family of Procreation: In this type of family, the buying behaviour
is affected by every family member such as spouse, children, parents,
etc. They purchase products considering the requirements of every
individual in a family.
iii) Roles and Status: A person performs different roles and has different
status in various groups such as family, organisation, clubs, etc. The
activity performed by a person is defined as a role and every role carries

a status. For example, an RBI manager has more status than a sales
manager and a sales manager has a more status than a receptionist.
This is because of the difference in their income, which directly affects
the status of the individuals. Therefore, the buying decision of an
individual is largely based on its role and status in the society.
3) Personal Factors: The personal factors that influence the buying behaviour
of a consumer are as follows:
i) Age and Stage in the Life Cycle: The requirements of a person changes
with his age. Different stages in life need different sets of products. For
example, in childhood, baby food is consumed and in youth healthy food
is consumed. Things like taste of clothes, home decor and recreational
activities are also related to age. Therefore, consumption pattern is
created on the basis of family lifecycle.
ii) Occupation and Economic Circumstances: The consumption pattern
of an individual is also affected by the occupation. For example, a blue-
collar employee will buy necessary items like formal clothes, office
shoes or lunchbox. While, a company head will buy luxury items like air
travel tickets, country club membership, or a large sailboat.
Here, marketers target those consumers who have high amount of
interest in their products. The selection of products also varies in regard
with the economic circumstances such as monthly income, savings,
purchasing power, assets, debts, etc.
iii) Lifestyle: Lifestyle is a certain way in which an individual lives his life.
It may comprise of individuals' activities, interests, opinions, etc. The
lifestyle also depicts the manner in which a person interacts with its
surroundings. A marketer needs to find out the product which is most
suitable for customers’ lifestyle.
For example, a person belonging to upper class will buy only luxury
cars because it suits his lifestyle.
iv) Personality: The personality is an individual characteristic of a person.
These are distinctive psychological features that lead to relatively
constant and long-term responses to the market environment.
Personality can be helpful in defining the consumers’ behaviour but the
type of personality should be identified precisely and there should be a
strong relation between the personality type and the products.
1.4.5. Buyer Decision Process

Decision-making is a process of choosing the best one out of many alternatives.
The marketers provide a wide range of products to its consumers having different
variants. The decision on items for daily use require time, while durable and
luxury items need sufficient time for making final purchase decision. Usually,
consumers consult with others before purchasing a particular product. The
Concepts of Marketing (Chapter 1) (tppl.org.in) 5 1
consumer passes through five stages while making the decision on purchases
which are described below:
1) Problem Recognition: The basis of consumer purchase depends upon his
needs. This need may be personal in nature or might have developed on the
basis of advertisements or
recommendation of acquaintances. The
marketer has to access the product
which appeals the customer needs. In
other words, it is about understanding
the reason behind the purchase of a
specific product.
2) Pre-Purchase Information Search:
After ascertaining the need, the next
step of consumer is to collect the
information related to the product.
This information may be received
through advertisements in local
newspapers, magazines or through
online media or from an acquaintance. Figure 1.6: Buyer Decision Process
This information collected from
internal and external sources enables
him to form an idea about the product he intends to purchase.
The next step taken by the consumer is to further analyse the available
information, consult his close friends to gain further confidence or discuss
with the marketers who have first-hand and latest information about the
product in the market. These will make different levels of influences on the
decision-making process about the product. There are four sources which
supply information to consumers:
i) Personal Sources: These sources are close to consumer, i.e., family
members, close friends or acquaintance.
ii) Commercial Sources: Advertisements in local newspaper or magazines,
a visiting salesman, interaction with dealers or through display
hoardings.
iii) Public Sources: These sources can be consumers, mass media, rating
organisations, etc.
iv) Experiential Sources: The consumer may personally examine the
product for his satisfaction.
3) Evaluation of Alternatives: It is a very common practice in present market
environment for examining the products put up for sale by different brands
along with the comparative parameters and prices of each. If the consumer
has a firm thinking towards a particular brand because of his past experience,
he may not indulge in looking for alternatives. At present, the customers
have generally rational thinking which makes them to spend a lot of time in
critically examining the products of other brands as well. The consumers do
not form an idea about a product in one go, but they prefer to take inputs
from various sources and analyse each thoroughly to arrive at the final
decision on purchase. But, before taking a final decision consumer first looks
at the positive and the negative aspects of each product and then makes the
judgement.
This formation of an idea may be divided into various systems such as:
i) Evaluative (Choice) Criteria: The different criteria on the basis of
which consumers evaluate and compare products or brands. The
evaluative criteria may include price, performance, running costs,
maintenance costs, after sales service, etc. of a particular product.
ii) Beliefs: Many a times, the consumer accepts certain product brand due to
his past experiences and characteristics of that product like reliability in
performance. Such beliefs go a long way for continuation of consumer
relationship with the product.
iii) Attitudes: Attitude is the level of liking or disliking of a consumer
towards a specific product. It also depends upon the evaluative criteria
and beliefs about the same product.
iv) Intentions: The intentions for purchase are derived from attitudes which
may be positive or negative. In case of a positive response consumers
make purchases. However, if there is a negative response, the chances of
purchase are partial.
4) Purchase Decision: After analysing different brands of a product, the
consumer restricts his choices primarily to one or two alternatives. However,
financial constraints may restrict the consumer decision to shift his purchase
plan for some time or he may even let go to the purchase decision, if no such
alternative is found suitable to meet the requirements of the customer.
At this stage, consumer sets some preferences among different brands and
may purchase the most preferable one. There are two factors which act as a
barrier between purchase intention and purchase decision:
i) The first factor includes liking or disliking of product by others, who are
close to consumer (may be his wife, children or a close friend). This
aspect has two situations:
a) The negative attitude of others towards the preferred alternative.
b) The importance attached by the consumer to honour or comply the
wishes of others.
ii) The second factor is related to unanticipated factors like performance,
durability, etc., of a product. These factors can change the purchase
intention of a customer.
This decision remains unpredictable because it totally depends upon the

individual nature of the consumer which is largely influenced by perceived
risk. The person’s perceived risk varies with the amount of money involved,
uncertainty and low self-confidence of a customer.
5) Post-Purchase Behaviour: After the consumer makes a purchase, he uses
the purchased product and compares the performance with his earlier
purchased product. In this comparison process, he may be satisfied or

dissatisfied with the performance of the product. In either case, the seller
must take a periodic feedback from his consumers and also offer after sales
services. In case of unsatisfactory response of the product, immediate
remedial measures like replacement of faulty product, repair or even return
of full money in some genuine cases must be carried out for building a good
relationship, winning the confidence of consumers and ensuring future
market of the product.
i) Post-Purchase Satisfaction: The post-purchase satisfaction depends on
consumer’s expectations from the purchased product from his past
experiences or experiences shared from others and his experiences with
the performance or taste of the product.
Depending upon the level of satisfaction derived by the consumer, he
may be dissatisfied, satisfied or delighted. This satisfaction is reflected
by the repetitive purchases of the consumer and his recommendations to
other consumers about the product.
ii) Post-Purchase Actions: The repetition of purchase is an indication of
consumer satisfaction after purchase. However, dissatisfied consumers
generally try to return the product, verify the price offered to them or
resort to legal actions like approaching to customer care forum, etc., or
simply stop buying the product and give a warning or advice to friends
and acquaintances. Such actions on the part of consumers only indicate
poor marketing by the seller.
iii) Post-Purchase Use and Disposal: The marketer should enlighten
himself as to how the consumers use the product, or dispose it off. In
case, the consumers store the product in closet, it means they have not
liked the product and this will certainly make the product unpopular.
Even if the consumer sells it after use, it may tarnish the brand image of
the product. A feedback of marketer on this aspect will help to improve
the quality of the product.
1.4.6. Importance of Consumer Buying Behaviour

The study of buyer behaviour is an essential part of marketing management. If a
marketer is unable to understand and identify the choice of customers, then it
may become a difficult task to retain the present and potential customers as well
as the survival of the organisation in the market.
The importance of studying buyer behaviour is as follows:
1) Attitude: Attitude defines the consumers’ philosophy towards a specific
product. This helps the marketer to renovate and improvise the specific
product and again approach the consumer to buy it. This also enables the
marketer to strengthen its marketing ability.
2) Culture: The marketing operations are widely influenced by the changing
demographics. Therefore, understanding of cultural differences and
sensitivities may prove advantageous to marketers for recognising their target
market and customers.
3) Lifestyle: Lifestyle based products are in trend. By analysing the consumer

lifestyle, marketers can sell those products which are most appealing to the
customers. Thus, a particular segment is offered lifestyle products for their
further consumption and satisfaction.
4) Experience: After consumption of a product, experience also influences
further buying decisions of a customer. The marketer must be vigilant
enough to observe and understand the consumers’ experience with a product
and accordingly promote the product.
5) Decision-making: While decision-making consumer use their thought
process. The marketer must try and find out a way through which consumers
can make a decision while evaluating a certain product. If a marketer is able
to identify the key points which the consumer looks up in a product then this
act leads the marketer to run the business successfully.
6) Product Use/Complements: Marketing is not just about selling of a
particular product, rather recognising the use of a product and its supporting
items which add more value to a product.
This helps the marketer to design a perfect product, keeping in mind the
requirements of customers. This is a vital tool to attract more customers.
1.5. INDUSTRIAL BUYING BEHAVIOUR

1.5.1. Introduction
Industrial /Business/Organisational buyers are the entities (individuals,
manufacturers, producers or other organisations), involved in buying goods and
services to produce new goods and services. These buyers sell, rent or supply the
produced goods and services to others.
The process of determining needs for buying products and services and selecting
the most suitable supplier or brand from available alternatives through
identifying and evaluating them, is called Industrial buying or Business buying
or Organisational buying.
The buying approaches are different for different organisations or businesses.

However, the sellers try to identify and explore common buying methods and
processes in order to develop suitable marketing as well as targeting strategies.
Understanding the phenomena and characteristics of organisational buying is

very crucial for the organisational marketers to develop suitable marketing
strategies so as to attract the organisational buyers.
This involves exploring the buying situations, process of buying for making
buying decisions, the way different members of the organisation affect these
buying decisions, the criteria used in making such decisions, etc. It is very
essential for purchase managers to communicate with different people in the
organisation having variety of responsibilities, in order to design the purchase

criteria. Generally, the normal consumers are dispersed in geographical area,
whereas organisational buyers are group of individuals who exhibit similar
yet derived demand. Therefore, it is very challenging to understand
organisational buying behaviour as group of decision -makers are associated
with it.
1.5.2. Nature of Industrial Buying Behaviour

The nature of industrial buying behaviour is given below:
1) Multiperson Buying Activity: Industrial buying behaviour is a very
complex process because it involves interactions among various people, e.g.,
the buying process of the industries or of the organisations such as, hospitals,
government organisations, educational institutions, etc.
The people who participate in these buying decisions may be from many
departments like, production, purchase, design, maintenance, etc., and these
people may also have different educational qualifications such as, engineers,
business graduates, graduates, etc.
Other than that, these people may also be from different hierarchical levels in
the organisation ranging from front line staffs to the senior level managers.
The people involved in the buying situation may also adopt different roles in
the buying process. This concept of varied roles in buying process is known
as ‘Buying Centre’.
2) Formal Activity: Technical complexities of industrial buying have high
monetary value, but still it has to follow all the formal procedures of the
organisation.
The organisation adheres to certain policies even at the times of emergency
and it is very important that suppliers have the knowledge of these policies.
All the decisions made during industrial buying lastly take the form of a
contract, where the parties to contract are suppliers and buyers.
3) Longer Time Lag between Efforts and Results: Since the industrial buying
behaviour is complex and involves the interaction of many people, they take
comparatively long time than individual buying.
Thus, there is a great time lag between the initiation of the marketing effort
and the actual buying taking place. It is very important for the marketer to
have a good idea of the time lag in getting the response from the customers;
otherwise he may end up doing an impractical planning.
4) Rational yet Emotional Activity: Industrial buying is a formalised process
with very clear rules and procedures, yet it cannot be said that it is an
unemotional or a rational process.
The reason behind this is the entities that carry out industrial buying, i.e.,
human beings. Therefore, the human characteristics can also impact the
activities of industrial buying, such as, buying of raw materials,
commodities, standard products, components, etc.
5) Uniqueness of Organisations: Several commonalities exist in the industrial

buying processes, yet no two organisations possess same behaviour and make
same decisions. This is because there is a wide divergence with respect to the
buying situations, resources, capabilities of the organisations, the suppliers
and their relationships, etc.
Hence, it is very important to consider every organisational buyer as a

separate entity in the process of industrial selling.
1.5.3. Objectives of Industrial Buying Behaviour

The industrial buying process is handled by the procurement cell. This
department is governed by the overall strategy of the organisation and also by the
specific rules which the department has laid down for itself.
Industrial buying has the following key objectives:

1) Non-Task Objectives: These objectives should be used by the procurement
department of a company in order to achieve the task related objectives.
Transparent and non-discriminatory policies, answerability of management,
and proficiency in the process of procurement, are some of the examples of
non-task objectives.
The procurement process should not favour any particular supplier or a group
of supplier. It should also not be biased towards any supplier and should
conduct the entire process in a fair and equitable manner. The efficiency of
the procurement department affects the efficiency of the entire organisation.
Hence, the procurement department should function effectively by acquiring
the required resources of best possible quality in the stipulated time.
This also helps in building the brand image of the company; for example,
successful brands like Maruti differentiate themselves in the marketplace
through their efficient and transparent procurement policies.
2) Task-Oriented Objectives: The task-based objectives of the procurement
department are determined in order to achieve following specific objectives
of the organisation:
i) Cost: Keeping control over the cost of acquisition is one of the important
facets of the procurement process. This can be done by ensuring that the
procurement of right product of the right quality, in the right quantity is
done at the right time, and from the right source.
In this process the procurement department identifies the suppliers who
meet their standards and then negotiate the rate at which the raw material
will be supplied. In this manner the procurement team delivers the
maximum value to the company.
ii) Quality: The next important task for the procurement cell is to control
the quality. This can be ensured by supervising that the manufacturing of
product is done by using the best quality of raw materials. The quality
specifications are usually set by the end user or the production
department, while the procurement department makes sure that these
standards are being met. The procurement department also undertakes

value analysis of all the alternatives so that best among them can be
selected such that the quality of the end product is not compromised in
any case.
iii) Service: The service aspect of the buying process should be well-defined
before the product is bought from the vendor. When the procurement
department buys a product from a vendor, the department should be very
clear about the services that are bundled with the product.
These can be in the form of additional technical information that is
provided, demonstration of functioning of machinery, after sales service,
etc. The procurement department of the organisation should negotiate on
these service parameters before it finalises the deal with any vendor.
1.5.4. Factors Influencing Industrial Buying Behaviour

The factors which influence industrial buying behaviour are broadly divided into
following four categories:
Figure 1.7: Factors Influencing Industrial Buying Behaviour
1) Environmental Factors: Following environmental factors influence the

organisational buyer behaviour:
i) Political: Political factors play a crucial role in influencing the
organisational buyer behaviour. The political system has the power to
alter the organisational work environment, which ultimately affects the
buying behaviour of organisations.
Certain organisations/products get concessions or exemptions under
political considerations. The trade agreements involving foreign
suppliers require government approval.
The attitude of government towards the organisation also influences the

organisational buying behaviour. Other political factors influencing the
organisational buying behaviour are lobbying, tariff barriers, defence
expenditure, etc.
ii) Economic: The economic factors attached with the environment of the
organisation also affect the organisational buying behaviour. These
factors include price and wage policies, inventory levels, availability of
cash-flow and credit, nature of consumer demand, etc.
These factors enable the organisation to determine the stock level of
goods and services, the level of finance for buying purpose, and the final
price which is to be paid for goods and services.
iii) Technological: The organisational buyer behaviour is also influenced by
the technological factors present in the surrounding environment. It is the
technological advancement that determines the quality and compatibility
of products and services. These technological factors determine the type
and category of products available in the market for organisational
buyers.
iv) Legal: Local, State and Central Governments put certain legal and
regulatory conditions, which can encourage or even at times, put
restrictions on the organisational buying. Product standards, policies
related to sales and marketing, and other market related terms and
conditions are developed by legal system, which influence the
organisational buying capacity.
v) Physical: Physical factors include the geographical location and climate
of the organisation. These factors do affect the organisational buying. It
may affect the behaviour of individuals involved in organisational
buying. The physical location of the organisation puts up limitations of
time and money involved in transportation of goods for the buying
organisations.
The supplier selection is affected by the location of both the
organisational buyer and the supplier. Organisational buyers prefer local
and cost-effective suppliers for buying goods and services. Organisations
operating globally prefer to buy goods from domestic suppliers.
vi) Ethical: The ethical conduct constitutes the bedrock of any negotiation
or financial transaction related to organisations. Lack of ethical conduct
could lead to long-term ramifications for both organisational buyers and
its vendors. This lack of confidence or mistrust hinders the organisational
buying.
vii) Cultural: The culture may be described as set of established values that
are being practiced in the organisation. Every member of the
organisation shares such values. Different large organisations exhibit
different cultural settings, having their own norms, customs, values and
traditions. The type and method of organisational buying is highly
influenced by these elements of cultural factor.
2) Organisational Factors: Organisational buying very much depends upon

the organisational set up. There are many factors like award system, product
selection, level of authority, communication system, objectives and policies
of the organisation, organisational structure, etc., which individually or
collectively, can influence the organisational buying. Following
organisational factors influence the organisational buyer behaviour:
i) Structure: The structure of an organisation affects the style of
organisational buying. The organisational structure of an organisation
depicts the official hierarchical set up within the organisation.
The structure may be formal or informal. In formal structure of the
organisation, a hierarchy of different levels of management is
maintained. However, the informal structures are quite different, being
based on personal relationships. The organisational buying is very much
influenced by its organisational structure, as structure determines the
quality and quantity of the required goods and services.
ii) People: The term ‘people’ here refers to the organisational members
associated with the process of organisational buying. There is always a
group of people who participate and decide about the purchasing process
in the organisational buying. These people are interrelated to each other
and each has certain defined roles to perform. The combined effect of
this group reflects the buying behaviour of the organisation.
iii) Tasks/Activities: The buying activity is done to fulfil the organisational
objectives. In order to effectively prioritise, it is categorised into various
heads based on certain factors like purpose of buying, amount of
expenditure, variety of material, routine or one-time purchase,
centralised or decentralised purchase, etc. Organisational buying is also
influenced by the tasks or activities involved in it.
iv) Technology: Organisational buyer behaviour is also influenced by the
technology available. Technological innovations influence both the type
of product which is being bought and the method used for buying. While
many organisations still prefer the manual process of buying, few have
started to take the process online also.
3) Interpersonal Factors: The factors responsible for influencing the
organisational buying behaviour through interpersonal influence are called
interpersonal factors. The relationship amongst the people counts high in
organisational buying behaviour. This relationship develops with personal
experiences and matures with passage of time, bringing confidence,
dependence and integrity which add to further strengthening in relationships.
Following interpersonal factors affect the organisational buying behaviour:
i) Power Relationship: Relationship between members of buying centre is
called power relationship, as all the members have buying power. The
purchasing intermediaries generally have a notion that their involvement
in decision-making process is more than others. Therefore, the nature of
relationship between members of buying centre greatly influences the
organisational buying behaviour.
ii) Buying Centre and its Role: In organisational buying, the buying centre
is a group of people who negotiate for purchase on behalf of the
organisation. Each of them has certain accountability, professional
standing, and ability of reasoning or arguments. The roles of different
members of the buying centre also influence the organisational buying.
4) Individual Factors: Individual factors refer to the psychological factors
associated with individuals involved in organisational buying. The persons
involved in buying have their own feelings and thoughts.
These are very important and are as follows:
i) Learning: This is a process which is associated with experience and it
has a strong influence on organisational buying behaviour. The
individuals learn from the satisfactory or profitable decisions made by
them. This encourages sticking to the same decision-making pattern
under similar conditions. In course of time with repeated successful
transactions it becomes an automatic choice.
ii) Motivation: It is difficult to understand the motivation level of
individuals involved in organisational buying. Their motives are
classified into two groups:
a) Task Related: In this category, the buying centre is motivated to
find that all factors needed for perfect buying, like right material,
right price, right quality and desired reliability of supply at desired
schedule are being offered by the supplier.
b) No-Task Related: In such category, the buyers are motivated due to
some other factors like promotion, increment and other personal
favours from the management. Such motives are associated with
personal recognition, personal growth and need for risk reduction.
iii) Perception: The same stimulus is received, interpreted and processed in
different styles within different individuals. The individuals form a
perception about a thing in their mind from their past experiences.
Thus, it is very important for the marketers to visualise the buying
centre’s perception about their products and develop their plans
accordingly. This has got two sides: perception of the buying centre
members towards the products and services of the selling firm and
perception of the same towards their own functions and responsibilities
in the organisational buying activity.
1.5.5. Industrial Buying Process

The organisational buying and consumer buying decision process differ from
each other to a great extent. Organisational buying decision process has eight
stages:
1) Problem Recognition: The first and most important stage of organisational
buying is the problem recognition stage, in which, a particular organisational
problem or need is identified. This problem can be eliminated through
buying a particular product or service.
There are many internal as well as external factors that become the root cause
of the problem in the organisation.
i) Internal Factors Responsible for Organisational Problem: It may
arise due to decision of the company to launch a new product as per
market demand. This will require procurement of new material and
machinery. In any company, break downs do occur and repair of
machines require procurement of new parts. Even the machinery has
service life, they do need replacement. The material procured sometimes
gets rejected due to poor quality. This forces the company to make
urgent procurement through another vendor. Sometimes, a better price or
better quality source is found before final bid is made. This results in
making fresh quotations on urgent basis.
ii) External Factors Responsible for Organisational Problem: The
marketers placed by the organisation in the Problem Recognition
market should act as the external fact¬
informer, i.e., the performance of the product
in the market, the needed improvements to General Need Description
be immediately incorporated is to be
conveyed to the organisation along with the Product Specification
information of competitive products. This
will act as an external stimulant for the
company to make suitable purchases to Supplier Search
remain competitive.
Proposal Solicitation
2) General Need Description: After understanding
the problem, the next step is to estimate the
quantity and quality of the product required to Supplier Selection
solve the particular problem or fulfil the need.
However, the organisational buyers unlike
Purchase Routine Selection
common consumers will be constrained to budget
considerations, cost-benefit evaluations, set profit
goals and expense quotas. Post Purchase Evaluation
3) Product Specification: In this particular stage,
Figure 1.8: Industrial
the technical and other value related Buying Process
specifications of the product are analysed. These
specifications should match with the organisational requirements. The
suppliers may be offering products having wider applications but at an
additional cost. The value analysis helps to review product specifications and
actual requirements to eliminate the waste.
4) Supplier Search: The next stage of organisational buying involves finding
the suitable vendors. The organisational buyers screen the available vendors
or suppliers on the basis of their products’ quality and performance.
Generally, reliability, market reputation and financial status of the vendors
are considered. Some vendors are dropped from consideration list due to
their inability to supply at stipulated time or due to poor brand reputation.
The qualified vendors finally make the approved list, from which final
suppliers are selected.
5) Proposal Solicitation: At this stage, the suppliers are requested to submit

their quotations. This involves using catalogues or sales representatives by
the suppliers to communicate their quotations. In case of complex and costly
items, a written proposal may be requested from the vendors and a
comparative analysis may be made to finalise the most appropriate vendor.
The proposal requested from vendors should incorporate marketing as well
as technical information. The oral presentations can only be fruitful, if the
vendor is able to win the confidence of the organisational buyer through
demonstrating its capabilities and potential.
6) Supplier Selection: In this stage, different proposals are examined on the
grounds of their relevance. After careful analysis of different vendor
proposals, the buying centre is ready to select the vendor for organisational
buying. It is generally done with the preparation of list of required vendor
attributes and their relevance. Some of the attributes are:
i) Nature of technical support services, ii) Approach and quickness of delivery,
iii) Nature of handling customer needs, iv) Quality of products provided,
v) Reputation in the market, vi) Price of the products provided, and
vii) Credit facility.
At this stage, the vendor analysis is not restricted to technical aspect but
reliability, punctuality, in-time delivery, price and credit offers, etc., are also
considered.
7) Purchase Routine Selection: At this stage, the organisational buyers put an
order to the selected vendor including the terms and conditions of the
purchase and mode of payment. The vendor receives the order and dispatches
the product as soon as possible. After receiving and inspecting the product,
the buying centre makes the final payment. Status reports are prepared for
every transaction to know the time consumed in the entire process. In case,
where a successful transaction takes place, companies generally follow a re¬
order policy for a specific period of time.
8) Post-purchase Evaluation: This is the last stage of organisational buying
process. An evaluation sheet is prepared by the buyers, based on price,
quality, delivery schedule, after-sale service, etc. Overall rating is given after
periodic consultation with various departments. This also helps to arrive at
the decision for continuation with the vendor or to search for another one.
The evaluation sheet is also shared with vendors to give them an opportunity
to improve.
1.5.6. Consumer Buying Versus Industrial Buying

The difference between consumer buyer and organisational buyer is illustrated in
the table below:
Consumer Buyer Business Buyer
Individual or household Personal consumption iis not the motive of
consumption is the motive of this this kind of buyer.
kind of buyer.
Final user generally buys the User of the product is not involved in
product. buying.
The buying decision is limited to A group of people is involved in making

consumer. buying decisions.
The buying decision is made on the The buying decision is made only after in¬
basis of brand reputation or depth analysis of product specifications by
recommendation of a close person. an expert committee.
Product specifications are rarely
considered.
The buying decision is made on It is never under impulse; evaluation of
need based impulse. alternatives is mandatory.
Occasionally, emotions play very There is no place for emotions, the decisions
important role in buying. are always rational.
Quick decision-making is the key Generally, it prolongs due to extensive
feature of consumer buyer. evaluation of different aspects.
The buyer-seller relationship is Due to interdependency, the relationship
generally one time or for limited between buyer and seller lasts for long.
time. Customer is free to go to other
sellers.
Generally, cash or credit/debit cards Buying decision is made after negotiations,
are used in such buying decisions, competitive bidding and other financial
on the list price. provisions.
The buyer does not buy products The organisational buyer frequently buys
directly from the producers. products directly from the producers.
Consumer goods are cheaper and The organisational products are complex and
hence low risks are involved. costly, hence high risks are involved.
The number of users is large but Number of users is limited but the quantity
they use small quantity. consumed by them is large.
The large number of buyers are There are few buyers and they are located in
scattered in the total population. limited area of industrial belt.
The product use is simple. The product use is complex and sometimes
requires proper training before use.
Consumers’ needs and requirements Demand of other products and services
determine the demand. This demand generate the demand for organisational
is static over time, independent of products. It may vary as it is inelastic in
other demand and price elastic in short-run. The price remains stationary for a
nature. short time.
The sale is promoted through The number of buyers is limited, hence
advertisements. personal selling is needed.
1.6. SUMMARY
1 ) Marketing is a total system of interacting business activities designed to plan,
price, promote and distribute want-satisfying products and services to the
present and potential customers
2) The major driving force of marketing is to achieve the organisational goals
by harmonising activities which help to attain customer satisfaction.
Therefore, marketing has wide scope in relation with its universal activities.
3) Value refers to the worth or usefulness of goods or services. The best
definition of value from consumer's perspective is the difference between a
potential customer's evaluation of the benefits and costs of one product in
comparison to others.
4) Quality is the distinctive attribute of a product or service which is perceived

by the consumers. It is largely based on the level of satisfaction received by
the customer.
5) A customer feels delighted when he receives more than what he has
expected.
6) Environment refers to the surroundings, conditions and influences in which
living organisms operate. In the similar way, organisational environment is a
sum total of events circumstances and objects that influence the organisation.
7) The environment in which the company thrives, or the set of factors
surrounding the company itself, is known as micro environment. The
factors which are not immediate environment to the organisation constitute to
form macro environment.
8) For analysing an industry efficiently, it is essential to consider various
competitive forces and how they interact with each other to create pressure
on one another.
9) Competitor analysis results in anticipating the moves and the responses of the
competitors towards the strategies implemented by the company which is
conducting the analysis.
10) Buyer behaviour is the study of buyers and the processes they use to select,
purchase and dispose of the goods and services.
11) Understanding the phenomena and characteristics of organisational buying is
very crucial for the organisational marketers to develop suitable marketing
strategies so as to attract the organisational buyers.
1.7. EXERCISE
1.7.1. Very Short Answer Type Questions
1 ) Define marketing.
2) List any two importance of marketing.
3) Give the concept of marketing environment.
4) What is competitor analysis?
5) State the term consumer behaviour.
6) Give any two nature of industrial buying behaviour.
1.7.2. Short Answer Type Questions

1 ) Differentiate between selling and marketing.
2) Mention the scope of marketing.
3) Describe the factors affecting marketing environment.
4) Briefly explain the internal marketing environment.
5) Mention the significance of industry and competitor analysis.
6) Explain the buying role of consumers.
7) Mention the types of buying decisions.
8) Differentiate between consumer buying and industrial buying.
1.7.3. Long Answer Type Questions

1 ) Explain general and core concepts of marketing in details.
2) Elaborate the various factors of macro and micro external marketing environment.
3) Explain Porter’s 5 Forces Model Also mention the components of Porter’s 5 Forces
Model.
4) What do you mean by industry analysis? Explain the factors analysed in industry
analysis.
5) Describe the framework for competitor analysis. Also explain the steps involve in
competitor analysis.
6) Explain the buying decision process. Describe the factors affecting consumer buying
behaviour.
7) What do you mean by industrial buying behaviour? Mention the factors influencing
industrial buying behaviour.
8) Discuss the industrial buying process. Also give the objectives of industrial buying
process.
CHAPTER Pharmaceutical Market

Aspects
2.1. PHARMACEUTICAL MARKETING

2.1.1. Introduction to Pharmaceutical Marketing
In a narrow view, marketing is an activity of selling and purchasing of goods or
services. But, the nature and scope of marketing is a much wider perspective.
Along with the fulfilment of needs and wants related to the sale and purchase of
goods and services, it encompasses the whole process of customer satisfaction.
Hence, the process involves identification of consumers’ needs and wants and
fulfilling it to the extent till the customers are pleased and contented.
Pharmaceutical marketing is all about “generating a prescription for the

products”. Here doctor plays very important role as he writes the prescriptions.
Hence the pharmaceutical marketing efforts are concentrated to influence and
educate doctors about the products.
There is a glaring difference between marketing pharmaceutical products and

other products, which makes pharmaceutical marketing a unique activity.
Pharmaceutical marketing is defined as, “the performance of pharmaceutical
business activities that direct the flow of pharmaceutical goods and services from
the producer to the consumer.”
Pharmaceutical marketing, as a sub-specialty of marketing, can be defined as, "a

process by which market for pharmaceutical care is actualised. It encompasses all
the activities carried-out by various individuals or organisations to actualise
markets for pharmaceutical care.’
The emphasis in pharmaceutical marketing is on pharmaceutical care, and not

just on drugs. Any article, service, or idea needed to anticipate and to remove
gaps in pharmaceutical care should be included in the discussion of
pharmaceutical marketing.
The marketing of many clinical pharmaceutical services and programs is as much

a part of pharmaceutical marketing as is the marketing of drug products. In other
words, pharmaceutical marketing is not synonymous with, but is significantly
broader than, the marketing of pharmaceuticals. Any party interested in the
exchange for pharmaceutical care may undertake pharmaceutical marketing
activities. Hospital pharmacies, community pharmacies, third-party insurance
companies, consulting pharmacies, and many other organisations and individuals,
in addition to pharmaceutical manufacturers and drug wholesalers, are involved
in pharmaceutical marketing.
Pharmaceutical Market Aspects (Chapter 2) 67
DYADIC EXCHANGE
Payment
Drugs
COMPLEX EXCHANGE
Figure 11: Examples of Types of Exchanges in the Pharmaceutical Market

Difference between General Marketing and Pharmaceutical Marketing

The major differences between pharmaceutical marketing and general marketing
are as follows:
1) The consumer does not have the choice to buy the pharmaceutical product.
He has to purchase the drug that is prescribed by the physician. Similarly, the
seller is also bound to sell the same drug which is prescribed by the
physician.
2) A proper drug license is required to deal in the pharmaceutical marketing.
3) The person dealing in pharmaceutical marketing must be qualified in the
pharmacy profession, because he has to deal with potent drugs. Little
carelessness can prove to be harmful for the consumer.
2.1.2. Characteristics of Pharmaceutical Marketing

Some of the characteristics of pharmaceutical marketing are as follows:
1) Pharmaceutical Products Need Prescription: Yes, day-to-day purchases
do not need prescriptions. We do not need a prescription to select clothing or
to buy groceries. Everyone knows that the average patient is unable to select
a treatment for his ailment because he may not know enough to make the
right choice. Medical science is obviously very vast. Thus, the doctor being
an expert is involved in the process.
The doctor decides upon the appropriate treatment. The patient may be the
purchaser of the pharmaceutical product, but the doctor as the decision¬
maker, is the main customer for the pharmaceutical marketers.
2) Customer is Intelligent: In today’s competitive business scenario, the
customer is “king”. But this customer - the doctor - is particularly special.
He is intelligent and knowledgeable. He is trusted in the society and treated
like God. Such is the confidence that doctors enjoy, that patients entrust their
lives to them. A good doctor sees many patients each day and can be very
busy indeed. The marketer needs to have something special to market the
product to such a high profile.
3) Scientific Marketing: Since the pharmaceutical products are the result of
extensive R&D efforts, a lot of scientific aspects need to be conveyed to the
doctors about the products which require special scientific knowledge. Hence
people required for pharmaceutical marketing need to be technically sound.
4) Marketing through Medical Representatives: Marketing of prescription
pharmaceuticals through mass media is not permissible, and in any case,
would be inappropriate for many pharmaceutical products. One-to-one
communication with doctors is a normal practice of pharmaceutical
marketing. For this, a pharmaceutical company needs a large field staff to
regularly meet prospective and existing doctors and promote the company’s
products. The principles of salesmanship here remain largely the same as
elsewhere. Thus the company’s field representative becomes the chief link
between the company and the doctor, often being described as the company’s
“ambassador” in the field.
5) Competition: With over 60,000 pharmaceutical formulations available in

India compared to less than 4,000 in some developed countries,
pharmaceutical marketing in India is a highly competitive business. A
strategically important doctor may meet fifteen medical representatives, each
discussing four or more products, in a single day. In this scenario, getting the
doctor to remember and prescribe the product can be difficult.
2.1.3. Functions of Pharmaceutical Marketing

The following are the functions of the marketing which are essential to be
2.I.3.I. Buying and Assembling

The most important function of pharmaceutical marketing is buying. In the
process of marketing, it is regarded as the initial step. In order to manufacture
pharmaceutical products manufacturer purchases raw materials and equipment.
Merchants or middlemen procure goods or services from different sources to sell
them to the customer to earn profit.
Manufacturer and merchant will surely earn profit if they buy products in an
economic and efficient manner. Therefore, the sellers which offer good quality
products at most reasonable price with best terms and conditions should be
preferred.
2.I.3.2. Selling
The term “Selling” and “Marketing” should not be used interchangeably as these
two terms explain two different concepts. The difference between these two
terms should be understood by the manager. Selling has always remained in
question due to the difference that prevails between the quality promised and
quality sold.
The sale of the particular brand in pharmaceutical marketing totally depends
upon physicians or medical practitioners. Thus, medical reps are appointed by
pharmaceutical manufacture to approach physicians. Medical reps persuade
physician to prescribe manufacturers medicines.
2.I.3.3. Transportation
The main function of transportation is to carry the products to different markets,
which may be at different geographical locations. Apart from transporting the
goods, the additional values that transportation provides to the customers are
providing the products on time, in the quantities demanded, and in the
undamaged form. The utility that transportation provides is called ‘place utility’
and the utility which is created by the storage is regarded as ‘time utility’. ‘Time
utility’ cannot be provided to a customer without the help of transportation
activities as the speed and the consistency by which a product is moved from one
point to other is determined only by the transportation activities. The activity of
transporting something or someone from one point to other or the activities
involved in being transported is termed as transportation.
2. 1.3.4. Storage
Storage is another important function of marketing process. In storage, goods are
stored in a warehouse until they are distributed in the market. Maintaining ample
stock of goods for meeting the demands of consumers is vital for retailers,
manufacturers and wholesalers.
Firms can store their goods either in their own warehouse or can share third
parties warehouse. As compared to third party arrangement, firms own
warehouse offer them greater designing flexibility, greater control over
operation, lower per unit cost, and effective market feedback. No fixed
investment is required for third party warehouse. Third party warehouse is
attractive as they offer flexibility in location and space utilisation. This approach
helps in improving services offered to customer. Warehouses are sometimes
called distribution centres.
2.I.3.5. Finance
It is an important function of marketing. The provisions of funds are essential for
the meeting of the various requirements of marketing. The marketing concerns
require both fixed and working capital. The wholesaler, retailer, commission
agent, broker, cooperative undertakings or sales department of a manufacturer
need relatively large amount of capital for the purchase of goods, for re-sale,
paying of wages and salaries, extending credit facilities to the consumers and
other operative expenses. The capital required for this purpose is called the
‘working capital’.
Similarly, fixed capital is required for the purchase of land, building, machinery,
furniture and other office appliances. The fixed capital required for this purpose
may be small because land and building are generally taken on rent.
2.I.3.6. Grading
Grading is an important part in the function of standardisation. Standard of a
product is decided on the basis of its shape, colour, size, strength, taste, content,
etc. Grading of pharmaceutical product is done on the basis of standards
maintained as per the pharmacopoeia. Products can be graded as IP (Indian
Pharmacopoeia), BP (British Pharmacopoeia) and USP (United State

Pharmacopoeia). In the process of marketing, standardisation of manufactured
goods is not required as they get naturally standardised in the production process.
Grading involves separating and classifying different commodities on the basis of
set standards.
2. 1.3.7. Risk Bearing

Every marketing activity involves risk in some or the other form and it is an
unavoidable part of any business. Risk brings loss and uncertainty for the
business. Marketing involves risks in different forms. Goods market value can be
reduced as a result of price fluctuation, changing marketing conditions and
changes in the consumer’s habit, taste and income.
Therefore, various marketing uncertainties and risks are faced by businessman.

Businessman cannot fully eliminate these risks but can minimise or transfer them
to those who can bear them easily.
2. 1.3.8. Feedback Information

Feedback is required for proper functioning of the business. The information
related to the current demand, supply, latest trend, package size and future
demand (through market research) are collected by the management. The
thorough and systematic research and study of any facts related to any problem in
the field of marketing is known as market research.
Following are the two sources through which information related to market
trends can be collected:
1) Internal Sources: Transport costs, advertising expenditure, sales turnover
statistics are those internal sources that can be analysed in order to obtain
market trend information.
2) External Sources: Primary and secondary sources are two types of external
sources through which information can be obtained.
2.1.4. Pharmaceutical Market

Pharmaceutical industries are involved in research, development, production and
marketing of pharmaceutical drugs. These drugs are prescribed by physician to
get cure or to get relief from the illness.
Pharmaceutical industries are involved in the production of generic or branded

drugs. There are various laws and regulations in pharmaceutical industries that
govern testing, safety, efficiency, marketing and patenting of drugs.
It is expected that global pharmaceutical market will reach to $1.5 trillion by

2023 with an annual growth rate of 3 to 6 per cent. This increase must be equal to
the increase in the number of launched product that is expected to reach 54 per
cent in 2023. The speciality share of total drug costs is expected to reach 50 per
cent by 2023 in most developed markets.
2. 1.4.1. Qualitative and Quantitative Aspects of Pharmaceutical Markets

Pharmaceutical companies require both qualitative and quantitative research to
ensure that their products follow the customer requirements and to verify the
consistency of the final goods. It is important to test a new medicine so that there
are less chances of harm. This helps in the selection of appropriate medicines for
the future use. Pharmaceutical markets are influenced by both qualitative and
quantitative forces.
The macro-environment determines the overall framework of situations and

mutual effects which determines the behaviour of market actors. In
pharmaceutical industries, qualitative and quantitative aspects can be easily
understood by understanding the factors of pharmaceutical environment factors.
These factors are explained below:
1) Social and Cultural Factors: Socio-cultural factors present both
opportunities and threats to the pharmaceutical industry. Increasing ageing
population offers a wide range of opportunities to the pharmaceutical
industries. On the other hand, obesity is also a common problem which
affects all age groups. The changing age of the US population and several
other factors have pressed new demands on the pharmaceutical industries.
Demands and expectations of the people have also changed which has led to
some additional pressure on companies. Thus, people are becoming more
informed than ever. Public activism has also increased by the exploitation of
new social networking technologies which put a pressure on pharma
companies.
2) Legal and Political Factors: Pharmaceutical companies have some
legislative and regulative restrictions. The evolution of the internet has also
been stretching some legislative boundaries. Now, the patients are
demanding more healthcare programmes.
In recent years, the pharmaceutical companies are facing tough political
scrutiny in all over the world. Drug prices were already under pressure in
Europe and Japan and now also in the US. In pharmaceutical industries,
political pressure can be a major challenge. Because of the increasing
political pressure several things have changed in the US. These pressures
become a source of problem for pharma dealers, suppliers and even for the
investors who are worried that drug manufacturer will have to offer some
discounts.
3) Economic Factors: Economic environment can be defined as changes in
expenditure and changes in revenues. Although the economic crisis is over
but several countries are still facing its effects and economic conditions have
not recovered fully. A variety of political and economic pressures are already
causing losses for pharma companies. However, 2015 was a bumper year for
the approval of new drugs. On the other hand, stronger dollar is also a
problem. It is reducing the net profit of the US based pharma companies.
But, its effect is positive for Europe. However, the economic condition
continues to change and the job rate has also been up since the crisis but
currency volatility is still a problem for pharma firms.
4) Technological Factors: A pharmaceutical industry is a high technology

industry. Technology provides several opportunities for the pharmaceutical
industries. It is also a source of expenditure for the pharma companies.
Growth of social networking has given rise to many new business prospects
for the pharma companies. Social media has started playing a very important
role in healthcare industry.
It provides an opportunity to the pharma companies so they directly
communicate with the customers. Several new technologies are helpful in
reducing the production cost of the companies. Technology is also involved
in the research and development of new drugs and in production and trade of
pharma products.
5) Natural or Environmental Factors: Several environmental risks are also
associated with the pharmaceutical products. Pharmaceutical residues can
pollute the environment. Although these products do not have a widespread
environmental impact but their proper storage and disposal are necessary to
avoid any kind of environmental risk. As the size of the global pharma
industry is very large so its responsibility is also big. Thus, both government
and the community put pressure on the industry to invest more in
environmental concerns.
6) Demographic Factors: Demographic factor plays a major role in
pharmaceutical industry. Advancement in pharmacy and drugs leads to
demographic transition. Demographic transition is the result of enormous
progress in medicine and pharmacy. It affects the development of
pharmaceutical industries. Pharmaceutical companies are showing their
major interest in demographic trends because demographic change will
change the demand for pharmaceutical products.
2.1.4.2. Size and Composition of Pharmaceutical Market

India is the largest provider of generic drugs globally. Indian pharmaceutical
sector supplies over 50% of global demand for various vaccines, 40% of generic
demand in the US and 25% of all medicine in the UK.
India enjoys an important position in the global pharmaceuticals sector. The

country also has a large pool of scientists and engineers with a potential to steer
the industry ahead to greater heights. Presently, over 80% of the antiretroviral
drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome)
are supplied by Indian pharmaceutical firms.
Market Size
Indian pharmaceutical sector is expected to grow to US$ 100 billion, while medical
device market is expected to grow US$ 25 billion by 2025. Pharmaceuticals export
from India stood at US$ 16.3 billion in FY20. Pharmaceutical export includes bulk
drugs, intermediates, drug formulations, biologicals, Ayush and herbal products
and surgical. As of October 2020, India exported pharmaceuticals worth US$ 13.87
billion in FY21. Pharmaceutical exports from India stood at US$ 16.28 billion in
FY20 and US$ 2.07 billion in October 2020.
India's biotechnology industry comprising biopharmaceuticals, bio-services, bio¬

agriculture, bio-industry, and bioinformatics is expected grow at an average
growth rate of around 30% a y-o-y to reach US$ 100 billion by 2025.
India’s domestic pharmaceutical market turnover reached Rs 1.4 lakh crore (US$
20.03 billion) in 2019, up 9.8% y-o-y from Rs 129,015 crore (US$ 18.12 billion)
in 2018.
2. 1.4.3. Investments and Recent Developments

The Union Cabinet has given its nod for the amendment of existing Foreign
Direct Investment (FDI) policy in the pharmaceutical sector in order to allow FDI
up to 100% under the automatic route for manufacturing of medical devices
subject to certain conditions.
The drugs and pharmaceuticals sector attracted cumulative FDI inflow worth
US$ 16.54 billion between April 2000 and June 2020 according to the data
released by Department for Promotion of Industry and Internal Trade (DPIIT).
Some of the recent developments/investments in the Indian pharmaceutical sector

are as follows:
1) In November 2020, the Indian Institute of Technology (HT) Bombay has
stepped up research and development (R&D) amid COVID-19 and
researchers are developing products such as a portable sterilisation device
and germicidal cabinet; wheeled sterilisation unit, especially for hospitals;
portable and rechargeable car sanitiser; eco-friendly sprays, and alcohol-free
and bleach-free sanitisers.
2) In October 2020, six generic drug makers— Dr. Reddy’s Laboratories, Zydus
Cadila, Glenmark Pharmaceuticals, Torrent Pharmaceuticals, Hetero Drugs
and Ackerman Pharma signed a deal with Hidalgo ,a state in Mexico, to
establish a large pharmaceutical cluster for production and logistics in
Mexico.
3) In October 2020, Aurobindo Pharma acquired MViyeS Pharma Ventures for
Rs. 274.22 crore (US$ 37.30 million).
4) In May 2020, Jubilant Generics Ltd entered into a non-exclusive licencing
agreement with US-based Gilead Sciences Inc to manufacture and sell the
potential COVID-19 drug Remdesivir in 127 countries, including India.
5) Affordable medicines under Pradhan Mantri Bhartiya Janaushadhi Pariyojana
(PMBJP) achieved record sales turnover of Rs 52 crore (US$ 7.38 million) in
the month of April 2020.
6) During December 2019, on moving annual total (MAT) basis, industry
growth was at 9.8%, with price growth at 5.3%, new product growth at 2.7%,
while volume growth at 2% y-o-y.
7) In October 2019, Telangana Government proposed Hyderabad Pharma City
with financial assistance from the Central government of Rs 3,418 crore
(US$ 489 million).
8) Indian pharmaceutical industry’s export to the US will get a boost as branded
drugs worth US$ 55 billion will become off-patent during 2017 2019.
2.I.4.4. Government Initiatives

Some of the initiatives taken by the Government to promote the pharmaceutical
sector in India are as follows:
1) On October 15, 2020, India and the Netherlands unveiled plans to collaborate
with an aim to provide digital health facilities and security to all citizens. Part
of India's National Digital Health Mission (NDHM), through this cooperative
initiative, the two countries will work closely to create capacities and put in
place the requisite technology to enable this initiative.
2) From April 2020 to September 2020, health insurance became the most
valuable segment for non-life insurers in terms of premiums collected,
leapfrogging in motor insurance.
3) In September 2020, the government announced production linked incentive
(PLI) scheme for the pharmaceutical industry worth Rs. 15,000 crore (US$
2.04 billion).
4) India plans to set up a nearly Rs. 1 lakh crore (US$ 1.3 billion) fund to
provide boost to companies to manufacture pharmaceutical ingredients
domestically by 2023.
5) In November 2019, the Cabinet approved extension/renewal of extant
Pharmaceuticals Purchase Policy (PPP) with the same terms and conditions
while adding one additional product namely, Alcoholic Hand Disinfectant
(AHD) to the existing list of 103 medicines till the final closure/strategic
disinvestment of Pharma CPSUs.
6) Under Budget 2020-21, Rs. 65,012 crore (US$ 9.30 billion) has been
allocated to the Ministry of Health and Family Welfare is. The Government
has allocated Rs. 34,115 crore (US$ 4.88 billion) towards the National
Health Mission under which rural and urban people will get benefited.
7) Rs. 6,400 crore (US$ 915.72 million) has been allocated to health insurance
scheme Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana (AB-
PMJAY).
8) As per Economic Survey 2019-20, Government expenditure (as a percentage
of GDP) increased to 1.6% in FY20 from 1.2% in FY15 on health.
9) The National Health Protection Scheme is the largest Government funded
healthcare programme in the world, which is expected to benefit 100 million
poor families in the country by providing a cover of up to Rs. 5 lakh (US$
7,723.2) per family per year for secondary and tertiary care hospitalisation.
The programme was announced in Union Budget 2018-19.
10) The Government of India is planning to set up an electronic platform to
regulate online pharmacies under a new policy to stop any misuse due to easy
availability.
11) Government of India unveiled 'Pharma Vision 2020' to make India a global
leader in end-to-end drug manufacture. Approval time for new facilities has
been reduced to boost investment.
12) Government of India has offered Rs. 6,940 crore (US$ 942.8 million)
production linked incentives between 5-20% for incremental sales and plans
to set up three mega drug parks to drive sustainable cost competitiveness.
2.1.5. Barriers to Marketing in Pharmaceutical Industry

Following are the barriers and misconceptions related to pharmaceutical industry
marketing:
1) Marketing for Drug Products, not for Pharmaceutical Services: In
general, the term “marketing1 involves marketing of physical goods only.
The myth or misconception that services cannot be marketed is very
common Therefore clinical professionals and many other professional’s
believe that professional involved in offering clinical services should not
indulge in marketing and only wholesaler and druggist should handle
marketing of pharmaceutical products.
2) Commercialism and Lack of Professionalism: Most of the healthcare
professionals believe that “service” was the reason behind joining healthcare
industry. Clinical pharmacists and other professionals believe that services
should not be offered for free and there should be some equitable charges
assigned with each service. An integral part of any product marketing is its
pricing.
3) “Drug Pushing”: Critics of pharmaceutical marketing believe that the
advertising and promotional efforts of the pharmaceutical industry are aimed
towards encouraging pill-taking and pill-prescribing behaviour. In order to
create demand for products, the pharmaceutical companies promote or
encourage drug use.
4) Unproductive Use of Resources: It has been claimed that all the expenses
incurred on pharmaceutical marketing go to waste as there is no visible
change in the form of product. One should recognise that intangible utilities
of time, place and possession are created through these marketing activities.
Though these utilities do not change the drug product but they help in
increasing value of the product in the mind of the customer.
5) Inefficiency and Ineffectiveness: Achieving objective through utilising
minimum resources is known as “efficiency”. Whereas achieving maximum set
objective is known as “effectiveness”. The relationship of efficiency and
effectiveness criteria to a few pharmacy-related activities are shown in Table 2.1.
Table 2.1: Efficiency versus Effectiveness
Effectiveness*
High Low
Training five clinical pharmacists a year for Training pharmacists to provide
ambulatory care setting to work with only drug distribution services.
High physicians in a group medical practice, with
the American Medical Association obtaining
+
employment for them upon graduation.
Requiring thirty minutes of pharmacist Spending $10 million on a
consultation with all patients for any campaign to pass a legislation
symptom. requiring every chain drugstore to
have a pharm. D. on duty in Ohio,
and not finding anybody to
sponsor the bill.
♦Effectiveness is the optimum attainment of the stated objective.
+Efficiency is the minimisation of resource expenditure necessary to achieve objective.
Source: Principles of Pharmaceutical Marketing by Mickey C. Smith Ph.D.
In case if the objective is patient welfare then the presence of too many marginal
pharmacies and me-too drugs are the proof that pharmaceutical marketing system
is inefficient. Pharmaceutical marketing will be considered ineffective where
there are lot of drugs present for treating a single disease and no drug present for
known diseases.
2.1.6. Motivation and Prescribing Habits of the Physician

One of the standard components of physician practice is prescribing drugs. It is
an area which requires proper skill, professional judgement and knowledge.
These qualities are necessary for prescribing right medicines/ drugs to the patient.
Indian pharmaceutical industry is changing in terms of physician prescription
pattern. In order to face future challenges, the pharmaceutical firms should
change their strategies. Physician prescription patterns are affected by the
manufacturing and marketing competence, quality system and innovation. In
order to ensure that prescription and protection are efficient and effective, new
drug discovery must firmly comply with IPRs (Intellectual Property Rights).
Physician prescription patterns are also affected by high curing effect, behaviour
pattern of patients, habitual or non-habitual choice, research and the pressures
from drug firms, education and advertising, clinical and behavioural
characteristics of the patient and by peer influence of physicians.
In prescribing behaviour of the physician, experience plays an important role.

Following are the two types in which physician behaviour can be divided:
1) Education and initial training which included medical school, possible
fellowship and residency.
2) Ongoing experience, which includes feedback from patient, personal use,
outcomes and adverse effects.
2.2. MARKET SEGMENTATION

2.2.1. Concept of Market Segmentation
The market contains variety of products and they differ from each other in their
specifications, quality, durability as well as prices. The customers also differ
from each other in their habits, preferences, hobbies, income, culture, purchase
decisions, etc.
In order to streamline the marketing process, the consumers of similar

characteristics are grouped together in segments. This is termed as ‘market
segmentation’. Market segmentation means division of market into smaller
groups having similar needs and qualities.
This helps the company to modify the products or services to suit the different
groups more effectively. Even, the advertisement messages and promotional
methods are needed to be modified so that they are well-understood by the group.
For example, a product being sold in the State of Tamil Nadu is required to be
advertised in Tamil language. Here, getting the endorsement of local popular film
star will be an added advantage.
According to Philip Kotler, “Market segmentation is sub-dividing a market into

distinct and homogeneous subgroups of customers, where any group can
conceivably be selected as a target market to be met with distinct marketing
mix”.
According to Philip Kotler, “The purpose of market segmentation is to

determine difference among them or marketing to them”.
2.2.2. Bases of Segmentation for Consumer Goods and

Services
There are different factors based on which consumer market can be segmented.
The bases for segmentation are as follows:
2.2.2.1. Geographic Segmentation

This includes the segmentation of market based on location, size, population
density, climate, etc. This type of segmentation enables the planning for better
marketing. Rural and urban markets can be easily segmented by such
segmentation. The geographic location is very helpful for marketers to design the
marketing plan. For example, there are different regions in India like Assam,
Bengal, Punjab,
Gujarat and Tamil Nadu which prefer clothes and food-items based on their
regional culture and food habits. Marketers must be very much conversant with
regional languages. Also, places known for extreme climate conditions affect the
need as well as the buying behaviour. For example, in cold climate, there is
permanent need for woollen garments and heating systems whereas for hot
climate, air-conditioners are needed.
2.2.2.2. Demographic Description

Another important basis commonly used for market segmentation is the
demography, i.e. age, gender, income, education, religion, family size, social
class, nationality, etc. This type of division of market is admired by most
marketers. These are discussed below:
1) Age and Life Cycle Stage: Under this segmentation, the requirements of
consumers are related to age group and this can be divided into four
categories, i.e. children, young, adult and old. For example. Dabur produces
oils especially for children.
2) Gender and Sexual Orientation: Males and females have different
requirements and it is inherent in their nature. For example, females
generally prefer to spend on expensive clothes, cosmetics, jewellery whereas
males prefer to purchase cars, hot drinks, going to clubs, etc.
3) Marital Status: Lifestyle of married and unmarried individuals is totally

different. A bachelor normally spends his earning on entertainment, hotels,
whereas, a married person will generally spend on home furnishing, children
education or purchase of house, etc.
4) Income: Buying behaviour of consumers is derived from their income. In
our country, it varies from few thousands rupees to even millions. Therefore,
individuals have different buying behaviour.
5) Social Class: As per the social status of a person, the buying patterns change.
A business tycoon will prefer Mercedes, Audi, BMW cars, expensive cell
phones, spacious and luxurious apartments or bungalow. A commoner will
go for economy cars, common cell phones and a suitable accommodation for
family.
6) Family Size: The purchase requirements vary with family size. The
consumption-level are different for joint family and nuclear family.
7) Occupation: Occupation of an individual affects the buying behaviour to a
great extent. For example, people related to glamorous film world have
totally different orientation in buying behaviour in comparison to researchers
and academicians.
8) Educational Level: People with same educational background and income
have different preferences for certain products but it cannot be taken as a
thumb rule.
9) Religion: Certain rituals, festivals, eatables, clothes, colours, etc. are related
to religion. The market can also be segmented on such considerations.
2.2.2.3. Psychographic Segmentation

Psychographic segmentation of the market is not absolutely correct and it is
generally found that persons of same age, financial status, educational
background and occupation, adopt different procedures in purchasing the
products, selecting a new product or choosing a shop. This is due to some
psychographic factors which include personality, values, lifestyles, beliefs, etc.
These are described below:

1) Lifestyles: Lifestyle of a person greatly affects his/her buying behaviour.
The lifestyle is associated with the standard of living and the way in which
money and time is spent by a person. This is also a result of social
background, culture, religion, psychology and demography.
It is an important factor in dividing the market and should not be ignored.
For example, corporate icons prefer to buy costly suits and luxurious cars,
whereas an executive goes for normal clothes and shoes.
2) Personality: Another variable in psychographic segmentation is personality.
Different individuals have different personality which determines their
buying behaviour. Marketers utilise this phenomenon to design products
having brand personality. Thus they segment the market according to the
personality of individuals. For example. Levi’s Jeans, Vimal Suiting’s,

Tanishq Jewellery, Sabyasachi and Gaurang Shah for Sarees, Paris perfumes,
etc., have personality statement which automatically attracts a particular
segment of the society.
3) Values: Values are the belief systems of individuals, which affect their
buying behaviour. These are also utilised for segmenting consumer market.
This is the most appealing strategy to attract the customers because it touches
their inner-self due to which selection of the product becomes easy.
4) Beliefs: Marketers know the fact that belief plays an important role in buying
and hence they accordingly divide the market. People adopt certain
characteristics from childhood which gradually becomes their firm
conviction or belief that govern their buying behaviour. For example, it is a
common observation that people exhibit buying behaviour and lifestyle as
per their religion, irrespective of festivals or normal days.
The psychographic segmentation reveals that consumers’ attitudes, values,
motivation, life style are responsible for their buying behaviour for a
particular product. Many marketing research companies are engaged in
studying the individual clients for psychographic effect.
2.2.2.4. Behavioural Segmentation

It involves segmenting the market on the basis of understanding how
customers use a particular product, how they respond towards a particular
product, what they know about product or what their attitude towards a
product is. The market segmentation is based upon the analysis of behavioural
variables like occasions, benefits, user status, usage rate, loyalty and attitude
of the consumers.
The analysis of these variables helps in developing the market segments. These
derivatives are described below:
1) Occasions: The marketers do recognise the occasions that are helpful in
developing needs. The household items are regularly purchased by the
salaried people on every first working day of the month. Festivals, family
functions or celebrations for specific events develop needs for purchase. The
companies can plan to enhance the supply of products based on these
occasions. Two types of occasions are common:
i) Regular: These include occasions like Republic Day. Holi, Diwali,
Dushehra, Eid, Christmas, Independence Day, etc.
ii) Special: These include marriage, anniversary or any happy occasion like
winning an award, promotion, etc.
2) Benefits: The market is also segmented on the basis of benefits derived by
the consumer. A consumer may purchase a watch as an essential need to
know the exact time or to gift someone or use it as a status symbol, wear it to
match with the dress or even wear it as a jewellery item. The marketers do
recognise this fact and provide different brands of the product to take care of
each segment separately.
3) User Status: The market can also be segmented on the basis of user status.
For example, the users for deodorant can be categorised as:
i) Non-user: This category is not interested in using the given product. For
example, children and aged people generally do not use deodorants.
ii) Potential User: This category heavily relies on given product
consumption. For example, deodorants are frequently used by
fashionable teenagers and corporate executives.
iii) First Time User: There are consumers who use a new product for the
change. For example, deodorants used by college going students.
iv) Regular User: There is a section in the society who leads a lifestyle
which requires regular use of deodorants or other cosmetics like film
stars, models, corporate big-wig and fashion conscious ladies.
v) Ex-user: Some people give up using a particular product (like
deodorants) because of allergy or medical advice.
4) Quantity Consumed/Usage Rate: The quantity consumed or the rate of
consumption of a product is also an established basis for segmentation of
market. This segmentation is commonly used in tea, coffee and soft drink
markets.
There are three categories:
i) Light: The frequency of consumption of the consumer is not constant
but occasional. For example, use of cosmetics by a housewife who is not
so fashionable.
ii) Medium: The frequency of consumption of product is frequent. It is
observed that teenagers frequently use cosmetics.
iii) Heavy: The consumption of product is regularly made in large quantity.
For example, the celebrities working in the film industry, models, etc.,
use cosmetics regularly since it is a part of their profession.
5) Buyer Readiness Stage: There are different readiness stages of consumers
regarding a product purchase. Some consumers may be unaware, others may
not be interested, and some might be interested while some might be ready to
buy the product definitely. The market is segmented as per the readiness of
the consumers.
6) Loyalty Status: There are different levels of loyalty of consumers for
specific brands as described below:
i) Hard Core Loyals: Such consumers always buy the same brand of
product, like newspaper, coffee, certain brand in clothes and sarees. They
get hooked to these products due to their long experience and develop a
sort of addiction and do not switch to other brands.
ii) Soft Core Loyals: Such consumers limit themselves to two or three type
of brands of the product. For example, a consumer using Sony, LG,
Voltas products is a soft core loyal consumer. Such consumers need to be
motivated by marketers to stick to one brand so that they could be turned
into hard core loyalist.
iii) Split Loyals: Such consumers shift their loyalty for a change. For
example, majority of customers prefer Colgate tooth paste but some also
use Pepsodent or Close Up.
iv) Switchers: Such consumers never stick to a brand rather they enjoy
switching to new brands for experience and thrill.
7) Attitude: Attitude is the principal driver behind a product purchase. Some
people lose interest in life due to some sad events, while some lead a very
simple life as directed in scriptures. Such people do not indulge in fun or
luxuries of life and behave differently. However, normal persons want to
enjoy their life to the fullest and have fun. Keeping these things in mind, the
customers are categorised as enthusiastic, positive, indifferent, negative and
hostile.
2. 2.3. Pharmaceutical Market Segmentation

Market segmentation is the process of segregating the target customers into
different groups which share similar characteristics. It allows pharmaceutical
companies to gain a better knowledge of customer needs. The customers are
segregated on the basis of their location, interest and need. People with similar
characteristics are classified into a group which is called as segments. In
pharmaceutical industry, the two major potential target groups are patients and
doctors. Both patients and doctors have different requirements. Thus, in pharma
industry, segmentation is a two-step process.
The first step is performed at consumer level (patient) and the second step is at
customer level (doctor). These two levels of segments are described below:
|Patient|
G.P.Presriptions I Hospital Doctor
Pharmacist Retail Nurses

Chemist
Pharmacist
Patient
Figure 2.2: Pharmaceutial
Marketing Segmentation
1) Patients (Consumer or End-User)

i) Patients having same illness fall under the same therapeutic group. For
example, asthmatic patients, diabetic patients, etc.
ii) Patients having same stage of illness is categorised under the same
group. For example, patient having severe, moderate or mild
hypertension.
iii) Patients who have similar age-group are categorised under the same
group. For example, geriatric patients, pediatric patients, etc.
iv) Patient can also be segmented on the basis of gender. For example,
female patients, male patients.
2) Doctors (Intermediate-customers or Influencers)

i) Doctors who have similar age-group are categorised under the same
groups.
ii) Doctors can be categorised on the basis of their speciality. For example,
gastroenterologist, oncologist, cardiologists, etc.
iii) General practitioners, who treat patients with minor ailments, common
diseases, etc., are grouped under the same category.
iv) Doctors are categorised on basis of place of practice. For example,
urban, rural, private hospital, government hospitals, etc.
v) Doctors are categorised on basis of type of practice. For example,
dispensing doctor, prescribing doctor, etc.
vi) Doctors are categorised on basis of usage. For example, light users,
heavy users, past users, etc.
The scope of segmentation in pharmaceutical marketing is becoming broader. In

order to look attractive, the size of the market segment should be very large in
terms of profitability and sales. Thus, it is essential for a company to choose
those segments which are substantial enough for the company.
2.2.4. Benefits of Pharmaceutical Market Segmentation

Pharmaceutical market segmentation helps in minimising waste and allocates
resources efficiently. It provides many opportunities to pharmaceutical
companies. A pharmaceutical industry will achieve success if it focuses its
attention towards market segments.
The increasing interaction between patients and healthcare professionals is

beneficial for pharmaceutical companies for achieving their objectives. It is
important for any pharma company to know the information related to the
attitudes, belief, emotions, interests and personality of patient. On the other
hand, messages based on attitudes of the patients improve the communication
between the patient and the manufacturer. When the company delivers products
according to the needs of the customers then it will increase the profit of the
company and build brand image.
Pharmaceutical marketing segmentation is beneficial for the companies because

it focusing only on narrow audience out of large audience. Usually, different
segments follow different purchasing process and the factors involved in process
of purchasing are also different. Therefore, it is important for pharmaceutical
companies to focus attention on these drivers.
2.3. TARGETING: TARGET MARKET

2.3.1. Concept of Target Market
Market segmentation helps the company to identify various opportunities. On the
basis of these market segments the marketer can determine the specific markets
to be targeted. Market targeting is a process of ascertaining groups of customers
who are likely to purchase the products and services of the company. This is
done in ways where some companies can cater to the entire market while others
can focus on developing products and services for small niche markets which are
profitable. Targeting is undertaken by companies of all sizes in order to retain
and maintain their customers.
Market targeting is not the same as target marketing. In market targeting,

the product positioning is done beforehand and only decisions related to
choosing of suitable target market has to be made. In target marketing, it is the
other way around.
The company already chooses a target market and then decides on what
products and services it has to offer. Marketing is all about understanding the
customers’ needs and wants, and developing the products that satisfy them.
Both market segmentation and targeting is practised by all organisations,
ranging from the small corner book store to large MNCs. A successful
marketing plan can be developed by the company only when there is complete
synchronisation between what the customer wants and what can be provided by
the company.
2.3.2. Process of Targeting the Market

The target market is a market segment (group of customers) selected by the
company for directing its marketing efforts and offerings (goods and services). It
is the first component of the marketing strategy.
The marketing strategy comprises of target market and the four elements of the
marketing mix - product, price, place and promotion, which are most crucial for
the success of a product in the market. After deciding the group of customers, the
company can develop a marketing mix strategy to satisfy its target market. Thus,
the market targeting process involves the following steps:
1 ) Evaluating the market segments to target, and
2) Selecting the target market.
2.3.3. Evaluating Market Segments to Target: Bases for

Identifying Target Customers
In the process of evaluating various market segments, the company must identify
the potential of the segments and also its own capability to target these segments.
The marketer needs to make sure that while serving the segments of market, the
organisational objectives are achieved.
While deciding on the market segments, the firm must consider three factors,
such as:
1 ) Segment Size and Growth: The potential of the segment can be assessed by
using forecasting techniques. Market segmentation analysis involves demand
forecasting for each element of the product market other than for the product
market as a whole. The potential of the entire market can be identified by
aggregating the potentials of each market segment. This can be shown as

follows:
MP=ΣSPi
i=l
where,
=
MP Market potential for the product market,
SPi = Segment potential in the ith segment,
n = Number of segments formed for the product market.
2) Segment Structural Attractiveness: The structural factors influencing the
attractiveness of the segment must be assessed along with its size and
growth. For example, if the segment already has many powerful
competitors, then the market becomes less attractive. These competitors offer
potential substitute products and may also limit prices and profits that one
can earn.
Buyers with strong bargaining power also influence the attractiveness of
market segment as they force the company to slash down their prices,
demand for more products and services, and try to raise disputes among
competitors all at the expense of seller’s profitability Similarly, some strong
and aggressive suppliers demand for lowering of prices or compromise on
the quality of the product. This again leads to destruction of structural
attractiveness.
3) Company Objectives and Resources: If a company is satisfied with its
market size, growth and structural attractiveness, then it must not
compromise with its objectives and resources. Some segments of the
market can be terminated if they are not appropriate for fulfilling long¬
term objectives of the company. Even if a segment fits the company’s
objectives, the skills and resources required for the company’s growth
must be ensured.
2.3.4. Selection of Target Markets: Targeting Strategies

Once all the segments have been evaluated and analysed, the company has to
decide the number of markets that it wants to serve. A target market consists of a
group of customers who have homogeneous needs which the company chooses to
fulfil.
Alternative segments targeting strategies can be of two types:

1) Limited coverage market targeting, and
2) Full market coverage targeting.
2.3.4.I. Limited Market Coverage Targeting

When the company chooses to operate in one or a few market segments then it is
called limited market coverage targeting. This strategy involves limited or fewer
resources. It is thus, appropriate for a small company or new entrants who are
trying to compete alongside large players in the industry.
The different forms of limited market coverage targeting are:

1) Single-Segment Concentration: The Company may choose to operate in a
single segment. By adopting concentrated marketing strategy, a company is
able to identify the needs and wants of a particular segment, which may help
to attain large market share.
The company can achieve economies of scale by focusing on its production,

distribution and promotion activities. A high return on investment can also be
achieved by market leadership.
(c) Product Specialisation (d) Market Specialisation
Figure 2.3: Limited Coverage Market

2) Selective Specialisation: Under this type of targeting, firm operates in large
number of segments, each of which is profitable and attractive. There may or
may not be interaction between the various segments but they are all profit¬
making segments. Being operational in various segments helps the company
to diversify their risk.
3) Product Specialisation: Here, the strategy of the company is product-based.
The company decides to specialise in a product and then sell it to various market
segments.
For example, a manufacturer of generators, who sells the generators to
hospitals, organisation, educational institutions, etc., provides generators of
different size and capacity, as per the needs of the customer. The company
specialises in this product and does not sell any other product to the customers.
4) Market Specialisation: In this strategy, the company focuses on a particular

customer segment and tries to supply as many products as possible to this
segment.
For example, company supplying laboratory equipment like Bunsen burners,

beakers, microscopes, etc., to universities and colleges labs may earn profit
and reputation by specialising in this particular area. The only drawback
related to this type of targeting is that sometimes the customer may cut-short
its demand due to its limited budget.
2.3.4.2. Full Market Coverage Targeting

In this strategy, the firm chooses to satisfy all types of customers by providing
different products. This is suitable for only large firms who can cover full
market.
For example, Mahindra and Mahindra in automobile market, Pepsi and Coke in
beverages market and Hindustan Unilever in FMCG industry are practising full
market coverage targeting.
This can be done in three ways:

1) Mass Marketing/Undifferentiated Marketing: In this, the firm does not
consider different market segments and offers homogenous products to the
entire market. The seller only focuses on the fundamental needs of the
customers than the variations in customer choices.
The firm develops a product which captures a large number of customers

using standard marketing mix strategies for product, price, place and
promotion.
The best example of this is Coke and Pepsi who use same pricing,
advertising and packaging means throughout various consumer segments and
geographic areas.
(a) Undifferentiated
Marketing
Figure 2.4: Full Market Coverage Targeting
The major benefit of undifferentiated marketing is that it earns economies of

scale through mass production and marketing activities. Undifferentiated
marketing can also be termed as mass marketing. Here, the company
assumes the entire consumer market as a single market. It adopts a single

marketing mix, i.e., a standardised product, uniform pricing, same
promotional schemes and the same distribution channels to reach out to its
consumers.
2) Differentiated Marketing: In differentiated marketing, the firm produces
and designs different product value propositions for different market
segments. It therefore, caters to the individual needs and wants of
customers belonging to a particular segment.
For example, Maruti Suzuki serves various segments of customers by
offering them variety of cars like level cars (800, Alto), Sedans (Esteem,
SX4), Hatchbacks and Vans. Differentiated marketing is also called
selective marketing or multi-segment marketing.
Unlike undifferentiated marketing, here, the firm markets different products
to address different needs of customers in different segments. With this, the
firm is able to find out consumer groups who are loyal towards its products.
Then the firm mainly focuses on those customers and creates good relations
with them.
The parameters like age, income, gender, economic status, and occupation
are considered which are commonly found in customer groups. For
example, Indian railways have different product offerings for different
customers like general coach, sleeper coach, AC coach, etc. In this, the socio¬
economic status of customers in each category is different. The price of each
coach also varies accordingly.
3) Concentrated Marketing: This is the third market coverage strategy. This
strategy is adopted by the companies having limited resources. The firm
targets a large share of one or more sub-markets instead of a small share in a
large market. An example of this strategy is recycled paper products, which
is used for making greeting cards.
This strategy is a combination of standardisation and differentiation and is

also known as focus marketing. Here, the core strategy used is alike for all
segments but differences occur in relation with the diverse requirements of
the customers. This strategy also helps to recognise the customer groups who
generate revenue and enable the firm to earn profits.
In other words, the focused marketing tries to find a profitable niche of

customers and develops products and services which are not being offered by
their competitors.
However, focussed marketing as a strategy is losing out to its significance to

other forms of marketing since the companies want to cater as many
customer segments as possible. A classic example is Mahindra s Scorpio
which has five or six variants to cater to different categories of customer
needs.
The basic version of the model has certain basic features but customers
can opt for upgraded models having features like power steering, airbags,
GPS services, etc., by paying more.
In this way, the company can achieve economies of scale and large
market share. All this depends on the type of strategy adopted by the
marketer so as to achieve high market penetration.
2.3.5. Benefits of Targeting

Targeting is not only significant, it is essential. The main advantages of targeting
are explained below:
1) With the help of targeting, the marketer can predict and analyse the features
of products and services which are of utmost importance to the target
customers. For example, a tailor can serve all those customers who want to
get their clothes stitched. But different people may like different benefits and
features which depend on their usages such as, clothes used for wedding
dress, casuals, office wears, etc.
2) A marketer can provide the right product to the targeted customers. A

product manager who is targeting a certain market segment has a clear idea
about the customer’s price affordability, age range, tastes and preferences,
etc. On this basis, a manager can develop products that match the
requirements of target customers in best possible way.
For example, the manufacturer of laptops can produce a laptop for the
customers at a price of 15,000. Because with the helpof market feedback, a
marketer may know that the students need laptops at low prices for the
purpose of their studies.
3) With the help of target market, a marketer can have a fair idea about the price
which the targeted customers are willing to pay for a particular offering.
Experienced marketers generally have a clear picture about the average
income of their target customers as well as price sensitivity of their target
market. For example, a high quality apparel company will focus on
businessmen or customers with high incomes.
4) A marketer can induce more sales on the amount spent on advertising
activities with the help of target marketing. In simple words, target
marketing will enable a marketer for not spending the financial resources
on those advertising activities which are not directed towards their target
customers.
As a result, their advertising becomes more efficient as they do not spend
on those customers who are not interested in the products or services of the
firm.
Target marketing helps the company to become more effective by
approaching right customers with a right message which is appealing to
them. The company can choose the best media for advertising to reach to
the target customers. Most of the advertising firms provide vital

demographic information about the audience which they reach to. For
example, a business magazine is more popular among corporates and
bureaucrats.
5) With the help of target marketing, the organisations can also have
information about the target customers’ location which in turn helps them in
identifying more potential customers from those localities.
The market segmentation maps can be used for viewing different income
levels of customers residing in different areas. Such information is very
important for the marketers to position their outlets in relevant areas.
Apart from this, the changing tastes and preferences of customers also
depend upon the geographical locations. With the help of target
marketing, the organisation can also address these varying preferences
effectively.
2.4. SUMMARY
1) Pharmaceutical marketing is all about “generating a prescription for the
products”. Here doctor plays very important role as he writes the
prescriptions. Hence the pharmaceutical marketing efforts are concentrated to
influence and educate doctors about the products.
2) The sale of the particular brand in pharmaceutical marketing totally depends
upon physicians or medical practitioners.
3) Grading of pharmaceutical product is done on the basis of standards
maintained as per the pharmacopoeia.
4) Pharmaceutical industries are involved in research, development, production
and marketing of pharmaceutical drugs.
5) Pharmaceutical markets are influenced by both qualitative and quantitative
forces. The macro-environment determines the overall framework of
situations and mutual effects which determines the behaviour of market
actors.
6) India is the largest provider of generic drugs globally. Indian pharmaceutical
sector supplies over 50% of global demand for various vaccines, 40% of
generic demand in the US and 25% of all medicine in the UK.
7) Pharmaceutical market segmentation helps in minimising waste and allocates
resources efficiently. It provides many opportunities to pharmaceutical
companies. A pharmaceutical industry will achieve success if it focuses its
attention towards market segments.
8) In market targeting, the product positioning is done beforehand and only
decisions related to choosing of suitable target market has to be made.
9) With the help of targeting, the marketer can predict and analyse the features
of products and services which are of utmost importance to the target
customers.
2.5. EXERCISE
2.5.1. Very Short Answer Type Questions
1 ) What is pharmaceutical marketing?
2) List any two barriers of pharmaceutical market.
3) Give the behavioural segmentation of pharmaceutical market.
4) Define market segmentation.
5) What is target market?
6) List any two benefits of targeting.

1 ) Mention the characteristics of pharmaceutical marketing.
2) Mention the size and composition of the pharmaceutical market.
3) Describe the motivation and prescribing habits of the physician.
4) Give the benefits of pharmaceutical market segmentation.
5) Mention the process of targeting the market.

1 ) Explain the functions of pharmaceutical marketing in detail.
2) What do you mean by pharmaceutical market? Explain the qualitative and
quantitative aspects of pharmaceutical markets.
3) Describe demographic description, psychographic segmentation of pharmaceutical
market.
4) Explain the selection of target markets. Also describe the bases for identifying target
customers.
Analysing the Market and Consumers (Chapter 3) 92
CHAPTER Analysing the Market

and Consumers
3.1. CONSUMER PROFILE

3.1.1. Introduction
The profile of an Indian consumer for the inevitable reason that India is gradually
moving up as a global emerging economical force and is already considered as an
international hub for information technology, automobiles, malls - both of Indian
and foreign companies, and textiles, particularly synthetic. Here consumers, by and
large, are noted for a high degree of value consciousness. Such value
consciousness has labelled Indians as “one of the most discerning consumers in the
world”. Even luxury brands have to offer specific, distinct values to justify its
premium pricing in order to get a foothold in the Indian market. In general, Indian
consumers have shown a high degree of family orientation. That is why probably
brands that support family values tend to be popular and are accepted easily.
India being very vast geographically, consumers here are naturally scattered over
a vast territory. As the country is also marked by great diversity in climate,
religion, language, literacy level, customs and calendars, lifestyles and
economies status, here consumers present a complex and bizarre group. The
heterogeneity holds many implications for a marketer, especially to those going
in for national marketing.
3.1.2. Characteristics of Indian Consumers

There is gradual shift of the consumer behaviour in India towards global trends.
Today Indian consumer likes to invest in consumer durables, clothing, and leisure
activities along with spending on holiday and experiential activities. The basic nature
and features of Indian consumers can be understood explicitly by knowing their
demographical and socio-economic conditions, which are as follows:
1) Demographic features of Indian Consumer: The demographic features of
the Indian consumers consist of the following:
i) Population Size: India holds second position in terms of population with
1,373,047,968 all over the world, following China with above
1,436,495,386 people. It means that India holds about 17.31% of the
world’s population i.e. 1 out of every 6 persons in residing in India.
ii) Literacy Rate: Education lays the foundation for socio-economic
progress. India has experienced drastic increase in education level since
independence from 12% to 74.04% (in 2011).
iii) Young Population: India is lucky to have 60% of the people below the
age of 40 years. This also means a golden opportunity for the marketers for
offering novel goods and services to young people. This feature when
supported by improved financial conditions has encouraged people to earn
more and spend more. Thus Indian consumers today are a part of growing
economy which has increased their spending power. Modern Consumers
in India are using their spending power to improve their living standards.
iv) Better Sex Ratio: Although sex ratio has declined gradually after
independence, it has experienced rise is the recent past. It has increased
from 933 (in 2001) to 940 (in 201 1) as per the census of India. However,
there is contrasting difference in sex ratio in rural (947) and urban (926)
areas as per 201 1 census. This growth trend is also a valuable feature to
be kept in the minds while conducting marketing activities.
v) Employment: India has experienced rise in the rate of employment with
2% annual rise for four decades since 1972-73. The annual rise in global
rate of employment in the past decade i.e. 2001-10 was 1.5%. The fair
picture of India in terms of employment rate not necessarily means the
same in in terms of labour growth. The Indian employment scenario
shows a sorry figure in the following ways:
a) The rate of employment has declined.
b) The sectors which can show high employment growth have shown
only sluggish progress.
c) Although agriculture sector has shown a steep decline in contribution
to the GDP, yet it is the major employer.
d) The employment growth is mainly visible in those sectors which are
unorganised and informal, and are marked with low income and poor
working conditions.
e) The organised sector show little bit rise in the employment rate,
however it is mainly confined to casual and contractual workers.
2) Socio-Economic Features: The socio-economic features of Indian
consumers can be defined in the following ways:
i) Change in Way of Living: The traditional joint family system has been
replaced by the nuclear families in the cities. Similar trend in visible
even in the rural areas. Today people believe in spending more and
saving less. The urban people like to spend more on consumer durables,
education, entertaining activities, etc. However, the trend in opposite in
the rural areas. The Indian urban population also like to spend on
clothing, food, heath care and on time saving devices.
ii) Rise in Income: As far as per capita income is concerned; India stands
at 142th position among the world countries. The figures indicate about
the living standards of the people. The per capita income is calculated by
dividing the national income by the total population of the country. India
has experienced almost double rise in the per capital income from 2005-
05 to 2010-11 reaching ?54,835 per year. The states with the highest
level of per capita income are Delhi, Haryana, Goa, and Maharashtra.
iii) Aspirational Levels: The Indian consumer is becoming aspirational day
by day. They have developed a refined taste that matches with those of
the developed countries. Hence, Indian consumer is demanding the
products at par with those in the developed countries. Hence, there is
demand for more aspirational products.
It’s not necessary that the aspirational products should be very

expensive. What the consumers really want are those products which are
designed in a way to offer maximum benefit. Hence, companies are now
mainly concentrating on the significance of designing while advertising
for the same.
iv) Value Consciousness: Although Indian consumers like to spend more,
yet they have not given up their value consciousness. The past few years
has experienced rise in purchasing of luxury goods but it was not done at
the cost of value consciousness. Even the most established brands like
Apple and BMW as to continuously struggle to meet the value conscious
demands of the Indian customers. While buying even luxury products,
value consciousness is rarely compromised. The consumer of today like
to spend more time on comparing and contrasting the features offered by
different brands in terms of value.
v) Working Women: There has been tremendous growth in the number of
working women since later parts of 1990s. This segment has created
numerous opportunities for marketers in India. The working woman has
created her own image beyond the four walls of the home. Today she is
walking shoulder to shoulder with the male folks. Working women are
capable enough to make independent purchasing decision regarding the
goods they like.
vi) Traditionalism: The middle class is essentially traditional. While buying
something, these people are extra careful as their primary focus is on saving
instead of buying. They like to spend quality time with their family members
instead of spending it one extravagance and merriment. They like to spend
more time in knowing about the product before purchasing it. Brand image
is equally important for them along with its usage and durability.
vii) Better Purchasing Power: Today the market of luxury product has
experienced a sudden boom which was insignificant in the last decade.
The primary reason for this change is rise in the purchasing power of the
people of India. There is rising awareness among consumers of India
regarding pricing, quality and choices. The consumer of today keeps in
mind all these aspects while buying something. In present scenario, price
is not sole decisive factor in purchasing as in case of past.
viii) Social Awareness: There is rise in social awareness among Indian
consumers. They have starting believing in the virtues such as honesty,
truthfulness, transparency and ethical practices. The consumers also pay a lot
of importance to the social aspects of the product. The brands reflect this
social responsibility through its CSR campaigns where they try to create a
good position of the brand in the minds of the customers. However,
marketers are unsure about its affect on the sales ratio. Anyhow, the influence
can be experienced in the long run. The consumer of today demand complete
democracy in the system, hence the companies need to allow transparency in
their system. The consumer of today keep an eye on the working of the
organisation in terms of the mannerism towards employees and the
customers, and the way information is disseminated by the company.
ix) Brand Switching: The rise in competition has enabled customers to

consider various alternatives. There are numerous options in front of the
consumers be it vehicles, Smartphone or consumer goods. The
availability of numerous options, helped consumer to easily switch from
one brand to another. As the features of the product are what actually
matters, the brand managers need to focus on the distinguishing features
of the product to win customers’ loyalty. With the brand switching, there
has also emerged the need for continuously interacting with the
consumers to understand their likes and dislikes. Hence, the brands are
spending more and more on Marcom i.e. different means of marketing
communication such as email, social media, newsletter and so on.
3.1.3. Socio-Psychological Characterstics of the Consumer

Understanding psychological state of the customer is very important for
marketers to clearly understand the concept of buying behaviour. It is not easy to
analyse the psychological state of a customer. The attitude and perceptions of the
customers are developed by absorption of different kinds of information given by
them. Even personality is also developed by this. These factors have an impact
on the manner in which a customer goes forward through a decision process
related to a certain product or service. The internal factors such as learning,
personality, attitudes, information processing, and motives have an impact on the
buying stimuli.
Any action which is directed to the satisfaction of needs is headed by motive. As

every individual is unique physically and psychologically, attempts are made by
the marketers to determine the patterns of behaviour which can be estimated in a
certain situation. There will be a greater possibility that the marketer will be able
to satisfy the human requirements which is the main objective of marketing.
There will be ready markets for the products of those marketers who prepare
their offerings on the basis of the identification of needs of customers. The
consumer buying behaviour is affected by different psychological factors. The
customer’s perceptions of his needs, wants, and status in life have a direct
influence on his buying decisions. There will be some consumer behaviours
resulted from the sub-conscious behaviours while others are resulted from the
conscious decisions which are taken by the customer for fulfilling some specific
objectives.
Figure below depicts the four main psychological factors which can affect the
buying choice of a person:
3.I.3.I. Motivation
It is a reason to act in a particular way. The reasons can be physiological or
psychological, which usually arise out of human needs and wants. These
physiological needs can be hunger, thirst, and discomfort while the psychological
needs can be self-esteem, recognition, or belongingness. A need acts as a motive
when it reaches a certain level of intensity then it pushes a person to act in the
same direction.
It is widely believed that consumer behaviour is aroused and directed by
consumer motives. This arousal of interests engages consumers both physically
and mentally. Thus, it is important to understand the influence of motivation on
consumer behaviour which is explained as follows:
1) Defining Basic Strivings: Motives enable the consumers to understand,
recognise and form their fundamental strivings and goals like safety,
achievement, affiliation, etc. These strivings decide how the consumer will
behave in a variety of situations and activities.
2) Recognising Goal Objects: As a general rule, people regard products and
services as means to satisfy their inner needs and desires. Many times,
consumers consider some products as their ultimate goals and forget that
such products are actually means of fulfilling their motives.
3) Influencing Choice Criteria: Motives influence the ways in which
consumers design the criteria of evaluating any product/service. For
example, if the underlying motive behind car purchase is economy then the
consumer will evaluate all the options that are available and gauge on this
parameter before reaching a decision. In this case, the economy as a criterion
will be more important than other criteria like looks or speed.
4) Directing Other Influences: Motives influence other psychological
variables like perception, learning, personality, attitudes, etc. They also
impact the way people process product information. Motives thus have an
impact on information processing which in turn determines how consumers
interpret the environment and how they respond to various stimuli.
3.I.3.2. Perception
It is a process or a way of looking at a person or a thing. It not just depends on
the physical stimuli rather it also involves the reactions received from the
surroundings and thinking process within the individual. All these factors
combine to form a perception. Under mentioned are some influences that
perception has on consumer behaviour:
1) Forms Decision about Company or Product: In order to determine
whether or not, any kind of value if delivered by a company, various
information about that firm is continuously combined and processed by the
customers. Firms mostly present their best selves in order to influence the
perception of customers. For example, quality and convenience of a product
or service are highlighted in the advertisements in order to improve the
perception of the customers which can be advantageous to the firms in the
form of improved sales. But sometimes, they make use of deception, fraud
and dishonesty to manipulate the customers.
2) Perception about Risks: Consumers are less likely to make a purchase

decision if there are higher risks involved. Consumers do not evaluate the
risks associated with an unfamiliar brand or product. For example, that
product could have some defects or can be expensive than its other
alternatives. Therefore, by providing maximum information about the
product in the advertisement and motivating promising product reviews, such
risks can be neglected. Such risk perception can be further reduced by letting
customers handle the products at stores or use them at their homes and by
implementing a flexible return policy.
3) Increases Brand Loyalty: The one task that remains after letting the
customers try the product is to uphold the good reputation and make the
customer loyal for the brand. This can be achieved with the help of good
customer service support as it will create a customer centric perception in the
minds of the customers. By doing such activities, the firms generate regular
revenue as the customers become loyal for the brand which makes it
challenging for the rival firms to steal such customers.
4) Helps in Noticing the Difference: The customers can differentiate between
the features of various alternatives on the basis of perception. Thus, the
attention of the customers can be attracted with the help of such
differentiating stimuli which are known and observable to customers.
3. 1.3.3. Personality
Personality is the collection of all possible ways in which an individual reacts
and communicates with others. Conversely, it can also mean how people
influence others as well as how they understand and view themselves. It includes
their pattern of internal and external measurable traits and the interaction
between person and situation. The impact of personality on consumer behaviour
can be understood as follows:
1) Generalised Self-confidence: A person having generalised self-confidence
is open towards making purchasing decisions. Usually, the consumers having
low self-confidence do not act as first adopters or innovators and like to pick
the popular brands instead of new ones. In the same way, people with high
self-confidence dare to try the products of a new brand.
2) Self-consciousness: Consumers usually are inclined towards knowing
themselves in various situations. Self-conscious people are very careful about
the image they portray in front of others. Under such overstated awareness,
people try to use the goods which help them portraying the desirable image
in front of others.
3) Self-monitoring: Self-monitoring is a term which is similar to self¬
consciousness. It is the way in which people adjust to varying situations and
are able to give the desired impression in front of others. People with low
level of self-monitoring are emotional and are conscious about their feelings,
outlooks and opinions. Their own instinct such as their personal values and
beliefs play a major role in affecting their behaviours. Hence, they seldom try
to alter their behaviour in varying situations.
4) Self-esteem: Individuals having a high level of self-esteem think positively

about themselves and those with low self-esteem do not expect much from them
and try to escape from the conditions where people might be judgemental. The
knowledge about self-esteem helps the marketers to know about the variations in
the products in terms of preferences, price sensitivity, purchasing ways, and
media habits among customers with low and high level of self-esteem.
5) Rigidity: Some people are more rigid to change their tastes and preferences
than others, while some are flexible to such changes. For example, children
usually are particular about the food they want to eat.
3.I.3.4. Learning
It is a process of acquiring skills, knowledge and experiences. Learning leads to
changes in one’s behaviour mainly with the increasing knowledge and
experience. It generates out of the drives, stimuli, responses, cues and
reinforcements. Learning enables one to take wise decisions. Under mentioned
are some influences that learning has on consumer behaviour:
1) Recognition and Recall: An advertisement intends to attract the attention of
consumers towards its certain elements, features or parts and then relate them
with the advertised brand and therefore, different amount of awareness is
experienced by consumers once they are exposed to an advertisement. The
components of the memory of the consumers for information advertised, are
represented by recognition and recall, however, the recognition can only
make use of the outermost or surface level of memory (similar to multiple¬
choice questions) when correlated with recall measures (similar to essay type
questions). The ability of the consumers to identify a similar advertisement
as a one already seen by them earlier is referred to as recognition. The first
goal of any ad is to get observed which is measured by the recognition tests.
They can be used to inform the advertiser about the manner in which the
consumers remember the different components of an ad.
2) Cognitive Responses to Advertising: The extent to which the intended
advertising message is understood by the consumer correctly is one more
influence that learning has on the consumer behaviour. Different media use
different tests to measure this influence, however, in order to have a
complete understanding of the effectiveness of an advertising campaign,
advertisers consider evaluating all the different parameters of advertising
alongwith different media together.
For example, there can be a chance that a single advertisement can perform
well on recognition and bad on attitude and purchase intention. Therefore, by
performing complete tests on the effectiveness of an ad campaign, from
awareness of the product to purchase, such differences and irregularities can
be identified which will eventually enhance the performance of the ad.
3. 1.3.5. Attitude
Attitude is a certain way of feeling or acting towards a particular thing or a
person. People have different attitude towards areas like religion, politics,
clothes, music, and food. Attitude is a like or dislike for a particular object which
assists the buyer to decide about a certain product. The following heads help us
understand the impact of attitude’s on consumers:
1) Negative Learned Attitudes: Attitudes are developed within individuals
from birth; possibly some of them are learned from parents. A learned and
admirable person can act as a strong influencer of attitudes and leaves a long
lasting effect on attitude change. For example, a salesperson selling a new
detergent launched in the market may find it troublesome to convince
individuals who are a staunch believer that whatever brand their mothers use
is the best. These well-informed attitudes, from the marketer’s point of view,
are negative ones as they have the power to impact the interests of customers
towards the product.
2) Positive Learned Attitudes: Marketers can find an involuntary consumer
franchise in terms of consumers who have positive learned attitudes. These
consumers are likely to display trustworthiness and buy the product quite
often. Also, they suggest it to other people who may denounce it. They take
criticism as a negative impression of the person from whom they gained such
attitude. There is a directly proportional relation between the consideration
they hold about the original opinion holder and attitude towards a product or
service held by opinion holders.
3) Negative Experience Attitudes: Nearly all consumer attitudes arise from
experience with products and services. For example, a person who had a bad
experience with a particular shoe might never be convinced to buy that shoe
again, even though a very attractive price is being offered by the dealer. There
is a high probability that buyers can generalise a negative attitude towards an
entire class of products or services or even specific groups or communities.
The consumers of organic foods may tend to develop a negative attitude
towards the ones who consume non-organic food items. Thus, consumer
perspectives are critically influenced by negative experiences.
4) Positive Experience Attitudes: Positive experiences prove beneficial to the
marketing personnel. As the name suggests, such attitudes are developed
through the positive experiences consumers have enjoyed in past associated
with the products and services. For example, if a person uses a car of a
particular company for 20 long years, then it is quite obvious that he will
once again go for the same brand during his next purchase. Thus, a positive
behaviour is similar to having a favourable approach. There is a strong
attempt of every marketer to make experiential attitudes as effective as
possible.
3.1.4. Changing Indian Consumer Behaviour

There has been drastic change in consumer behaviour in the past few years.
Internet and special media has resulted in dramatic change in consumer behaviour.
India is getting highly urbanised and its affect is visible on the lifestyle of the
people and their consumer behaviour. The focus of present discussion is on the
consumers' point of view, purchasing behaviour and contentment. Indian
consumers are highly value oriented. Inspite of low per capita income, Indian
market is very profitable even in case of luxury goods. It’s not easy to understand
Analysing the Market and Consumers ( Chapter 3 ) 100
consumer behaviour due to underlying complexity and irrationality. In the recent

past consumer behaviour is highly driven by the celebrity endorsement, virtual
shopping, discount offers and eco-friendly tags. The consumer market of India is
marked with high spending. The desire for modern lifestyle has highly influenced
consumer behaviour in town, cities and villages. Evidently consumer behaviour is a
vital part of marketing and it is necessary for marketers to scale it appropriately and
design strategies accordingly. In case it is so important , why it is considered to
pose a new challenge? The reason is that there has been constant shift in consumer
behaviour in the recent past.
What the Indian consumers are actually looking for is a luxurious and
comfortable life. They want to make most of the present instead of saving for the
future. One of the recent developments in Indian consumer market is
development of rural market for consumer goods. The consumer culture has got a
big boom through the middle class and it is assumed that it will keep on rising in
the coming years.
3. I .4. I .
Drivers of Change in Indian Consumer Behaviour
Numerous factors which affect Indian consumers are as follows:
1) Shifting Demographic Trend: It is estimated that at the end of 2020, there
will be more than 50% people below 30 years. It is considered to be a golden
opportunity for marketers. Hence, marketers need to devise their marketing
strategies which mainly concentrate on changing demographic trend.
2) Small Families: The urban families are nuclear families in comparison to
joint families in the rural areas. There is also a rising trend towards “Double
Income No Kids” ( DINK ) family . It has led to a new trend where there is
rising demand for lower pack size and Stock Keeping Unit (SKU).
3) Rising Awareness: Today both conventional ( text message, newspaper,
pamphlets ) and novel social media (internet, whats app and social platforms)
are helping in making consumers aware about numerous options. Presently,
advertisements are created in a manner to leave a permanent impression on
the consumers' mind regarding a specific brand . Sometimes advertisements
are designed in a way to let consumer emotionally relate with a specific
brand. Latest development in telecom sector has enabled marketers to easily
connect with the consumers. Generally speaking, modern innovations such as
SMS, whatsapp, social media marketing have enabled the marketers to
effectively convey their message to the target group.
4) Impact of Western culture: Westernisation has influenced urban Indian
families through mass media. The urban India has westernised in terms of food
habits, clothing, cosmetics, automobiles and other apparent items. For
example, Indian families are opting for low calorie breakfast cereals such as
oatmeal, corn flakes instead of tradition parantha, puri, dosa , idli, sambhar, etc.
5 ) Organised Retail Stores: One of the most prominent development in retail
sector since 1990s is the development of retail stores and shopping malls as
in case of western countries. Several malls offer one stop solution in form of
ATM, food joints, kids’ zone, parking facilities, pub, grocery store, etc .
Many big stores such as Reliance, Big Apple, Spencer, and Easy Day are
opening their outlets in different parts of the country. The endeavour of these
retailers is to create a complete shopping experience for the high end society
and upper middle class.
6) Celebrity endorsement: Consumer behaviour is highly influenced by what
their favourite celebrity is using. For this reason, celebrities are widely used in
advertisement to influence the brand with their charismatic personality. The
increasing use of Visual media has helped in supporting celebrity endorsement
of the products. Celebrities are the news makers. The actions and movements
of celebrities are admired and imitated by their fans as a result product
endorsed by them exhibit heavy sales. Undoubtedly, this is the primary reason
for which celebrity is commonly used in advertisements. In a country like
India, it is quite obvious to use celebrities in advertisements. Indians are great
fans of their favourite stars and cricketers and like to follow them.
7 ) Quality Directed Stores: The consumers of India are obsessive about
quality products, they attach value to brand and consider high price as a sign
of quality. Anyhow if the product is not of a popular brand , they try to
purchase it from well -known retail store thinking that these will deliver
products with good quality only. These retail stores can be a good venture for
the Malaysian companies which want to capture Indian market as these don’t
believe in heavy investment in advertising.
8) Free Gifts: Indian consumers are easily swayed by free gifts and discount offers.
These free gifts are given to the consumers on purchase of certain products or
buying above certain limit. Generally such offers are given along with consumer
durables such as refrigerator, television, mobile, etc. The products which are
offered as a free gift include soaps, shampoo, creams, oil, etc.
9) Product Features ( such as Colour, Size, Designing, and Shape): Product
features have a huge impact on Indian consumers. It is evident through
numerous examples. For example, the rural India was reluctant to accept Tata
Sumo in white colour. However, when the same model was renamed and
introduced with new bright yellow colour with more space for seating and
transportation, it received warm welcome by the rural population of India.
Hence, sometimes product makeover can help in popularising the product.
10 ) Change in Saving/Investing Trend: The recent trend in India is not toward
saving money for future use or investing in property or gold but in mutual
funds, insurance policies, etc. which are likely to bring heavy returns.
3.1.4.2. Changing Consumer Trends

Following are the trends related to consumer behaviour in India:
1 ) Better income: Consumer pattern is greatly influenced by better income of
the people. It has been assumed that by the end of 2025, the major part of the
market will consist of two group, viz. elite class and affluent class. There will
be rise of these groups from 8% to 16% . On the other hand , the percentage of
poor will fall from 31% to 18% . The affluent and rich people will have 40
percent of consumption in 2025 which was merely 27 percent in 2016; on the
other hand out of total consumption of about 33.3% will be by the wealthy
population in the urban areas.
2) Growth and Uniqueness in Urbanisation: The urban population of India is

not only growing but is also unique . In other countries urbanisation is
confined to some major cities, while India is experiencing urbanisation even
in small cities. As per a study, 40 percent Indian population will be living in
urban areas till the year 2025 which will contribute to 60 percent of total
consumption. In addition to this, existing cities with population more than
one million will further accelerate the process. The rise in affluence in these
cities is contributing to increase in expenditure by 14 percent per annum
which is just 12% in other cities of the world .
It is estimated that by the year 2025, there will be a rise in the affluent and
elite families. However, when it comes to emerging cities, people are likely
to be more conscious in terms of value for money. Moreover, people in these
areas are highly ambitious but there is limited stock availability in their area.
For this reason , the firms need to expand further for catering to the needs of
these rising markets.
3) Development in Family Pattern: Nuclear family is replacing traditional
joint family. Nuclear family can be subdivided into single parent family,
single person family or a couple family having or not having children . There
has been considerable rise in the number of nuclear families in the past
twenty years and it has reached to 70% of the families. It is likely to be 74%
by the end of the year 2025. It is good news for marketers as it has been
found through the studies that nuclear families are likely to spend 20-30%
more than joint families.
The reason for this change in trend is mainly due to the fact that young
generation is quite liberal when it comes to shopping. These people shop to
match with their lifestyles and latest trend ; this is specifically true in case of
clothing and consumer goods.
4 ) Varying Spending Patterns: The spending pattern is also varying with the
increasing income. As per a survey report conducted in 2017, consumption
goods can be divided into three categories, viz. high frequency goods ( food ,
beverages and personal care goods), medium frequency goods ( home
furnishing, travelling expense, etc.) and low frequency goods ( consumer
durables and home appliances). The relation between consumption and
income is directly proportional where consumption starts at some income
grade and keeps on rising with increase in income. It can also be inferred that
income becomes stable at some stage of income and it keeps on declining
after some income stage has been attained.
5 ) Changing Growth Factors: In the past, one of the most crucial factors for
capturing a target group was market penetration. However, this approach has
been changed as people are likely to buy frequently and also spend more.
People don’t mind spending few more bucks for getting better quality
products. It has been revealed through figures that India consumers are ready
to spend 30% more for products they consider better than the others. The
percentage ratio is much above than that in the developed countries such as
UK, US and Germany.
The trend is further advanced in case of affluent and elite class as affluent
class don’t mind spending 5 times and affluent class don ’t mind spending
nine times than ordinary people when it comes to female cloth line. Similar
trend is visible in case of dining out. Affluent class is likely to spend 13
times and elite class is likely to spend 35 times more than ordinary people.
Mainly three factors are responsible for this changing trend, viz. increase in
spending per purchase, increasing market penetration and increase in
frequency of purchasing.
6) Digital Explosion: There has been tremendous rise in internet usage in the
recent past, where it has reached from eight percent in year 2010 to twenty -
five percent in the year 2016. It is estimated to go beyond 55 percent by the
end of the year 2025 as the internet users are likely to grow to 850 million.
Even the composition of users is likely to change in the next decade and will
have more than half people from the rural areas. Moreover, the internet users
of today are mature. The internet users consist of more than 50% people in
the age group 24 years or below. However, it is likely to go to 65% above 24
years by the end of 2020. The trend is towards virtual shopping with the rise
in number of online shoppers reaching 7 times from 80 million to 90 million.
The trend is likely to go further with opening of more virtual stores and
further internet penetration. It has also been assumed that there will be 300-
350 billion internet users by 2025.
Moreover, e-commerce is likely to reach $150 billion by 2025 from $130
billion at present. The figures include not only virtual shopping but also e-
transfers which are $45-50 billion per annum at present and are likely to
become 10 times to $500-550 billion by the end of the year 2025.
7) Rise in E-commerce: The concept of e-commerce has revolutionised the
Indian business scenario. The e-commerce of India is likely to grow from
US$38.5 billion in 2017 to US$ 200 billion in 2026. The rise in internet
usage and Smartphone has served as catalyst for the growth of the industry.
The digitalisation is likely to raise the internet user base from 560.01 million
in September 2018 to 829 million by the end of year 2021.
The internet economy of India is likely to become twice from US$125 billion
in April 2017 to US$ 250 billion in 2020, which has mainly endorsed e-
commerce. The e-commerce revenue of India is likely to become the highest
in the world with 51% growth rate per annum from US$ 39 billion in 2017 to
US$ 120 billion in 2020.
3.1 .4.3. New Consumption Patterns of Indian Consumer

The consumer behaviour is reflected through customer purchase patterns. There
is variation in this pattern for different cultures. Marketing strategies are likely to
be futile without understanding the basis of this consumption pattern . It involves
knowing about repeat purchasing and unplanned buying. Following are points to
indicate the novel consumption patterns in Indian scenario:
1 ) Buying in Large Quantities: India is getting highly urbanised and its affect
is visible in form of changing lifestyle and purchasing behaviour of the
people. The urban population mainly rely on ready -to-eat and quick-to-cook
food as they don t want to indulge in tedious task of conventional cooking

'
and cleaning the utensils. People also like to stock up goodies in one go
instead of visiting to the super markets again and again .
2 ) Occasional Affordable Buying: The changes in values and income level
have resulted in self -control to occasional affordable buying. Although
Indians always believed in shunning extravagance yet now they don t mind '
indulging in occasion or even regular indulgence. This trend varies among

poor and affluent classes of urban area , but still it exists. It helps in creating
numerous opportunities for the marketers across all the product categories.
3) Lifestyle Trends: The consumer behaviour of upper class and middle class
India is largely influenced by the western culture. The consumer of today is
open -minded and experimental. The western fashion is reaching Indian
consumers through social media and Indian people residing in western
countries. Foreign brands for beverages, food items ( ready -to-serve, cook and
serve, canned, etc.), cosmetics, audio-visual products, cloth line, footwear,
toys, gifts, etc., have gained tremendous popularity among Indian consumers.
4 ) Adolescents as Prospective Customers: The adolescents or teenagers of
today are self -conscious and always look for creating self -image. They
consider themselves to be kind , honest , gregarious, wise and innovative. At
times, they also tend to rebel and question traditional values as they consider
these as backward. Its affect is also visible in their role as consumers; this is
specifically true in case of existing and emerging urban areas. What they
need is love and affection . Adolescents of today like to wear western casuals,
branded sportswear and want to own products and activities which help in
creating their bold image such as listening to pop music or watching lifestyle
and music channels. They like to spend hard earned money of their parents
and also play a decisive role in the family purchasing.
5) Gender Based Purchasing: There are numerous products related with the
gender and it is evident in advertisements also. For example, mothers are
always shown changing the diapers of the baby. Some products are
considered for male folks such as cigarettes, shaving items, trousers, and
bike, tie, etc.; whereas some are associated with female folks such as lipstick,
bindi, mehndi, bangles, bracelets, etc. Anyhow many products are coming
out of their conventional gender typology such as insurance policies,
automobile, Smartphone, laptop, consumer durables, etc.
6 ) Packaged Foods v/s Loose Food: It is common to see consumption of loose
food items such as pulses, cereals, milk and cooking oil. People go to shops
who sell the desired quantity after measuring it. This is commonly called
loose selling system. If the order is big, the products are even delivered to
home. Although loss selling system is prone to adultery and weighing frauds
and is discouraged by the government yet it is widely prevalent in India.
Government of India has legally banned selling of loose oil in 1998 ( but it is
still in practised ) which resulted in selling of packaged oil.
7 ) Working Women as New Target Group: Working women is a new target
group for developed and developing companies. This group has
distinguishing needs other than house wives. The peculiar features are less
frequent shopping, little time in shopping, brand/store loyalty. This group are
likely to shop after office hours i.e. generally in evening.
Lynn J . Jaffe has observed the response to financial services and has found that
the modem position strategy where the product primarily focuses on family and
career is found to be more efficient in comparison to traditional positioning
strategy where the woman primarily focuses on nurturing and family.
8) Traditional v/s Modern Food : India is a diverse country as far as food
habits are concerned . The staple food of North India is wheat and that of
South India is rice. The gravies of the South India predominantly have
coconut and tamarind while that of North India have pulses. The rural India
also depicts similar trends. Anyhow the Indian food habits are getting a
complete makeover with people turning towards western dishes such as
chowmein, pizza, burger, momos, etc.
3.1.5. Patient’s Choice of Physician

Patients choose physicians when they have some health issues. They choose
physician on the basis of their previous experience, distance to the physician or
primary physician referrals. There are only few patients who actively search for
physician. Such patients are young, highly educated, having high income, or
having bad experience with previous physician.
However, some patients have no opportunity to choose the physician because of

the urgent requirements of physician . It is believed that patient’s choice is
determined by the interaction between patients and physician characteristics. The
patients expect high quality treatment with low costs but due to lack of
information they are not able to make rational choices. Thus, they choose their
physician by comparing the characteristic of many physicians of the other
hospital for same illness.
On the other hand, patient’s choice is influenced by the physician characteristics

such as, gender, age, medical education , specialisation , skills, availability,
waiting time, etc. There are following factors which are important for the
selection of new physician:
1 ) Patients Want to Feel Comfortable: Trust is one of the key factors which
bring the patient back to their previous physician. On the other hand, patient
wants to remain with their current physician because they feel comfortable
with them. As well as they can easily discuss their medical issues with them.
Patients prefer those physicians who are ready to listen them and able to
understand their medical history.
2 ) Patients Want to Stick with their Doctor: In healthcare industry, patients
are loyal to their primary physician. It is observed that many patients want to
visit the same doctor for the whole life.
3) Convenience is Key: Sometimes, patients choose their physician on the
basis of location . Patients go for those physicians who are nearby them.
4) Qualification and Skills: Whenever a patient chooses a physician then

he/she may want to know the educational background , experience and skills
of the physician. Work history of the physician is also an important factor of
consideration for the selection of physician.
5) Demographic Factors: Gender and age are one of the essential factors
which influence patients’ choice . On the basis of some studies physicians
demographic characteristics were considered as weaker factor. Sometimes
women are likely to prefer the physician of their own gender.
3.1.6. Patients’ Choice of Retail Pharmacist

Patient satisfaction is one of the essential measures for the selection of retail
pharmacists. Both patient and pharmacists have different opinions regarding
potential pharmacy services. It is believed by many researchers that patients have
negative perception about the role of pharmacists and the reason behind this is
the lack of awareness and communication .
There are following factors which affect the choice of patient for retail
pharmacists:
1) Convenience: Convenience plays an important role for the selection of retail
pharmacists. Patients prefer those pharmacists that are convenient for them .
Convenience is perceived as easily availability of public transport, friendly
environment, wide parking space, etc.
2 ) Physical Environment: Physical environment can be described by the
physical characteristics of a store. A patient will choose those pharmacists
which have all types of physical stimulants such as, store decoration, product
display, ventilation, lightening, appearance of staff and their attitude, etc.
Physical environment of store is an important factor to gain competitive
advantage It influences patients’ choice as it has positive effect on the
purchasing behaviour of patient .
3) Sales Promotions: Sales promotion is more effective than any other
advertising media. It is mainly used to attract the patient. It helps the
pharmacist to reach the right customer at right place and time. With the help
of sales promotion , a pharmacist can directly influence the patient.
4) Qualification and Experience: Pharmacies arc considered as the primary
health service providers. They provide medicines to the patients by
counselling them about the health. Pharmacist provides advices to the
patients about drugs and illness.
Thus, pharmacist must be qualified and experienced. The pharmacist should
provide patient -oriented service and should continuously improve the quality
of their pharmacies.
5) Customer Service: Customer service is the ability of pharmacists to meet
the requirements of the patients. Attention , enthusiasm, communication,
patience, sincerity, understanding, appreciation, etc. are included in customer
service. Although it is difficult to make a plan for customer service but once
it is effectively planned then it will build positive image of the store and
retain patients. In retail store, customer service strategy is tailored to provide
unique services to the patient.
6 ) Branded Pharmacies: Branded pharmacies means the pharmacies consist
of two or more branches. The services provided by these stores are
different from other local stores. There is standardisation in pharmacies.
Standardisation means that customer will get same type of service and
product quality in all the branches of same brand . Thus it is easy for
brand pharmacies to build the reputation in local markets through
standardisation .
7 ) Demographic Variables: Demographic factor includes gender, age,
lifecycle stage, occupation, interest , opinion , personality , self -concept
activities. These demographic factors play a very important role in the
selection of pharmacist.
3.2. MARKET RESEARCH

3.2.1. Introduction
The process of market research involves collecting and analysing of data
regarding the business environment, the market competition as well as the market
to be targeted . It is a systematic process used by the pharmacists to become
familiar with the above three aspects.
According to Green and Tull, “Marketing research is the search for and
analysis of information relevant to the identification and solution of any problem
in the field of marketing”.
With the help of market research, pharmaceutical firms collect the data ( which
encompasses facts and figures ) and build a database of information which in turn
helps in directing the strategic decisions of the business. Market research is a
continuous process and not a one-time activity. An effective market research is
one where the value of the conclusions reached goes beyond the conducting cost
of the research process.
Market research in pharmacy is the process of gathering and evaluating the

information and intricate details regarding the business environment of a specific
drug or a medicine. With the help of such research, pharmacists are able to
achieve an overall understanding of the available marketing prospects related to a
particular drug. This helps them in finding out the opportunities and threats
regarding new drug development in the earliest phase. Pharmaceutical market
research also includes testing of several materials of promotion, such as,
giveaways, commercials, advertisements, etc.
Measuring a product ’s potential is one of the responsibilities of the

pharmaceutical firms . This depends on the drug’s capacity to treat the
patients. The development of a new drug should show an improvement in
order to validate its cost of development , in case the current drugs can treat a
certain number of patients. Continuous evaluation of drugs has to be carried
out by the pharmaceutical firms in the process of research . Moreover, funding
the trials of drugs requires more investment . Several pharmacies carry out the
testing of a drug in the initial phase in order to cure a rare symptom. This is
done so that competing against the outcomes from the current treatments can
be avoided .
3.2.2. Objectives of Market Research

Some of the objectives of market research are given below:
1 ) To make an interrelation between the customer and the pharmaceutical firm
with the help of information , so that more information can be gathered about
customers.
2) To find out the actual needs and wants of the customers.
3) To carry out the process of finding out and analysing information in order to
evaluate the available marketing options and in turn selecting the most
suitable one.
4) To recommend adequate modifications and alterations in the products, so that
the demands of the market can be met .
5) To take measures to strengthen the position of the firm not only in the market
but also inside and outside the nation, as these are the liable for decreasing or
increasing the market share of the concerned firm.
6) To ascertain the various threats and opportunities present in the
pharmaceutical firm’s external environment.
7) To get to know the customers’ reactions regarding the current and new
products launched by the pharma firm in the market.
8) To get information regarding the type of market segments beforehand. This
helps the pharmaceutical firm in introducing products in the desired segment
as a strategy of product innovation.
3.2.3. Steps in Market Research Process

Market research process involves a series of steps which has to be carried out by
the pharmacists. These are described below: Preparing to do the Research
Step 1: Preparing to do the Research:
Market research enables the managers
Doing the Primary Research
in making sound business decisions by
using valuable information. Therefore,
the issues and available opportunities Interpreting the Research
associated with the pharmaceutical
firm are required to be known while Reporting the Results of the Research
conducting the process of research. In Figure 3.1: Steps in Market
this regard, it is also necessary to know Research Process
the type of information that will prove helpful for the managers. Hence, a
researcher has to first find out the issue or opportunity , conduct an initial
research, develop and form ideas that will be helpful in the resolution of the
issue and create a schedule of information.
Step 2: Doing Primary Research: The initial preparation of the research is

followed by gathering of data. This step begins with finding out the
sources of data. After that , the data is gathered, evaluated and reported to
the individuals in the managerial positions. Hence, this step covers the
outlining of primary research, selecting of sources of data , gathering and
evaluating of data, and communicating the conclusion of the research to
the managers.
Step 3: Interpreting the Research: After conducting the primary research, the
process of evaluation of data is carried out by the researcher. The
objective here is to discover what the data conveys regarding the issue,
encode and arrange it in a tabular form with the intention of presenting it
as information , which is both valuable and useful for the managers.
Hence , this step encompasses the editing , encoding and evaluation of the
data.
Step 4: Reporting the Results of the Research: Market research enables the
managers in making sound business decisions by using valuable
information . Hence, communicating the research findings to the
management is very essential in this regard. This can be done by
preparing a research report. Therefore, communicating the findings of
the research by preparing a report is covered under this step.
3.2.4. Role of Market Research

The importance of market research is described below:
1) Guides Communication with Current and Potential Customers: With the
help of market research, focused and effective pharmaceutical marketing
campaigns can be developed by the pharmacists. Such campaigns therefore,
pique the interest of the customers.
For example, zip codes are asked from customers by a few retail
pharmacies. This helps the stores in locating the place of residence of their
customers which thereby enables the management of the store in devising
appropriate campaigns for marketing.
2) Helps to Identify Opportunities in the Marketplace: It can be considered
an opportunity when a pharmacist plans to set up a retail store in a place
where no store of similar type is present. Moreover, the success rate
increases if a lot of people reside in the selected location and have similar
tastes and preferences as that of the target market. However, this is also
applicable in case of services.
3) Minimises the Risk of Doing Business: There are some researches in which
the findings might tell that the planned action course should not be followed
by the pharmacist.
For example, the findings of a certain research might show that introducing
a new drug in a specific market may not be profitable and the pharmacists
should not develop it. Hence in this case, pharmacists have to select an
altogether different location or a product.
4) Uncovers and Identifies Potential Problems: With the help of market

research, possible issues and problems can be identified . For example, a new
pharmacy store situated at the hub of a populated city is running successfully,
but a research tells that there is a plan for the construction of a huge flyover
that will help in getting rid of the traffic in the city.
5) Creates Benchmarks and Helps to Track Progress: Knowing the business
status at certain time intervals is essential for future comparisons. With the
help of market research, comparisons can be made against a set of standards.
It also helps in measuring the progress of business in between the intervals of
research.
6 ) Determines the Exact Marketing Mix: An appropriate marketing mix is
necessary if a pharmaceutical firm wishes to be successful in business. The
elements of a marketing mix , i.e., product , price, place and promotion play
an important role in attracting prospective customers. Therefore, the
availability of accurate and precise data becomes necessary in achieving the
suitable marketing mix. In this regard, conducting a market research can be
considered as an important step in the pharmaceutical industry. This helps in
understanding the vital elements that have the potential to grow a pharmacy
business. In the absence of market research, several problems and difficulties
have to be faced by the pharmaceutical industry.
7) Helps Create the Exact Products that Most People Need: Research not
only assists marketing campaign by providing suitable and accurate data , it
also helps in the development of products that have the capability of being
successful in the market. Mass manufacture of a medicine that could cure
only a small portion of people suffering from a specific disease would not be
good business decision. Instead , medicines for diseases that are common and
widespread should be produced by the pharmaceutical firm.
Therefore through market research, exact products that most people need and
require can be developed by the pharmacists.
3.2.5. Limitations of Market Research

Market research has certain limitations. These are given below:
1 ) Research Costs: The cost of conducting a market research is usually
high. Not only hiring an external firm increases the expenses of the firm
but employing current employees can also be a costly affair. This is
because preparing and conducting studies, interviews and questionnaires
have to be done when the employees are at work. Moreover, consistent
information for research cannot be obtained just by asking some specific
people only.
2) Secondary Data: Secondary sources can be useful for obtaining huge
amount of data. However, such data may not be accurate and requires careful
filtration , verification and interpretation. This is not an easy task. Also,
inaccurate data may also prove to be an obstruction in obtaining the ultimate
result. Therefore, primary data should always be preferred for conducting
market research.
3) Price: The process of preparing a research report is also a costly affair.

However, pharmacists must keep in mind that primary research work can
help in arriving at decisions on time. Hence, they should never avoid primary
researches.
4) Limited Volunteers: The views and opinions of people regarding only one
product is mainly the base for a market research. A market research may also
not be fruitful if the number of respondents is not adequate. For example ,
online surveys and questionnaires can be completed by those who do not
have access to Internet . Non -availability of experienced interviewers is also a
limitation regarding market research.
5 ) Time: Time is another major constraint in conducting market research.
Infact, a lot of time is also consumed in organising interviews and preparing
questionnaires. Moreover with regards to market research, time and cost are
directly related with each other because a research will be more costly, if it
consumes a lot of time. Hence, a proper time period must be defined within
which the questionnaires have to be prepared and answers by the respondents
have to be collected and evaluated.
3.3. SUMMARY
1) The profile of an Indian consumer for the inevitable reason that India is
gradually moving up as a global emerging economical force and is already
considered as an international hub for information technology, automobiles,
malls - both of Indian and foreign companies, and textiles, particularly
synthetic.
2) Understanding psychological state of the customer is very important for
marketers to clearly understand the concept of buying behaviour. It is not
easy to analyse the psychological state of a customer.
3) There has been drastic change in consumer behaviour in the past few years.
Internet and special media has resulted in dramatic change in consumer
behaviour.
4 ) The consumer behaviour of upper class and middle class India is largely
influenced by the western culture. The consumer of today is open - minded
and experimental .
5) Patients choose physicians when they have some health issues. They choose
physician on the basis of their previous experience, distance to the physician
or primary physician referrals.
6) Patients choose physicians when they have some health issues. They choose
physician on the basis of their previous experience, distance to the physician
or primary physician referrals.
7 ) Patient satisfaction is one of the essential measures for the selection of retail
pharmacists. Both patient and pharmacists have different opinions regarding
potential pharmacy services.
3.4 . EXERCISE
3.4. 1 . Very Short Answer Type Questions
1 ) What do you understand by consumer profile?
2) Give any two objectives of market research.
3) Define market research.
4) What is attitude?

1) Mention the characteristics of Indian consumers.
2) Describe new consumption patterns of Indian consumer.
3) Mention the role of market research .
4) Discuss the influence of learning on consumer behaviour.
5) Determine the impact of personality on consumer behaviour.

1) Explain the socio-psychological characteristics of the consumer in details.
2 ) Describe the drivers of change in Indian consumer behaviour. Also mention the
changing consumer trends.
3) Discuss the patients’ choice of physician and retail pharmacist .
4) Explain the steps involve in market research process. Give the limitations of market
research.
Product Decisions ( Chapter 4 ) 113
CHAPTER Product Decisions

4
4.1. PRODUCT DECISIONS

4.1. 1. Concept of a Product
A product is the item that is developed and refined for sale in the market. It aims to
meet the customers' needs and wants. The concept of product can be categorised
into two, i.e., narrow concept and wide concept. In its narrow concept , a product
is a combination of physical or chemical characteristics which has some utilities. It
is not just a non-living object or a physical substance. A product also has other
..
functions than its utility like satisfying customer needs and wants, e g , fan , table,
pen, cooler, chair, etc. In its wider concept, a product having a variety of colours,
designs, packaging and brand is said to be a different product.
For example, if a shampoo is made available in three different variants and
smells, then these are three products, as they are fulfilling needs of customers
with varied choices. Hence, product is defined as a complete package of benefits
received by a consumer.
.
According W Alderson, ‘A product is a bundle of utilities consisting of various
features and accompanying services”.
According to Philip Kotler, A product is a bundle of physical services and
symbolic particulars expected to yield satisfactions or benefits to the buyer”.
It is the sole responsibility of product managers to manage the products. The
product management activities comprise of planning, forecasting and marketing
of products or services at all stages of the product lifecycle. Broadly, it is a wide
range of activities carried-out to deliver a particular product in the market.
4.1 .2. Characteristics of Product

The key characteristics of a product are as follows:
1 ) Tangibility: A product can be perceived by sense of touch . It also has
features like to be seen, felt, etc. e.g., car, computers, t -shirt , etc.
2) Intangible Attributes: Intangible products lack physical substance. They
cannot be touched. It is in the form of services, e.g., repairing services,
insurance services, etc. Intangibility can also be an associated feature of
tangible products.
For example, if a person provides free servicing for a refrigerator,
refrigerator is a tangible product , whereas after sales services is an intangible
attribute. This means that the product offered is both tangible as well as
intangible in nature.
3) Associated Attributes: The associated features of a product consist of pack -

aging, warranty, brand, etc. For example, Hindustan Lever’s “vanaspathi
ghee” is best known by the customers with its brand name DALDA and its
packaging. Moreover , it has created such an image that all types of
vanaspathi ghee are commonly known as DALDA ghee.
4 ) Exchange Value: A product either tangible or intangible in nature must have
an exchange value. It should be exchangeable between the seller and buyer at
a commonly acceptable price.
5) Consumer Satisfaction: A product should be capable of satisfying the
customers. The type of satisfaction experienced by the customer can be real
or psychological. For example, when a consumer purchases branded
cosmetics, one also purchases beauty .
4.1.3. Levels of Product

Every product has five levels. A marketer must consider these levels to achieve
better customer value . These five levels are also known as ‘customer value
hierarchy’ as shown in figure 4.1: Core Benefit
Basic Product
Expected Product
Augmented Product
Potential Product
Figure 4.1: Five Product Levels

The five levels of a product are defined below:
1 ) Core Benefit : Core benefit is the most important level of hierarchy. At this
level, the customer is buying the essential benefit or service. Here, marketers
are the benefit providers to customers. For example, guest of a hotel is
buying rest and sleep, a woman at a spa resort is buying comfort and luxury.
2) Basic Product: In the next level, it is the job of marketer to transform the
core benefit into a basic product . For example, a hotel room is the core
benefit while, a bed, a bathroom, a desk, a chair, towels and a closet are the
basic products.
3) Expected Product: At this level , the marketer needs to prepare an expected
product. An expected product comprises of all those attributes which a
customer expects while buying a product. For example, a visitor at a
restaurant expects clean table, good quality food, quick services and vibrant
ambience. Mostly, all restaurants try to provide these attributes, but
customers also look for least expensive restaurant along with these attributes.
4) Augmented Product: The fourth level of product provides augmented
product to its customers, which is beyond their expectations. These types of
products have additional attributes and benefits which enable the customers
to differentiate between the available product and other products offered by

competitors. For example, a hotel may include fine dining and 24*7 room
service, fresh flowers, a remote -control television set, rapid check -in and
express check-out , which are all extended services provided by the hotel to
build up a augmented product.
5) Potential Product: The last and the fifth level is that which offers the
potential product . This type of product covers all the prospective alterations
and extensions that the product may go under in future. At this level, the
companies make most of their efforts to find out new ways to gratify their
customers and offer unique products to them. For example, an innovative
transformation of the traditional hotel product can be like offering all -suite
hotels where the occupant books a set of rooms.
4.1 .4. Classification of Pharmaceutical Products

Products in pharmaceutical can be divided into two categories. The
pharmaceutical products are categorised on two bases, i.e., on the basis of
products that are sold to customers directly and on the basis of products that are
sold to medical professionals. The products that are in the first classification are
termed as “Over-The-Counter” products are the ones that are sold directly to the
customers and are also termed as OTC products while products in the second
classification are termed as “prescription Products”.
1 ) Prescription Products: There are a number of factors to be considered while
selecting a certain medicine such as profit of the patients, history of illness,
tolerance of the drug, any possible allergic reactions, therapy duration, side
effects, and the price and quality of the product. Undoubtedly, it is not
possible for a common individual to deduce the right decision due to less
technical knowledge. A blunder is unforgivable when the risks are as high as
the patient ’s life. This is the main reason behind categorising the majority of
the medicines as prescription products and only with the help of prescription
provided by the registered medical practitioner these products can be sold.
But in case of the developing nations such as India, the scenario is
completely different in reality. Any individual can purchase any type of
medicine without a prescription from the chemist without any trouble. The
wit is that law is not implemented as its original spirit despite having one of
the lowest literacy levels in the world. This result in an ongoing risk of
deaths and illness symptoms related to self -medication , which people
typically engage in so that they can avoid doctor’s consultation fees.
2 ) OTC Products: These medicines can be treated as low -risk medicines and
thus it is possible for the customers to buy them over-the-counter. This class
of medicine includes Vitamins, nutritional products, cough syrups, and
simple painkillers.
Pharmaceutical companies are allowed to promote OTC products directly to
the general public through mass media in developed countries. However, in
developing nations, due to low literacy level , which can result in wrong
medication consumption or incorrectly, promotion of OTC medicines
directly to the public has been prohibited by the Ministry of Health.
Some of the medicines such as Panadol, Corcin , Paracetamol, Actifed, etc.,

are not turned into OTC medicines because of their long market existence
and the common knowledge of their actions. From above description, it is
clear that there is still a lot of doubt about the differences between
prescriptions and OTC medicines in India. This confused state of affairs is
continued to prevail unless the governing authorities come up with a viable
strategy to strictly enforce the drug laws
4.1.5. Product Management in Pharmaceutical Industry

In pharmaceutical industry , product management plays crucial role as it relates to
both company’s product marketing strategy and its implementation . ‘ Product
management in the pharmaceutical industry ’ is defined as the vertical that
manages all the marketing exercises, i .e., the product’s pre -launch stage to the
launch campaign of the product to post-launch marketing.
Every pharmaceutical product goes through four phases, Introduction, Growth,

Saturation and Decline, of product life cycle and product management plays
significant role in all these phases of PLC.
It is associated with the top line ( gross revenue generation ) and sales team and
bottom-line targets of a pharmaceutical company .
The benefits of product management can be enjoyed by Pharmaceutical Industry

in both the discovery of drugs and control and management of the drug
procedures. The main fields that can be benefited from the product development
and implementation are related to the main and supportive knowledge fields that
consist of following:
1 ) Vision and leadership of the product.
2 ) Strategy of the product.
3) Road map of product .
4) Sales and marketing of product.
5 ) Product management.
4. I .5. I . Hierarchical Structure of Product Management in the

The hierarchical structure of product management in the pharmaceutical industry
may vary on the basis of company’s size and revenue. It generally involves:
1 ) Product executives with 1 or 2 years of experience or sometimes fresh
management trainees.
2 ) Product or associate product manager with 3 to 5 years of experiences.
3) Group product manager with 5 to 8 years of experiences.
4 ) Marketing manager with 9 to 12 years of experiences.
5) General Manager with 12 to 15 years of experiences.
6) Director or VP marketing or sales and marketing, with 15 to 18 years of
experiences.
7 ) President of sales and marketing with 19 to 22 or more years of experience.
4. I .5.2. Roles and Responsibilities of Product Manager in the

Following are the roles and responsibilities of product manager in the
pharmaceutical industry:
1 ) Product managers are responsible for facilitating product knowledge, product
training, and giving direction to salespeople to make sure that they have
adequate scientific and communication skill.
2) They are also involved with the cross-functional teams such as R& D team,
medical affairs, learning, and development team.
3) They are responsible for making product -related plans or strategies, including
market research, market penetration strategy, and competitor analysis.
4) Conducting product line SWOT analysis and monitoring the sales team to
utilise the various opportunities and increase in sales of the product.
5 ) Developing the brand inputs for the various promotional purposes such as
VA, LBL, Newsletter, flipcharts, or digital campaigns like website or app
launch or webinar series, etc.
6 ) Organising various meetings, scientific symposia, CMEs, conferences, and
making sure proper brand visibility for the different target customer
segments of the pharmaceutical industry that includes mainly the healthcare
professionals and hospitals.
7 ) Conducting training camps, award ceremonies, and recognition programmes
for the motivation of the sales team.
8) They are also responsible for product forecast , developing new product
pipeline, pre-launch, and launch strategies and post-launch of the product and
also make efforts for the growth strategy of the product.
4.1 .5.3. Knowledge Areas of a Product Manager

The management of products in pharmaceutical marketing is challenging and
requires discipline that pharmaceutical industries need to be mastered. The
different important areas such as product strategy, product planning, creative
insights, and product marketing are the parts of it. The role of pharmaceutical
product manager becomes critical and it is important for him to have the required
skills that can help him to look for the various gaps in the models for effective
product management.
Core Knowledge Supporting Knowledge Areas
1 ) Vision and Leadership. General Market Knowledge
2 ) Product life cycle management Development/Technologies
3 ) Product strategy and market research Marketing
4 ) Business model and Financials Sales and support
5 ) Product road map Project/Release management
6 ) User experience and product backlog Process
Core Knowledge Areas

Following are included in the core knowledge areas are as follows:
1 ) Vision and Leadership: It is important for the Pharmaceutical product
manager/owner to have vision and leadership abilities. The vision set by the
product manager will be practical and contributes to the stakeholder’s

growth . The manager must compile a list of all stakeholders’ criteria for the
production of a pharmaceutical product .
2) Product Life Cycle Management: Product manager requires clear
understanding of all PLC stages in order to optimise the profit. The product
manager must ensure that there is no decline in the growth rate. The leading
edge can be enjoyed by introducing the product innovation to the drug but it
is not necessary that it will result in sustained competitive advantage. Having
control over the various products and their domination in the market in the
various product life cycle stages is important for the product managers.
3) Product Strategy and Market Research: It is important for the product
manager to conduct the market research and data analysis in an efficient manner
so that an effective product strategy can be developed in order to establish the
product in the market. Following are the various strategies that can be evolved:
i ) External versus Internal Strategies.
ii) Protection versus Diffusion Strategies is the various strategies that can be
used by the organisation.
iii ) In Source versus Open Source Strategies.
iv ) Radical versus Incremental strategies.
4) Business Model and Financials: A significant business model creates value
to the company for a pharmaceutical product. The product manager will
conduct the financial forecasting on the basis of the value creation and a
major role can be played by the business model in this regard to find out the
current position of both product and the company. For creating new or
existing pharmaceutical business model , Business Model Canvas is the
strategic management pattern. This can be seen as a visual chart with the
various factors that can explain the value proposition, infrastructure,
customers, and finances of the product and the organisation . With it, the
product manager can align the various activities.
5) Product Roadmap: It is important for a manager to develop the relationship
between the product roadmap and strategy and supervise it constantly to
make frequent changes as per required. There are seven parts in the roadmap:
i ) Product road map matrix .
ii) Patent portfolio.
iii ) Quality to be built in both products and processes.
iv) Product descriptions and status reports.
v ) Description of the business.
vi ) Allocation of resources.
vii ) Product forecast.
6 ) User Experience and Product Backlog: The product manager has to find
out the user experience with the help of interaction, visual designs, and by
including the functional and non -functional dimensions. Having the profound
knowledge about the various stages of the buyer experience and the utility
levers important for the customers is vital for the product manager as it will
help him to develop the utility map that is quite important for the
pharmaceutical product manager.
Supporting Knowledge Areas

Following are included in supporting knowledge areas:
1 ) General Market Knowledge: The knowledge about the current market
share and the users is important for the product manager so that better service
can be provided to them. The anti -infectives with 16% , cardiovascular drugs
with 13% , gastrointestinal with 11% , and the drugs related to vitamins and
minerals and respiratory are among the leading five categories that lead the
Indian pharmaceutical market with 57% of consumption.
2) Development Technologies: For being a part of the development
technologies, it is important to have collaborated with performance teams.
Either through inside the organisation or outside the organisation or both, the
technology transfer should take place for developing the product. A passive
mode, semi-active mode, or an active mode using common modes reverse
engineering channels or planned channels can be used in the technology
transfer. During drug formulation, development, production, quality control,
and medical trials, the transfer may be done in pharmaceutical industry.
3) Marketing: In order to rightly position the product in the market, it is
essential to select the right marketing mix. Before the launch of a product in
the market , product manager is required to consider the following aspects:
i ) Product: The various product -related aspects are:
a ) The type of health requirements needed by consumers.
b ) The kind of dosage that satisfies the need.
c ) The process, time and areas for using the product.
d ) The form used to deliver the product.
e ) Drug name.
f ) Branding.
g ) USP used for the product.
h ) Competitors and differentiation.
ii ) Price: The various price- related aspects are:
a ) Buyer’s value.
b ) Price sensitivity of the consumers.
c) Structure of price to wholesalers, retailers, distributors and end-users.
d ) Possibility of getting reimbursement.
e ) Price of the product as compared to the competitors.
iii ) Place: The several place-related aspects needs to be considered by the
product manager are:
a ) Availability of drug.
b ) Salesforce requirements.
c) Access to channels of distribution .
d ) Competitor’s actions.
e ) Ways to differentiate product .
iv ) Promotion: The several promotion-related aspects needs to be
considered are:
a ) Form of communication channel to be used.
b ) The process, time and method used to deliver the message to the
target market .
c ) Competitor’s behaviour .
4 ) Sales and Support: It is important for the product manager to act like a
dignified partner for the sales and support and must provide help in developing
the sales training and collateral and choosing the correct sales channel. The
road map of sales includes the determination of prospects, meeting scheduling,
needs recognition, delivery of proposals, and price negotiation.
5) Project/Release Management: The portfolio of the product has been
designed by the product manager. There are several stages in the product life
cycle similar to any other product. Monitoring and controlling the timeline
are the most efficient methods. The risks related to various product phases or
sub-phases can be identified and controlled with the help of this.
6) Process: For idea generation and the selection and to realise the new products
and new features, it is important for the project manager to have a better insight
of phases of the project/ sub-project phase. Customer Development/Lean
Startup, Business Model Generation are also included in this.
4.2. MAJOR PRODUCT DECISIONS

4.2.1. Introduction
A product is a definitive element of ‘ marketing planning' and hence decisions
related to products are most important for any organisation . Decisions taken to
deal with organisational products are called product decisions. Product decisions
may vary from minor changes made in the packaging ( like altering the tag or
colour of the pack ) to significant business diversifications (attained through
merger/acquisition or R & D).
The starting point of marketing process of any organisation is the decision about
product, which it wants to cater to the target customers. Apart from fulfilling the
needs and wants of the consumers, a product is also an essential factor which acts
as the source of profit for the organisation . Both for-profit and non -profit
organisations use their respective products differently.
For-profit organisations sell their products to earn profits and to meet the
stakeholders’ requirements, whereas, non -profit organisations use their products
for self -sustenance. In order to earn favourable outcomes in the long run, a
marketing organisation needs a professionally designed product strategy,
developed in accordance with the target market. The various kinds of product
decisions are enumerated below:
Major Product Decisions
Product Line Decisions Product Mix
Branding Packaging
Labelling
Product Decisions (Chapter 4) 121
4.2.2. Product Line Decision

A product line denotes the group of closely linked products which the
organisation offers. These products are linked together as they operate in an
identical manner, used by same group of customers, have similar price range, or
sold via same type of retailers.
The number of products that are used to cure same type of disease or are
promoted to the same medical profession segment is defined as the product line
in pharmaceutical marketing. For example, a large variety of antihypertensive
drugs is carried by Merck Sharp and Dhome ( MSD) with some changes in the
profile, prices, and action. These are promoted under the brand of Renitec,
Hyzaar, and Cozaar and all of these have the identical action that is to lower the
blood pressure by various action modes and have different prices.
In pharmaceutical marketing, decisions related to product line are critical,

particularly, decision -related to product line length . The company will mainly
deal with the number of products that are to be carried in the given product line.
The main objective is to have such a product line that is both measurable and
profitable and provides adequate alternatives for the doctors. For example, a
company may decide to launch the newer version of its old hypertension
medicine, i.e., in the same drug category but with higher prices. This will be
defined as upward line stretching.
A company might be having a high -priced product , on the other hand , may
decide to make the share of low-priced product as well. This is known as
downwards product line stretching. Moreover, if a company finds it significant to
have a long product line then it may even go for both -side stretching. The
product line filling is when the company launches the product in the middle of
the low and high-end products.
Different Forms of Product Line Decisions

Marketers encounter several difficult decisions on product line featuring and
product line length while establishing product line strategies. These product line
decisions are discussed below :
1 ) Product Line Length Decisions: By including more items in the product
line, if the profit increases, the product line is said to be too short. On the
other hand , by eliminating few items from the product line, if the profit still
increases, the product line is said to be too long. The length of any product
line of an organisation is determined by its objectives. One objective may be
to enhance the sales.
A product line can be expanded by two methods namely ; line stretching and
line filling:
i ) Product Line Stretching Decisions: The product line offered by all
companies includes specific variety of items out of the complete range of
products furnished by the entire industry . For example, Maruti deals
with automobiles of the most economical or moderate price range in the
automotive industry. If a business entity expands its product line over
and above the present array, it is termed as ‘line stretching’. Line

stretching can be exercised in the following three ways:
a) Downward Stretch: Several organisations start with offering most
expensive products in the market and gradually try to extend at lower
levels. For example. TATA Motors deals into midsize and high end
utility car segment. It has extended its product line downwards by
venturing into the small vehicle segment through launching TATA
Nano. The key reasons for downward stretch are as follows:
• The organisation involved in serving high end market faces
tough competition and decides to cater low end market to deal
with competitors.
• Presence of poor growth rate in the high end market.
• The organisation includes a low end division to avoid the entry
of new competitors.
b ) Upward Stretch: Organisations serving low end market may intend
to move into the high end market . High level profit margins, elevated
growth rate or an opportunity to feature as a full -line producer may
be few reasons which may tempt organisations to enter the high end
market. For example, initially Maruti was known to produce low
end cars, but it moved into the high end market with the launch of
Maruti Esteem and Maruti 1000. The decision of upward stretch is
also risky . The well-established high end competitors may respond
by plunging into the lower end market. It is not easy for sales
executives as well as for suppliers/ vendors to effectively perform in
the high end market without proper skills and training.
-
c) Two way Stretch: The organisations belonging to the mid -level of
the market can extend their product line in any one way out of the
two options available, i.e., either upwards or downwards.
ii ) Product Line Filling Decisions: Product line extension is also possible
by including new products in the current product line. To achieve gradual
increase in profit levels, to persuade the agents with regards to the
criticism faced due to decrease in sales because of the products not being
present in the current product line, to make use of the surplus capacity
available, to become market leader in the full -line segment, to block the
loopholes to control the competitors, are the few reasons behind product
line filling. Excessive product line filling may confuse the consumers
and consequently reduce the sales of other products. Each item needs to
have a distinct place in the consumer’s mind . The distinctness of each
product should be thoroughly significant. The new product
recommended should have an advantage in terms of increased market
acceptance and should not be included to reassure the internal
requirements of the company.
2 ) Product Line Modernisation Decisions: Here the product, a part of the
product line , is revised and re -launched to meet the contemporary
styling requirements and preferences. Product lines should be updated as
per the latest trends in the market. This process of modernisation can be,
in terms of the technology used for the production of the product or the
appearance or style of the product. Many companies have adopted the
modernisation process.
3) Product Line Featuring Decisions: This is all about deciding which
product(s) to feature in the organisation s product line. The manager deciding
'
the product line strategies picks up one or more products from the product
line to represent as a flagship product or a prominent item of the line to
increase the demand. This kind of decision is taken in case of presence of
several non-profitable items in the product line. Thus, line featuring is
helpful in elevating the sales volume of the organisation.
4) Product Line Pruning Decisions: This strategy finds out the products which
are poor performers in terms of profit earning potential in the product line
and removes them from the line to increase the earning potential of the
company. This process decreases the length of the product line. This process
is adapted by the company when it is unable to earn the expected profit levels
or when a specific pattern is not well received by the customers or not being
beneficial for the growth of the organisation. Pruning decisions can be taken
to make physical or human resources available for other capable models
which are being utilised by the unproductive model .
4.2.3. Product Mix

A group of all product lines and commodities supplied by a seller to its customers
is called ‘ product mix ’ . It can also be termed as ‘product assortment’. A product
mix is offered by a company which has many product lines under its tag.
Generally, it is not necessary to have correlated items in a product mix. Thus,
product mix is a mixture or combination of all the products made available by a
firm to its customers. It can also be termed as “a compilation of the various
products produced or marketed by a company ” . For example, a company ’s
product mix consists of shampoos, detergents, soaps, etc., produced by it.
According to American Marketing Association, ‘Product Mix is the composite
of products offered for sale by a firm or a business unit”.
The product mix of a company can be strengthened to satisfy the fresh
requirements of customers or group of customers so as to help the organisation
develop and progress. Expansion and inclusion of products leads to an exhaustive
marketing budget for the company. This addition may cause competition by the
similar brand in the market and overlapping of marketing strategies.
The total number of product line and items offered by the company is defined as
the product mix. There may be a number of antibiotics, painkillers, cough syrups,
and some other types of medicines in the various categories. When all these
products are combined , it will be termed as product mix.
For any organisation, the decision related to the product mix can be treated as crucial
and vital as it will highlight both the market natures and the firm’s resources and the
underlined management philosophy of the company. There are huge alternatives
present to the organisation in this regard. Diversification is one of them. While there
are some organisations that favour focused strategy and specialise in a certain area
and may opt to have a narrow product mix. For example, only immune-logical is
being offered by the Serum Institute of India. It is essential for the companies to keep
in mind that the marketing programme quality tends to identify the degree to which
that potential is achieved while the upper limit for corporate profitability is
determined by the opportunities for the product-mix of the firm.
4.2.3.1 . Product Mix Decisions

The dimensions of product-mix possessed by any pharmaceutical company are as
follows:
1 ) Product Mix Width: The different product lines possessed by a company
may define as the product - mix width of that company. For example, a wide
product mix comprising painkillers, skin treatments, antibiotics,
multivitamins and antiulcerants is offered by SmithKline and Beecham .
2 ) Product Mix Length: The number of items comprised in product line of the
company is defined as product mix length. For example. Augmentin,
Ampicillin, Fortum and Ampilox are the different product items offered by
SKB in its antibiotics category.
3) Product Mix Depth: The number of versions offered by each product is
known as product mix depth. For example, an antibiotic brand Fortum of
SKB comes in lgram, 500mg and 250 mg and similarly other brands are also
available in various versions.
4.2.3.2. Product Mix Strategies
The major product mix strategies required to be managed are explained below:
1 ) Product Line Expansion/Contraction: A collection of many product lines
is termed as concentration of product mix. An extended and lengthy product
line is cut back to remove the products which are not cost effective.
Extending the current product line is termed as diversification. Widening the
depth and width of the product mix can help the organisation in availing the
prevalent opportunities in the market. For example, companies dealing in
audio equipment manufacturing can expand its activities by manufacturing
television sets. There may be additions or deletions or even both in the
current product lines by an organisation. Application of latest and ultra-
modern technology helps a company to have an upward stretch or it may
settle for a downward stretch by using lucid technology.
2) Product Modification: This product mix strategy talks about modifying or
altering the basic features of a product namely ; shape, size, style, cost,
colour, etc. A company usually considers modification method when it is
striving to revive or strengthen the demand of a particular product. At times,
simply an external alteration is necessary in a product or in the current
product line. The modification being tangible or intangible can be
accomplished by re-creating, re-developing, altering size and including or
eliminating some characteristics related to the product. For example, popular
pan masala brand, Pan Parag, launched small packets offering different
quantities and at variable costs to gain access to different market segments
and to increase its market area.
3) Product Elimination: It is always not possible to refine or change products

to complement the market requirements. On such cases, removing these
products from the market can prove to be a beneficial option . The activity of
removing the product is known as ‘ product elimination ’ in technical terms .
This activity of elimination or deletion can be for the whole product line or
for a specific item of the product line. Products with non -profitable scale of
production and poor cost-inventory analysis ( due to low demand ) are
generally eliminated from the market . The profit levels may not justify the
unreasonable management time consumed by such product. Since, these
products are obsolete they may lower the company’s reputation. Therefore,
elimination decision is very crucial in such cases.
4.2.4. Product Branding

A brand particularly consists of a name, logo, other visible features including colour
combinations, fonts, images, symbols, etc. A brand raises a number of expectations
in the minds of the individuals in relation with particular goods or service.
According to American Marketing Association, “ Brand is a name, term, sign,
symbol, or design, or a combination of them which is intended to identify the
goods or services of one seller or a group of sellers and to differentiate them from
those of competitors”.
The term branding’ is a very broad concept . It comprises of the entire effort in
creating a unique space in the mind of the consumers for the product of the
company , through consistent advertising and promotion campaigns.
According to Costantino, “ Branding is to help achieve and maintain a loyal
customer base in a cost effective way in order to achieve the highest possible
returns on investment ”.
Every consumer product invariably possesses a brand while products may be or

may not be branded in pharmaceutical. Generic names can be used by some of
the firms to promote their products rather than having any brand name. This is
usually the case when the firm decides to have a marketing strategy in which
there will not be the active promotion of the products and these will be sold to the
organisations which buy the generic products in place of branded ones. For
example , a hospital can elicit bids for paracetamol tablets, which are marketed
under both brand such as Panadol and Calpol and generic names.
Many marketing-oriented firms, on the other hand, tend to sell their goods under
brand names, which help them to properly place and advertise their products. It is
worth noting that, over time, drugs like Panadol for Paracetamol , Brufen for
Ibuprofen, Voltaren for Diclofenac Sodium, and so on have become synonymous
with their generic names. There are hundreds of brands available for some of
these generics, but not all of them are easily identified for their generics.
According to American Marketing Association , brand is defined as “ name,

term, symbol, design or a combination of them which is intended to identify the
goods and services of one seller or groups of sellers and to differentiate them
from those of competitors”. In India, some of the leading brands of the
therapeutic group called B-complex oral ( solids) are Cobadex, Becosules and
Basiton Forte. A trademark is a name that has been lawfully protected, meaning
that it can only be used by one vendor. In order to gain legal rights, a name must
be registered with the Registrar of Trademarks. In India ' s pharmaceutical
industry, filing a trademark will take anything from two to three years.
4.2.4. I . General Branding Strategies

The general branding strategies used in pharmaceutical industries are as follows:
General Branding Strategies
Individual Brand Strategy

Family Brand Strategy
Corporate Brand Strategy
Multiple Brand Strategy
Generic Brand Strategy
Private Brand Strategy
1) Individual Brand Strategy: As the name suggests individual brand strategy

carried a unique brand name for the different products. The organisation
should come up with a catchy name for each of its products and launch
several brands under a common product category. Thus, the other brands of
the company are not victimised or affected if one brand fails or proves to be
ineffective or inferior. For example , Lederle has got number of brands such
as Vl- magna, Autrin, Folviron, Incremin, Prenata, Gevral and Stress Caps in
the group of multivitamins and minerals.
2) Family Brand Strategy: A common name is used to brand all related

products is known as family brand strategy. The company can capitalise or
cash in the image of highly successful brand name is the main advantage
associated with brand strategy. Family brands are popular in the pharmacy
industry and a range of medications must be used in various dosage
formulations for different conditions and age ranges, such as in paediatrics
and geriatrics.
The examples of some of the very successful family brands include

Terramycin of Pfizer that is more likely to have the extension of its brand
image on the other products promoted by the company in the similar class of
the products. In India, the brand image of Galaxo is quite remarkable as it is
considered as the household name in the Indian market as the company
produces baby foods, protein food supplements, and so on . With the help of
extensive direct advertising, the company is best known in the Indian
pharmaceutical market. Glaxo is prominently illustrated in broad bold letters
on the company’s packages, which capitalises on this. Some of the large
sellers of Glaxo brands in India include Ostocalcium, complex B liquid
Glaxo and B 12 Glaxo.
Product Decisions (Chapter 4 ) 127
3) Corporate Brand Strategy: Although the focus of the corporate or

company brand strategy is to enjoy a positive company image, however, the
successful brand will help in strengthening the well -established and positive
image of the organisation itself . As a consequence, the business image and
the brand image will complement each other.
4) Multiple Brand Strategy: The virtual market of same product with two or
more brands is known as multiple brand strategy. Getting a bigger market
share is the basic aim of using this strategy. The focus is to get a higher
market share. However this is not an easy strategy if not well planned and
conveyed cautiously, then it may result in brand cannibalisation. The term
cannibalisation indicates that although a larger market share can be obtained
with the help of a twin brand strategy that may not be possible if not used.
One of the leading examples using multiple brand strategy is Glaxo. Of
course, different selling teams had promoted these brands (Glaxo and
Allenburys divisions ). Multhite F.M. ( Allenburys ) and Becadexamin (Glaxo )
are multivitamin -mineral capsules with the same formulation. Both are late
entrants into the market. Now, with 45% of share in the market of
multivitamin-mineral, Glaxo has formidable market share.
5) Generic Brand Strategy: There is a contradiction in the terms generic brand
or “ branded generics”. In Indian Pharmaceutical Industry, company name are
used to recognise the branded generics. Some companies began to be active
in this region. Only generic names such as B-complex, diazepam injections,
con rimoxable tablets, etc., are used in countries India where larger quantities
of medicines are being purchased by the government to supply to poor
patients through primary health centre network and hospitals. Here, the price
competition is intense and name of company is the only difference.
Generally, nursing homes and dispensing doctors also prefer branded
generics ( the name of the company is what makes product a brand that is
otherwise generic ) for the purpose of dispensing due to price advantage.
Another reason for using this could be anonymity. The drugs which are
unidentifiable by the patients are preferred by majority of doctors for
dispense purpose. But , when it comes to prescription, they used to prefer
“reputed brands”.
In order to manage the branded generics, many companies reorganise
themselves structurally. Since, large pharmaceutical houses do not want to
enter competition that is price-oriented so they seem to be shying away from
this branded generic business. In addition, either with the help of joint
ventures with private entrepreneurs or Central Government , many State
Governments are setting-up units. The major market for branded generic is
likely to be unavailable to the companies of private sector when these units
come up.
6 ) Private Brand Strategy: The brand owner does not manufacture the product
is known as the private brand strategy. This is mainly owned by the
distributor or marketer or middleman. This type of private brand strategy is
getting quite popular in the pharmaceutical industry of India. An increasing
number of labels and canons of the new products are witnessed by the
customers that have the caption “manufactured by so and so and marketed by

so and so”. There is no requirement for the small -scale producer to undergo
the tedious activity of registering with D.G.T.D. ( Director General of Trade
Development ) and he will also not be subjected to D. P.C.O. ( Drug Price
Control Order ). Just a license will be required. Even leading pharmaceutical
companies resort to this back-door method of getting the drug manufactured
by a small scale manufacturer but market it themselves in order to save
valuable time and to avoid the fear of rejection of the licence for the
proposed new product.
I.2.4.2.
• Advantages of Branding
Branding has the following advantages:
1 ) To Consumers
i) Easy to Recognise: The existence of the brand name allows the
consumers to identify the brand in the market clutter. This is because the
brand has a distinctive packaging, colour, design , etc.
ii) Availability of Quality Products: A brand is an assurance of quality.
Even the producers have to make constant efforts to invest in R & D etc.,
so that they offer quality product and fulfil the brand promise.
Consumers therefore get an assurance of quality when they buy a brand.
iii ) Minimum Fluctuations in Price: It has been seen that price fluctuations
do not occur in brands. Consumers therefore get assured prices.
iv) Improved Packing: The packaging of the brands is given lot of
importance. The name of the brand and other details are included in the
brand packaging. The packaging itself has to undergo a constant
innovation in terms of look and feel so that the quality perception of the
brand is maintained.
v ) Mental Satisfaction: The use of brands by consumers also gives lot of
satisfaction to the consumers as it gives them a feeling that they are using
a superior product. For many consumers it can often be the feeling of
pride like owners of Mercedes and Harley Davidson.
2) To Producers
i ) Easy to Advertise: Having a proper brand helps the organisation to
develop advertising strategies as the brands vision, target markets and
value propositions are clearly defined. The name of the brand can be
used by the organisation in its advertising campaigns.
ii) Easy to Identify the Products: The brand name helps consumers to
identify the products. This helps in advertising the products easily.
iii ) Creation of Separate Market: The brand helps the company to develop
a value proposition for a particular market . This also helps it to develop a
separate market for its products.
iv ) To Get More Price: Branding attracts and retains customers. They
become loyal to the brand and are ready to pay any price for the brand.
Product Decisions ( Chapter 4) 129
v) Easy to Expand the Product Mix: The existence of a successful brand

helps the company in expanding the product mix. The company can add
new products to the product mix and also add to its product lines. Getting
the customers to buy new products is not a problem as the new products
can rely on the positive image of the existing brands.
vi ) Personal Contacts with Consumers: The brand also helps the company
to establish a direct link with its customers and to eliminate the activities
of all middlemen who have vested interests. This reduces the cost of
distribution immensely.
4.2.5. Product Packaging Decisions

An end consumer always receives the product inside a cover, container or
wrapper. It is termed as packaging. It is an essential element of the product
presentation. It resides with the product until a customer does not buy it from a
retail outlet. Packaging and packing should not be used interchangeably.
Packaging is the material used to cover and safeguard the product . Whereas, the
method of enfolding or covering products into packages is called as packing.
With the help of suitable packing, a product gets an outer protective enclosure
useful during the transportation of the products to the importer.
According to William J. Stanton, “Packaging may be defined as the general
group of activities in product planning which involves designing and producing
the container or wrapper for a product”.
Not only for the humans but also for the other living species, medical field is of
significant importance. Medicine plays critical role medical field. And packaging
plays important role when it comes to medicine.
There has been significant role played by packaging whether it is for products or
medicines. It is also known as 5 th P of the marketing mix. Packaging is not just
the part of the marketing mix but also very critically associated with the
characteristics, shelf life and application of the product in case of medicines. This
is quite significant to facilitate the protection from germs, damage, and external
environment and bacteria and also can be helpful in keeping the children away
and the safety concerns of the old people.
4.2.5. I . Levels of Pharmaceutical Packaging

In pharmaceutical industry, packaging varies from drug to drug. Generally,
packaging is done on three levels as follows:
1) Primary Packaging: Primary packing is the most crucial part of
pharmaceutical product packaging. There is no surety whether the
pharmaceutical product will be able to maintain its original quality or not if
the primary packing is not done accurately.
Neutral material should be used during the primary packing and no
interaction should be carried out with the pharmaceutical product in its whole
life. It will be life-threatening for the patients who may consume the product
after being prescribed by the doctors or physicians if the primary packaging
fails to do its work.
Normally, primary packaging uses pet bottles and Blister strips because these
are formed of non -reactive materials like aluminium and PVC. Similarly, in
place of glass, high-quality plastic is utilised for liquid doses in order to
avoid spilling or damage during the transportation from pharmaceutical
factories to hospitals and medical clinics. Following are the most common
plastic types used for packaging pills and tablets:
i ) Polyethene terephthalate ( PET ).
ii) Polyvinyl Chloride ( PVC ).
iii ) Polycarbonate
iv) Polyethene ( PE)
v) Nylon ( polyamide )
2 ) Secondary Packaging: The pharmaceutical product is ready for secondary
packaging once the airtight primary packaging is done. Generally, it is
nothing but the other packaging layer which includes cartons or boxes, i.e.,
the printed material.
Active and inactive ingredients, manufacturer’s name and address, type of
medicine, and warning precautions are commonly mentioned on these boxes
in order to help the people to differentiate between the two different boxes
having the different pharmaceutical product. The use of secondary packaging
is smart because it gives the product a manufacturer’s brand appearance
while still making it seem less impervious.
3) Tertiary Packaging: Tertiary packaging is the last one that is basically used
for the purpose of shipping or transportation. Typically this type of
packaging is not observed by the customers as before showcasing the
products for the sales in the clinic, retailers remove this type of packaging
material.
However, the main objective of the tertiary packaging is to ensure the safety
of the central product by facilitating the protection of the primary and
secondary packaging material from any type of external pressure while it is
in transport. Cardboards, plane boxes, and shrink wraps are commonly used
as tertiary packaging.
4.2.5.2. Types of Packaging
Following are the common types of packaging used in pharmaceutical industries:
1 ) Ampoules Packaging: In order to package the smaller quantities of liquid
drugs, ampoule packs are used. These are smaller in size in comparison to
the vials packaging and commonly used to contain the single -dose medicine
and glass or plastic material is commonly used for it.
2) Vials Packaging: Glass and plastic are used in the case of vial containers but
in comparison to ampoule containers, these are larger in size. These
containers have larger capacity and are used to store powder, liquid or solid
drugs.
3) Blister Packs: A thermoformed plastic cavity is built, the drug is held in the
cavity in the shape of a tablet or pill, and the cavity is sealed on the open side
with plastic or aluminium foil . The basis of the form and chemical
composition of the drug will determine the use of the packaging. Blister,
Strip, and Alu - Alu are widely used for the packaging of capsules and tablets.
Inert pharmaceutical packaging materials such as aluminium and PVC are
used in these packaging.
i ) The packaging of solid drugs such as tablets and capsules and lozenges,
blister packs are widely used . Thermoformed plastics are commonly used
for its production and it is produced with aluminium foil or plastic lid
that is easily tom with the hands. A basic coat of aluminium or robust
paper or plastic alongwith a transparent plastic film is mainly utilised for
the state-of -the-art blister pack that can be used to squeeze the different
tablets one by one.
ii ) This is quite cost-effective for production and has less wastage in
comparison to the other packaging due to fewer material requirements.
iii ) Easy removal of tablets and to dose hence facilitating greater satisfaction
to the patients.
iv ) Easy product recognition due to transparent files and also improved the
advertising effect at the point of sale.
v ) Due to design flexibility and high productivity delivered by this process
for the packaging of the oral solid, there has been worldwide acceptance
of the blister packs in the pharmaceutical industry in the past 40 years.
vi ) Perfect sealing is provided by the blister packs alongwith the greater
stability and reliability for the pills. It is gaining more popularity as it
also enhances the aseptic solution.
vii ) The different types of medication mistakes can be prevented using
dosing accuracy. Due to their smart features, the popularity of blister
packaging is improving as it will facilitate the taking of the pills on time.
Nowadays, a sensor is also used with the blister packaging that will send
a signal to the smartphones and thus the medication mistakes can be
reduced.
4) Bottles: Two types of glass and plastic bottles are used in pharmaceutical
packaging. Most commonly available colours are orange and light brown as
these are colours that protect drugs from UV lights.
5 ) Sachet Packaging: Sachet packaging is usually available in rectangle and

square in small pouches. A certain type of plastic is commonly used for these
pouches and it facilitates the appearance such as paper pouch and it is easily
turned with hand. These are cost -effective and are used only once and once
tom; it is not possible to use them again.
6) Strip Package: It is a package is a type of unit dose packaging widely used

for tablet and capsule packaging. Two webs of a heat sealable flexible are fed
through a heated crimping roller to form a strip package. In order to have the
final seal set, the product is placed into the initially formed pocket.
Commonly a continuous packet strip is produced. These packets strip can be
divided into any expected number of packets. Papers, polyethene, foil , PVC
are the various materials that are used in this type of packaging.
4.2.5.3. Benefits of Pharmaceutical Packaging

The different activities such as research , development, production, marketing of
products all are involved in the packaging. Therefore, understanding why to
invest in pharmaceutical packaging is important for business owners. Following
are the various benefits of pharmaceutical packaging:
1 ) Packaging Improves Medication Adherence: There are some reports that
indicate that a large percentage of the population is not able to have the right
medication. The main reason for the non -compliance with the medication can
be originated from the problems of accessing and dispensing the right dose.
The ineffective packaging can also result in the problem of identifying and
-
recalling the doses on time. State-of -the art technology is used by the
pharmaceutical packaging to manage this problem by developing the design
that can motivate people to have the right dose of the correct medicine at the
right time and right condition. The pressure on the healthcare system can be
reduced with adequate packaging.
2 ) Packaging is designed to uphold the Highest Medical Standards:
Packaging is considered as the economic way of providing protection ,
stability, integrity and containment to the products in pharmaceutical. The
pharmaceutical industry helps the highest standards for quality testing with
the increasing demand to maintain healthcare standards. It can be used as a
medium of protecting the product and ensuring the traits of the material to
intact.
3) Packaging Reinforces Brand Preference: This is quite demanding to
market the product especially when there are numerous brands having the
same medicine. With the help of intelligent packaging, one can get an
advantage over the rivals. Packaging will help in creating value for the
product , ensuring consumption , and avoiding any kind of counterfeiting. In
fact, it will help in boosting brand recognition , consumer preference, and
improved profitability.
4 ) Pharmaceutical Packaging with Time -Temperature Indicators: There are
some medicines that are required to be kept at a certain temperature
otherwise they will not only be unusable but can prove fatal for the patient’s
life. With the help of intelligent packaging, labels can be developed that
information about the temperature of the product while transportation and
storage so that it can be determined by the doctors, pharmacists, or even the
patients that the product is still safe to use or not.
5 ) Pharmaceutical Packaging with NFC Tags: It is quite commonly known
that there is hardly any individual who goes through the information
provided on the leaflets of the drug packaging. Apart from this, the patients
are not taking their prescriptions or even they do not remember to take the
medicine. This it becomes more evident that additional information is
provided to them so that they can understand the proposed usages of the
drug. For facilitating this information, it is quite smart to use Near -field
communication ( NFC) in a more interactive manner on the smartphone of the
patient such as with the help of video.
4.2.6. Labelling Decisions

The section of the product which conveys the details of the product and the seller
is called as labelling ' . It specifies the information about the product like its
brand name, components, brand logo, instructions to be followed while using the
product, promotional messages, if any. A label can be a portion of the packaging
or a small sheet may be fixed with the product itself .
According to William J. Stanton, “The label is that part of the product which
carries verbal information about the product or the sellers ( manufacturers or
middlemen ). A label may be part of the package or it may be a tag attached
directly to the product”.
Pharmaceutical labelling is a process of adding labels in the pharmaceutical
products so that the correct information is given to the consumer. This is a very
important part of the industry. It is also known as drug labelling or prescription
labelling. A great deal of care must be paid to the rules and regulations. A small
mistake in labelling like dosage, expiration date, etc., may have severe impact.
People who use pharmaceutical products trust the labels implicitly. They believe
in the veracity of the contents of the label. Pharmaceutical labels are required for
all sorts of drugs. These include both over the counter products as well as
prescription products.
Some examples of pharmaceutical products which require labelling could be anti -
cavity or medicinal toothpaste, hand sanitizers, skin ointments, creams, etc. It is
therefore important to keep in mind the composition of a product so that one is
compliant with various regulatory requirements.
4.2.6.1. Labelling Requirements

FDA requires that all drugs rules contain a “ Drug Facts” table to clarify the drug
information. This is very similar to the nutrition table that can be found in food
articles. It includes following information:
1 ) Active Ingredients: The composition of the drug and the usage norms.
2) Uses: The ailments for which the drug can be used.
3) Warnings: This has various categories:
i ) The “Do not use” statement involves those types of drugs that are not be
used unless prescribed by a medical practitioner. It also covers those
medicines that are only for particular ailments.
ii) The “Ask a Doctor or a Pharmacist” statement includes warnings which
advise the consumer when he has to seek medical advice on whether to
continue with a medicine or not.
iii ) “When Using This Product ” covers side effects and drug interactions.
Some of common statements are “May Cause drowsiness” and “Avoid
Alcoholic drinks”.
iv) “Keep Out of Reach of Children” is a very common warning that is used
on medicines.
v) “Stop Using if ’ or “Stop and Ask a Doctor if ’ contains side effects and
signs of toxicity which tells the consumer to stop using the medicine
immediately and take medical advice.
4 ) Directions: It gives the instruction to the consumer about the usage of the
product.
5) Other Information: This contains some other important information . For
example , tamper protection technique. This informs the consumer to know
the various steps taken by the manufacturer for protecting the container.
Another example is instructions on how to store the product .
6) Inactive Ingredients: These are ingredients that are not medicinal in nature.
4.2.6.2. Guidelines for Labelling Pharmaceutical and Healthcare

Products
The FDA ( Food and Drug Administration ) plays a big role in regulating the
labelling standards for pharmaceutical , medical , dietary and nutrition-based
products. These regulations are applied on both prescription-based drugs and
medical devices. The following is a complete list of instructions for
pharmaceutical and healthcare labelling:
1 ) Labelling Responsibilities: FDA rules stipulate that the labels used in
pharmaceutical and healthcare industry should be Fit for use in different
conditions of usage and storage.
The manufacturer should ensure that the label maintains its identity
throughout the life of the product. The manufacturer is also responsible for
compliance with content and format requirements.
2) Displaying Product Information: A product label requires different types
of information and it is governed by various rules and regulations. Every
drug has its own set of requirements that must be put on the label . There are
following important information that must be included on the pharmaceutical
product label:
i) The registered name of the product.
ii ) Both the active and inactive constituents of the medicines.
iii ) The Drug Facts table.
iv) Use and purpose of the drug.
v) Warnings related to the medicines.
vi ) Product usage instruction .
vii ) Possible side-effects like allergies.
3) Formatting Labels for FDA Approval : FDA rules also specify different
formats for the classification of several products like over the counter
medicines, contraceptives, combination drugs, etc. A manufacturer should
consider the following things while formatting labels for FDA approval:
i) The size and type of the font being used.
ii ) The language should be appropriate in terms of grammar , leading
statements, short forms, etc.
iii ) Different sections should be arranged properly such as, drug uses, facts
and warning.
iv) Materials used in formation of the medicine should be based on the
nature of the medicine.
4) Choosing Approved Materials: Materials used in labels is not as strictly

regulated as packaging. The manufacturer is free to use a variety of materials
like standard white paper stock , holographic films, shrink sleeve labels.
Manufacturer also uses multi-layer labels for healthcare products. This is
because healthcare products share huge amount of information. The
manufacturer should also use adhesives, coatings, and inks which do not
contaminate the product inside the container.
5 ) Controlling Label Quality: It is important to constantly check the quality of
the labelling. It is very important to have a quality control process in place as
safety and liability reasons are involved. The following precautions should be
ensured:
i ) Printing Multiple Pharmaceutical Labels: There should be proper
segregation of the products so that mix ups do not take place. This
separation of the product can be done manually or by employing press runs
at different time intervals. It is important to clarify to the manufacturer that
the area of the press run should be free from earlier runs.
ii ) Proper Control of Storage: The proper storage of the labels should also
be there. This will prevent the accidental mix up of labels. In order to
ensure that label complies with the FDA standards, it is necessary to
check the labels before they are issued.
4.2. 6.3. Importance of Labelling in Pharmaceutical Products

A label is of immense use to the consumer as it helps in providing information
regarding medicines ingredients, usage and also precautions.
Labelling is beneficial for both consumers as well as medical professionals. The

two most important part of the pharmaceutical food chain is packaging and
labelling. Both these activities are governed by FDA rules. It is very necessary
for every pharma company to pay attention on these aspects.
FDA rules specify the packaging material that can be used for particular drugs.
This is very important to safeguard the product from contamination.
It is necessary for both packaging and labelling to have 100% adherence to FDA
rules and requirements. In other words, for the continuous growth of the
pharmaceutical industry, it is important that every step should be carefully
monitored by the regulatory bodies.
FDA regulations cover pharmaceutical, dairy and nutritional products. FDA

regulations stipulate that every pharmaceutical label should be designed in such a
way that they remain in an irreversible environment during supply, distribution
and storage of the product.
The label should contain all possible information like the ingredients - both
active and inactive, the name of the product, the facts table, any side-effects like
allergic reactions, etc.
Also, it is required that all the information should be as per the FDA format. The
font style and size should not impact the readability of the content. There should
be no misleading information. The material used for labelling can be flexible and
can range from normal white paper to holographic films.
Labels can be useful for basic administration functions of pharmacies. A label

includes stickers which provide simple instructions to the pharmacists. It may
reduce the patient waiting time and simplify the prescriptions.
Labelling can also help the pharmacies to avoid errors regarding drug storage.
For example, using an easily identifiable label for providing information to the
pharmacists regarding the storage temperature of a drug can be helpful for the
pharmacist.
4.3. PRODUCT LIFE CYCLE (PLC)
4.3.1. Introduction
All the products have a particular duration of life, similar to human beings. As
human has different stages of life ( like birth, growth, aging, and death ), product
also passes through several definite stages, which can be easily identified by
marketers. Right from the time of concept generation, during product
development , and upto the time of product launch, the product is said to be in its
pre-initial stage.
The life of the product starts with its introduction into the market. It then
experiences a rapid expansion in its market. This stage is followed by steady
growth of the product resulting in its maturity.
Subsequently, there comes a stage, when the market for the product decays and
finally its life ends. Product life cycle can be defined as “the change in sales
volume of a specific product offered by an organisation, over the expected life of
the product . ”
According to Phillip Kotler, “The product life-cycle is an attempt to recognise
distinct stage in the sales history of the product”.
According to Arch Patton, “The life-cycle of a product has many points of
similarity with the human life-cycle; the product is born, grows lustily, attains
dynamic maturity then enters its declining year”.
According to William J. Stanton, “From its birth to death, a product exists in
different stages and in different competitive environments. Its adjustment to these
environments determines to great degree just successful its life will be”.
The concept of product life cycle ( PLC ) is used by marketers to design a series of
strategies for dealing with each and every stage, the product passes through. For
a product , market conditions change with the change of its position in the PLC,
therefore, it must be managed through effective strategies.
4.3. 2. Characteristics of Product Life Cycle

The pattern of demand associated with a product for a certain time period is
known as its life cycle. The characteristics of PLC are discussed below:
1 ) Every product not necessarily undergoes each and every stage. Most of the
products even fail to go beyond the introduction stage.
2 ) Each product spends some time in a particular stage of PLC. This time period
may vary from one product to another.
3) There are some products with very small span of life and they complete
entire cycle in very less number of days.
4) If the product is repositioned, it may get a new product life cycle.
Repositioning refers to altering the image of the product or perceived utility
of the product.
5) In a product life cycle, a product goes through different stages starting with
introduction and followed by growth, maturity, decline and then ultimately
deletion of the product. Product( s ) pass through all these stages at varying
speed.
6) The patterns in which revenues and profits are earned from the product are
predictable depending upon the stage in the life cycle of the product .
Generally, a product earns profit during its growth stage, then it becomes
constant during maturity stage, and finally starts coming down as the cycle
progresses to the stage of deletion.
7 ) The per unit profits earned by a product also vary from one stage to another
in its life cycle.
8) Different risk factors and opportunities arise in different stages of the product
life cycle, which in turn requires different strategies for dealing with them.
9 ) Emphasis is paid on different functional areas during different stages, e.g , .
development stage requires the attention of R &D whereas the decline stage
stresses upon how to control costs.
10) The product life cycle may be widened by exploring new utilities of the
product or by discovering new consumers or by convincing the existing
consumers to increase their usage.
4.3.3. Stages of Product Life Cycle
Generally, product life cycle graph is a bell -shaped curve. This curve consists of
following four stages:
1 ) Introduction: Introduction stage is the stage at which product is introduced
into the market. This stage is characterised by presence of slow sales growth.
There is no scope of profit generation , as it takes time to balance the product
launch expenses with its sales. Among the different stages of the PLC, the
introduction stage is the most costly stage as it consumes a large amount of
investment . Research and development, market testing, initial promotion,
etc., are the areas where a huge investment is needed, particularly, in a
competitive market.
2 ) Growth: This is the stage wherein the product gains quick acceptance in the
market and starts generating profit. The rapid growth in sales and profit is the
key feature of this growth stage. As the organisation attains economy of scale
in the production, it is able to generate profit from the sales of the product.
This profit margin keeps on increasing as the organisation maintains the
economy of scale. This growth enables the organisations to invest more in
promotional strategies to get the best from the growth stage.
Introduction Growth Maturity Decline stage

stage stage stage
s_
Total market sales
Total market
profit
+ 0
Time
Figure 4.2: Product Life Cycle
3) Maturity: In maturity stage, a level of maturity is reached in a product’s sale

as it has now been accepted by most target customers. The profit generated
by the product is stabilised or may decline due to enhanced competition . In
this stage, the main objective of marketers is to sustain the market share that
the product has built up. This stage is the most crucial stage in any product
life cycle, and the marketers need to make wise and mature decisions
regarding marketing of the product. For gaining competitive advantage,
marketers may rely on product modifications or alterations in the production
processes.
4 ) Decline: This stage is marked by sales going down and profits decreasing
drastically. Here, the product loses its position and makes a way for a new
product to enter into the market. In this stage, the market share of the product
starts decreasing, and that is why, it is called decline stage. This decline
could be because of the market being exhausted ( i.e., all the consumers who
could purchase the product are already in possession of it), or due to the
switching of consumers towards a different product. Being unavoidable, this
stage may force the organisation to withdraw its product from the market.
However, organisations may still generate profit by adopting low-cost
production processes and targeting cheaper markets.
Characteristics of Different Stages in Life Cycle

Characteristics Introduction Growth Maturity Decline
1 ) Marketing Attract innovators and Expand Maintain Cut back, revive,
Objective opinion leaders to distribution & differential or terminate
new product product line advantage as long
as possible
2 ) Industry Sales Increasing Rapidly Stable Decreasing
increasing
3 ) Competition None or small Some Substantial Limited

4) Industry Profit Negative Increasing Decreasing Decreasing
5 ) Customers Innovators Affluent mass Mass market Laggards
market
6 ) Product Mix One or two basic Expanding line Full product line '
Best -sellers
models
7 ) Distribution Depends on product Rising number Greatest number of Decreasing
of outlets outlets number of outlets
8 ) Promotion Informative Persuasive Competitive Informative
9) Pricing Depends on product Greater range of Full line of prices Selected prices
prices
4.3.4. Drugs Life Cycle and Corresponding Strategic Plans

The product life cycle of a drug is made after considering many macro and micro
environmental conditions. The participation of doctors in demand creation
process, the market share of the drug, the behaviour of customer demand to
changes in price (elasticity ), etc. are the factors which affects the product life
cycle of drug.
The marketing strategies at different points of the FLC can be framed after
considering the various competitive actions, strategies of the company, product
position, the sales and distribution expenses of the company and consumer
loyalty.
Understanding the PLC is a very important requirement in manufacturing and

distribution activity. The selection of the customer segments, the targeting and
positioning of the drug is dependent on the sales volumes.
Stage of the life Priorities

cycle Strategic Purposes Marketing Program
Placing on the Creation of the demand Information of current and
market potential consumers, of
doctors and pharmacists on the
new product placed on the
market
Increase Maximising the market Activation of sales and
share increase of turnover
Maturity Maintenance of the Consolidation of the company
market share on the market segments gained
Decline Minimisation of Concentration of the activities
expenses on the remained market
Therefore, drug product life cycle is an important activity for the pharmaceutical
companies. It is a particularly important function for domestic drug companies.
There are following reasons which explain the importance of drug life cycle:
1) High market competition in the pharmaceutical industry.
2 ) The low level of purchasing capacity of the people who buy pharmaceutical
products.
3) Allocation of lesser funds for the buying of pharmaceutical products by

medical and sanitary bodies.
4) The intense rivalry for the consumer market between domestic and foreign
manufacturers.
5) The logistics and distribution of the pharmaceutical supply chain .
4.4. PRODUCT PORTFOLIO ANALYSIS

4.4. 1 . Introduction
Portfolio analysis is also called corporate portfolio analysis, business portfolio
analysis or product portfolio analysis. It is a technique or tool which allows the
company to analyse and select the products and businesses and make the
necessary strategic decisions regarding them.
Portfolio analysis is a study of the performance of various portfolios under

different conditions of returns and risks. It is a quantitative method of selecting
an optimal portfolio.
However, in the healthcare sector, portfolio analysis is very different. In the

pharmaceutical industry, business managers want to get the analysis for new
products in the pipeline as the costs and investments on these products have
already been incurred.
In the case of OTC and cosmetic markets, business managers do a portfolio

analysis of marketing expenses whenever they want to launch a new product or
extend an existing product into a new segment.
This type of analysis gives rise to a lot of transparency and understanding

between the various stakeholders. It also helps in launching of new product.
4.4.2. Portfolio Analysis Techniques

There are number of techniques that could be considered as corporate portfolio
analysis techniques. Some of the commonly used techniques are:
1 ) BCG Product-Portfolio Matrix
2 ) GE 9 Cell Model
3) Corporate Parenting Analysis
4.4. 2.1 . BCG Matrix

The BCG matrix is a model used for analysing the portfolio of companies.
This model was developed during the early 1970s by Bruce Henderson of
the Boston Consulting Group. According to this model , the business units of
an organisation can be classified into four different categories based on the
market growth and market share as compared to the leader in that sector.
-
Therefore , this method is also called as “ growth share matrix ” The growth -
share matrix measures the positions of various business units along these two
dimensions.
The BCG matrix seeks to establish a relationship between the products or

business units that are highly profitable ( cash -generating ) and highly unprofitable
( cash-eaters ). The market growth symbolises the attractiveness of a particular
industry. It should also be kept in mind that the market growth here denotes the
growth of overall industry that also includes the returns and profits of
competitors.
Boston Consulting Group ( BCG ) Matrix is a technique for estimating a

company ’s position on the basis of its product range . This technique helps an
organisation to analyse its products and services so that various important
decisions can be made about the ones it should invest in and the ones it should
divest its money from.
As per BCG matrix, the business units can be classified as high or low on the
basis of Relative market share and the Market growth rate. These are described
below:
1) Relative Market Share: According to this model , the more is the relative
market share of a firm, more is the return. It says that the firm that produces
more, enjoys higher economies of scale due to which the experience curve is
higher for them , hence these firms exploit the benefits of higher market
share. However, sometimes, higher profit is also achieved by those firms that
have low production market share.
2 ) Market Growth Rate: If market growth rate is high, then there are
opportunities for higher returns. However, it also takes more capital to be
invested for future growth. Thus, it can be said that those business firms that
operate in industries that have a higher growth rate, invest their capital when
there are opportunities to grow further.
Four Cells of BCG Matrix

On the basis of the above classification, the firms in an industry can be classified
into four types:
High Select Remainder

Few Divested
Market
Invest
Growth
Rate
Liquidate
Low
High Low
Relative Market Share

Figure 4.3: BCG Product - Portfolio Matrix
1 ) Stars: In this block those businesses are placed which enjoy high growth rate
as well as higher market share. These businesses are most likely to be in the
growth stage of the product life cycle ( PLC). These firms pursue an
aggressive strategy to expand the market and gain maximum penetration in
consumer segments. For example. In India sectors like telecommunications,
fast foods, retail, petrochemicals, etc., are some of the businesses which are
having a very high growth .
2) Cash Cows: Cash cows are those business units which generate a lot of cash,
but the growth rate of these business units is less. These businesses
correspond to the maturation stage of the product life cycle, which enjoy the
benefits of its high experience curve. The capital needed to reinvest in the
business is quite less than the profit returns. To sustain in this position, the
firm needs to implement stability strategies. In this stage, the firms focus on
beneficial long-term opportunities and limited expansion.
Since, these are pretty mature firms, hence they gradually lose their market
share as well as their growth rate decline. Due to this, the profitability also
decreases. At this point , retrenchment strategies are appropriate for these
firms. The profit generated from cash cows can be reinvested into ‘star’ firms
and ‘question mark’ firms, both of which require high resource investment .
Some examples of cash cows in India are Scooters for Bajaj Auto, toothpaste
for Colgate, etc.
3) Question Marks ( Problem Child or Wild Cat ): These are the business
units which have a low relative market share even when the industry growth
is high. These firms require huge amount of capital to sustain that market
share. These are generally those firms that introduce new products or
services in the market with high growth opportunities. According to the
concept of experience curve, the firm that gains early profits can achieve the
cost advantages as well as market leadership. This will create entry barriers
for other firms in the industry. In this phase, the firms need to decide their
future plans. If they feel that they can gain market share, they need to adopt
expansion strategies. Retrenchment strategies would also be appropriate in
this phase. If sufficient investment is made in the growth of these firms, then
these may convert into ‘star ’ firms, or else can also become ‘dog’ firms if
sufficient attention is not provided. In India industries like e -commerce can
be called as question marks. These are growing at a very fast rate, but for the
majority of players the relative market share is very less. Another example is
holiday resorts.
4) Dogs: These are the firms which have slow growth and have relatively less
market share. These neither earn profits, nor require investments. If
correlating with the stages of PLC, these firms remain at the stage of late
maturity or decline.
4.4.2.2. GE 9 Cell Model

The GE-9 cell model or GE business screen is a portfolio analysis technique, which
was developed by General Electric Company ( GEC ) along with McKinsey &
.
Co of the USA in order to overcome the loopholes of the BCG matrix .
Instead of considering market growth and relative market share as the basis for
portfolio analysis, this model considers industry attractiveness and business
strength as the basis for classifying the firms. These two factors are further split
into three categories, making it a nine cell grid . These cells classify business
firms as winners, losers, question marks, average businesses, and profit
producers. This model is shown in figure 4.4. The strategies for all the kinds of
firms are different, such as, the organisations should invest its resources in
winners and question marks, since the industry attractiveness and business
strength both are in favour.
Organisations should also maintain the market position of average businesses and
profit businesses though their industry attractiveness and business strengths are
average. Moreover, the business units that are at loss should be sold-out as the
industry attractiveness and business strength both are not favourable.
Zone Strategic Signal
Green Invest/Expand
Yellow
Select/Earn
Red Harvest/ Divest
Strong Average Weak

Business Strength
Figure 4.4: GE 9 Cell Matrix
The two basic factors considered in analysing the business units are:
1 ) Business Strength: Various factors that are jointly analysed under the basic
factors are profit margin of the products, market share of the business unit,
management skills, technology deployed, etc. the quantification of these
factors can be done based on the estimation of the strength and importance of
other factors for achieving success. The strategists can rate the strength and
importance as per their personal experience.
2 ) Industry Attractiveness: Many factors are needed to be studied for
analysing the industry attractiveness, such as, industry growth rate, profit
margin of the industry, seasonal and cyclical trends of the industry,
economies of scale, entry and exit barriers, technological development , legal
and social factors, etc.
These factors can also be quantified in a similar manner in which the
business strength factors have been estimated.
There are two basic differences between GE 9 cell and BCG matrix:
1 ) The GE model considers two basic factors, i .e., industry attractiveness and
competitive position, which are further divided into three factors, instead of
only two factors in BCG matrix, i.e., market growth and market share,
making it a simple model .
2 ) The GE model analyses the variables at three levels, i.e., high, medium, and
low , whereas the BCG model considers only two levels, i.e.. high and low.
-
Zones of GE 9 Cell Model
The nine cells of the GE matrix are divided into three zones and represented by
the colours green , yellow and red, which are similar to the traffic signals. Hence,
these colours are interpreted in the similar ways, i .e ., green represents ‘go’,
yellow represents ‘waif , and red represents ‘stop’ Due to this similarity, GE
model is also called as the “spot-light strategy matrix”. Each of these zones
suggests a particular strategy to be followed by the organisations, which are as
follows:
1 ) Invest /Expand: This is the first zone, which is represented by green colour,
and hence called as “green zone”. In this zone, firms have both the industry
attractiveness and business strength in different degrees. This is the
favourable situation for business units, but the business units do not remain
in this situation for a long time as other firms get attracted to the industry.
But this can be maintained by creating some entry barriers.
The important strategy for the firms in this zone is to invest and expand their
businesses. It is clear from the figure that in the upper left comer, both the
industry attractiveness and business strengths are high, which is an ideal
position. However, the other two cells represent realistic business situations.
The middle cell of the top row indicates high industry attractiveness and
average business strength. The firms which belong to this cell would grow in
the long-term. Though , if the firm does not improve its strength, then the
situation may prove to be unfavourable in future.
2) Select /Eam: This situation represents the middle or mixed situation for the
company. Not much growth opportunity exists, but the organisation has the
opportunity to do selective earning. This happens because either one of two
parameters of business strength and industry attractiveness are at high or
middle level. The two situations of average strength and medium
attractiveness and strong strength and low attractiveness indicate a strategy
of hold i.e., to earn the profits at existing capacity with no additional
investment. In the situation of high industry attractiveness the company has a
flexible option . High industry attractiveness, low strength indicates an
opportunity for the organisation. However, if the organisation is not able to
build its business strength, then it makes sense to leave the business as the
business is likely to turn into a ‘question mark’. Similarly, in case of strong
strength and low industry attractiveness, the company can opt for backward
or forward integration. A company can also diversify into other industries
where it is able to utilise its business strengths.
3) Harvest/Divest: This is the third zone also called “red zone”. The cells,
which come under the zone have average strength and low attractiveness, or
average attractiveness and weak business strength . For these firms,
harvesting is the appropriate business strategy. In harvesting, the company
quits the business but withdraws gradually. In this situation, the initial
emphasis is on reducing the costs by stopping those activities that have long-
term business influence, such as research and development , advertising, etc.
The entire thrust of the organisation in these cases is to earn short term
profits as the business does not have a long-term horizon. One thing that
should be kept in mind that the business units with low strength and low
industry attractiveness should immediately be stopped and the company
should divest its capital.
4.4.2.3. Corporate Parenting Analysis

The corporate houses consisting of multiple-businesses are structured in such a
manner that there is a corporate headquarters which is the centre and it has
different SBUs or Strategic Business Units that act as its satellites. Therefore, the
ways in which these different business units are treated and managed is known as
‘corporate parenting '
In this concept, the entire corporation is represented as a pool of resource and

capabilities that are used for the development of individual SBUs and for
fostering coordination and cooperation among the business units.
The corporate parenting methodology therefore seeks to address one of the major
weaknesses of the corporate portfolio technique.
The corporate portfolio evaluates the business units on the basis of industry
attractiveness and looks at individual businesses in terms of their financial
contribution. While corporate parenting technique looks at the organisation as a
group of different businesses and tries to identify the synergies that are created
through the interactions between the parent firm and its business units.
According to Campbell. Gold and Alexander a diversified corporation must

resolve two issues:
1 ) What are the businesses that a diversified entity should get into and why?
2) What is the organisation structure, procedure, or management concepts that
should exist so that the best results are obtained in the corporation’s
individual SBU ?
In order to identify the appropriate strategy for every business unit , following
steps should be completed:
1 ) Estimate each business on the basis of its critical success factors.
2) Identify the areas of where there is a scope for improvement in each business
unit.
3) Scrutinise the strategic fit between the parent firm and its business units.
These three steps allow the development of a matrix called the ‘ parenting-fit
matrix ’ as shown in figure 4.5. This matrix has two variables:
1 ) Positive Contributions: The positive contributions arise when there is a fit
between parenting opportunities and parenting characteristics.
2 ) Negative Effects: The negative effects arise when there is a misfit between
the critical success factors of the business units and the parenting
characteristics.
Ballast
=
'
Alien territory
High
Low
Fit Between Parenting Opportunities and Parenting
Characteristics
-
Figure 4.5: Parenting Fit Matrix
This analysis gives rise to five strategic positions, each of which has their own
ramifications for the corporate strategy. Unlike the portfolio technique which
uses factors like the growth potential of the individual businesses and the
competitive position, the corporate parenting technique focuses on the strategic
fit achieved between the corporate parent and the SBUs.
The five positions are as follows:
1 ) Heartland Businesses: Heartland Businesses are those in which the parent
has a very good understanding about the CSFs of the business unit and it can
thus utilise its expertise to make improvements in a particular SBU.
Expansion strategies are suitable for the heartland business units.
2) Edge-of -Heartland Businesses: In edge-of -heartland businesses there is a
partial fit between the parenting characteristics and the businesses. There are
some characteristics which fit and some which do not. The level of
engagement between the parent and the SBU increases with the
understanding between business units and the parent company. For these
business units, expansion strategies will be appropriate if the parent firm can
contribute its resources for the development of these SBUs.
3) Ballast Businesses: Ballast businesses are those business units that have a
mutual fit with the parent firm, but have rare chances of improvement , in
which the parent firm can invest. In a way these are similar to cash cows in
the BCG matrix , which are the mature businesses. Which can still survive,
but have little potential to achieve success and can become a constraint for
the parent corporation since it can do anything to improve them. It is better to
shut down these businesses at the time when it is realised that the cost of
production is exceeding the realised profits.
4) Alien Territory Businesses: Alien territory businesses are those in which
there is very little scope of improvement by the parent firm because of the
existing misfit between the parents’ characteristic and the success factors of
business units. Many a times this situation occurs because of unwise
diversification strategy implemented in the past. Retrenchment is the
appropriate strategy for these businesses.
5) Value- trap Businesses: Value-trap businesses are those in which there is a

good fit between parenting opportunities and the business units, but they
suffer because the parent firms do not understand the CSFs of the SBU. At
times these businesses show opportunities for growth, but the company
cannot exploit them as these opportunities may not suit the competencies of
the parent organisation. Therefore, the parent business firm should avoid or
retrench these business units.
Thus, it can be said that the corporate parenting technique works with the implicit
assumption that the parent has an important role in value addition to the business units.
4.4.3. Advantages of Portfolio Analysis

The advantages of portfolio analysis are as follows:
1 ) Identifies Performance of Assets: The key advantage of portfolio analysis
is that it helps the investor to see how the various assets under his control are
performing. By dividing the assets into asset categories and sub-categories,
the technique is able to identify which of the assets are performing well and
which are not. Therefore, the investor can plan which assets he wants to keep
and which he wants to remove from the portfolio.
2 ) Provides a Review of Past Performance: The portfolio analysis also
allows the investor to see how the asset classes have performed in the
past. It is also possible to see how the asset classes have performed with
the changes in the economy and other macro variables with the help of
portfolio analysis. Historical data can also be shown in terms of a
graphical representation .
3) Allows Comparing the Portfolio: The portfolio analysis also allows the
investor to compare the performance of his portfolio with other comparable
asset classes.
4) Identifies Exposure: Portfolio analysis allows the investor to identify areas
where he has invested most of the capital . The areas where there is a greater
exposure of resources, the likelihood of a financial exposure is more in those
areas. It facilitates the investors to balance-out his capital in different areas
for distributing the risks.
5) Simplifies Complex Situation: The portfolio analysis technique helps the
investor to analyse the complex situations and analyse the strengths and
weaknesses of the organisation’s portfolio of products and businesses.
6 ) Acts as a Good Returns Mechanism: This technique helps as a medium to
deliver superior returns to the shareholders of the organisation in medium to
long-term.
7 ) Helps in Risk Identification: Since the portfolio analysis technique
identifies areas where the company can have greater exposure, it also helps in
identifying the risks associated with the company portfolio.
8) Identifies the Industry Trends: The technique identifies trends in the
industry beforehand and seeks to achieve a high level of profitability before
the product or the industry reaches the decline stage.
4.4.4. Disadvantages of Portfolio Analysis

The growth of a business typically proceeds by the launch of new products or by
its entry into new markets or both. Portfolio technique helps the managers to
judge the profitability of the various businesses of the organisation based on
certain parameters.
It helps them to allocate scarce resources amongst various competing businesses

and bring about optimum utilisation of the same, so that the investments generate
the best returns for the organisation. Portfolio analysis has certain limitations
which are described below:
1 ) Frequent Changes: Portfolio analysis does not provide short -term utility.
When Portfolio analysis is done in a short-term, it can lead to frequent and
costly changes in the company ’s resources.
-
2 ) Complex and Time Consuming: Acquiring new businesses and removing
the older ones can be both a difficult and time-consuming activity. The costs
involved in these can be substantial and should be taken into account before
acting on the suggestions based on portfolio analysis.
3) Does not Always Provides Appropriate Analysis: Portfolio analysis does

not always provides appropriate judgement. Many times, it is seen that the
firms with low market share also perform better, which is not true as per the
portfolio analysis technique.
4) Does not Considers Synergies: Portfolio analysis techniques do not

generally consider synergies across the business or its products. The portfolio
analysis technique treats each business as a standalone business and ignores
the coordination and cooperation that exists between them.
5) Difficult to Define and Categorise Products: The entire technique of

portfolio analysis depends on segregating the products and businesses of an
organisation into various categories. However, the process of defining and
categorising businesses is quite subjective and hence lacks objectivity.
6) Forecasting: Portfolio analysis depends upon the past financial data on the
basis of which future of the business units is forecasted. Heavy reliance on
the financial data may lead to erroneous results.
7 ) Ignores Interaction between Products: There is a lot of interaction

between the performance of different products and this is often inter-related.
These relationships between products are complex and are typically ignored
by the portfolio analysis technique which uses profit potential as a yardstick
to categorise the businesses.
8 ) Alternative Investments: Since portfolio analysis only looks at the current

products and services of the organisation, it ignores possible alternatives
where the resources of the organisation can be better employed. For
example, the company can increase its rate of return by investing in a new
technology rather than investing the same in its current product mix.
4.5. PRODUCT POSTIONING

4.5.1. Introduction
Positioning is a marketing approach which creates a distinct position for a brand
or a product in the minds of the customers. It aims to provide a different and new
product to the customers in comparison to the other competing brands or
products.
According to Kotler, “ Positioning is the act of designing the company’s offering
and image to occupy a distinctive place in the target market ' s mind ”.
Unlike positioning of consumer products, it is more challenging to position

pharmaceutical products. The basic difference is that pharmaceutical products
deal with the lives and safety of human beings. There is, thus, a great amount of
regulation in the case of pharmaceutical products. Some of the acts which govern
the pharmaceutical industry include Magic Remedies Act, the code of
Pharmaceutical marketing practises and the Ethical Way of promotion. It is not
just sufficient to be logically right . One also needs to keep the medical
implications in mind. Otherwise one can face the brunt of governmental and
regulatory rebukes.
In the case of pharmaceutical products, perceptions also play a very big part.
Tetracycline is one of the examples in this regard. It is advised to not to give this
medicine to the children of age below 10 years. This is because of its side effect,
i.e., discolouration of teeth. This was published in many medical journals and the
regulatory bodies also highlighted this fact relentlessly.
There is also the example of a famous company which wanted to get a good
market share of the market for hypertension products with its product - a new
drug with an ace- inhibitor. Instead of the smaller segment of those hypertension
products with renal complications, the company chose to target the wider
segment of mild to medium hypertension patients.
The claimed advantage of this product was that it needed to be taken only once a
day which was offered by various competitors. And thus the ultimate result for
this was that the physician as well as MRs forgets the name of the medicine and
failed to explain its actions. There is no wonder that they are unable to meet the
targets of sales. This could one of the disadvantages of avoiding positioning.
Positioning is not just the choice of a few words. It is based on that aspect of a
product that differentiates it from its competitors. Also, this benefit needs to be
something that can be sustained by the organisation and something that can be
measured.
In the case of pharmaceutical products, marketers often use the medical world to
identify the main differentiating benefit of a product. Very often this is also based
on extensive marketing research. It is best that positioning is done by the
marketers though they can refer to the opinions of the doctors.
Even now products are often positioned on indications. For example .

Ciprofloxacin ( Brand: Cifran ) is used for the treatment typhoid . If the positioning
of this drug is unique then it is easy for the doctor to prescribe this medication.
On the other hand, if the market is highly cluttered then it will be very difficult
for the doctor to prescribe a medicine.
4.5.2. Tasks Involved in Positioning: Process of

Positioning
Pharmaceutical products can be positioned by following a certain sequence of
activities. These are as follows:
Tasks Involved in Positioning:
Process of Positioning
Conduct Interviews with Practitioners in

Product 's Therapeutic Niche to gain
Relevant Insights Assess the Competition
Develop a thorough Scientific

Understanding of Product's Clinical Conduct Internal Positioning Workshops
Attributes and Features with Team
Create Positioning Statements Conduct Qualitative Positioning Testing to

Provide a Diverse Range of Subjective
Viewpoints about Product
Uncover Emotional Connections to Brand
Conduct Quantitative Market Research to
Craft the Final Statement and Ensure Buy - Refine Insights about Positioning Options
in from all Internal Stakeholders
Write the Creative Brief
Write the Creative Brief
1 ) Conduct Interviews with Practitioners in Product’s Therapeutic Niche

to gain Relevant Insights: Initial discussions with medical practitioners
about the product can be done telephonically. In this, the various features of
the product are presented to the respondent and he is asked to choose the
property which is most appropriate. The next step is to ask questions which
help in framing the positioning strategy. What is the treatment protocol for a
disease? What helps the practitioner to prescribe a particular medicine? What
are the requirements which are not being satisfied currently ? One should
keep in mind that doctors or physicians constantly make comparisons
because it is an important part of their job.
2 ) Assess the Competition: The next step is determining how competitor’s
products are positioned in the market ? Are their claims backed by their
performance or is it a case of erroneous positioning ? What is the method of
promotion of competing brands? How are competing brands dealing with the
requirements of doctors? The marketer needs to have the knack of predicting
the next move of his competitors.
3) Develop a thorough Scientific Understanding of Product’s Clinical
Attributes and Features: It is also necessary to understand the treatment
protocol. What constitutes product success? It is necessary that the marketer

works in close consultation with the medical practitioner to understand the
various treatment requirements. This will help in creating a unique product
positioning.
4) Conduct Internal Positioning Workshops with Team: The next step is to
analyse and collect all the data and information gathered during the “due
diligence” phase of the positioning process. The team needs to discuss the
various positioning themes. The goal is to develop five to six positioning
options and then start testing them in the market. All these positioning
themes should be different ones and not mere rephrasing.
5) Create Positioning Statements: Good positioning themes are often based on
emotional content - though the communication is very subtle. For example,
if the company says that Drug Y makes people with a certain ailment feel
better as it is impactful , safe and bearable, then such a claim may not be very
successful with customers as it is not sufficiently different from what other
competitors would be claiming. Such a positioning is very general and thus
fails to connect emotionally with the customer.
Fosamax could be another example in this regard. Merck position Fosamax
( alendronate ) with the phrase “Fosamax helps people regain their
independence” and thus achieved ideal positioning strategy for Fosamax . In
this Merck focussed on the deep-rooted customer need of osteoporosis
especially in women. Women faced the constant threat of fracture because of
low bone density. This helped Fosamax to get a very good sale. On the other
hand, if Merck had positioned the brand as “it improves bone density”, then
it would not have connected with the customer at an emotional level.
6) Conduct Qualitative Positioning Testing to Provide a Diverse Range of
Subjective Viewpoints about Product: It is also important to hire a good
market research company to conduct proper qualitative research. The market
research professionals should be experts who can pick up subtle changes in
tone or body postures. They should also be adept at interacting with
customers and connecting with them. The process can start with face -to-face
interview with doctors. The reactions of the doctors can be noted regarding
the various positioning themes that have been developed by the marketer.
7 ) Uncover Emotional Connections to Brand: Marketers can use different
techniques like personification, projective techniques and ethnographic
research to gauge the latent needs of the customers. This helps them in
identifying emotional issues which are most meaningful to the customer. The
use of personification is very simple and at the same time results very good.
In this method, the researcher asks questions like “What was the genesis of
this brand?” or “What kind of constituents does this brand have?” Though
personification tactics often look a bit vague but they are often successful in
uncovering many hidden aspects of consumers. It allows the marketer to
understand complex constructs like perception and attitude.
For example, a research is conducted by a company related to the drug used
to deal with the acute coronary syndrome. It asked doctors that where the
drug is originated from. To this many doctors gave the suggestion - MIT.
This made the company realise that the doctors perceived the product to be
technically better than other products. This helped the company to develop a
unique positioning option for this product.
8 ) Conduct Quantitative Market Research to Refine Insights about
Positioning Options: Quantitative research makes use of Statistical
techniques and mathematical models. This helps in creating a different
perception of positioning and helps in quantifying responses and representing
them on a plane. This research is, generally, conducted online.
-
9) Craft the Final Statement and Ensure Buy in from all Internal
Stakeholders: Once the various outputs from the research have been
received, it is easy for the marketer to generate the various positioning
options. One must try to make the final selection as simple as possible. Many
people may want to add more data on clinical trials and other procedures to
make the content more elaborate. However, this can make the
communication process more complicated.
Simplicity is the essence of positioning communication. The details can be
added at a later date. Once the final positioning theme has been decided
upon , the finer details can be added. A nice format which can be used for
creating positioning statements is:
“Brand X” is the ( add descriptor here, e g., “only ” or “first” ) treatment for
( indication goes here ) that provides ( benefit goes here ) because of ( state the
reasons why ).
10) Write the Creative Brief: The creative team can then get into the act of
creating a brief for the concept once the marketer has cleared the positioning
theme. In terms of management, the creative team implements what the
marketer as created ( strategy ).
4.5.3. Positioning Strategies

The creation of brand differentiation considering the value frame of the
customers is the key role of positioning strategy. For this, positioning of a
product can be done by using different strategies, such as:
1) Attribute Positioning: This strategy involves multiple product attributes or
uses that the brand can offer to its customers, other than the competitors.
2 ) Price/Quality Positioning: This approach stresses the product’s place on the
price/quality continuum by positioning it in the minds of consumers.
3) Use or Application Positioning: In this strategy, a product is positioned on
the basis of its usage or applicability.
4 ) Product User Positioning: This type of product is associated with the
specific category of user.
5) Usage and Use Time Positioning: This type of positioning is done on the
basis of the product usage or its usage time.
6) Product Class Positioning: Product class positioning involves association

with a particular group of products, which are different from the
conventional products.
7 ) Category Positioning: In this type of strategy, the product is positioned
other than its original category to which it belongs. This is advisable when
the existing product category is overcrowded and brand differentiation
becomes difficult.
8) Benefit Positioning: Usually, consumers ' purchase products for acquiring
the benefits related to the product. With the help of this strategy, marketers
may select an exclusive and not -yet -offered benefit to position the brand .
9 ) Competitive Positioning: Here, the positioning of a product is done in
reference to the prevailing competition in the market. This product is set as a
favourable substitute against the established brand.
10 ) Corporate Identity Positioning: A brand attempts to make a direct
connection with the corporate identity and tries to play on its key credentials.
A corporate brand is used by products to label their offerings in the market.
11 ) Brand Endorsement Positioning: Unlike the previous method , here a
successful brand acts as an endorser of a new product.
4.5.4. Importance of Positioning

The importance of positioning is explained below:
1 ) Placing the Product in Customers ’ Mind : Positioning and differentiation
are the marketing activities which help the marketers to place the product in
the minds of the target customers. The product fails to survive in market if
the positioning decision goes wrong. And if the product is positioned
wrongly then enormous time and effort is needed to retrieve the product.
Despite the fact, repositioning of a product at a later stage is much easier than
correcting a wrongly positioned product.
2) Connects Product Offerings with Target Market : The process of target
market selection helps to determine the actual target audience for whom the
offering is proposed , and the marketing mix assists in bringing the 4 Ps in line
with the intended target market. Therefore, market positioning acts as a
linkage between the product and the target market.
3) Product cannot be ‘ Everything to Everyone’: A product cannot be
‘everything to everyone’ but a little or more to some . This may define the
need for differentiation and positioning of a product . For this, some
distinctive features of the product or some unusual requirements of the
market , or some visible gaps in the competitor 's products are identified and
on the basis of these specifications the product is positioned for a specific
target market.
4) Creates a Locus in Customers’ Mind: The customer’s mind may be viewed
as geometric perceptual space which is occupied with diverse products and
brands having specific positions. A new product can take hold of the space
by replacing the existing brands from their position. A brand position in the
customer’s mind can be achieved through several ways. Placing a brand
against another existing brand or against certain expectations raised by the
consumers may seek a position in customer’s mind .
5 ) Providing Competitive Advantage: Positioning of a product is the finest
method for providing a competitive advantage to a product or service. This
helps the marketer to determine the competitor’s potential moves and
responses so that appropriate steps can be taken, such as:
i ) Providing the target markets the motive to buy the services and then plan
the entire strategy.
ii) Providing the guidelines to device the marketing mix , such that every
element is aligned with the positioning.
6 ) Better Serving and Covering the Market: Here, the marketer identifies that
every consumer or group of customers has different requirements and
belongs to different market categories. In this approach, the main aim of
marketer is to recognise the potential market segments, monitor the market in
those segments and offer the customers’ with their desired needs and wants .
4.6. NEW PRODUCT DEVELOPMENT

DECISIONS
4.6.1. Introduction
The goods and services that vary considerably in terms of their attributes or
intended usage in contrast with the goods manufactured previously by the same
firm are termed as ‘ new products’. It is a difficult task to define a new product. It
involves novel ideas and offerings which are entirely different and new for the
customers. Moreover, the relative view is considered highly useful in defining a
new product , as the potential consumers who will be using the product for the
first time, may identify opportunities or problems for consideration.
According to Kotler , ‘New product mean original products, improved products,
modified products and new brands which are developed by the firm through its
own research and development efforts and includes those products which the
consumers see as new. A new product is thus perceived differently by different
people. It is a need satisfying concept with benefit for buyers bundle of need
satisfying features; for marketers, a way to add value; for intermediaries, an
opportunity to design ; for R & D and to assemble and process for production
department”.
In comparison to other industries, the new product development procedure is

very much difficult in pharmaceutical industry. The R& D capability,
development cost, registration with health ministry, raw material sourcing all
makes development of new product a challenging task for any marketing team
acquisitions, one of the most often used means of procuring new drugs; do not
refer to local pharmaceutical firms in developing economies. The reason is that
all MNCs of any stature already have their local offices in almost all developing
countries and instead of joining hands with local partners they choose to sell their
goods from them. There are some examples of an agreement between a foreign
company and a local company exist, but they make up a very limited portion of
the overall production of the business. This leads the businesses with no option
other than developing a new product. However, given the size and resources
available to local industry, there is no possibility of development of new product
at present.
4.6.2. New Product Development Process

Following are the steps involved in the process of new product development:
1) Molecule Identification: In
essence, pharmaceutical products Molecule Identification
are a form of dosages such as
tablet, pill , syrup, infusion or
ointment, comprising the active Molecule Screening
ingredient responsible for the
medicinal action or the core value
that the substance is intended to Sourcing of Raw Material
yield.
Molecule identification, i.e., the
I
Pilot Batch Manufacturing
active ingredient that a company
wants to brand and launch is the I
first step in developing a new Marketing Strategy Development
product . Keeping the company’s
marketing focus, resources and
profile under consideration, Test Marketing/Clinical Trial User Trial
several molecules that can be of
interest are short-listed , and then
Commercialisation
the real game starts by molecules
screening to arrive at the final one Figure: New Product Development
or more. Process
2 ) Molecule Screening: While

deciding upon a new product, molecule screening is the most important step
a marketing team has to go through. Various aspects are taken into
consideration while screening a molecule in order to find out the advantages
and disadvantages. Some of them are as follows:
i ) Company’s Objectives: It is based on the company needs and what it
wants to attain. The product decision is directly affected by whatever the
company wants to achieve such as aim of entering into the new product
category, aim of strengthening the existing product line, aim of
optimising the market share, focuses on high profits, or aim to build
volume. In order to have a positive effect on the medical profession, a
company seeking to join a new product segment may wish to choose a
comparatively newer molecule, which otherwise may not lend much
priority to companies that come with brands with a molecule that are sold
by many other companies. But, an older molecule can even complement

the existing range very well in case a company wishes to strengthen its
product line.
ii ) Patent Status: The raw materials of pharmaceutical products have to be
procured critically. In pharmaceutical industry, the concerns may revolve
around the various factors other than price , availability and quality which
are major concerns of other common industries. Patent status to the
molecule is one of the most important issues to be taken into
consideration. It is the protection provided to a company for a specific
period of time during which company can recover the heavy expense
incurred in research and development. Generally, the patent period is 16
years from the application date.
iii ) Special Requirement: Company has to look into the production
requirements and the available facilities once it is clear about the patent .
Special facilities such as humidity /temperature/moisture management,
storage conditions, processing procedures, packaging material, etc., may
be needed for pharmaceutical ingredients. This may either prove too
expensive for the company if arranged for just one product or might not
be used by the company currently.
iv ) Market Size: The availability of authentic and accurate data compiled
and distributed at cost by a Swiss company, International Marketing
Statistics is one of the major advantages the pharmaceutical industries
have. This enables the pharmaceutical companies to accurately determine
the growth rates, market size and performances of the product. This
forms the basis for the preparation of reliable market forecast and to
monitor the target segment’s attractiveness.
v) Competitive Position: The next aspect that the company should
consider is its competitive environment and chances of achieving success
in respect of its strengths and weaknesses. It considers the number of
players in the market , molecule acceptance amongst the medical
practitioners, the number of same molecule brands in the market , the
future prospects and so on.
3) Sourcing of Raw Material: The need to imitate the standard parameters all
the time is one of the specific features of the pharmaceutical product. Every
pharmaceutical possesses its unique feature such as shelf life, stability in
form, dissolution in time, physical appearance, etc.
A company should perform pilot batch research within a specific time period,
generally 3 to 6 months to ensure that the product quality is upto the mark if it
wishes to switch sources in order to maintain all these. A company is required
to be more careful while purchasing the raw materials from the company will
ensure quality consistency and fulfil the demands regularly because this is an
important matter. Most of the companies perform an elaborate vendor
evaluation programme apart from conducting a pilot batch testing.
4) Pilot Batch Manufacturing: In pilot batch manufacturing, trial batches are

produced while maintaining the real life condition. The manufacturing
equipment , raw material and packaging material which then will be used to
manufacturing commercially, are the same.
The batch is kept under the various conditions such as high humidity,
different temperatures, sunlight , etc., for the time period of 3 to 6 months
once the batch is manufactured. The stability of the product is studied by
conducting the test each month . And the product is approved for commercial
manufacturing if the result matches with what the standard profile represents.
5 ) Marketing Strategy Development: The company began working on its
marketing plan simultaneously with to trial batch testing . Following areas
with reference to pharmaceutical products are covered under the typical
marketing plan:
i ) Market Overview: It includes the segment size, profile, rate of growth
and prospects.
ii ) SWOT Analysis: It includes the strengths and weaknesses of the
company and threats and opportunities of the environment.
iii ) Competition Analysis: It includes the analysis of the number of players
in the market , SWOT, rate of growth, market share and so on.
iv ) Product Profile: It includes the types, structure of molecule, dosage
form and regimen, action mode, merits or demerits related to segment
and so on.
v ) Clinical Profile: It includes the efficacy, precautions, clinical reports,
indications, side effects and other pharmacological aspects.
vi ) Product Positioning: It includes the product s basic position. It
generally depends on the USP of the product.
vii ) Marketing/Sales Objectives: It involves the quantitative and qualitative
objectives.
viii ) Promotional Strategy: It includes the material to be used, sampling to
be done, messages to be communicated , advertisements and other
activities like seminars, clinical trials, symposia, user studies, and so on.
ix ) Sales Strategy: It includes the distribution strategies, segments or areas
to be covered, diseases or symptoms to be focused related to different
segments targeted , doctors to be visited, etc.
The above aspects along with financial become the fundamental monitoring
document for the team of marketing.
6 ) Test Marketing/ Clinical Trial/ User Trial: In this stage, a company may
decide to go for a clinical or user trial in order to promote the medical
profession on the product’s safety or efficacy based on the nature of the
product. It is just a user trial or a controlled trial based on protocol where
the results obtained through the free samples of the product provided can
be judged by the doctors. If the results so obtained from this study are
positive then it becomes an effective promotional tool for the company.

And based on the nature and situation of the product , the trial can be pre -
launched or post - launched.
7) Commercialisation: It begins with delivering stocks to the channel
intermediaries. In view of the supply of the medication , the medical
representatives schedule promotional events and continue to visit the physicians
or doctors in whose proximity the product has hit the chemical shelf.
4.6.3. Why New Products Fail : Failure of New

Pharmaceutical Products
The various reasons responsible for the market failure of pharmaceutical product
are as follows:
1) Failing to Demonstrate Efficacy or Safety: In inability of the
pharmaceutical companies to demonstrate the product efficacy or safety is
the most basic reasons for the market failure of the product . There are several
reasons why potentially successful medicines may still fail to show
effectiveness, including a defective nature of the research, an incorrect
statistical endpoint , or merely getting an underpowered clinical trial ( i.e., too
limited a sampling size to refute the null hypothesis ), which may result from
patient dropouts and inadequate participation . It is essential to consider safety
as the primary concern at each and every stage of clinical development if it is
not the primary goal . At any point, even post -approval stage, the cost of
uncovering a safety concern arises.
2 ) Financial Impact: Financial aspect is another reason for the failure of many
pharmaceutical products. Many medicinal trials ( in third phase or even
earlier ) may fail because of lack of finances or may not have significant
chances to generate a positive results even at additional costs and if protocols
are amended.
These results increase in the ethical concerns related to the involvement of
patients. Patients normally assume that their presence in a trial can contribute
to the development of expertise based on the successful conclusion of the
trial. By contrast , underfunded experiments are more likely to skip the
recruitment required to show statistical significance at a predefined efficacy
stage.
3) Eligibility Criteria: Inability of the product to meet out the eligibility
criteria will be another reason for product failure. For example, a company
needs to consider all the aspects of target segments say patients having other
medical issues apart from hypertension while launching hypertension
medicines as they may have different eligibility criteria from the patients
who are only suffering from hypertension. And when the product fails to
match these varied eligibility criteria, it may fail in the market too.
4 ) Patient Recruitment: When patients believe that they have a chance to get
better treatment or their results can help others, they are willing to take part
in the clinical or user trials. However, still failing to recruit the significant
number of patients in the clinical trial is one of the major reasons that lead to
product failure. Moreover, one -third of the publicly funded trials fail to attain
the initial enrolment goals and required a time extension.
5 ) Additional Costs Associated with Recruitment: The additional cost
associated with the enrolment of patient, even in the same region of
investigation, is highly fluctuated and difficult to estimate apart for
remuneration . This could be one of the reasons of the market failure of the
pharmaceutical product.
6) Respecting the Patient's Concerns: Instead of getting active study drug,
when patients are more concerned about being assigned to a control group,
the retention and enrolment of patients get negatively affected. This negative
impact may result from the poor knowledge of the patients regarding the
samples or treatment being offered in a control group. The concern may
revolve around not having effective and efficient treatment at all for the
patients with poor diagnosis.
7 ) Poor Recruitment, Dropouts, and Underpowered Trials: A recurring
problem trend in the research is that fewer qualifying patients than predicted
are identified by research centres. Historically, research centres with a track
record of good results are most likely to achieve enrolment expectations.
Results from research in which multiple study sites struggled to reach
enrolment or failed to enrol any topic at all are considerable research
reporting results.
The trials may become underpowered ; either they are based on actual or
projected enrolment, when they go through too many dropouts. There are
several issues that may arise from underpowered clinical trials. By extending
the number of sites raising funds allocated to the study in an attempt to reach
minimum enrolment , the sponsor may respond to low enrolment .
As a result, this often involves the termination of some proposed experiments
in order to reallocate the funds available. This, in turn, some endpoints have
inadequate sample size to estimate the crucial outcomes.
8 ) Patient’s Financial Burden: Given the immense issue of clinical trials that
struggle to complete because of the inadequate recruiting, registration , and
retention, it is of primary importance to consider the strain each patient
undergoes in the design and execution of clinical trials, with the assumption
that retention is adversely associated with patient burden.
While focusing on the other aspects such as goals, endpoints and other
significant factors related to any specific trial , the financial burden of the
patients can be easily overlooked. While participating in the clinical trials,
the patients may become out-of -pocket. This includes commuting expenses
and employment cuts, but also treatment costs for further research. Beyond
what is called routine, insurance cannot provide medical treatment. Even
where it is, deductibles are always very large and it might not be practical for
a particular patient to continue to join .
4.7. SUMMARY
1 ) A product is the item that is developed and refined for sale in the market. It
aims to meet the customers’ needs and wants.
2 ) A product can be perceived by sense of touch. It also has features like to be
..
seen, felt, etc. e g , car, computers, t-shirt, etc.
3) Products in pharmaceutical can be divided into two categories. The
pharmaceutical products are categorised on two bases, i.e., on the basis of
products that are sold to customers directly and on the basis of products that
are sold to medical professionals.
4) In pharmaceutical industry, product management plays crucial role as it
relates to both company 's product marketing strategy and its implementation.
5 ) It is important for a manager to develop the relationship between the product
roadmap and strategy and supervise it constantly to make frequent changes as
per required.
6) The number of products that are used to cure same type of disease or are
promoted to the same medical profession segment is defined as the product
line in pharmaceutical marketing.
7) The term branding’ is a very broad concept It comprises of the entire effort
in creating a unique space in the mind of the consumers for the product of the
company, through consistent advertising and promotion campaigns.
8) Packaging is the material used to cover and safeguard the product. Whereas,
the method of enfolding or covering products into packages is called as
packing.
9 ) Pharmaceutical labelling is a process of adding labels in the pharmaceutical
products so that the correct information is given to the consumer. The FDA
( Food and Drug Administration ) plays a big role in regulating the labelling
standards for pharmaceutical, medical , dietary and nutrition-based products.
10 ) The concept of product life cycle ( PLC) is used by marketers to design a
series of strategies for dealing with each and every stage, the product passes
through. For a product, market conditions change with the change of its
position in the PLC, therefore, it must be managed through effective
strategies.
11 ) Portfolio analysis is a technique or tool which allows the company to analyse
and select the products and businesses and make the necessary strategic
decisions regarding them.
12 ) Unlike positioning of consumer products, it is more challenging to position
pharmaceutical products. The basic difference is that pharmaceutical
products deal with the lives and safety of human beings.
In essence, pharmaceutical products are a form of dosages such as tablet , pill ,

syrup, infusion or ointment, comprising the active ingredient responsible for the
medicinal action or the core value that the substance is intended to yield.
4.8 . EXERCISE
1) Define product.
2) What do you mean by product decisions?
3) What is product mix?
4) Define product life cycle.
5) What do you mean by product positioning?
6) What is product branding?
7) Give any two benefits of pharmaceutical packaging .
8) What is pharmaceutical labelling ?
9) What is labelling decision?
4.8. 2. Short Answer Type Questions

1 ) Briefly explain product line decisions.
2 ) Mention hierarchical structure of product management in the pharmaceutical
industry.
3) What are the knowledge areas of a product manager?
4 ) Describe drugs life cycle and corresponding strategic plans.
5) Explain corporate parenting analysis with its five strategic positions.
6) Mention the task involved in positioning.
7) Why do new products fail?
8) Describe the general branding strategies for pharmaceutical product.
9) Briefly explain the types of pharmaceutical packaging.
10 ) Discuss the project management in pharmaceutical industry.

1 ) Discuss project management in pharmaceutical industry . Mention the roles and
responsibilities of product manager in the pharmaceutical industry .
2 ) Elaborate the classification of pharmaceutical products. Also mention the
characteristics of product.
3) What do you mean by product mix decision? Explain the strategies of product mix.
4 ) Describe the stages of product life cycle. Also give the characteristics of product life
cycle.
5) Discuss product portfolio analysis with its advantages and disadvantages.
6) Explain BCG Matrix and GE 9 Cell Model of portfolio analysis techniques.
7) Determine the strategies involve in positioning. Also mention the importance of
positioning.
8) What do you mean by new product development decisions? Explain the process for
developing new product.
9) What is product packaging decision ? Explain the level of pharmaceutical packaging.
10 ) Mention the guidelines for labelling pharmaceutical and healthcare products. Also
mention the importance of labelling in pharmaceutical products.
CHAPTER Promotion
5
5.1. PROMOTION
The process, through which consumers ( or potential consumers) are attracted
towards the products and services of different producers or manufacturers, is
called Promotion or Marketing Communication . This process informs and
reminds the potential consumers about the products and services of the
manufacturers. It is also used to request and persuade the consumers to buy these
products and services. However, this promotion may either be performed in the
presence of the product , or even before its market introduction.
Pharmaceutical companies are actively involved in the promotion of drugs or
medicines in all over the world. The objective behind this is to modify the
prescribing patterns of the doctors and to encourage patient for self- medication.
Thus, all the informative and persuasive activities of the pharmaceutical
industries are referred to as drug promotion. It aims to convince the patients,
doctors and other health professionals to purchase the medicines. Advertisement
of drug to doctors, medical representative’s activities, direct -to-consumer
advertisement, telemarketing, scientific meetings, symposium, provisions of
samples and gifts, etc., are the activities which are involved in the promotion of
drugs. Promotional labelling and advertising are the two common ways in
which drugs are promoted.
According to World Health Organisation ( WHO ), pharmaceutical promotion
means “all informational and persuasive activities by manufacturers and
distributors, the effect of which is to induce the prescription, supply, purchase
and /or use of medicinal drugs”
5.1. 2. Importance of Promotion

The importance of promotion can be understood with the help of following
points:
1 ) Increasing Awareness: Promotion becomes highly critical activity when a
product is at nascent stage in the market or it is to be launched in a new
potential market . Thus, the overall market awareness of the product has to be
increased by citing research about the product, validating usefulness and
appeal of the product and by attracting maximum media attention towards the
product , to portray a popular image of the product. The existence of the new
product in the market has to be effectively conveyed to the target consumers.
2) Increasing Knowledge and Preference: Customers would not directly
purchase the new product or brand only by knowing that it exists in the market .
Promotion ( Chapter 5 ) 163
Promotion has the responsibility to further communicate the usefulness of the

brand to customers by assuring that the product is required by them . Putting
together product (or brand ) awareness and information, is a way to attract more
customers towards the stores for finding promoted products.
3) Increasing Retailers: Promotion communication designed by the
organisations, improves the awareness and knowledge of the potential
consumers about the new product ( s ). These consumers seek the promoted
product ( s ) in the retail stores. This prompts the retailers to offer the promoted
product ( s ) in their stores. It motivates the other retailers to offer the same
product ( s ). Therefore, promotion helps in increasing the number of retailers.
4 ) Increasing Sales and Establishing Brand: Increase in sales is the final
measure of a successful promotional strategy. As the three basic objectives of
promotion are to inform, to persuade and to remind, an effective promotion
strategy leads to the sales increment of a particular product or product -mix. It
describes how products and services offered by organisations are different
from those of competitors. Thus, it helps in sales increment and thereby
building-up of brand loyalty.
5) Maintaining Public Profile: A sound public profile of the organisation and
its products is developed through the effective use of promotion. It helps in
communicating the capabilities and importance of the organisational
products to target customers. Thus, it enables the customers to buy more.
5.1 .3. Strategies of Marketing Communication

Following are the two main marketing promotion strategies:
1 ) Push Strategy: When market intermediaries of the distribution channel are
targeted to design the promotional programme, it is called push strategy. In
this strategy, market intermediaries are encouraged to buy or stock the
organisational products, promote them and ultimately sell them to target
customers as given in figure 5.1. Here, different incentive schemes are
offered to the market intermediaries ( distributors, wholesalers and retailers )
for pushing the product in the market. Through this strategy , distributors are
encouraged to offer the products to the wholesalers, who then persuade the
retailers to buy these products, and finally encourage the target customers to
buy it.
Marketing
Marketing
Firm Communication Channel Communication End Customer
Product Intermediary Product
Push Push
Figure 5.1: Push Strategy

In push strategy, promotional techniques like sales promotions, personal
selling, trade shows and contests for salespersons are used. Push strategy is
best applied under conditions, when:
i ) The brand clutter or brand identity is weak,
ii ) Product differentiation is not available,
iii ) Access to advertising media is not possible .
iv) The budget for promotion is low,

v) There is availability of low wages, i.e., low cost of employing
salespersons as compared to advertising cost,
vi ) Brand loyalty is low ,
vii ) Marketing channels are short and direct ,
viii ) Products are industrial in nature,
ix ) Appreciating product benefits is difficult, and
x ) Institutional sales are present.
Push strategy is frequently used ( to move products through the distribution

channel ) by the firms having low budgets for promotion. Moreover, it is hard
for the customers to make a difference between the competing brands due to
brand commoditisation, which makes push strategy more operative.
2 ) Pull Strategy: In the pull strategy customers are encouraged to purchase the
product from the retailers through promotional programmes, as shown in
figure 5.2. Due to this strategy, customers demand the promoted product
from retailers. Consequently, retailers demand the given product from the
wholesalers, who, in turn , demand the product from distributors, and finally,
distributors order the product from organisations.
Product Channel Product End

Firm "
Request Intermediary Request Customer
Marketing Communication
Figure 5.2: Pull Strategy

Pull strategy is best applied under the conditions, when:
i) Brand identity is strong,
ii) Category of the product is high-involvement product,
iii ) There is perceived product differentiation ,
iv ) Brand loyalty is high,
v ) Promotional budgets are high, and
vi ) Retail includes self -service, i.e., supermarket culture.
In pull strategy promotional tools like advertising and sales promotion

campaigns ( such as gift vouchers, samples, discounts, etc.), are used which
are targeted at potential customers. Moreover, long-term brand loyalty can be
developed among customers through pull strategy. A suitable mix of push
and pull strategies may also be used in case of a situation resembling any of
the above mentioned factors and situations.
5.1.4. Promotional Mix: Methods of Promotion

Promotion/communication is one of the components of marketing mix.
Traditionally, promotion involved advertising ( through various media ), sales
promotions and personal selling techniques. In modern times, variety of
promotional tools with widespread scope is available in the market.
These include e-commerce/online marketing, point-of -purchase displays,

sponsorship, trade shows, exhibitions, event marketing , packaging, customer
service and corporate communications. The process of combining all the
promotional tools and techniques with the other elements of marketing mix in
'
order to gain competitive advantage is called ‘promotion mix .
Thus, it can be concluded that Promotion Mix or Marketing Communication Mix

involves the combined use of different promotional tools ( like advertising, sales
promotion, personal selling, publicity and personal relations) by an organisation to
generate, sustain and improve the demand of its products and services.
Methods of Promotional Mix in Pharmaceutical Industry

The methods of promotion mix/communication mix are as follows:
1 ) Advertising: It is a type of non -personal promotion. Pharmaceutical
advertising can have direct impact on consumer’s health. It is a process of
increasing awareness and interest among the patients to buy the
pharmaceutical products. It also motivates patient to buy product repeatedly.
At the clinical stage, imaginative and inventive advertising has always helped
to meet the sales targets.
2 ) Sales Promotion: Trade offers, special discounts and special offerings for
bulk purchase, etc., are the most commonly used methods of sales promotion.
The objective of sales promotion is to influence the patient for purchasing the
product instantly. In pharmaceutical industries, sales promotion creates a
networking channel for healthcare professionals and provides opportunity to
establish strong relationship with the patient. However, awareness,
experimental testing, usage and re- usage are essential in terms of sales
promotion at doctor’s level .
3) Personal Selling: Personal selling is the personal interface ( telephonic or face-
to-face ) between the prospective buyer and the seller. Personal selling is the
personal interface ( telephonic or face-to-face) between the prospective buyer
and the seller. In pharmaceutical marketing, personal selling plays a very
important role. In terms of individual doctors or groups of doctors, it may
affect all phases of the buying process. Personal selling is an approach which is
used by the salespeople ( medical representative ) to convince customer ( patient )
to buy a product. It increases the visibility of the product, generates interest,
and encourages the doctor to test the medicine for clinical use.
4 ) Publicity: In pharmaceutical industry, publicity involves engaging in
medical exhibitions, advertising special products, conducting seminars for
large clinical trials, etc. In clinical study, it shows significant effects. It
creates awareness and interest among the patients and also encourages them
for repeat usage of medicines.
5.1.5. Determinants of Promotional Mix

Following are the factors influencing promotion mix:
1 ) Nature of Product: The nature of product is one of the important
determinants of promotional mix. It affects the decision of the promotional
manager. Many grocery items are initially promoted by mass consumer
advertising with good retail display. On the other hand , pharmaceutical

products are not advertised in newspaper and journals. These products are
usually advertised in medical journals and promoted by pharmacists or
medical representatives. Medical representative contacts the surgeons and
physicians who act as an agent for promoting the pharmaceutical products.
Likewise, some convenience products are promoted through personal selling
whereas, industrial products require various other forms of promotional mix.
2 ) Stage in Product Life Cycle: The promotion mix strategies also differ with
the change in the stage of the product life cycle in which the product to be
marketed is present. When a product is present in its introduction or early
growth stage, the need is to create awareness among the customers and
persuade them to try the product. A promotion mix that involves advertising,
consumer sales promotions, trade promotions, publicity , spreading
information, etc., is considered to be the best one. In the later stages of the
product life cycle, i.e., in the maturity stage, the marketer needs to promote
and maintain brand loyalty among its customers.
3) Budget Availability: Budget is also one of the important factors that
determine the decision regarding promotion mix. With the addition of each
promotional tool , the overall cost of promotion mix increases. The firms
which do not have enough budgets go for cheaper promotional strategies like
dealer display , hoardings, wall paintings, personal selling, etc. However, the
companies having large scale funds may go for better promotional strategies,
which may involve the use of technology such as internet marketing,
broadcasting, etc.
4) Company Policy: When the marketer is deciding upon the marketing and
promotion mix strategies, he needs to ensure that they are in line with the
company policy . Desired public image, market strategy and top management’s
believe in the promotion , collectively influence the promotion mix.
-
5) Buyer Readiness Stage: Buyer-readiness also affects the promotion mix
strategy, as the cost-effectiveness of the communication tools differ at
different stages of buyer-readiness to buy the product. At the stage of
comprehension, advertising and personal selling are effective. Conviction
stage is characterised by use of personal selling. At the stage of closing the
sales, marketers use sales promotions and personal selling. At re -ordering
stage, again sales promotions and personal selling are effective.
5.2. PROMOTIONAL BUDGET

5.2.1. Introduction
Promotional budget is a blueprint for spending the money to promote a product
and to grab the attention of the customer towards that product. It is a specified
amount of money which is allocated to promote the product or belief of a
business. It is created to predict the cost involved in the expansion of a company
or in maintenance of a brand image. A budget is often set on the basis of
percentage of sales or profits.
A part of the total marketing expenditure or budget assigned for advertising in

order to attain objectives set up for advertising within a definite time period is
defined as ‘advertising appropriation or budget ' It is also known as ‘ marketing
communication ( Marcom)’. If explained in a simple manner, it is the specific
amount of money assigned by a marketing manager for advertising campaign for
a definite time period. There are several factors determining marketing
communication ( Marcom ) budget including competitor’s expenditure, pre-
determined percentage of sales, etc. A pre-arranged plan designed for the
expenditure of funds on promotion is termed as marketing communication
( Marcom ) appropriation or budget .
The total amount of money to be expended on marketing communication

activities and the manner, in which this amount will be distributed among
different products, sales territories, media, or other activities, is described by
marketing communication ( Marcom ) budget. The management can use it as a
decision -making mechanism, during allocation of existing resources to different
advertising functions and other allied activities of the company.
The nature and procedure of marketing communication ( Marcom) budget is
similar to that of advertising budget or Sales Promotion budget . This similarity
enables the marketers to use these three terms interchangeably.
The Advertising Manager in discussion with the Marketing Manager designs the
advertising budget of the firm. There are many small scale companies which do
not own distinct advertising department ; in that case the formulation of
advertising budget is the responsibility of senior management or Marketing
Manager of the company.
According to the Institute of Cost and work Accountant London. “A budget
is a financial or quantitative statement prepare prior to a definite period of time;
of the policy to be persuade during that period for the purpose of achieving a
given objective”
It is important for every pharmaceutical company to decide the maximum and
minimum level of budget. Economies of scale is at the minimum level to meet
the requirements of the market and maximum level depends on the amount of
returns in terms of sales that the company is expected to achieve. Market
competitions, size of the firm, etc., are the factors which affect the promotional
budget of a company.
5.2. 2. Objectives of Promotional Budget

Objectives of preparing marketing communication ( Marcom ) budget are as
follows:
1) To Communicate: The process of budgeting involves justifying the
resources required for the achievement of organisational objectives. The
scope and scale of tasks as well as the methods of carrying them out are
communicated by the managers to their superiors. As a result , the mutual
commitment towards the goals of the organisation between the subordinates
and the superiors is ensured through the process of communication .
2 ) To Coordinate: There must be coordination among the various tasks

performed by the various departments of an organisation. For example,
coordination between the manufacturing and the purchasing department is
necessary to make sure the proper availability of goods in the market. In this
regard , purchase and installation of equipment and machinery could also be
involved. Moreover, there could also be the necessity of proper planning and
execution of advertising promotions. Therefore, an appropriate time for
carrying out of all these tasks must be decided.
3) To Plan: Generally , budget refers to the plan for carrying out the organisational
operations over an extended time period. Planning involves answering
questions and making decisions. Traditional processes and plans are also
compared with the new ones. The process of planning also involves decisions
regarding effective performance of activities and availability of resources.
4) To Control: After the finalisation of the budget, the organisational activities
and operations are to be carried out. Operational expenses need to be within
the budget whereas generation of revenues should be as stated in the budget.
Regular monitoring is necessary to know if there are any deviations and
variations between the actual and the budgeted expenses and revenues.
Corrective measures should be taken in case of any variation from the
planned budget. In the absence of regular monitoring, the organisation cannot
keep track of its activities and cannot take any timely remedial measures.
5) To Evaluate: Comparing the budgeted and the actual performance is one of
the ways to assess a manager. The manager should try to generate profits
within the budgeted expenses. However, the performance of managers is also
affected by factors like economic conditions, market conditions, etc. It is the
responsibility of the manager to attain the targeted goals of the organisation.
5.2.3. Factors Influencing Promotional Budget

The factors which are considered while preparing the promotion budget are given
below:
1 ) Objectives to be Achieved: The objectives which are to be achieved by the
organisation determine its extent of expenditure. Objectives serve as
standards for the performance of promotion activity. The various objectives
can be:
i ) New product introduction
ii ) Building of goodwill
iii ) Increasing sales
iv) Supporting sales team
v ) Managing the competition
vi ) Building brand preference
vii ) Reaching inaccessible customers
viii ) New market entry
ix ) Improvement relationships with dealers
x) Increasing the industry’s sales
Thus, the promotion budget is prepared keeping in mind the various
objectives.
2) Funds Available: Availability of funds is also an important factor to be

considered while preparing advertising budgets. No matter how the manager
attempts to increase sales or profits, those cannot be achieved if there is
unavailability of funds.
3) Coverage Expectations: The number of people who are to be reached is
determined by the promotion coverage. It refers to reaching the target
customers with the help of various media. The nature of market which the
product caters to however, influences the degree of coverage. It affects the
development of promotion budget.
4 ) Class of the Product: Consumer goods are mainly divided into three
categories, viz . , convenience goods, shopping goods and speciality goods.
Convenience goods depend heavily on mass promotion and require intensive
distribution. As a result , they demand a heavy promotion outlay. Conversely,
less promotion outlay is required by fashion goods. This is because buyers of
such products can assess the quality themselves by going from one shop to
another.
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5) Stage in the Product life Cycle: All products go through four phases of
their life cycle, viz., introduction phase, growth phase, maturity phase and
decline phase. In the introduction phase of the product , the need for
promotion is supreme, so the promotion budget increases. Whereas in the
growth stage of the product, there is also substantial amount of promotion
expenses. On the other hand , when the product is in the stage of maturity or
decline, sales are generally revived through price appeal rather than the
strategy of promotion . Thus, the promotion expenditure lowers down.
6) Competitive Activities: The success of an organisation depends upon
identifying its competitors and their activities instead of its spending ability.
As a result , the promoter should have an idea about its competitors, their
strategy and their amount and pattern of spending. It has also been observed
that many organisations use the budget pattern of their competitors for
preparing their own promotion budget.
7) Approach to Advertising: The approach adopted towards the concept of
advertising is also a factor to be considered while preparing the advertising
budget. Earlier, advertising was looked upon as an expense similar to other
expenses of sales. However, this is not the case now. The attitude towards
advertising has gone through a transformation. Nowadays, it is regarded as
an investment.
8) Size of the Company: Size of the company also influences the promotion
budget. Bigger organisations having enormous amount of financial resources
would be liberal in preparing their promotion budget. For such organisations,
even a small percentage of sales ( set aside for advertising ) is enough to bring
about the desired outcomes. On the contrary, smaller organisations with less
financial resources have to spend relatively more in order to bring about the
same desired outcome.
9) Age of the Company: A well-established and familiar business firm is likely
to have an edge during the introduction of new goods or services. Since an
established company is known to the people and is also dependable, any new
product of that company will be readily accepted by the people. On the

contrary , it would not be easy for a new business firm to introduce products
in the market since it is not much known to the people.
10 ) Prevailing Economic Conditions: There is dynamism in the economic
activities. Just like the business cycle goes through boom and slump phases,
similarly economic system goes through the brisk and slack phases in the
economic cycle. Many companies cut -down their promotion budget in the
slump phase and increase their advertising budget in the boom phase. It
happens because of the wrong notion about promotion not being an
investment but a recurrent expenditure.
5.2.4. Methods of Promotional Budgeting in

Pharmaceutical Company
Some of the important methods of promotional budgeting are discussed below:
1 ) Percentage of Sales Method: In this method , the advertising budget is
determined by the product of the value of previous year’s sales or estimated
sales for the specified budget period and a pre-determined percentage.
Advertising Budget Amount = Past Year’s Sales or Anticipated Sales x
Pre-determined Percentage
Several factors such as nature of product, stage of product life cycle,
availability of capital , level of competition faced in the market , amount of
funds spend by rivals on advertising , etc., influence the pre-determined
percentage, while calculating advertising budget. The total percentage of
sales appropriated for advertising budget differs from industry to industry.
2) Competitive Parity Method: Some companies set their promotion budget to
achieve share-of -voice parity with competitors. Proponents of this method
argue that competitors’ expenditures represent the collective wisdom of the
industry and that maintaining competitive parity prevents promotion wars.
Neither argument is valid. Company reputations, resources, opportunities,
and objectives differ so much that comparing promotion budgets is not an
appropriate guide. Furthermore, there is no evidence that budgets based on
competitive parity discourage promotional wars.
Nowadays, many pharmaceutical companies are using competitive method
because of its own advantages. This method depends on the existing market
conditions. By the use of this method, a company is able to beat the
competition by analysing the spending of the competitors.
3) Fix Amount Allocation Method: In this method, a company allocate a fixed
amount on a particular product on the basis of past sale records. After
allocating the amount strategies are prepared accordingly.
4 ) Economy of Scale Method: Many firms use this method because the top
management wants to avoid promotional costs that define the promotion
budget at the minimum level in order to achieve the maximum output.
5) Strategic Objective and Scheduling Method: In this method , past sale
record is very important. In pharmaceutical marketing, this is one of the most
popular methods from strategic point of view. The predefined goals of sales
are accountable here. The promotional budget is distributed according to the
targets and is prepared in accordance with product sale plan.
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6) Push Led Strategy of Product Promotion: Every local company use this
strategy because their product promotion is solely based on the trade margins
provided to the retailers. However, generic products are being pushed into
the market on a wide scale. This strategy has been extensively used in the
marketing of generic drugs.
5.2.5. Promotional Expenditures in Pharmaceutical Industry

Since 1997, the use of direct -to-consumer advertisement on radio and television
for prescription drugs has been increasing. It reached at $1.9 billion in 1999 and
from 2000 almost 97 prescription products are advertised through print media or
television.
However, budget was prepared separately for symposia, promotion and

advertising, and for medical representatives who contact with pharmacists,
doctors and medical professionals. The medical representative informed doctors
and other health professionals about the product and explain the prescription, side
effects and dosage of those products. Moreover, they also provide samples to
doctors so that they can use these medicines for a treatment of a patient who
cannot afford that medicine.
Many congress members believed that pharmaceutical companies are investing

so much in promotion and advertising. However, some pharmaceutical
companies would like to cut these expenses. The proponents who want to limit
the expenditure would bring lower costs for physician recommended drugs
whereas, they do not accept the fact that promotion of a new medicine and new
treatment procedure requires cost.
On the other hand, many health professionals believed that if new medicines are
promoted only in medical journals then doctors will not know about medicines
for many years. However, those patients who are in need of new drugs will be
deprived of the recent developments in healthcare.
5.3. AN OVERVIEW OF PERSONAL

SELLING
5.3. 1. Introduction
Personal selling can be defined as a direct and face-to-face communication
between seller and buyer, in which the seller provides information about the firm
and its products to the buyer so that he or she can make the decision about
purchase. It is a two-way communication, allowing the buyers to actively
participate in the communication process.
Personal selling builds the relationship between sellers and the customers, which
in turn makes it a unique form of selling. It is an only method of direct sales
promotion. Although, it is a flexible and efficient method of sales promotion , it
also incurs a huge cost.
Personal selling is one of the most reliable methods used in the promotion of
pharmaceutical products. In highly competitive market personal selling plays a
very important role. Medical Representatives ( MRs) are the focal resource of
personal selling. Pharmaceutical companies sell the same or identical products so
personal selling is used as a method which makes the difference between the
products. Brochures, information of drug, drug samples, personalised gifts,
giveaways, etc., are the tools used in the process of personal selling.
5.3.2. Features of Personal Selling

Features of personal selling are as follows:
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1 ) Face to Face Communication: Personal selling involves developing a
relationship between buyer and seller through a face-to-face communication.
2 ) Oral Communication: Personal selling takes place through an oral
communication regarding the firm’s products and their features such as,
colour, shape, design , etc.
3) Quick Handling of Queries: In the process of personal selling buyers
enquire about the product and the seller tries to solve the problems quickly
by providing relevant information.
4) Costly Method: Sales personnel are able to contact with few buyers only in
a day. If the firms employ few personnel to minimise the expenditure, the
firms will not be able to achieve the predetermined targets. On the other
hand, employing a large number of sales personnel can incur a huge cost.
5 ) Flexible Method of Selling: Personal selling is a flexible method of selling,
since the salesperson can act and communicate according to the responses of
customers to persuade them for purchase. The salesperson can read the mind
of customers and can change his approach accordingly.
6) Slow Process: It is a very slow process, as the sales personnel go from door-
to-door multiple times for selling. It can be successful, only when the buyer
agrees to purchase, which consumes their time. This in turn , slows down the
speed of sales.
7) Knowledge about Customers: Although the sales personnel target the
customers after gathering information about them, but after contacting them
directly , they get to know more about their tastes and preferences.
8) Maintenance of Records: Sales personnel maintain records regarding
products sold and the orders received from each customer.
5.3.3. Process of Personal Selling in Pharmaceutical Industry

The steps in the personal selling process are described below:
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1 ) Pre sale Preparation: It is the first step in personal selling process. Here,
the sales personnel try to acquire the background knowledge about customers
and their needs and wants. In this step, the sales personnel also try to gain the
knowledge about market, product , its features, products of competitors, and
methods of selling. The sales personnel should know the benefits and
disadvantages of their own product as well as the products of their
competitors. This step is carried out to ensure that sales personnel are having
the knowledge about important aspects related to selling. This knowledge
helps the sales personnel in persuading the customers, by providing them
useful information and handling their queries.
2) Prospecting: The next step in the personal selling is prospecting. It is concerned
with the identification of potential customers. The next step in the personal
selling is prospecting. It is concerned with the identification of potential
customers and vendors who are willing to buy a product. This step involves the
formation of portfolio sales. Portfolio sale is a list of pharmaceuticals
pharmacies, wholesalers, etc. They can also be the potential buyers of the drugs.
This step also identifies the customers who are willing to buy a product .
3) Conquest of Arrangement the Client : This step is based on the first
impression of the customer towards seller’s attitude, his behaviour and
appearance. Presentation is one of the most important stages of personal
selling. It aims to create a personal contact between the buyer and seller which
provided some relevant information to the buyer about the new medicine. This
helps in convincing the buyer so that they can purchase that medicine.
4) Presentation: Attention, Interest , Desire and Action ( AIDA ) is the function
of any presentation. Mechanical approach and targeted approach are the two
methods of presentation. Targeted approach is used by the sales
representatives and other health professionals to identify the specific needs of
the potential buyer. On the other hand, mechanical approach is used by the
beginners in which memorised information regarding drugs are repeated.
5) Overcoming Objections: Overcoming personal sales objections is the next
step of personal selling. Usually, indication of consumer’s interest is
considered as objection. It provides an opportunity to develop new ideas.
Approaches to overcoming objections are as follows:
i ) Asking counter-questions to the sales representatives.
ii ) Providing responses to the objections of the customers.
iii ) Resolving the issues by careful consideration .
6) Completion of the Sale: Whenever a customer takes decision to buy a
product then it is called as stage of completion of sale. After the completion
of the sale, it is important for the seller to contact with the customer and
collect feedback from the customer regarding the product .
5.3.4. Importance of Personal Selling

Following points highlight the importance of personal selling:
1) Allows Mutual Communication: Personal selling allows the seller to
communicate with the customers and therefore helps in comprehending and
resolving the objections. It also allows the seller to discuss the selling points
with the customers instantaneously.
2 ) Allows Modifying the Message: The direct communication allows the seller
to modify the message for better understanding by the buyer. It helps the
seller to understand the specific problems and needs of customers. Personal
selling also helps the sales personnel to decide the time to proceed for the
next stage of selling.
3) Less Distraction: Due to direct communication, the chances of distraction
are reduced as the buyer pays more attention to information provided by the
seller. It is less distracting even when there are more than one salespeople
involved in the presentation or more than one buyer is involved. The process
of personal selling allows lesser distraction than mass-media.
4) Provides Information: For an organisation, where the marketing and sales
departments are well -structured, the sales force can play an active part in
gathering updated information about the competitors and their strategies such
as their products, pricing, promotion, etc., that will help the marketing
department in formulating competitive strategies. They also act as a medium
to know the needs and wants of the customers to address them more
efficiently.
5.4. ADVERTISING
5.4.1. Introduction
A promotional tool, which stimulates the prospective customers to take or
continue a particular decision, with the help of a commercial offering, is called
Advertising The title ‘advertising’ is taken from a Latin word ‘advertere’
meaning ‘to turn toward’. The advertisements are capable of diverting the
attention of the viewers, listeners, readers or the onlookers towards a particular
brand , product , service or an idea. Thus, any piece of information that diverts the
attention of the target customers towards a brand/product/service/idea, can be
called ‘advertising’.
According to American Marketing Association, ‘Advertising is any paid form
of non-personal presentation of ideas, goods or services by an identified
sponsor”.
According to Wheeler, “Advertising is any form of paid non -personal
presentation of ideas, goods or services for the purpose of inducing people to buy”.
In the era of advertising debate, advertising of the pharma products is of specific
interest. The nature of pharmaceutical markets is not like the other markets. This
is because the decision-makers in pharmaceutical markets are not necessarily the
customers. Professionals in healthcare industry ( physicians ) suggest a medicine
and the patients follow the suggestion ( by buying the medicine ) as well as the
suggested course of medication.
Depending upon the ad target , the advertisements in the pharmaceutical market
are either oriented towards the customer or the physician. The ones towards the
physician are considered as the heart of pharmaceutical advertising.
It involves free sample distribution, conferences, advertising in industry journals,

sales visit to the clinics or dispensaries and other places where the products can
be promoted by pharmaceutical firms. A new method used by drug
manufacturers is direct -to-consumer-advertising or DTCA. It includes
advertisement on billboards, televisions, radios, magazines and other media that
are common among the general public.
Pharmaceutical firms use advertising as a marketing technique to communicate

with the doctors as well as the customers. Advertising messages are considered
as the combination of persuasion and information.
These advertisements may probably generate the need to use pharmaceutical
product, which may not be the most operative solution of the problem or may not
be required all the time.
5.4. 2. Advertising Objectives

Following are the main objectives of advertising:
1 ) To Inform: Providing product information is the key purpose of advertising.
The organisations may broadcast existing or new products and services
offered to the public through advertisements. Advertising is also helpful in
informing the target audience about the business of a new organisation. The
advertisements strategically focus on drawing the attention of potential
customers, through utilising effective verbal and communication techniques
that become highly appealing.
2 ) To Influence: Sometimes, informing target customers about products and
services does not generate required results. So, organisations start using
advertising to influence the consumers to buy their offerings. For this
purpose, suitable languages and pictures/images are utilised by organisations
in their advertisement programs to influence the customers. These languages
and images , when used effectively in advertisements, result in highlighting
the strong points of a product or service, thus influencing the buying
decisions of the customers.
3) To Remind: Reminding the customers about offered products and services,
is also an objective of advertising. As numerous brands exist in a single
product category, it may make the customers forget about some brands. The
advertisements, thus, remind the customers about the brand/organisation and
position its offerings in the minds of the customers.
4) To Add Value: Advertising aims at presenting the product or service to the
audience in a positive light, so as to add value to the organisation’s brand
While preparing an advertisement , an advertiser focuses on increasing brand
value by emphasising on the product ’s strengths. As the basic character of
advertising is to persuade, a brand ’s value can be increased by using
advertising elements like pictures/images and texts.
5) To Assist in Other Company Activities: Apart from the above objectives,
advertising also aims at aiding other activities like informing the customers
regarding sales promotion offers like - discounts and gift cards. Use of
advertising is also profitable for the organisation, as it instructs the customers

about different uses of the product or service before they purchase it. This
also helps the salesmen, as it saves the time incurred on describing the
product functioning and use. Consequently, the saved time is implemented in
achieving sales.
5.4.3. Changing Role of Pharmaceutical Advertising

Historically, promotion and advertisement of prescription drugs were focused
towards the doctors and some limited advertising were directed on pharmacists.
In 1980s and 1990s, with the expiry of patent drugs some generic medicines
became available from competing manufacturers. Earlier, the prices of generic
medicines were lower than branded medicines thus pharmacists passed laws that
substitute branded products and generic products.
It allows pharmacists to make decision regarding the selection of generic

company ’s products. If only pharmacists are present in a committee or boards
then it is important to decide which medicines can be prescribed under third-
party payment programmes. HMOs, Medicaid, etc., are the examples of third-
party programmes. In recent times, advertising is being focused on the consumer.
5.4.4. Principles of Advertisement

A decent advertising message can be formulated with the help of principles of
advertisements. These are described below:
1 ) Attract People: Advertisements should have the potential of instantly
attracting the people. An advertisement can be called effective if it attracts a
person for only a mere second and compels him/her to take a second look.
2 ) Be Clever and Creative: A smart advertisement signifies a smart company.
Therefore, having a creative and innovative approach towards an
advertisement campaign becomes very crucial. It must reinforce the image of
the brand and grab the attention of the people. People would like to know
more about the products and services of a firm whose advertisements are
perceived to be smart and creative.
3) Speak Loudly: An advertisement can be heard more if it speaks loudly. “The
louder it talks, the more people hear to it”. Although, an advertisement which
is “loud ” may not necessarily mean a big advertisement . But this can be
attained in various different manners.
4) Do not Make People Think: Advertisements should not stimulate
overthinking among the people. Therefore, advertisers must smartly apply
their mind while creating an advertising message. It should be created in way
that a person instantly understands what the ad wants to communicate.
5) Use Colours That Make Sense: Choosing a colour scheme is also a crucial
part in advertising. Since the actual feeling of a brand works parallel to the
colour scheme therefore the colours must be selected keeping in mind the
audience and the environment which the advertisement caters to. Distracting
colours must not be used while attracting the target audience. Simple colour
scheme is advised for a serious advertisement. In the last, a colour scheme
completely depends upon the type of advertisement and the firm.
6) Be Informative: A message must be delivered through an ad . An
advertisement is a pictorial representation of a message.
7) Be Memorable: Two important elements of an effective advertising message
are memorability and uniqueness. Therefore, a good advertisement should be
unique and entirely different so that it becomes memorable.
8) Show Not Tell: An advertisement can be called effective if it demonstrates
but not tells. Using pictures/skit is advised to demonstrate a concept rather
than using simple text.
9) Use Humour (a Metaphor ) : Adding humour to the advertising message is
also a way of attracting audience. Humour can be added by using metaphors
to the ad message. Humour is not applicable all the time, sometimes, it does
not even match with the company or brand. Therefore, they should be used
judiciously.
5.4.5. Advertising Techniques in Pharmaceutical Marketing

Pharmaceutical advertising can be divided on the basis of various customer types.
The major advertising techniques that are used in pharmaceutical marketing are
discussed below:
1 ) Direct Mailing: In direct mail advertisement, a list is prepared which
consists of the chemists, druggists and the registered medical practitioners to
whom the catalogues, folders, leaflets and letters are sent on a regular basis
via, direct mails. As the mails are targeted to a specific individual, they have
a personal appeal .
2 ) Print Advertising ( Newspapers, Professional Magazine and Journals ): In
pharmaceutical industry, manufacturers use print media for the purpose of
marketing. For example , using newspapers, magazines and journals for
advertising and medical stores etc.
3) Television, Radio and Other Audio- visual Media: Television is a powerful
medium for advertising because it engages the ears and eyes of the
individuals. Radio is also a popular mode for advertising. Various
entertaining programs on television and radio are sponsored by large
pharmaceutical firms. In this way, the firms are able to commercialise their
products and themselves.
4 ) Personal Contact and Detailing: This process involves utilisation of
personal contacts for advertising and sales promotion of the products.
Manufacturers of pharmaceutical products employ individuals for developing
personal contacts with the doctors and sellers. These individuals persuade
sellers and doctors to support the products manufactured by the firm.
5) Outdoor Advertisement: Outdoor advertisement refers to advertising on
bus stands, street corners, moving vehicles, railway stations etc. These days
outdoor advertising is gaining pace. The objective of outdoor advertisement
is to draw the attention of the people passing by.
5.4.6. Direct Mail

One of the oldest means of approaching the target audience is direct mail
advertising media . Direct advertising is most common and widespread form of
media which, instead of using indirect medium like magazines or newspaper to
deliver message, uses all types of printed advertising which directly connects
with target audience. The printed form of material can be distributed door-to-
door, distributed to people who are passing along road sides, fixed under wind -
screen of automobiles, sent through posts or distributed through retailers. When
all these information written on printed matter is sent directly through mail, then
it is termed as direct mail advertising.
It is an important method of communication for the doctors and other healthcare

professionals. However, advertisement to doctors can achieve higher returns for
pharmaceutical companies. In pharmaceutical industries, direct mail is the
suitable method of educating physicians and consumers about the medicines of
the company . A direct mail displays the brand name of the company and provides
detailed information about the product. It also enables companies to interact with
customers directly.
Whenever a physician received a mail about the new drugs of diabetes or

epilepsy, then the manufacturer’s mail should be directed towards the consumer .
Direct mail is an effective approach of building communication with potential

and existing patients. It is also helpful in building trust , enhancing practice -area
authority and nurture relationship with the patients. Effective direct mail
marketing leads to more engaged patients and patient engagement is the secret to
a busy and successful practice.
5.4.6.1. Types of Direct Mail Marketing

The most common types of direct mail advertising adopted by marketers are as
follows:
1 ) Post Cards: Post card is the most widely used form of direct advertising
because of its high attention value and economy. It is designed to get direct
and immediate attention of the recipient . Post cards are used to carry brief
messages, to acknowledge the orders, to announce the next mailing, to check
the address, to rescind, to make an offer, to answer an enquiry and to bring
the mailing list up-to-date.
2 ) Envelop Enclosures: The phrase ‘envelop enclosure’ is quite likely to
mislead us. By ‘enclosure’ normally we mean a paper enclosed or attached or
tagged to the main letter. Here, it stands for the bunch of papers itself , which
is posted separately. It may be a circular, or a stuffer or a folder.
3) Broad -Sides: Broad-side is a large size advertising folder. The striking
features are its superior or jumbo size, typographical and illustrative display.
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4 ) Book Lets: Book - let is a very small book consisting of not more than 8 to 10
pages fastened with staples or glue to allow it to open as a book. A book -let
is usually mailed in an envelope.
5 ) Catalogues: Catalogue is quite similar to the book-let in physical make-up,

except that it is much larger and presents wider range of products of the
business house. It is more substantial in covering sales literature and can be
kept much longer as reference book.
6) Sales Letters: Letter or sales letter is the silent ambassador of the firm
speaking about the company products and consumer satisfaction . A sales
letter sells first the name of the company then the products or the services.
The success of a sales letter is banking heavily on its convincing, appealing
and impelling capacity.
7 ) Gift - Novelties: Gift advertising or specialty advertising is the medium that
employs useful articles known as advertising specialties or the gift -novelties
that are imprinted with the name and address and the sales message of the
advertiser. These are presented to selected audience free of cost or obligation .
These act as goodwill or reminders gifts.
8) Store Publications: A store publication is a house organ or bulletin. It is a
magazine or a miscellany published by the company mainly for the purpose
of promoting goodwill and moulding the public opinion, though it has the
tinge of sales expansion . These house organs are freely distributed to the
dealers, customers and the employees. The success of any house organ
depends on the factors like - format ; get - up, internal lay -out , colour
combinations, language, stuff and the style.
9) Package Inserts: The phrase ‘ package inserts’ is used in a broad sense and
includes packages, labels and inserts. Though a package is a container
protecting the contents and facilitating easy handling , storage and
transportation, it is also a very effective means of carrying message about the
product. Thus, it acts as a medium of advertising. For better results, the
advertising message on the package must be short and illustrative, giving
product features and its uses. The trade-mark or the brand name must be
conspicuous.
10 ) Sampling: Sampling is that method of direct advertising where the
advertisers distribute samples of the product to prospective customers free of
cost. This sampling works on the theory that a product once tested by the use
will sell itself. Sampling is done in cases of those products that are cheaper
and have repeated sales.
11 ) Leaflet: A leaflet is a single printed sheet. It is used to explain the message
fully. The printed leaflet running into a few pages may be inserted in an
envelope bearing the requisite postal stamp.
5.4.6.2. Importance of Direct Advertising

Some benefits of direct advertising are given below:
1) Flexibility: Out of all the media, direct advertising is the most adaptable and
flexible. It can adjust into any form, shape or size. The advertiser firm gets a
wide array of choice through flexibility. It may remove or add some names
as per its wish, choose among the various direct advertising media , focus on
a few or large number of prospects depending upon the cost involved, etc.
2 ) Highly Selective: Direct advertising is highly selective. It offers the scope to

the advertiser to choose prospects as per his/her confidence and choice and
direct the advertising efforts to them only.
3) Deeper Impact : Direct advertising focuses on a limited set of prospects.
Therefore, the advertising messages are directed towards the individual
prospects. Messages reach the home of the prospects and have their names on
it. It provides the freedom to the prospect to read the communication or the
advertising message when they are at leisure and relaxed. This leaves a
deeper impact on the minds of the prospects which in turn results in
increased amount of sales and satisfaction.
4 ) Personal Touch: Direct advertising is specific and personal , unlike
newspapers or magazines which are impersonal and generic. Every
advertising message can be personalised and customised according to the
individual prospect. This has a huge psychological impact on the prospect .
5) Result Measurability: Delivering the communication messages to the
prospects and gaining the desired outcomes are not the same. Only those
media whose outcomes can be effectively measured are provided under
direct advertising.
5.4.6.3. Effective Ways to Use Direct Mail for Pharmaceutical

Marketing
There are following ways through which direct mail is used in pharmaceutical
marketing:
1 ) Direct Mail Marketing to Physicians: If physicians do not allow
representative to visit their offices then it might be difficult to maintain
relationship with them. In this situation , direct mail is one of the excellent
ways of communicating with the physicians. There are following ways of
using direct mail to marketing to the physicians:
i ) Use Different Paper Sizes and Weights: Generally, physician received
mail in white colour paper thus, if manufactures wants that their mails
get noticed by the physicians then they should use vibrant colours,
textural ads such as, glossy postcards, heavyweight, etc.
ii) Customise Imagery and Messaging: A physician should stay away
from the pointless stock photos and overused medical jargons. In order to
maintain referral relationships, a manufacturer should increase the
openness with the doctors. He should use messaging for increasing the
openness and provide useful information to the doctors.
iii ) Use Data and Testimonials: Real statistics and customer testimonials
should be added in the direct mail. It provides a security to the physicians
so that they may refer the medicine to the patients.
2 ) Direct Mail Marketing to Patients: Nowadays, a large number of
healthcare providers are present in the market. Thus, a patient may choose
the provider according to the marketing security that they receive. Many
research shows that when people get direct mail then they not only feel more
valued, but it creates a positive image of the company or product in the mind
of the customers. There are following ways of using direct mail marketing to
the patients:
-
i ) Create Walk In Traffic: When a physician wishes to promote walk-in
traffic then he/she should approach people to his/her office. They should
welcome patients into their clinic, in educational session on health
problems, or in free consultation.
ii ) Insider Tips: A physicians should position themselves as opinion
leaders to remain at the forefront of their heads, and provide health -
related advices and updates to existing and potential patients.
iii ) Reviews and Testimonials: Word-of - mouth is one of the effective tools
of marketing. A physician may combine the direct mail efforts with the
digital efforts. Almost 84 per cent patients use online reviews for
selecting a physician. Thus, it is important for physician to encourage
patient to leave testimonials on digital platforms.
iv) Use Demographics to Generate Leads: Whenever a physician customises
direct mail on the basis of patient’s demographics then it will create greater
probability of conversions. For example, doctors may send direct mail to
those women who are between the age of 40 to 45 and who have not yet
begun regular mammograms. The doctors can remind them about the
importance of early cancer detection by sending a direct mail.
v ) Trigger Data Targets Behaviours that Lead to Patients: The size of
mail should be smaller but more focused . When physicians may find
behaviours that suggest a particular timing or medical needs then in that
case direct mail should be more targeted. Trigger programmes are used
to focus on the internal and external reaction of the patients.
vi ) Thank You Cards and Announcements: A thank you card should never
be underestimated especially when it includes the signature of a doctor or
office staff. It will create a long lasting impression in the mind of the
patients. On the other hand , official announcement such as, addition of a
new doctor, new location of the office, is another opportunity of direct
mail which puts an impression on the patient ’s mind .
5.4.7. Trade Journal

A periodical that comprises discussions, new developments, articles and many more,
in respect to the specific profession or trade is defined as trade journals. In other
words, it is an electronic publication or magazine focused on a particular company.
For example, a publication “Advertising Age” targets the advertising companies and
publishes news and other related matters for specific industry or trade.
It is term used for particular type of publication aimed at specific people who
operates in a specific company, generally a magazine. Articles published in
medical journals can be considered as an effective information source by the
physicians or doctors. The basic aim of publishing the medical journals is to
educate the physicians, researchers, scientists and other healthcare workers
regarding the new researches. This article lists scientific journals concentrating
on the history of nursing or some speciality of medicine.
These journals are served as the basic methods for primary care physicians or
doctors through which they get information and practice.
For example , a telephone survey was conducted of a stratified random sample of

over 600 primary care physicians in order to evaluate the benefits of certain
research programmes designed for education of primary care physicians treating
diabetic patients. Here, articles published in journal were recognised as the
potential information source in comparison to other sources of continuing
medical education that affects practice behaviour related to diabetes.
Alimentary Pharmacology & Therapeutics, The Angle Orthodontist, Annals of
Emergency Medicine, Biological Research for Nursing, Indian Journal of
Gastroenterology, Indian Pacing and Electrophysiology Journal, Indian Journal of
Pharmacology, International Journal of Psychoanalysis, Investigative Ophthalmology
and Visual Science, etc., are some of the examples of medical journals.
5.4.7.1 . Advantages of Trade Journals

Following are the advantages of trade journals:
1 ) Hits Target Audiences: Advertisers have assured of reaching out the target
audiences when they advertise in trade journals. This indicates the effective
and efficient use of the advertising budget .
2 ) Meet New Suppliers: Advertisers are able to get both new customers and
wholesalers and pharmacists who are ready to sell advertiser ’s product at
reasonable rates by advertising in trade journals.
3) Cost Effective: In order to have an effective and sustained campaign, ads in
newspaper or on TV need a lot of money. While, advertising budget gets
more mileage of longer time period with just a couple of ads in the reputable
trade journals.
4) Builds Market Image: The business of advertiser gets more respect and
importance by advertising in trade journals than advertising in newspapers or TV.
S.4.7. 2. Disadvantages of Trade Journals

The disadvantages of trade journals are as follows:
1) Since, trade journals are used by the various competitors, the physician’s
attention gets divided among various ads.
2) Journals which have wide circulation are distributed cost -free and that is why
these journals are casually read by the audiences.
3) There have been different perceptions regarding the trade journals related to
same trade. Because of the closely similar trade journals, there are varied
buying influences experienced in potential customer organisations.
4) Limited to particular content and are less comprehensive.
5.4.8. Exhibition
Many companies exhibit their products in international trade fairs and
exhibitions. This serves as a platform for direct negotiations between the sellers
and the buyers. Buyers from various countries visit major international trade
fairs. The sellers also have the advantage of showing their products to the sellers,
which often enables the sellers to make on -the-spot buying decisions. Even if the
deal is not closed, a lot of international leads are generated , which can be further
contacted either personally or through mail.
Though people do use these two terms namely , ‘exhibition’ and ‘trade fair’
inter-changeably, there is difference between the two. ‘ Exhibition’ is in effect, a
congregation of show-rooms of different manufacturers under a single roof. It is
a huge gathering of manufacturers for the purpose of displaying, demonstrating
and booking orders for their latest products. Exhibitions are non-conventional in
the sense that they do not provide entertainment. If at all , it would be the part and
parcel of their pavilion activities. Exhibitions are normally organised by trade
associations and chambers of commerce.
Trade shows are organised events that bring both industry buyers and sellers
together in one central location . Spending on trade shows is one of the highest of
all sales promotions. Marketers are attracted to trade shows since these offer the
opportunity to reach a large number of potential buyers in one convenient setting.
At these events most sellers attempt to capture the attention of buyers by setting
up a display area to present their product offerings and meet with potential
customers. These displays can range from a single table covering a small area to
erecting specially built display booths that dominate the trade show floor.
Trade shows and exhibitions are other promotion vehicles that are
increasingly important in the promotional mix , especially for industrial
products and in the international marketplace. At two recent international
packaging trade shows, the percentages of international companies were 33
per cent and 40 per cent. International trade shows offer businesses the
opportunity to identify and recruit importers/exporters and agents and to
make contact with trade bureaus of foreign governments. They also offer an
inexpensive and efficient way to meet - potential customers from other
countries. Trade shows differ from country to country .
The trade fairs, or exhibition, industry is an exciting one because of the
complexity of trade show plans, the excitement of travelling to exotic locales,
and the pressure of managing the details necessary to pull a show together.
5.4.8.1. Types of Exhibitions

There are several types of shows in which to exhibit:
- -
1 ) Association Sponsored versus For Profit: Association-sponsored shows
are exhibitions that occur as a sideline to a convention and conference of a
trader or professional association. For example, the California Dental
Association has an annual convention that includes seminars on the latest
dental practices plus an exhibition of dental equipment. Sometimes,
companies exhibit at association shows in order to support the organisation.
2) Regional versus National or Global: Regional shows attract both regional
exhibitors and regional attendees. Regional shows are usually the least
expensive to participate in because they are smaller shows. Many exhibitors
may not have a booth but simply use a table to display their offerings.
An interesting trend is that regional does not mean domestic; some regional
shows are international , drawing visitors from other country depending on
the show’s location . Choosing a regional , national , or global show depends
on one's market and marketing strategy .
3) Vertical versus Horizontal: A vertical show is one that focuses on one
industry or profession. Horizontal shows or shows that include many
industries and professions. The trend , though, is to vertical shows that
narrowly define their target market. The narrower the audience, the more
efficient trade show dollars can be because, with proper show selection, a
larger percentage of the audience is more likely to be prospects.
5.4.8.2. Importance of Exhibitions

Importance of exhibitions is as follows:
1) Wide Display Collection: The exhibitor can display a wide range of
products and services. International buyers can source as per their choice
from a wide collection. One can meet large number of prospective buyers in
a brief duration of time.
2 ) Close Proximity: Opportunity to view from close proximity, the USP of the
competitor s products, and their selling strategies A face to face interaction
with the prospective foreign customers. An opportunity to learn from the
mistakes of the competitors.
3) Display and Demonstration: An international exhibition or a fair gives a
unique opportunity for display and demonstration of the company product
range in an alluring atmosphere created in each pavilion or the stall. Each
producer can tell the story, philosophy and the success of his house through
presentation , demonstration and literature.
4 ) Deeper Impact: An exhibition or trade fair is a very strong channel of
persuasion and an essential ingredient of marketing mix. As compared to
press and broadcast advertising, this medium has higher degree of impact as
it has the opportunity to compress into one activity the whole selling
operation namely, attention, interest, persuasion, desire to purchase and
finally placing an order.
5) Market Development: Exhibition and trade-fairs are the fertile grounds for
publicity and sale, huge crowds visiting these places provide ready market
for the products displayed and demonstrated. They uncover wide variety of
uses for products that lead to identification of new markets.
6 ) Cost Effective: Trade shows offer budget friendly solutions to market the
brand and sell the product in foreign market. With a simple booth, some
technological accessories and selling charm, conventions offer simple,
inexpensive ways to get the brand on the market.
7 ) Relationship Builder: The personal interaction offered at trade shows
allows the marketer to establish a direct , more effective relationship with the
client. The marketer can establish a client base through business cards or
compiling e- mail lists.
Promotion (Chapter 5 ) 185
8) Product Launch: An exhibition or a trade show is the perfect platform to

launch a new product or service as all parties - members of the industry,
interested buyers and media are in attendance. This enables the marketer to
attract the attention of multiple audiences towards the product or service easily.
9) Build Relationships: Exhibitions or trade shows are excellent places to
network with potential buyers and client , thus, giving the marketer the
opportunity not only to develop connections but also personal relationship
with said buyers and clients.
10 ) Instant Sales: Exhibitions and trade shows enable one-on-one interactions
with the target international market. This interaction can help the marketer to
overcome buyer doubts, thus, enabling him to accelerate the decision -making
process ( buying process). The marketer can also kick start the revenue by
selling the products and services at thee stall at the exhibition or trade show.
5.4.8.3. Medical Exhibition

Medical exhibition presents a great place for the physicians or doctors to find
best medical equipment’s at reasonable prices. It is a one-stop place for many
visitors to purchase clinical equipment’s for their clinics, hospitals and also
allows them to get international dealership. The participants of medical
exhibition include decision makers or professionals from reputed medical
organisations, physicians, hospital owners, and doctors.
Following are the tips to exhibit effectively among the competitors:

1 ) Know Product like the Back of Hand: The company is required to know
each and everything regarding the product in terms of its benefits, uses, side
effects, and various other features as the visitors in the exhibition are doctors,
physicians and other medical professionals. He should ensure that he must be
present at the time when visitors asks product -related queries as this will help
him in getting trust of his visitors.
2 ) Make a Lively Presentation: There are only two possibilities in the medical
exhibition. Either there are few visitors or number of visitors. In any of the
above two conditions, one should not lose his confidence as enthusiasm and
excitement he presents at the presentation time sets the tone for sale.
3) Reach Out to the Attendees: Sometimes, one is required to reach out the
attendees to draw them towards his stall in a medical expo where world -class
medical equipments are in large numbers. This will also be successful
because the participants will be confused to choose their stalls to know more
about their preferred medical equipment.
4) Know More about Competitive Products: One is required to know all about
his competitor’s product regardless of that his product might be one of the
most trusted and preferred product in the market. This is so because the visitors
might ask about the similar product and they will be happy if they answer their
queries. This strategy will help the marketers to generate more sales lead.
5 ) Do Strategic Marketing: There are very rare chances of any sales in the
medical expo. Competitive products, hesitation to go for it instantly could
be some of the reasons for this. Therefore, marketers are required to be

smart enough so that their product booms in the mind of the attendees
even after they left the expo. By offering samples, future seminar info,
self -explanatory brochures and more, marketers can do strategic
marketing. This will do wonders for marketers and they are not required
to do branding or re - marketing .
5.4.9. Sampling/ Samples Distribution

Sampling/ sample distribution refers to free distribution of samples to the
customers. This can be done as door-to-door distribution or distribution through
retail stores or alongwith the purchase of a particular product. These products can
also be given to professional for recommendation. The customers get a chance to
verify the product quality before they actually start using it. For example ,
pharmaceutical companies give away free samples of medicines to doctors, who
if find these suitable, may also prescribe to patients.
Determining the method of distributing the sample is important from the point of
view of costs. This also makes an impact on the consumers to whom the samples
are offered. The best prospects will receive the products through the best or
appropriate methods of sampling distribution.
1 ) Door - to- Door Sampling: This refers to the approach in which the products
are delivered to the residence of the prospect customer directly. Door-to-door
sampling is quite an expensive method as it consists of labour costs however
this can be compensated if the prospect customer resides in a geographically
prominent area or/and if the marketer has sufficient information that can
determine the target market . An affordable way is to deliver the sample,
alongwith newspapers, to the place of the customers.
2 ) Sampling through the Mail : This includes targeting specific market areas
as where the sample has to be delivered . Usually the samples used here are
lightweight , small in size and non-perishable. Here the marketer has control
over the location and timing of sample delivery.
3) In-Store Sampling: This method is extremely popular, particularly when
talking about food products. Temporary demonstrators are hired who meet
the customers and passers-by in small booths and handover small sample
product packets to them. This method of sampling has been quite effective
for food products as the customers instantly get to know the taste of the food
item as well as get all the necessary information from the demonstrator
simultaneously. The demonstrator gives away certain discount offers or
coupons that enhance immediate trial purchase. However, besides being
highly useful, this method is quite expensive and requires a sound planning
and cooperation from the retailers.
4 ) On - Package Sampling: This method of sampling involves attaching the
sample with another product. Considered widely as one of the most cost
effective methods of sampling, this is helpful especially in case of multi -
product brands because they can attach a sample of the new product with the
existing ones.
5) Event Sampling: This method has emerged as the fastest growing and
highly popular methods for sample distribution. Sampling programs are used
as a part of integrated marketing programs that feature events, tie-ups with
media , and other activities. Through these events it becomes easy for the
customers to understand the product completely rather than just tasting as
happens in case of food and beverages. These events take place in concerts,
sporting events and other relevant venues.
5.5 . RETAILING
The origin of word ‘retail is related with the French word ‘ retaillier ' which
7
means ‘to break the bulk’ or ‘to cut a piece off . In the process of distribution, the
products move from the manufacturers to the final customers. Several
intermediaries or middlemen are involved in this process and the retailers are the
last ones. Retailers directly offer the firm’s product to the customers, and thus,
link the customers with the manufacturers.
They collect feedback from the customers directly and convey it to the
manufacturers. The comprehensive combination of different activities or steps
which are used to sell a product or a service to the consumer for self or family
consumption is termed as retailing. Individual demands of target customers and
supplies of available producers are effectively matched by the retailers.
Over the past few years, the Indian pharmacy retail industry has undergone
substantial growth due to an epidemiological transition and favourable
demographic trends. The selling of pharmaceutical products which includes
prescription and OTC products is defined as the pharmacy retail. Pharmaceutical
retail stores sell pharmaceutical products and their related services alongwith
various other FMCG products.
The pharmacy retail is an autonomous avenue that sells generic medicines with
or without prescription to the general public that they carried already while they
visit to the retail pharmacy store. These stores can be a part of big corporations or
an autonomous body.
In order to ensure the correct and healthy operation of retail pharmacies,
governments and medical authorities have implemented different legislation.
While the units were originally set up by entrepreneurs and pharmacists, large
companies displayed interest in the segment as they are in the process of
developing a national network. In an effort to catch the consumer ’s attention,
they adopt a corporate way of positioning their brand.
5.5. 2. Functions of Retailing

Following are the main functions of retailing:
1) Sorting: Sorting is one of the main functions in retailing. Producers
generally offer large quantities of similar or different products and expect it
to be sold in lots to concerned buyers to reduce cost , whereas customers

require variety of products to choose from and buy only in small quantities.
Therefore, in order to fulfil the demand of both the parties, retailers
perform the function of sorting. In this, they first buy the products from
numerous producers having different type of products in large quantities
and then offer those products to the customers to choose from for making
their small purchases.
2) Breaking Bulk: Another function of retailing is breaking bulk. Big lots of the
products are transported by the producers and wholesalers in order to reduce
the costs which are then divided into smaller quantities by the retailers so that
these products can match with the consumption needs of consumers.
3) Holding Stock: Holding stock is also a function of retailing which is
significant to the producers. In order to support the producers in inventory
control and production , retailers provide stock holding facility to them. In
this, they maintain a significant level of inventory of products to be supplied
instantly to the ultimate consumers when they need it.
In this way, they help producers to regulate the level of production and price.
It is also significant for the consumers because they know they can buy
desired products in desired quantity from the retailers at any time.
4) Supplementary Services: Through variety of services, retailers make the
buying process simple and convenient and thus, ease the process of changing
merchandise ownership. In order to add value to the products, retailers are
engaged in after-sales services, product guarantees and entertaining
consumer complaints. In order to improve the sales, credit and hire-purchase
services are also offered to the customers.
Filling orders, processing orders and delivering as well as installing products
also come under the function of retailers. Some retailers appoint sales
executive so as to assist the customers with the displayed products. These
executives answer the queries of the customers and provide desired
information about the concerned product.
5) Channel of Communication: Acting as a channel of communication
between producers/ wholesalers and the customers is also a function of the
retailing. Customers learn a lot about the features, traits of a product or
service with the help of sales force, advertisement and displays. On the other
hand, sales forecasting, consumer complaints and delivery delays are learnt
by the producers. Defective or unsatisfactory merchandise and services can
be replaced or modified by the manufacturer.
6 ) Transport and Advertising Services: Retailers can also provide assistance
to the small manufacturers in advertising, storing , transporting and pre-
payment of goods. In case of significantly small retailers, this activity can
also be performed from the manufacturer’s side The percentage and volume
of sales which is required to be covered by the cost and profit determine the
number of functions which will be performed by the retailer.
5.5.3.Difference between Wholesaler and Retailer in

Table: Difference between Wholesalers and Retailers in Pharmaceutical Industry
Wholesalers Retailers
1 ) Wholesalers in pharmaceutical The retailers in pharmaceutical
marketing deal with medical marketing deal only with doctors and
institutions, hospitals, retailers, patients.
pharmacists and dispensaries.
2 ) Wholesale drug license is must . Must have number oi retail drug license .
3 Buy products directly from the Buy products from the wholesalers .
)
company .
4) Wholesaler's profit margin varies from The profit margin of retailers varies
8% to 12% . from 16% to 24% .
5) The wholesaler' s sale is not affected by Retailer s location may affect his sales .
'
the location of his shop.

6 ) Sell product in bulk . Sell product in small quantity .
7) No pharmacist is icc|iincil to gel license . Pharmacist is required to get license.
8) Sell products at price to retail basis . Sell products on the basis of maximum
retail price .
9) Patients cannot buy medicines directly Patients can directly purchase medicines
from wholesalers. from retailers.
5.5.4. Importance of a Retailer in Pharmaceutical Industry

The importance of a retailer in pharmaceutical industry is as follows:
1 ) The one who distributes the medical practitioner’s prescription and sells
medicines to the patients is retailers. It is important that the product is
accessible at the retail level . The doctor changes the prescription and
suggests an alternative if the prescription is returned because of lack of stock.
Moreover, the retailers sometimes have a strong impact on his customer that
he himself suggests an alternative brand to his customer.
2) Retailers are considered as an essential information source for the company
regarding the circulation of competitor’s product and doctor’s prescribing
behaviour. The importance of retailers has been realised by the medical
representatives as they spend significant amount of time with the retailers to
get useful information. Retailers have number of information such as the
shelf -stocks of assorted items, the medications taken in by the patients and
the bill books for discerning observer to see, note and act upon .
3) Once the retailer is convinced about the company and its products, it
facilitates to increase the prescription drugs with OTC profile and sale OTC
formulations.
5.6. PUBLIC RELATIONS
A group of individuals having a definite impact or likely interest in an
organisation’s capability , to attain its targets, is termed as public. Public
relations ( PR ) comprise of various events or shows, created to foster a better
image of the organisation or of the products offered by the organisation.
“Public relation is an extensive process of communication to establish and

continue the constructive relations between the organisation and its stakeholders
or society”.
According to Indian Institute of Public Relations, “ Public relations practice is
the planned and sustained effort to establish and maintain goodwill and mutual
understanding between an organisation and its public”.
According to Public Relations Society of America ( PRSA ), “Public Relations
( PR ) help an organisation and its publics relate to each other to the benefit of both”.
Public relations are a necessary component of pharmaceutical communications.

Public relations is a management as well as a communications function and the
steps in the public relations process.
5.6.2. Types of Public Relations

The principal tools used by public relation campaign are as follows:
1 ) Press, Radio and TV/Media Relations: PR and media relations principally
undertake the job of communicating or declaring about an organisation and
its products through various media vehicles namely; radio, TV , newsletter,
newspaper, magazines and internet. To generate and gather media coverage,
PR executives present particular stories about organisations, their goods and
services and the concerned spokesperson/authority, with the help of media.
Creating attention -grabbing yet appropriate stories and communicating them
through media, is the base of such media coverage. It is very important for
PR professionals to know that media do not ask for any type of payment to
place a story and only attractive and worthy stories are placed in media.
2 ) Media Tour: Media tour helps in advertising and promotion of new and
innovative products. It is a process where a spokesperson of an organisation
visits all major cities to launch a new product . The spokesperson participates
in radio and television talk shows and organises interview sessions with
different media ( print as well as internet ) reporters. Public influencers like
bloggers are also invited in interview sessions. A spokesperson can be
anyone having a reliable connection with the target audience. He may be an
employee of the organisation or any expert or celebrity hired by the
organisation for such purposes. Generally, media tour is utilised in case of
launch of a new book, where writer or author travels across nation to
promote its latest publication.
3) Newsletters: Advertising agencies establish correspondence (on regular
basis) with their existing and prospective customers, by using newsletters.
These newsletters are addressed to end users, trade buyers or business clients
and are send through postal services or emails i.e. e-newsletters. Through
newsletters, marketers try to provide information about the products and
promotions and some interesting content to customers.
4) Special Events: A range of events including grand receptions, parties,
elegant dinners, stunts, etc., comprise of special events. These events are
created specifically for a particular group of audience.
5) Sponsorships: Association with a specific group or activity enables the

organisation to build a positive image and brand acceptance. The sponsor,
who helps the marketer to accomplish its goals, reaches target audience and
is in accordance with the financial budgets of organisation, should be
selected by the marketer. Starting from the local institution level ( like theatre
or art centre ) to the level of Olympics, various local, regional , national and
international sponsorship options are available. Many organisations striving
for sponsorships, furnish data on various levels, comprising of details about
the audience which is part of the event, level of exposure, signage, printed T-
shirts, public declarations, other occasions, etc.
6) Employee Communications and Relation: Several organisations exchange
information on a uniform basis with their employees so as to keep them
aware about the latest corporate events/happenings, incentive plans
corresponding to sales figures, employee related matters and also notify them
about various new products and services to be launched. Several ways are
used to be in contact with the employees like printed and online newsletters,
emails, intranet, etc. Large scale organisations have the public relations
department functioning simultaneously with human resource department to
establish better communication system with the employees.
7 ) Website Development: Website has been a useful tool for marketers to build
up a relationship with the target consumers. Website development has been
an area, which consumes lot of time and requires technical expertise. But
these days, the technical hassles have reduced and many user -friendly
website development applications are available. These applications help in
instant and easy creation as well as updation of web pages. Due to invention
of these applications, internet is now used differently. Now -a-days, websites
act as a medium, through which every individual can put forth his/her
viewpoints, whereas, earlier it was only a place to promote and provide
necessary information about various products and services and a platform for
e-commerce.
8) Market Monitoring: With the outbreak of various information vehicles on
the internet, it has been further important to observe each remark or opinion
stated about the firm and its products and services. Organisations should
keep a close watch on conversations taking place on various blogs, social
media, chat corners, public messaging sites, forums, etc., and also on content
of conventional print and broadcast media. In case of any negative remarks
and wrong information being propagating about products, the marketers
should be quick in replying to such issues before they get unmanageable due
to latest technology avenues.
'
9) Customer Service: An organisation s customer service department provides
customers the necessary assistance or service before, throughout as well as
.
after a purchase. According to Jamier L Scott, “Customer service is a
series of activities designed to enhance the level of customer satisfaction, i.e.,
the feeling that a product or service has met the customer expectation”.
Marketers use customer service as an important tool towards understanding
how a product will be valued by a potential customer.
5.6 . 3. Public Relation Strategies in Pharmaceutical Industry

A public relation activity involves informing about new products, participating in
charitable events and seeking opportunities to support the society. A well-defined
public relation strategy is beneficial for every company. Pharmaceutical industry
may use following public relation strategies:
1 ) Offer Free or Discounted Vaccinations: A pharmaceutical company should
provide free vaccination for elderly people and for families who cannot
afford vaccination fees. The company must plan the event in advance and
spread the information about the event by the use of press and newspaper.
2 ) Donate Time and Resources: Pharmaceutical company should find ways to
donate non-prescription medicines to the healthcare providers and clinics. If
a person runs a clinic then he may ask their clinical staff to serve their
expertise and time in health care events like blood donation. On the other
hand, a firm should maintain donation records , time spent by staff in health
care services, and the amount of money contributed as donation.
3) Inform the Public: A pharma company should share some healthcare
information with the general public. They may use social media to provide
some healthcare tips to customers and other public. Company should inform
the public about health care events and other helpful resources that are useful
for the public.
4 ) Keep an Open Line to the Press: Pharmacy industries should interact
with press in order to inform about new product , new services, any
changes or renovations in stores. Pharma company should hire formal
representatives who write articles on local publications. This method is
more useful than press.
5.6.4. Role of Public Relations in Healthcare Industry

There are following roles of public relation in healthcare industries:
1 ) Communicating: Pharmaceutical industries address many clients and every
client wants customised messages so that they can understand the message
easily. Different clients prefer different languages and tones. For example,
while communicating with clients the industry must focus its attention
towards product quality. On the other hand , while communicating with
physicians the industry must focus on patient compliance, usability of
product and various other possible issues.
2 ) Building the Brand: Reputation of a company is totally based on the image
of the company in the mind of the public. Media is one of the vital factors in
making public opinions. It is helpful in recognising the presence of a
company by positive publicity . Hence, it is essential to build strong
relationship with media professionals.
3) Company Advisor: Due to frequent changes and advancements, healthcare
industry is at the increased risk for potential crisis. Thus, company hire
outside advisors to overlook on the problems arises during crisis. This is an
objective and creative approach which is helpful in providing business
recommendations. It can also be used for effective business communication.
4 ) Enhance Business Growth: Healthcare industries attracting new customers

by building brand image and by spreading information and messages that
audience demands. This helps in maintaining good relationship with the old
customers and building trust .
A public relation activity requires strategies that need to be integrated with

the sales, marketing and management divisions of the company. These
strategies can build the brand , lead to large media coverage, and create
demand that ultimately generates revenue.
565
I I « Limitations of Public Relations
Few limitations of public relations are as follows:
1 ) May not Appear in Media: The different communication vehicles of public
relations may not be featured in media , particularly those which are to be
scrutinised by media personnel.
2 ) Incapable to Link Messages: The messages given by PR communication
mechanisms are not linked with the organisation even if those being heard,
seen or read by the public.
3) Fail to Achieve the Objectives: These tools can fall short of the
expectations or goals set, for which they were formulated by the
organisation . In such cases, it may remain unknown to the organisation, as
determining the efficacy of public relations is quite a complex process.
4 ) Brief Life: These tools have a brief life, as for having desired impact on the
target audience, frequent changes are made though providing new and better
information.
5) Incapable of Changing Perception: Altering the perception of potential
customers about a particular product or service or any other business dealt by
the organisation is quite complicated. Number of communication tools need
to be used for a considerable amount of time in order to change the
perceptions of consumers.
5.7. OTC PRODUCTS

5.7.1. Introduction
Drugs that are legally allowed to be sold over the counter without the
prescription of any medical practitioner are called as OTC drugs or over the
counter drugs. In India, drugs which are not in the list of prescription drugs are
referred to as non -prescription drugs or OTC drugs.
OTC drugs are directly sold to the customer without any prescription whereas
prescription drugs are sold if it is prescribed by any registered medical
practitioner. Many countries select OTC drugs by regulatory agency. This agency
ensures that the ingredients of drugs are safe for consumer even without any
valid prescription. The OTC drugs are regulated by APIs ( Active Pharmaceutical
Ingredients ) rather than end products.
There are following Indian OTC drugs which promote brand on television :
1 ) Analgesic or Cold Tablet
i ) D’cold ii ) Stopache iii ) Disprin
iv ) Vaporub v ) Triaminic vi ) Crocin
vii ) Vicks
2 ) Antiseptic Cream or Liquids
i ) Boroplus ii ) Borosoft iii ) Dettol
3) Balm or Rubs
i ) Amrutanjan Joint Ache Cream
ii) Emami Mentho Plus
iii ) Himani Fast Relief
iv) Iodex
v) Moov
4 ) Cough Lozenges
i ) Halls
ii ) Strepsils
iii ) Vicks Cough Drops
5) Digestives
i ) Dabur Hingoli
ii) Eno
iii ) Hajmola
iv ) Pudin Hara
6 ) Health Supplements ( Tonic and Vitamin )

i ) Boost
ii) Calcium Sandoz
iii ) Complan
iv ) Dabur Chawanprash
v) Himalaya
vi ) Horlicks
vii ) Jeevanprash
viii ) Sona Chandi Amritprash
ix ) Sona Chandi Chawanprash
7 ) Skin Treatment ( Medicated )
i ) Clearsil
ii) Itch Guard
iii ) Krack
iv ) Ring guard
5.7.2. Pharmaceutical Marketing Strategies for OTC

Products
A pharmaceutical company depends on its novel research molecule. When this
research molecule loses its market due to the expiry of patent then these
prescription products are shifted towards the OTC drug product with the help of
OTC drug marketing. Pharmaceutical company may use following marketing

strategies for the marketing of OTC products:
1) Divest Strategy: Pharmaceutical industry uses divest strategy to cut the
advertising and promotional expense. As well as companies are trying to
redirect their saving towards those brands that are still enjoying the patent
protection. The success of this strategy depends on the inertia of doctors,
patients and other stakeholders.
2 ) Value for the Money: Introducing new flavour, delivery system, or
packaging in OTC products may lead to an additional , functional and
emotional consumer benefits. This creates image of the brand and increases
the awareness of the brand . These innovations typically do not extend the
patent life so it is difficult to pass the costs on consumer when there is
general competition. Thus, this strategy is one step ahead towards price
competition. On the other hand , these innovations can also be copied by
generic products which have negative impact on sales.
3) Invest in Generics: Pharmaceutical industry launches its own generic for
capturing both ends of the market. This will reduce the efficiency of generic
manufacturer and may discourage them from entering in this category. Many
pharmaceutical companies recognised that production and marketing of
generic drugs require various skills in their traditional business. It is difficult
to be strong in both models of business. Therefore, generics competition will
eliminate the profitability of the original brand.
4) Research Molecule Strategy: Pharmaceutical companies can renovate
themselves by launching new formula, dosages and by demonstrating
usefulness of new indication. Pharmaceutical companies conduct researches
which is helpful for providing better service to the doctors and for
communicating on the diseases. Although conducting research is a time
consuming process and requires money and resources but it will create a
brand value of the company.
5.7.3. Promotion of OTC Medicines

OTC drugs are promoted by the use of following promotional strategies:
1) Advertisement: According to Drug and Magic Remedies (Objectionable
Advertisement ) Act and Rules, advertisements which show a slope of illness
are not allowed to be shown on public. There is no such law for the promotion
of recommended drugs. A manufacturer must follow certain standards for the
Advertisement of OTC drugs. The advertisement should not be biased and
support the rights of the consumers. The sales capabilities must contain worthy
data of creation and must have ethical understanding with retailers and doctors.
2 ) Sales Promotion: Sales promotion is used to increase the short-term sales. It
includes special offers and discounts coupons. Marketing corporation is
considered to be progressively associated with the new system of present -day
exchanges.
3) Personal Selling: Personal selling means selling drugs directly to the
customer, pharmacist or physician through sales force. The personal selling
of OTC drugs is somewhat similar with the promotion of FMCG products.
4) Direct Mail: A pharmaceutical company use direct mail to generate enough

publicity for the OTC drugs. It increases the rate of response and improves
the sale of the company.
5) Push and Pull Strategies: Push and pull strategy is used in the promotion of
OTC drugs. Push strategy ensures product availability and convince doctors,
retailers and chemist by providing them product knowledge and offers. In
this strategy, product is promoted from manufacturer to wholesalers,
wholesalers to retailers and then retailers to patients. In pull strategy, the
marketer makes a request to the customers by advancing their products.
Thus, it promotes the product through appropriate channel by assuring the
retailer and distributor.
5.7.4. Online Promotional Techniques for OTC Products

Promotion on internet is more interactive because it creates a direct contact
between manufacturer and customers. This may give immediate results.
Promotion means introducing organisation , product , or services to the customers.
This helps in increasing the demand for the products or services.
Digital marketing is a new concept. Thus, pharmaceutical marketing requires
different approach for doctors, consumers and OTC products. The popularity of
over-the-counter drugs leads to the expansion of OTC sales on online platforms.
In U.S., approx 25 per cent OTC sales currently occur via online platforms.
Amazon, an online retail giant has recently launched a private label line known
as Basic Care which contributes the trend. Amazon started private label line after
strategic partnership with Perrigo which is a US largest OTC private label
manufacturer.
Digital Marketing Strategies
There are following digital marketing strategies which are used for the promotion
of OTC drugs:
Digital Marketing Strategies
Launching a Content Marketing

Portal [ Rx & OTC| Leveraging Offline Recall for Online
Conversions
Leverage Digital Media

Connect with Health Apps and
Wearable Tech
Tap into Social Media
1) Launching a Content Marketing Portal [ Rx & OTC]: Nowadays,

informative and helpful content is one of the strongest tools for
pharmaceutical marketing. Doctors are spending their times in analysing the
information deeply . This will help in making better decisions regarding drugs
or treatments. A content marketing portal proves beneficial for the promotion
of Rx drugs. It is helpful in maintaining the brand image and dispelling the
information.
Consumers spent most of their time on online for searching symptoms,

medicines and off -the-shelf products that help them in treatment and
prevention. Thus, in such case content marketing portal act as an effective
tool for providing information, engaging consumers, creating awareness and
promoting brand .
2 ) Leveraging Offline Recall for Online Conversions: In the marketing of
OTC drugs, establishment of identity and creation of maximum buzz plays
vital role. This is the reason due to which pharmaceutical company will avoid
the use of TV and radio for the promotion of drugs. Nowadays, it is effective
to supplement these traditional mediums with the online media.
3) Leverage Digital Media: Those online media which are trusted by the doctors
can easily bridge the communication gap between the pharmacies and the
physicians. Marketer should tap on neutral online medium where doctors can
discuss about the OTC drugs and get detailed information from other
healthcare professionals. This online connection can be valuable for building
relationship with doctors and getting the latest information in about the drugs.
4) Connect with Health Apps and Wearable Tech: In order to tap into the
health tech savvy user base, OTC brands may consider advertising and
sponsorship. For example, Propeller Health and GlaxoSmithKline have a
’smart inhaler’ that detects those factors which trigger asthma attacks in the
patients.
5) Tap into Social Media: Many big pharma companies have social media
accounts. OTC brands can promote their product by using online media such
as, facebook live, infographics, educational videos or by twitter posts. This
help marketer for interacting with the customers and answering their queries.
On the other hand , instagram is a digital platform where marketers can share
their emotion -based content to the patients.
5.8. SUMMARY
1) The process, through which consumers ( or potential consumers ) are attracted
towards the products and services of different producers or manufacturers, is
called Promotion.
2 ) Pharmaceutical companies are actively involved in the promotion of drugs or
medicines in all over the world. The objective behind this is to modify the
prescribing patterns of the doctors and to encourage patient for self -
medication.
3) Increase in sales is the final measure of a successful promotional strategy.
4 ) When market intermediaries of the distribution channel are targeted to design
the promotional programme, it is called push strategy.
5) In the pull strategy customers are encouraged to purchase the product from
the retailers through promotional programmes,
6) Promotion Mix or Marketing Communication Mix involves the combined
use of different promotional tools ( like advertising, sales promotion, personal
selling, publicity and personal relations) by an organisation to generate,

sustain and improve the demand of its products and services.
7 ) In pharmaceutical industries, sales promotion creates a networking channel
for healthcare professionals and provides opportunity to establish strong
relationship with the patient.
8) In pharmaceutical industry, publicity involves engaging in medical
exhibitions , advertising special products, conducting seminars for large
clinical trials, etc.
9 ) Promotional budget is a blueprint for spending the money to promote a
product and to grab the attention of the customer towards that product .
10) Pharmaceutical companies are using competitive method because of its own
advantages. This method depends on the existing market conditions. By the
use of this method , a company is able to beat the competition by analysing
the spending of the competitors.
11 ) Personal selling builds the relationship between sellers and the customers,
which in turn makes it a unique form of selling. Medical Representatives
( MRs ) are the focal resource of personal selling.
12) Advertisements in the pharmaceutical market are either oriented towards the
customer or the physician. The ones towards the physician are considered as
the heart of pharmaceutical advertising.
13) Direct mail is an important method of communication for the doctors and
other healthcare professionals.
14) A periodical that comprises discussions, new developments, articles and
many more, in respect to the specific profession or trade is defined as trade
journals.
15 ) Medical exhibition presents a great place for the physicians or doctors to find
best medical equipment’s at reasonable prices.
16) The pharmacy retail is an autonomous avenue that sells generic medicines
with or without prescription to the general public that they carried already
while they visit to the retail pharmacy store.
17 ) A public relation activity involves informing about new products,
participating in charitable events and seeking opportunities to support the
society.
18) Drugs that are legally allowed to be sold over the counter without the
prescription of any medical practitioner are called as OTC drugs or over the
counter drugs.
5.9. EXERCISE
1 ) What is promotion?
2) Define pharmaceutical promotion.
3 ) What is personal selling?
4 ) List the principles of advertising.
5 ) What do you mean by trade journal ?
6 ) State vertical versus horizontal exhibitions.

7 ) What do you mean by public relation?
8) Mention the role of public relation in healthcare industries.
9 ) What is OTC product?

1) Briefly explain the promotional budget.
2) Mention the changing role of pharmaceutical advertising.
3) Explain the term Sampling.
4) What is medical exhibition ? Give the tips to exhibit effectively.
5) How to do promotion of OTC medicines.
6) Differentiate between wholesaler and retailer in pharmaceutical industry.

1 ) Explain promotion mix for pharmaceutical product. Also mention the determinants
of promotional mix.
2 ) Elaborate the methods of promotional budgeting pharmaceutical company. Give the
objective of promotional budget.
3) Explain the process involve personal selling of pharmaceutical industries. Describe
the features of personal selling.
4 ) What is advertising? Explain the advertising technique in pharmaceutical marketing.
5 ) Determine effective ways to use direct mail for pharmaceutical marketing . Also
mention the importance of direct advertising.
6) What do you mean by retailing? Describe the importance and functions of retailing
in pharmaceutical industry.
7 ) Explain the public relation strategies in pharmaceutical industry.
8) Describe the online promotional techniques for OTC products. Also explain
pharmaceutical marketing strategies for OTC products.
CHAPTER Pharmaceutical
6 Marketing Channels
6.1 PHYSICAL DISTRIBUTION MANAGEMENT

6.1.1. Introduction
Place or distribution is a critical element of marketing mix. It is the location
where goods are made available for purchase. This is also termed as distribution
channel. It becomes convenient for some manufacturers to sell their products to
wholesalers who in turn sell them to the retailers, while other manufacturers
prefer to directly sell their products to retailers or customers. This whole process
is known as ‘distribution channel’. Place involves different methods of
transportation and storage of goods and then making them accessible to the end
consumers. The role of the distribution system is to deliver the right product to
the right place at the right time. Other than this, distribution also carries out
facilitating , logistical and transactional functions. The decisions related to
distribution include market coverage, logistics, selecting channel members, and
level of service. Numerous conditions govern the selection of distribution
method. Any physical or virtual ( internet-based ) store can be a part of it .
The decisions related to place activity is majorly dominated by distribution
channel. All place decisions are associated with the distribution channels, as it is
the means of delivering the products to the customers. The decisions associated
with the selection of a mix combining different types of distribution channels for
delivering the goods from producers to final consumers is referred to as ‘ place
mix’. Customers are offered these goods via wholesalers and retailers or directly
through chain stores. Any one of the channels is chosen, keeping in mind the
convenience of customer’s reachability . Hence, place is a part of organisational
strategy which depicts the way it intends to make its goods and services available
to its customers so as to attain profitable exchange from them.
Managing the flow of material and goods, from raw material to finished product
is known as Physical Distribution Management or Distribution Management.
Physical distribution management ( PDM ) is the most significant aspect of every
business and it is extremely complex process. We can say that PDM is
marketing’s other side. The purpose of marketing is to create demand , while the
purpose of PDM is to fulfil the demand by making the product efficient , low-
cost, and quickly available.
The main objective of PDM is to make sure that the product is available at the
right time and at the right place. Among the four P’s of marketing, ‘ place is
considered to be as least dynamic. Scholars and experts of marketing are inclined
to focus on most apparent feature of marketing. Many of the PDM expertise are
derived from military practices. Now , PDM is considered as an important field of
overall marketing management.
Pharmaceutical Marketing Channels ( Chapter 6 ) 201
Fulfilling the demands by creating place and time utility is the main concern of
distribution management .
Distribution Management = Physical Distribution + Marketing Channel
Distribution management involves meeting the customer needs by controlling,

managing, and implementing the flow of material from point of origin to the
point of consumption.
6.1 .2. Tasks in Physical Distribution Management/

Components of Physical Distribution
The following are the tasks in physical distribution management:
Tasks in Physical Distribution/Components
of Physical Distribution
Pharmaceutical Procurement
Port Clearing
Receipt and Inspection
Inventory Control
Storage
Requisition of Supplies
Delivery
Dispensing to Patients
Consumption Reporting
1 ) Pharmaceutical Procurement: The point at which the commodities and

medicines are available for delivery to the health patient is the point at which
distribution sequence intersects the procurement process.
2) Port Clearing: The first step for the purchaser is to make medicines
available for distribution in case where the medicine has not been locally
acquired or where the international suppliers have not taken the
responsibility for port clearing. Port clearing duties include shipment
identification as soon as they arrive at the port, importation documentation
processing, customs requirement completion , proper storage of medicines,
examining the signs of losses and damages, collecting medicines as soon as
the entire legal requirement has been completed.
3) Receipt and Inspection: The staff of central stores will completely inspect
each shipment received from local supplier or port. Until this inspection has
been carried out , the shipment should be kept away from other stocks. The
duty of the inspector is to inspect the damaged and lost items. They also
check whether or not the quantity, quality, presentation, labelling, packaging
and drug type are in compliance with requirements laid down in the contract.
All the shipments should be inspected accurately and immediately in order to
ensure that the suppliers are fulfilling their duties. Before settling a claim, the
insurance companies always ask for records related to any loss incurred.
4) Inventory Control: Coordination of the flow of distribution system of the

pharmaceutical firm and protection of the inventory against theft and corruption
depends upon effective establishment and maintenance of inventory records and
procedures. Inventory control system is used for demanding and issuing
medicines, for developing stock balance and consumption reports and for
financial accounting, etc. Records should be maintained in detail so that audit
trail which accurately tracks the flow of medicines and funds in the system can
be provided. Audit trail should satisfy the requirement of government auditors
and programme managers. The adapted inventory management system should
match the needs and capacity of each and every individual involved in health
programme. Supervisor should monitor the inventory records regularly in order
to avoid or identify any type of loss. Cost -effective and responsive distribution
system requires a careful inventory control.
5) Storage: A fully automated warehouse at national level and a small wooden
boxes lying in health centre (or being carried by community health worker )
can act as storage facilities. The quality of the medicine and the loss and theft
caused due to damage can be reduced and managed by having a proper
located, organised and maintained storage facility. It also helps in
maintaining a continuous supply of goods to health facilities.
6) Requisition of Supplies: The pharmaceutical supply system is operated either
under pull or push system. One of the key parts of inventory control system is
the forms and procedure for requisition . Different country can have different
procedure and forms for requisition. These forms and procedure can also differ
from one level to another within the same country. The requisition system can
be computerised or manual or both. It should be developed in a manner that
facilitates inventory control , provides an audit trail, list issued medicines and
assists in financial accounting for simplifying distribution process.
7 ) Delivery: Warehouse staff can deliver the medicines and health facility staff
can collect it. The medicines can be transported via railway, waterway, airway,
porters and roadway . The carriers can be either from public and private sector
and between them the most cost-effective carriers should be selected. The
method of transportation should be selected carefully by the transport manager.
The deliveries should be scheduled in a systematic and real manner so that
economic and timely services can be provided. Transport planning should be
done keeping in mind the factors such as fuel and lubricants availability, safety
along supply lines, vehicles breakdown, private sectors services availability,
seasonal changes in access route and various other local factors.
8) Dispensing to Patients: The purpose of distribution system is achieved at
the time when the medicines are received , prescribed and distributed by
health centres, hospitals wards, community health workers or outpatient
clinics.
9) Consumption Reporting: The last activity involved in distribution cycle is the
flow of information related to consumption, for example, actual demand,
stock balance and procurement. Maintaining records related to inventory and
requisition helps in preparing a straight-forward compiling consumption report.
6.1 .3. Strategic Importance of Distribution

Distribution is also an important factor for the success of organisation though it
has not been given much importance. The importance given to distribution is
much lower as compared to personal selling and advertising. The customer will
get satisfied only when he/she receives the goods. The biggest influencing factor
for the company’s product is distribution and an important role is played by
distribution manager in marketing.
Earlier distribution is considered as a tactical problem which forces manager to
do everything that is possible for minimising cost and conflicts. The increasing
knowledge regarding the importance of physical distribution has changed the
organisation’s perception with respect to distribution. Hindustan Unilever
( FMCG products leader ) recognised that getting products in stores shelves in a
quick and efficient manner is important for attaining profitable position in the
market. It has been experienced that neither technology nor market factors are the
reasons behind the failure of half of new product. Such failure results from the
mistakes that take place during physical distribution.
One of the important parts of marketing mix is distribution. It becomes difficult
for the buyer to purchase goods that are unavailable in the market. There are
following strategic importance of distribution:
1 ) Distributors are the assets of the company as they may be clinical in
providing all the market information to the company. On the other hand , they
are also aware of the retailer’s touch points in a particular market .
2 ) It is important for a company to generate revenue on large scale. Distributor
plays a very important role in large scale revenue generation because they
cover all the potential market of the company.
3) For the execution of marketing campaigns, a company requires information
related to competitor’s product, competitor sales trends and market coverage
Distributor may provide all these information to the company by
continuously watching the market trends and intensity of competition.
4) Distributors play a very important role in market research as they provide
primary data to the respective company which they obtained from day -to-day
business operations.
5) When there is a strong relationship between distributor and manufacturer
then in this condition distributor has a habit of making sacrifices and sharing
the risk of failure. This is only done when there is lot of trust between the
manufacturer and distributor, and lot of time and efforts are invested in
maintaining the relationship with the suppliers.
6.2. CHANNELS OF DISTRIBUTION

6.2. 1 . Meaning and Definition of Channels of Distribution
Marketing channels are the route between producers and users through which
goods are distributed. These routes are also known as Distribution Channels or
Trade Channels. In case of services, the distribution channel is direct, since the
services are intangible in nature. A distribution channel generally requires a
buyer and a seller. The buyer can either be an industrial consumer or the end
customer. Other than the buyer and seller in the marketing channel , various
middlemen are also involved in the supply chain. Here, middlemen may be
distributors, wholesalers, retailers or dealers.
Broadly, a distribution channel involves the movement of goods and services
from the manufacturer to the ultimate consumer passing through various
intermediaries. Therefore, the key actors in the distribution channel are
manufacturers, intermediaries and consumers.
Channel of distribution is one of the major concerns of the pharmacists in
pharmaceutical industries. In pharmacy, the term ‘channel ’ is commonly used to
describe the routes which are used to communicate with the patients. In
pharmaceutical distribution channel , information flows in both inward and
outward direction, i.e., both customers and distributor collects the information
about the patient. In pharmaceutical industries, distribution channels are used for
distribution of medicines, payment of medicines and protection of the medicines
from any kind of risk. It also facilitates the appropriate usage of the medicines.
A pharmaceutical company is not only responsible for research , production and
medication of drugs but it is also responsible for distribution of drugs to the
patients and the physicians. Manufacturer of company must ensure that the
quality of the medicines should not be compromised. Indian manufacturers have
no control over the multi -layered distribution system thus cold -chain
management process continues to be complicated and expensive. However,
manufacturers are constantly realising the importance of effective distribution
channel. Thus, overcoming the problems of distribution process will be helpful
for both patient and the healthcare system.
According to American Marketing Association, “A channel of distribution or
marketing channel is a structure of intra-company organisation, units and intra-
company agents and dealers, wholesalers and retailers through which a
commodity product or service is marketed ”.
According to Philip Kotler, “Every producer seeks to link together the set of
marketing intermediaries that best fulfill the firm ’s objectives. This set of
marketing intermediaries is called the marketing channel ( also trade channel or
channel of distribution )”.
6.2.2. Nature of Distribution Channels

The nature of distribution channels is enumerated below:
1 ) Pathway or Route: Distribution channel is the route through which goods
and services are transmitted from the manufacturers to the consumers.
2 ) Flow': In a distribution channel , the goods and services flow in a sequential ,
smooth and unidirectional manner.
3) Composition: The channel comprises of intermediaries like agents,
distributors, retailers, wholesalers, etc., who willingly participate in the
distribution process.
4) Function: The functions of distribution channel are performed by

intermediaries. They assist in transfer of title, ownership and possession of
goods and services between manufacturers and consumers.
5) Remuneration: The remuneration of intermediaries is paid in form of
commission. Manufacturers compensate the remuneration as commission
that they provide or by adding it to the price of goods sold.
6) Time Utility: The goods are made available to the consumers whenever
required.
7 ) Convenience Value: The goods provided to the consumers are in convenient
shape, size, unit, package and style.
8) Possession Value: It facilitates consumers to attain goods with the
ownership of title.
9 ) Marketing Tool : Distribution channel acts as a medium for screening the
external aspects of the marketing organisation and for bridging the physical
and non-physical gaps which occur while transferring goods from the
manufacturers to the consumers.
10 ) Supply - Demand Linkage: It bridges the gap between the manufacturers and
consumers by eliminating all the spatial ( geographical distances) and
temporal ( time based ) discrepancies related to supply and demand .
6.2.3. Ways to Improve Pharma Distribution Channel

Distribution channels play a very important role in pharma company or pharma
franchise business. Distribution channel enables pharma companies to distribute
their medicines or drugs from one place to another place. The company may start
losing the trust of customers if there will be no distribution channel. Good
network is very important for any pharma company . Company’s growth will
depend on the reliability of its distribution channel.
A business involved in pharma sector must be aware of the ways of making

efficient pharma distribution channel. With the help of distribution channel, the
manufacturer executes the work systematically so that a wide range of drugs is
delivered to the customers on time and in safe condition . The marketing strategy
which helps in improving the performance of pharma distribution is as follows:
1 ) Make it a Priority: There should be at least one dedicated person who keeps
an eye on the distribution activities of the pharmaceutical companies. This
individual will consider all the activities of the company and various
marketing programmes for generating greater revenue.
2 ) Track Performance: Another essential thing that a company has to keep in
mind is whether they know the best sellers of every state such as, tracking
orders, volume, total revenue, etc. This practice will help pharmaceutical
practitioner to track the performance of their competitors.
3) Communication: An organisation should continuously interact with their
customers so that they are aware of the changes in their requirements. This
helps in fulfilling the requirements of the customers.
4 ) Do not Fluctuate Prices: The manufacturer must avoid the fluctuation of

prices. Fixed pricing will help the manufacturer in building trust within
customers and establish a position in the market .
5) Detect the Problem Swiftly: The performance of a pharmaceutical company
can be improved by swiftly detecting the problem and finding the solution of
that problem. This is another key for success.
6.2.4. Pharmaceutical Marketing Channels

While a marketing channel requires a minimum of two Manufacture
parties, in so far as the manufacturer of prescription
drugs is concerned, the law requires that atleast one
intermediary stands between the manufacturer and the Physician
consumer - i.e., the doctor. It is illegal for the
manufacturer to sell prescription drugs directly to the
patient. Usually, the physician is not considered a Pharmacist
member of the distribution channel. Instead , he is
considered an influencer or intermediary customer and,
therefore, is not drawn into such diagrams. He is Consumer
considered only as the decision -maker. Dispensing
Figure 6.1:
doctors, however, are members of the distribution Pharmaceutical
channel. One cannot overlook the role of the Marketing Channels
pharmacists and the need of their services in the
process of drug distribution. The distribution channel, when consider the role of
the pharmacist looks as in figure 6.1:
The “ pharmacist” in the distribution channel could be either a retail pharmacist,

who is commonly known as a retail chemist or druggist , or a hospital -pharmacist.
The five basic members of the distribution channel are:
1 ) The manufacturer, 2) The physician,
3) The wholesaler, 4 ) The retailer, and
5) The consumer.
Another characteristic feature of pharmaceutical distribution in India is that only
licensed persons can manufacture and sell allopathic drugs. This is required by
law. Even other systems of medicines like Ayurveda and Unani, require a
separate licence for manufacturing. Homoeopathic and Unani drugs, however,
are made an exception to the requirements of the Drug Technical Advisory Board
and Drug Consultative Committee as per the Drugs and Cosmetics Act of 1945.
It is, therefore, imperative that a retail chemist or druggist should also be
qualified and licensed to sell pharmaceutical preparations.
The minimum qualification for a registered pharmacist , who can dispense
medicines on the prescription of a medical practitioner, is a Diploma in
Pharmacy ( D. Pharm ). Since pharmaceutical products are concerned with the
health of the people, it is essential that the persons who dispense the drugs on the
prescriptions of doctors possess adequate technical knowledge. Only then can
they interact and communicate with consumers regarding matters related to the
dosage, side-effects, drug interactions, etc.
Currently, there are a number of unqualified but experienced persons working in

various retail pharmacies. If the 1979 amendment of the Pharmacy Act is strictly
implemented, there would be a severe shortage of qualified pharmacists in the
country . The 1979 amendment of Pharmacy Act states that only qualified and
registered pharmacists shall be allowed to mix , prepare or dispense medicines.
Even if all the experienced but unqualified pharmacists are to be trained and
educated to acquire the necessary qualifications, it is quite an uphill, if not
impossible, task to provide them the necessary education and training.
There are over 60 institutions turning out around 3500 diploma holders in
pharmacy every year. This is by no means adequate to meet the ever -increasing
demand for dispensing pharmacists in the country.
6.2.5. Selecting the Appropriate Channel of Distribution

For effective performance of channel , it is essential to select an appropriate
channel of distribution. In past, pharmaceutical companies did not adopt the
concept of supply chain management. Nowadays, various factors are forcing the
firms to change their traditional way of conducting business. There are following
determinants that are considered during the selection of distribution channel:
1 ) Firm Infrastructure: A manufacturer will inquire about the potential
distributor before selecting a distributor. This inquiry can be done by past
and existing customers and by its competitors. Financial strength,
management ability , and experiences are some of the variables of firm
infrastructure. Management ability is one of the essential factors for the
selection of potential distributor. The ability of management is defined by the
quality of management and its core competencies related to the market and
strategic operations.
Financial strength demonstrates the overall capabilities of potential channel
members, in addition to information related to specific channel functions. It
can also be gained by frequent visits from their business set -up and third
party opinions. Distributor’s experience is also important for the selection of
supply chain management. If distributor has an experience of the market then
it will increase the competitive position of the firm in the market. Knowledge
management , resource mobilisation, and uncertainty reduction , etc., are the
benefits achieved by the past experience.
2 ) Marketing Capabilities: Marketing capability is defined as the collective
capacity of the firm to apply the knowledge, skills, capital and resources to
capture the highest market share. A manufacturer is highly dependent on
distributors for various marketing activities such as promotion and
merchandising. The distributors also act as a marketing partner as they
provide information related to the market which is essential for the
manufacturer to understand the changing requirements of the customers.
The marketing capabilities consist of product capability, sales strength, and
market coverage. Most of the firm considers distributor’s selling ability at the
first priority. This is so because it ultimately leads to sales and captures the
market shares. In order to know about the effectiveness of the distributors, a
manufacturer will observe the sales performance of potential distributors.

Marketing competence is also considered as the ability of distributors to
cover maximum geographical areas. It would help in achieving the market
shares, high volume sales, high product availability, market penetration and
high brand reputation. Marketing capabilities are also measured by the
distributor’s product line . If a distributor is carrying the same product or
products that have the same delivery mechanism then it would be beneficial
for the distributor.
3) Relationship Intensity: While selecting supply chain members, the
manufacturer will carefully evaluate the relationship factors. This consists of
enthusiasm for building relationship, commitment , willingness to share the
information and familiarity of manufacturer with distributor. On the other
hand, a good distributor plays a very important role in the success of
manufacturer. A company should hire those distributors who are enthusiastic
about the contract and devoted for achieving success. Commitment is also
important for building long- term business relationship. It is important that the
manufacturer is familiar with the prospective distributor. Manufacturers are
more likely to choose those distributors with whom they are familiar or who
have been recommended by channel customers.
4 ) Logistics Capabilities: Logistics is considered as a source of core strategic
advantage. Logistics services are properly managed by the distributors. It
brings financial advantage as well as flexibility , operational efficiency and
value to overall supply chain. An effective channel requires that its members
are equipped with good logistics capabilities. It is the basic responsibility of
distributor to manage the inventory cost. Efficiency of delivering products is
another important aspect of firms’ logistics. Whenever a right product is
delivered in the right quantity , at the right time and place then it is referred to
as delivery efficiency . A distributor should always be prepared for
increasing the value-added content of its logistics services. This will be a
source of competitive advantage for the organisation . So innovation becomes
an important factor for selection of supply chain .
5 ) Strategic Issues: A distributor should have some strategic importance. A
manufacturer has interests associated with the distributor. This can be in the
form of gaining high market share, to counter any strategy of the competitor
or to form a high profile organisation. Interests might be varied but these
concerns are always on their mind. Sometimes, a cultural match between the
manufacturer and distributor is important so that it becomes easy to carry out
business.
6.2.6. Types of Channel Members

The types of channel member in indirect distribution channels ( excluding the
zero level ) are as follows:
1 ) Manufacturer: In pharmaceutical distribution channel, features of the
manufacturer play an important role. The features are explained below:
i ) Financial Capacity: An important factor to be considered in selecting
the distribution channel is their financial capacity. In today’s era, it is too
expensive as well as practically impossible to reach the customers or the

retailers to sell directly to them. It is beyond the capacity of a small -scale
manufacturer In the late 1960’s, companies like, Alembic, East India
Pharmaceuticals, Glaxo etc., practised multiple retailing, which was very
expensive. Therefore, they shifted to an almost standard channel of
distribution ( manufacturer-wholesaler-retailer-consumer ).
ii) Reputation: Reputation is an important and a hard laboured feature of a
manufacturer or an individual. A manufacturer can enter into a channel
of distribution with the help of its reputation . Fair dealing, integrity and
quality are some of the aspects on which reputation can be build.
iii ) Manufacturer's Policies: Defined and practical policies of the
manufacturer with respect to different aspects of business play a vital
role in an effective channel of distribution.
iv) Physician: In the activities of pharmaceutical marketing and
pharmaceutical marketing channel , a very decisive role is played by the
physicians. No customer can buy or no retailer can sell drug without
being prescribed by a physician. In pharmaceutical distribution channel ,
the role of physician is indirect, i.e., he/she does not purchase or resell
the pharmaceutical product to the patient , but can act as a decision -
maker. Doctors or physicians who provide medicines are an exemption
to this situation . The role of such physicians is direct in the distribution
channel , as medicines and drugs are directly purchased by them from the
manufacturer and sold to the patients.
2) Wholesalers: Wholesaler is the second largest intermediary after the sole
selling agents in comparison with the size, resources and territory of
operation . A wholesaler is also known as ‘stockist’ or ‘distributor’. If a
manufacturer wants more than one intermediary to handle the work, then
wholesalers work under the sole-selling agents. Mostly, consumer goods
industry prefers wholesalers instead of intermediaries.
3) Super-Distributors: Distributors, super-stockists or super-distributors can
be employed by pharmaceutical firms under a contract. The functions
performed by these are same. However, different firms choose to call them
by different names. Super-distributors handle the distribution which covers a
comparatively larger area like, a whole region or some part of it. Firms select
these super-distributors on the bases of certain factors like, extent of market
penetration required by the firm, business volume , size of the chosen state or
region , product - mix , etc. Super-distributors who sell products of different
pharmaceutical firms are referred to as Accredited Wholesale Dealers
( AWDS ). Other than that , these distributors also sell pharmaceutical products
directly to dispensing doctors, hospitals and nursing homes.
4 ) Retailer: Retailers are intermediaries who sell products to the final
consumers for household or personal use . Therefore , a retailer does not
sell healthcare services or drugs for resale. In other countries, retailers of
pharmaceutical products in India are also termed as druggists and
chemists.
-
5 ) Value Added Resellers (VARs ): They are intermediaries who purchase the
basic goods from manufacturers, then add value to it or modify it on the basis
of product attributes, and finally resell the goods to the end consumers. VAR
is a firm where new and attractive features are added to the existing product
transforming it into a unified product or turn -key solution . This is very
common in the electronics industry where a software application might be
combined with the hardware.
6.2. 7. Types of Distribution Channels

There are following types of distribution channels:
1) Direct Marketing Channel ( Zero Level ): Direct marketing channel is one
of the primary distribution channels. In this type of channel, a pharmaceutical
company manufactures and markets its product by its own. In recent times, it
becomes difficult to find this type of distribution channel. This channel is not
preferred by those companies who are trying to make a position in the
market. This is because it involves high marketing cost and high risk is also
associated with it. On the other hand , those companies who are established
by its own and who have high capital are still using this type of distribution
channel . In direct marketing channel, a company may hire one distributor for
drugs who are usually known as super stockiest.
Figure I
Manufacturer | Super Stockist Stockist | | Retailers |
2 ) Indirect Marketing Channel: Nowadays, this distribution channel is

commonly used by many pharmaceutical companies. Indirect marketing
channel is a type of distribution channel in which only manufacturing
functions are performed by the manufacturer. However, drugs are sold and
marketed by an intermediary agent called as marketing company. In this type
of distribution , drugs are sold by the name of the marketing company not by
manufacturing company. On the other hand, the marketing company further
creates its intermediaries for distribution. The distribution intermediaries that
are appointed in this network are called as stockist , super stockist, retailer,
etc.
Figure 2
Manufacturer I Company Super Stockist | | Stockist | Retailers ]

Marketer
I Stockist | | Retailers I
3) DTP/ Direct to Pharmacy: This is another type of distribution channel in

which pharmaceutical industry sells its drugs directly to the hospitals or
pharmacy retailers. Thus, in this distribution channel there is no role of
wholesalers. Here, pharmaceutical companies build direct relationship with
the hospitals and pharmacists. This type of distribution is very rare in India
but in Australia and some European countries it is popular.
Figure 3
| Hospitals
Manufacturer Pharmacists |
Exclusive
Manufacturer Marketing
Company Retail Stores
4 ) Through Franchise: Many Indian pharmaceutical companies have recently

used the franchisee system for sales, distribution and marketing of the drugs.
In this type of distribution, a company firstly appoints franchises and then
these franchises appoint retailers and super stockists. Buying a franchisee
offers profit making margin in form of net sales and distribution network
rises with faster rate. This is considered as one of the key drivers for buying a
franchisee. Figure 4
Marketing
Manufacturer Franchise
Company
| Super Stockist Stockist | Retailers |
6.2.8. Importance of Distribution Channels

Following points highlight the importance of marketing channels:
1 ) Ensuring Proper Availability of Desired Product: The marketing channels
provide the desired product at the desired marketplace. For this,
organisations first identify the relevant marketplace having significant
demand for the concerned product. Then , suitable retail outlets or stores are
selected in that marketplace. Thus, through these outlets, organisations
provide desired products to target customers.
2) Improving Sales Outlook In a particular retail store, the sale of organisational
products depends on its display. The marketing channels arrange a proper
display of organisational products in the retail store so that the sales outlook of
that particular retail store as well as organisation can be improved.
3) Establishing Cooperation between Distribution Factors: Various factors
affect the distribution system like, type of unit loads, delivery time limits,
order size, delivery access, handling aids or tools, nature of product handling,
etc. A strong cooperation between these factors is required for efficient
distribution. Therefore, establishing cooperation between such factors is also
a function of organisational marketing channels.
4) Achieving and Maintaining a Level of Service: Marketing channels
achieve and maintain a level of service towards both customers and
suppliers. This is important for the customers. They observe the service
performance of different suppliers so as to compare them and to determine
the future purchase decision .
5) Minimising Logistics and Total Cost: Cost of production is included in the
price of a given product. This cost is very important for pricing. Therefore,
marketing channels of an organisation are focused to minimise the logistics

and total cost of the product. A particular cost reflected by selected
distribution channel must be evaluated in terms of type of product served and
the required service level .
6 ) Collecting Accurate Information: Marketing channels collect accurate
information. An efficient distribution system requires sound flow of
information. Sales trends, cost monitoring, service levels, damage reports,
inventory levels, etc., are helpful in getting required information.
6.3. DESIGNING CHANNEL

Channel design decisions are significant to the company because they define the
market presence and buyer’s accessibility to the product . In addition, channel
design is of great importance as it involves long-term investments by the
company . Usually, it is simpler for the companies to alter the price and
promotion decisions in comparison with the marketing channels. The channel
design decision involves two major steps, that is:
1 ) Designing the Right Channel: This stage comprises of segmenting the
market, recognising the right positioning responses to segments’ demands,
choosing the target segment on which the company wants to focus and
launching ( in the absence of a pre-existing channel ) or modifying ( in the
presence of a pre-existing channel ) the channels in the market.
2 ) Implementing that Design: The implementation stage entails a deeper
understanding of each channel members in terms of their power and
dependence. It also requires an estimation of the potential sources of channel
conflict and an effective plan to create the environment where an ideal
channel design can be implemented without any hurdles. The result of this
plan will lead to channel coordination.
The best and most effective form of distribution channels are those where the
interests of the distributors and manufacturers are in congruence. Therefore,
before making any investments, the company has to get assured about the
distributor's objectives, attitudes and customer focuses.
6.3.2. Dimensions of Channel Design

After deciding the various alternative channel structures, the channel manager
needs to evaluate the variables or dimensions affecting various channel
structures. These dimensions can be categories into six types:
Dimcnsioiu of Channel Design
Market Dimensions
Product Dimensions
Company Dimensions
Intermediary Dimensions
Environmental Dimensions
Behavioural Dimensions
1) Market Dimensions: Marketing concepts act as the basis for underlying the
philosophy of marketing management including channel management, which
largely focuses on customer ( market ) orientation. At the time of formulating and
adapting the marketing mix, the marketing managers should keep in
consideration the needs and wants of customers which is their prime motive.
Therefore, the products offered, the prices charged, and the promotional
messages employed by the company should clearly define the needs and wants
of customers. Thus, market variables are the bases for designing the marketing
channel. These market variables are basically of four types, which are as follows:
i ) Market Geography: The geographical size, location and distance of
market from the manufacturers is termed as ‘ market geography ' . From
the view point of channel design, market geography is crucial for
developing an appropriate channel structure that serves the market
effectively and ensures timely supply of goods and services to the
markets.
ii) Market Size: Market size can be determined by the number of
customers that form a marketplace. From the view point of channel
design , the numbers of customers are directly proportional to the market
size. Hence, it can be said that the greater the number of customers,
bigger is the market size of the product.
iii ) Market Density: The market density can be identified by evaluating the
number of customers per unit of land area. Here, the cost of distribution is
inversely proportional to the market density and vice -versa. This
particularly applies in the case of flow of goods and services to the market.
iv) Market Behaviour: Market behaviour is concerned with four types of
buying behaviour:
a ) How Customers Buy: Usually, customers tend to buy in small
quantities.
b ) When Customers Buy: The buying behaviour of customers is
highly seasonal in nature.
c) Where Customers Buy: Customers largely tend to shop at home.
d ) Who does the Buying: Both , husband and wife are involved in the
buying activity.
2 ) Product Dimensions: The product characteristics also influence the
decisions related to channel design . Some of the important product variables
are bulk and weight , perishability, unit value, technical versus non -technical
and newness of the product.
i ) Bulk and Weight: Products which are heavy and bulky in nature have
high handling and shipping costs. The manufacturer of such products can
reduce their cost by shipping goods in large quantities and to the selected
possible destinations only. Subsequently, the channel structure for heavy
and bulky products should be short or direct, i.e., from the manufacturer
to the customer . In some exceptional cases, where customers buy small
quantities and prefer quick delivery, the company needs to appoint
intermediaries.
ii ) Perishability: There are products which are bound to rapid physical

deterioration and are perishable in nature, like fresh foods. The rapid
change in fashion trends is also considered highly perishable. In this case
the significance of channel design is to develop suitable channel structure
for highly perishable products that can be directly delivered from
manufacturers to ultimate consumers.
iii ) Unit Value: Usually, the lower the unit value of a product , the longer
will be the channel structure. The reason behind such channel structure is
low cost of distribution which arises due to low unit value of a product .
Typical examples of such products are convenience goods at consumer
market and operational supplies in the industrial market . These products
use number of intermediaries so as to share the cost of distribution by
other products. As a result , this leads to economies of scale and scope.
iv) Technical versus Non -Technical: For highly technical products in the
industrial market direct channels are used for distribution of products.
Through direct channel , manufacturers can sell the products to customers
briefing them about the technical features of the product and also provide
after sales services. In case of non -technical or relatively less technical
products in the consumer market such as personal computers short
channels are used for distribution.
v) Newness: In both the consumer and industrial markets, new products
require extensive and aggressive promotion in the introduction stage to
generate primary demand in the market. It will be difficult to promote a
new product if longer channels are used. Therefore, it is beneficial to
adopt shorter channel to gain product acceptance.
3) Company Dimensions: The company variables which affect the channel
design are:
i ) Size: The size of firm is directly proportional to the availability of
several channel options. The power base of large firms like expertise,
coercion, and reward helps them to apply a considerable amount of
power in the channel. As a result , large firms have greater options for
selecting channel structures than the smaller firms. Thus, the capacity of
large firms to develop a suitable distribution channel has high degree of
flexibility as compared to smaller firms.
ii ) Financial Capacity: If a company has huge financial capacity then its
dependency on intermediaries is relatively low as compared to small
firms. In few cases, where direct selling is required, the company needs
to have its own sales force and service staff or retail outlets, warehousing
and order processing competencies. All these facilities are easily
affordable by large companies. There are exceptions to this design , like
direct mail -order channels, electronic channels, etc., who are not
financial capable of hiring large intermediaries.
iii ) Managerial Expertise: It is very essential for the companies to have
managerial expertise in order to perform distribution functions. If the
company lacks managerial expertise then it can initially rely on
intermediaries in the form of wholesalers, selling agents and brokers.

However, with time when the company gains experience, the distribution
channel can be changed.
iv) Objectives and Strategies: If a company’s general and marketing
objectives and strategies have a high degree of control over the products
and services, then the use of intermediaries can be eliminated or reduced.
This will also lead to restricted choice of channel structures which
includes aggressive promotion and rapid reaction over changing market
conditions.
4 ) Intermediary Dimensions: The factors relating to intermediaries which
affect the choice of channel structure are as follows:
i ) Availability: The availability of suitable intermediaries also affects the
channel structure. If the suitable intermediaries are not present then the
company may face problems in marketing of their products.
For example, due to the unavailability of adequate channel structure,
Michael Dell , the originator of Dell Computers, decided to opt a direct
mail-order channel system. Through this system Dell was able to offer
customised personal computers and strong technical expertise to its
customers.
ii) Cost: The cost of using intermediaries is one of the crucial factors in
selecting the channel structure. If the cost of using intermediaries is high
than the services offered then the company minimises the use of
intermediaries.
iii ) Services: The service offered by intermediaries is also a determining
factor in the choice of channel structures. For this, the services offered by
the intermediaries are evaluated to analyse the most efficient channel , at
relatively low cost.
5) Environmental Dimensions: The environmental factors also influence the
choice of channel structure. The major factors which significantly affect the
channel design are economic, social, cultural, political, legal and
technological environments. The effect of environmental factors is one of the
main reasons behind making channel design decision.
6) Behavioural Dimensions: The behavioural variables also influence the
choice of the channel structure. The manager should evaluate the behaviour
of channel members and set up a right approach in handling the behavioural
issues in order to avoid the occurrence of channel conflicts. Managers should
also give more attention to the issues which affect the communication
between the channel structures.
For example, a small manufacturer who employs large number of channels
may not be able to get his work done by using his coercive power. However,
by stressing on the expert power he could get his work done by the channel.
The channel manager who wants to exercise power in order to achieve his
distribution objectives, he must keep in mind the legitimate power base while
designing the suitable channel structure.
6.3.3. Process of Channel Design

The steps in the channel design process are as follows:
Defining the Customer Needs
Defining Channel Objectives
Channel Alternatives
Evaluation of Major Alternatives
Ideal Channel Structure
1 ) Defining the Customer Needs: The first and foremost step in designing the
channel structure is to recognize the service output level on the basis of the
customers' requirements. Therefore, it is very important to capture the
customer demands at the time of designing marketing channels. The channel
generates the following service outputs:
i ) Product Information: There are certain types of products for which
customers seek more information. These products can be new products,
technically complex products or those products that have a fast changing
technological element.
ii ) Product Customisation: There are some products that essentially
require technical adjustment . Then it becomes crucial for the company to
customise the product so as to meet the customers’ expectations. Even a
standardised product may have to go under customisation process to
fulfill a specific target customer like in terms of size or variants.
iii ) Product Quality Assurance: The quality of a product is the foremost
priority to customers. The consequences related to a defective or low -
quality product may affect the customer’s operations. Therefore, it is
essential for the company to emphasise more towards the product
integrity.
iv) Lot Size: The lot size indicates the number of units that the channel
normally sells to a customer. A lot size determines the financial decision
of the customer and also leads to the final purchase decision.
v ) Product Variety /Assortment: The product variety indicates the range of
products that are available with the channel , which is termed as the
‘assortment breadth’. A greater assortment involves more choices which
increases the chances for the customer to get what they are seeking for.
Sometimes the customer may also need a broad range of products
available at one place.
For example, a customer who is an electrical contractor may require
different electrical codes, to find out the most suitable code for his
project work.
vi ) Spatial Convenience/Availability: There are some customers that
require the channel to support a high degree of product availability.
These types of customers have unpredictable product-usage rate or who

switch over products at the time when the specific product is unavailable.
The concepts of demand uncertainty and buffer inventory are closely
linked with this situation .
vii ) Waiting and Delivery Time: The waiting time refers to the average
time that customers will wait for delivery of the goods. Mostly,
customers prefer faster and quick delivery channels.
viii ) After Sales Service: The customers also require after sales services
such as installation , repair, maintenance and warranty. Many times, the
quality and availability of after sales services influence the initial sale of
the company. The nature of services varies with the type of industry. For
example, in the computer industry, the availability of hardware and
software upgrades often influence the purchase decision of the
customers.
2) Defining Channel Objectives: The companies should also clearly define
their channel objectives in terms of the targeted service output levels. On the
basis of competitive conditions, the companies should try to offer the desired
level of service outputs at minimal total channel cost. The marketers can
identify various market segments and their different service output levels.
From several market segments, one segment is selected and a suitable
channel is decided to serve the same. The channel objectives may differ,
depending upon the product characteristics. Some of them are:
i ) For perishable products, direct marketing is most preferable mode of
distribution .
ii) Bulky products like building materials require intermediaries that have
shorter shipping distance and low handling cost.
iii ) The sale of non-standard products such as custom-built machinery and
specialised business forms is held directly by the company’s sales
representatives.
iv) The sales and maintenance of products requiring installation or
maintenance services, such as heating and cooling systems, is largely
carried out by the company itself or franchised dealers.
v) High -unit-value products like generators and turbines are sold by the
company’s sales representatives instead of intermediaries.
The channel objectives of a company must be flexible in nature, so as to meet
the changing trends of the market environment . At the time of economic
depression, the company may have to use shorter channels so that the final
cost of the product is not high. In the same way, the legal regulations also
affect the channel design. In many countries, law disapproves those channel
structures that reduce competition and create a monopoly .
The channel design objectives can also be framed considering the customer
service deliverables. The channel objectives should be such that the company
is able to meet the expected service level outputs at the least possible cost.
The company may have different service levels for the same product in
different segments.
3) Channel Alternatives: There are various alternatives which a company may

adopt to reach out the final customers. These alternatives involve sales force,
sales agents, distributors, direct mail , telemarketing, internet , etc. Different
channel structures have their own strengths and weaknesses. A direct sales
force can handle complex products and transactions, but they can be
expensive to maintain. In contrast to other alternatives, internet is
economical , but it may not handle complex products. Distributors can create
high sales but the company may lose direct contact with the customers.
Whereas, manufacturer’s representatives have direct contact with the
customers at very low cost but their selling power is less as compared to
company ’s sales representatives. After deciding the target customers and
customer service deliverables of the channel , the company focuses on
selecting the various channel alternatives. While, deciding for the
alternatives, the company must look for the following points:
i ) Types of Intermediaries: A company must identify the types of
intermediaries accessible to perform the channel activities. An attempt
must be made to find out the innovative marketing channels. With the
rapid growth in business activities over the years, various intermediaries
and channel partners are in operation and can be used for marketing of
products.
ii ) Number of Intermediaries: The ulitisation of number of intermediaries
at each channel level must be decided by the companies. The choices can
be made between three major patterns of distribution , viz.,
a ) Exclusive Distribution,
b ) Selective Distribution , and
c) Intensive Distribution.
iii ) Cost of the Channel System: The cost of distribution includes
transportation costs, margin, order booking and execution cost, etc. All
these costs are included in the price of the product or service that the
customer purchases. Therefore, to balance the distribution costs spend
and the level of customer service offered by the company is the key
responsibility of the sales management. The cost elements of the channel
network include the following:
a ) The margins of the channel partners,
b) The transportation cost of goods between the company and the end -user,
c) The cost of order booking and execution,
d ) The cost related to returns of expired stocks from the market , and
e ) The cost of any reverse logistics required , e.g., getting empty bottles
of soft drinks.
iv) Terms and Responsibilities of Channel Members: The members of the
channel must be treated equally by the company and must be given an
opportunity to earn profits. The key elements of “trade-relation mix” are
as follows:
a ) Price Policy: The company must form a price policy to establish a
price list and a structure of discounts and commissions that is fair
and profitable for intermediaries.
b ) Conditions of Sale: Conditions of sale is defined as the company 's

terms of payment and guarantees that are provided to the channel
members. Many manufacturers offer cash discounts to distributors
and channel partners for early payments. Manufacturers also
provides guarantee against the damaged and defective products or
price fluctuations.
c) Distributors’ Territorial Rights: The territorial rights of
distributors refer to the distributor’s territories and the conditions on
which the manufacturer will choose between several distributors.
The distributors are assumed to collect full credit for sale held in
their territory, irrespective of whether the sales are made or not.
d ) Mutual Services and Responsibilities: The mutual services and
responsibilities in the channel partnership need to be clearly stated,
especially in case of exclusive-agency and franchised channels. For
example, McDonald ’s offers franchisees with a promotional support,
infrastructure, technical support and training, etc. In return, the
franchisees are expected to adhere the policies of the company by
fulfilling the physical standards, cooperating with the promotional
programs, providing the requested information and buying materials
from the recommended vendors.
4) Evaluation of Major Alternatives: While evaluating the alternatives, the
company has to select the best channel by considering the factors affecting the
channel decision through which the long-term objectives of the company can
be achieved. Hence, each alternative is evaluated on the following criteria:
i ) Economic Criteria: In evaluating the channel alternatives, the economic
criteria are very significant because it helps the company to pursue
towards making of profits. Here, three factors are most considerable:
a ) What level of sales volume will be achieved by each of the channel
alternatives? Will a particular channel structure be able to increase
the company’s sales volume? This can be assessed by conducting a
market research of the sales potential of each channel alternative.
b ) The second factor to be considered is the sales and distribution costs
of each alternative. This can be done by evaluating whether the cost
of each alternative is reasonable and within the company ’s abilities
in view of its financial resources and sales volume.
c) The third criterion is to compare the sales and costs of various
alternatives considering the net profit of the firm. The company
should also decide whether to use its own sales force or outsource
the sales force. While estimating the net profits of each alternative,
the cost related with sales should also be analysed. Here, the cost
should be divided into fixed and variable costs. The sales volume of
smaller firms will be low and larger firms operating in small
territories will have larger selling and distribution cost. On the other
hand, when the costs of smaller firms or larger firms operating in
smaller markets reach at the break -even level , then they can use their
own sales force.
ii) Control Criteria: The second main consideration in evaluating the

channels is the control factor. In other words, how can a marketer control
a specific distribution channel ? The greater the control of the company,
the better will be the channel of distribution. Here, the relationship
between various channels of distribution , their attitude and interests
towards the company ’s product and conflicts between them must be
considered. Other than this, the legal aspect in appointing a particular
channel should also be considered by the company.
The contracted partners of the distribution network such as C&F agents

and distributors are considered as the extensions of the company who
serve the customer efficiently . These channel partners have to follow
certain rules and regulations to be a part of the company ’s distribution
network. Some of the key functioning rules decided by companies and
followed by the channel partners are:
a ) The coverage area of the markets, i .e., width and depth,
b) The frequency of coverage,
c) Estimate of the calls made per day and the percentage of productive calls,
d ) Providing ready stocks in the market and not booking orders for
deliveries later,
e ) The limit of extending the credit facilities in the market,
f ) Providing servicing support for automobiles, and
g ) Participating in exhibitions, fairs, melas, and events to promote the
products.
iii ) Adaptive Criteria: Another consideration in channel selection is to view
the adaptability of the channel to the changing market conditions. For
this, every alternative should involve some level of commitment and
stability . For example, an alternative involving long-term commitment
can be considerable for economic and control criteria but will not be
suitable for adaptive criteria .
The channel structure must be able to increase sales volume other than
handling the current sales. The channel structure should be such that it
can handle changes under certain situations, such as:
a ) Increase or decrease in number of products,
b ) Additional service support required,
c) Coverage of new territories, e.g., rural markets for FMCG products,
agricultural inputs, tractors, pump-sets, seeds and fertilizers,
d ) New institutional business leads,
e ) Price increases and adverse consumer reactions, and
f ) Controlling of stocks due to limited availability,
It is therefore necessary to decide on these criteria before evaluating the
alternatives.
5) Ideal Channel Structure: After the evaluation of various alternatives, the
manufacturer must select the best channel structure that is ideal in terms of
costs associated and customer service delivery. Some of the optimal channel
design and their characteristics are discussed below:
i) A C& F agent or wholesaler is considered appropriate channel choice for

breaking of bulk, and if intensive distribution is required then the
company must hire large number of retailers.
ii ) A company ' s technically qualified sales force is an ideal choice for
industrial and engineering goods for providing inventory and credit at
finance.
From the above channel choices, it can be said that outsourcing of
distribution activities is more cost effective for the company . Whereas, using
the channel partners is also a beneficial way of distributing products. .
6.3.4. Criteria for Effective Channel Design

Some of the criteria to be considered for effective channel design are as follows:
1 ) Effectiveness: By evaluating the channel objectives the effectiveness of the
channel can be assessed. For example, if zero waiting time is one of the
channel objectives then its effectiveness can be measured by observing that it
is achieved without fail .
2 ) Efficiency: The quantity of inputs consumed to achieve the output level is
used to define the efficiency of the channel structure. For example, if two
channel structures generate the same level of output but one channel structure
consumes more inputs in the form of logistics and other inputs, then the
second channel design is considered more efficient.
3) Equity: The remuneration pattern of company should be equitable. The
channel members should be remunerated on the basis of their participation in
the channel functions. If the remuneration pattern is not equitable then the
channel structure becomes ineffective and instable. This could also lead to
conflicts within the channel structure. Thus, equity principle is of utmost
consideration while selecting the channel design.
4) Scalability: One of the major factors to be considered is the scalability of
channel structure. The main question here is, Can the channel structure
handle a sudden increase in demand ? This criterion becomes crucial in case
of products where it is difficult to forecast the demand .
5) Flexibility: Another essential criterion is the flexibility of the channel
structure which is often ignored by the company. When there is a changing
demand pattern or new products are introduced in the market , then it is
essential to observe that whether the channel system is able to handle the
changes or not. This becomes of utmost significance in case of marketing
high -technology products where innovation always is an option.
6.3.5. Channel Design Decisions

The channel analyst can ascertain an ideal channel structure which is able to meet
out the service levels of different segments in the market. It may be required to
have a separate channel to fulfil the demands of each individual segment. For
this, the channel design needs to involve three elements, that is:
1 ) Selecting the Channel Member: The channel members must be decided by
the channel designer. The designer needs to decide who will be the members
of the channel structure. Other than all this, the manufacturer must also
decide the appropriate channel , i.e., whether to use independent distributors,

sales representative companies, independent trucking companies, financing
companies or any other distribution channels need to be involved while
designing the channel structure.
2 ) Identity of the Channel Partner at Each Channel Level: Another
important element of channel design is to decide the identity of the channel
partner to be used at each level .
3) Type of Channel Member: The channel manager must also decide the actual
number of each type of channel members to be involved. This decision is related
to the determination of channel intensity, such as, in case of consumer goods,
should the channel involve several retail outlets ( intensive distribution ), a few
outlets (selective distribution ), or a single store (exclusive distribution ).
However, the selection of channel depends on the efficiency of the channel
operations and on implementation of the channel members. An intensive
channel structure increases the availability of the product to the end user
because of which inter-channel conflicts may arise. Therefore, the channel
manager needs to make a trade off to arrive at the final decision.
6.4. CHANNEL CONFLICTS

The behaviour of one channel member founds to be obstructing by the other
channel member in achievement of goal or effective operations is defined as the
channel conflict. It is believed by one school of thought that for effective
functioning of marketing channel , some degree of conflict should be there.
Also, between the several departments such as sales channel, channel conflicts
may occur. If for no other cause than that the priorities of different departments
are not always same, the conflicts between the channels arise no matter how
effective the channels are structured and managed. When one channel member is
obstructed by the other channel member achieving its objective, the conflicts
between the channels may arise. The disagreement or dissonance situation
between the different channels of same marketing system is refers to as the
channel conflict. More than the facts, these conflicts are based on facts and
always have negative implications.
Social system is a channel system which is formed by the different entities in
order to create a working relationship and conflicts are considered as a part of it.
And a conflict situation may arise when the behaviour or actions of one channel
have a direct impact over the performance of first channel or obstructs it from
achieving its goals.
6.4. 2. Causes for Channel Conflict

The underlying reasons of channel conflict can be both financial and non -
financial. Both, in turn results in several reasons which are as follows:
1 ) Goal Incompatibility: Incompatibility of perceived goals is one of major
reasons of conflict between the wholesalers and manufacturers. For
example, while sales maximisation and thus profit maximisations are the
main goals of wholesalers whereas, market share and profit maximisation in
the long-term are the main goals of manufacturers. The wholesalers prefer to
work on short term profitability and at higher margins. This results in
conflicts between the wholesaler and manufacturer as wholesalers argues that
the manufacturer squeeze their margins whereas manufacturer argues the
wholesaler of being fair weather partners.
2 ) Role Ambiguity: Most of the time, role ambiguity is the reason of channel
conflict. In general, multi -channel conflicts occur because of the role
ambiguity. For example, in some companies , often, the roles and duties of
salespeople of manufacturer and product selling dealers to major accounts or
organisational customers in the territory are not clear. This, it turn, results is
conflicts between the relationships with the channels in these companies.
3) Differences in Perceptions of the Market: Conflicts between the
manufacturers ansssssssssssd intermediaries may also arise from the different
perceptions of the economy and market. For example, new products,
multiple brands are introduced by the manufacturers and also new dealers are
appointed when manufacturer may see an opportunity in the booming middle
class market of India whereas existing dealers found it as weakening of their
control over the market because of the multiple dealers appointed and
downsizing of their territory.
6.4.3. Conflicts in Pharmaceutical Marketing Channels

There are three kinds of conflicts in any channel arrangement:
1 ) Chemists ( Drug Stores ) and Supermarkets: A wide variety of products are
manufactured by pharmaceutical (drug/ medicine) enterprises. Medicines can
be either sold by chemist/ pharmacies or in the supermarket. Headache tablets
are one of the examples of medicines that are sold in the supermarket. As
compared to chemist/ pharmacies, supermarket offers far greater sales
potential. Challenges related to the distribution of a wide variety of vitamin
tablet are the reason behind the conflict between supermarkets and chemists.
These medicines were earlier sold by chemist only.
People are now becoming health conscious and therefore supermarkets are
approaching pharmaceutical firm to buy these vitamin tablets. The
Involvement of supermarket in selling vitamin tablets has made chemists
unhappy. Chemists are in the situation to lose their customers and profitable
product line as supermarkets are trying to challenge them on price.
The Chemists has warned pharmaceutical firms that they will not distribute
their different variety of product (i.e., medicine) in case the exclusive
arrangement signed between them is affected by the involvement of
supermarkets.
2) Insurance Companies: Generally, brokers and agents used to sell most of the
insurance products. The Emergence of call centres and the internet has enabled
insurance companies to offer and sell their product straightaway to the consumer.
Direct selling does not involve any kind of commission charged by the agents or
broker’s therefore insurance companies can sell their products at a much lower
premium. This has made insurance agents/brokers unhappy. Selling products by
themselves is the primary challenge for insurance companies as most of their
sales are conducted by agents/brokers. The job of these distributors is to generate
business for the insurance company.
They find the customer and sell them the products of the insurance company.
These agents or brokers stop conducting business with the insurance
company with which they are not satisfied. It is a challenge for insurance
companies to sell their product directly to the customer without upsetting
their brokers or agents.
3) Franchisee Conflict: Conflict may arise between different franchisee of a
pharmaceutical company. Price- setting can be one of the reasons behind
such conflict. The price can be fixed by franchisees. They are not bound to
follow the prices recommended or published by the franchisor.
6.4.4. Stages in Channel Conflicts

At all levels of distribution channels different stages emphasise on different
conflicts. Normal operations of
channels may not be affected by the
conflict when they are hidden . While, Attitudinal Structural
it get noticed and considered seriously sources of sources of
conflict conflict
when it degenerates into disastrous
behaviour. Identifying and
understanding the conflict in its initial Cognitive
- Affective
stages is very important. Unless, the conflict
conflicts are resolved at each stage,
they are approximately processes Conflict Manifest
through four different stages. The resolution conflict
sequential process of channel conflict
is shown in figure 6.2. Conflict
1 ) Latent Conflict: Latent conflict outcomes
stage is the initial stage from Figure 6.2: Stages in Channel Conflict
where the conflict starts. There are several latent reasons such as personal
reasons, perceived injustice and so on which are unattended by the channel
principal for long term and may generally results in inter -channel conflicts.
There are two types into which latent conflicts are classified by Etgar:
) Additional Causes of Conflict: Causes related to the expectations,
channel communication, disagreements about roles of channels and
perceptions are defined as the additional causes of conflict. Therefore,
recognising these conflicts is very difficult. Collection of guidelines that
describe in a specific place what a member’s behaviour should be is
defined as the channel roles.
Also, because of the lack of proper roles definition, role- based conflicts
arise. The channel members expect from others to perform the operations
which they found to be non - profitable and difficult if the roles are not
properly defined. As a result there is a massive confusion in the
organisation. And because most of the channel roles are defined at the
channel design stage, it is therefore very critical to take care of these
things at the stage of designing channel . Differences in expectations,
beliefs that what is going to happen next, regarding what might happen
in future also give rise to the attitudinal conflicts.
ii ) Structural Causes of Conflict: Since these causes are well -articulated
and tangible, these causes are easy to recognise and understand .
Following are the main reasons of structural conflict:
a ) Divergence in Goals: It is one of the basic reasons of conflict. For
example, dealing with new products found to be risky by the
distributor as unknown commodity investment is included in it while
by introducing new products; manufacturers might wish to expand
its market share.
b ) Drivers for Autonomy: In making decisions that specifically affect
them, all channel participants strive to exercise their anatomy . There
would be a natural indignation towards certain acts of coercion
whenever the channel leader or other channel participants are
deemed to be infringing on this autonomy .
c ) Fights over Scarce Resources: Mostly between the same level
channel members in a channel distribution, conflicts because of the
scarce resources arise. It is also known as the horizontal conflict.
When an organisation practises intensive distribution , these conflicts
can be seen very often . There will be a definite competition for
customers between the dealers when more dealers are appointed by
the manufacturer in a particular market resulting in subsequent
conflict and a serious competition .
2 ) Felt Conflict: The underlying causes of conflict are only the basis of the
future behaviour of conflicts. . If these are not resolved these can manifest
into conflicts of large proportions where there is tendency for the channel
members to outwit the others. Once the basis of the conflict has been created,
the next stage is the affective conflict stage. This is also called the felt
conflict stage. The affected people give vent to the various expressions like
frustration, anger and other regressive feelings at this stage.
When the specific disagreement level is crossed and emotions of the individual
concerns get affected, a phase of felt conflict occurs. However the member
does not indulge in any act which can impact the functioning of the
organisation. The other members should understand the cause of grievance and
try to resolve it at the earliest. However if the problem is left unresolved, then
the felt conflict can turn into a much more ugly form - the manifest conflict.
3) Manifest Conflict: In the manifest stage the conflict assumes damaging
proportions. The channel members resort to practises like boycott. There is a
major trust deficit between the parties. Very often there is a serious effort
made to come to some kind of a compromise between the warring parties.
Very often the conflict gets resolved. If not then this leads behind a major
trail of devastation in the organisation. Also if the conflict is resolved, there
is still a lingering feeling of distrust between the parties and this can cause a
major attitude transformation in the members. The future actions of the
members are often taken with a big feeling of suspicion by the other
members. In this manner there is a vicious cycle of conflict . One act of
conflict cascades into a series of conflicts - all of which has a very bad
impact on the organisation .
6.4.5. Impact of Channel Conflicts

Following are the various impact of channel conflict:
1) Decrease in Productivity: The organisation members lack their focus from
the basic aims of the organisation they are assigned with achieving when
most time of organisation is spend in resolving the conflicts. Members
focuses more on gossiping about the conflicts or uttering about frustrations
than focusing on project on hand because of the conflict. This results in lack
of resources, funds and investors.
2 ) Members Leave Organisation: Many members also get frustrated and leave
the organisation because of the conflict level in the organisation . The
organisation may faces the problem of recruiting new employees once the
members starts to leave.
3) Violence: Tensed situation between the members also arises because of the
conflicts. Violence between the channel members leading to the legal
problems for the members and possibly the company may also takes place
because of the conflicts.
4) Inspire Creativity: Luckily, some channel members find creative solutions
to resolve the conflicts by seeing conflicts as the opportunity. By analysing
conflict problems from difference perspectives, members are inspired to
brainstorm the new ideas.
5) Share and Respect Opinions: Members are more willing to share their ideas
and views with the other group members when all the organisation members
work together in order to solve the conflict. Members tries to listen each
other’s views more actively as they are working together to achieve the goals
of the organisation because of the conflicts.
6 ) Improve Future Communication: Members are able to know each other
more closely and comes together because of the conflict. Conflict provides
organisation the tools to resolve the future conflicts because as it helps the
members from knowing each other’s views on substantial topics to the
growth of the organisation to understanding communication style of each
other.
7 ) Mental Health Concerns: If members feel that there is no solution in sight
or if they feels that groups are not considering their views, they becomes
frustrated which may results in stress and ultimately effects both personal
and professional lives. Problems like overeating or lack of appetite, sleeping,
headaches and unfriendliness may face by the members because of all this.
Whereas, in order to avoid the problems of stress or stress-related symptoms,
meetings are avoided by the channel members.
6.4.6. Techniques to Resolve Channel Conflict

Following techniques can be used to overcome the conflict:
1) Communication: There are several measures for improving the communication
between the different channels of distribution. Channel members are able to find
solutions of their channel conflicts more easily with the help of effective and
efficient flow of communication. Frequent conversation between the channel
members and manufacturers leads to reduction in channel conflicts.
2) Super Ordinate Goals: Goals which all channel members wish to attain but by
working alone, they are not able to achieve them are defined as the super
ordinate goals. Evolving super ordinate goals for achieving the maximum
satisfaction of customers is another measure to solve conflicts between the
channels. Most of the channel conflicts can be resolved if channel members are
encouraged to perceive their main aim to gain maximum customer satisfaction
which ultimately results in profit maximisation of all the channel members.
3) Persuasion: It is believed that the channels are open to make improvement
because different channels have different goals. Reference to common goals
can resolve the conflict over sub-goals if basic agreements regarding goals
are exists. Persuasion suggests that the organisations concerned rely on
leadership as a medium to resolve conflict. It involves a great deal of
transparency and conversation between the conflicting channel members.
4 ) Negotiation: Fixing the disagreements over the goals is presumed in
negotiation. The creation of new agreements and little efforts to appeal to
shared goals brings to an end to conflict . End of conflict is the main aim of
negotiation and no efforts to satisfy channel member fully. In this process,
while the conflict is resolved but the seeds of disagreement are not
necessarily removed . There are always the chances of conflicts if stress
continues. One particular way in which conflicts are resolved is through a
process of compromise. In order to end or resolve conflict, each channel
gives-up something it wishes in compromise situation.
5) Coalitions: In essence, an attempt to modify the structure of channel control
leads to the coalition formation among the channel members. For example,
dealers are offered the capability to deal with the manufacturers effectively
by the National Automobile Dealers Association. Small retailers are allowed
to negotiate on an equal basis with large chains of supermarket with food
processors by the voluntary and cooperative retail chains. Channel members
political move is represented by such coalition formation . Either through
problem-solving negotiation or persuasion, the process of conflict resolution
may be achieved once the coalition is formed.
6) Mediation and Arbitration: A third-party may be involved in the process of
conflict resolution by both mediation and arbitration . The channel members
are not bound to accept the solution of conflict suggested by the third -party
in mediation, whereas; channel members are bound to accept the conflict
solution suggested by third -party in arbitration. Though, there are several
reasons to prefer mediation and arbitration for resolving the conflicts but
there are very few real lives examples of using this measure.
7 ) Lobbying and Judicial Appeal: In order to resolve the conflicts,

governmental procedures may also be used by the channel members. Regular
efforts are made to influence the legal procedures through lobbying
operations. Another common way to solve the conflicts through involving
third -party into the disputes is court litigation.
8) Withdrawal: In order to avoid the aggressive behaviour existing in the
channel , one firm withdraws from the relationship is an additional and very
common measure to end conflict. An organisation must be willing to change
its business’s nature and goals or must available alternatives in place when it
decides to end its existing channel relationship.
6.5 . SUMMARY
1 ) Place or distribution is a critical element of marketing mix. It is the location
where goods are made available for purchase.
2 ) The decisions related to place activity is majorly dominated by distribution
channel.
3) Managing the flow of material and goods, from raw material to finished
product is known as Physical Distribution Management
4) It is important for a company to generate revenue on large scale. Distributor
plays a very important role in large scale revenue generation because they
cover all the potential market of the company.
5) A distribution channel involves the movement of goods and services from the
manufacturer to the ultimate consumer passing through various
intermediaries. Channel of distribution is one of the major concerns of the
pharmacists in pharmaceutical industries.
6) The “ pharmacist” in the distribution channel could be either a retail
pharmacist , who is commonly known as a retail chemist or druggist, or a
hospital -pharmacist.
7 ) Logistics is considered as a source of core strategic advantage. Logistics
services are properly managed by the distributors.
8) In the activities of pharmaceutical marketing and pharmaceutical marketing
channel , a very decisive role is played by the physicians.
9 ) Direct marketing channel is one of the primary distribution channels. In this
type of channel , a pharmaceutical company manufactures and markets its
product by its own.
10) Indirect marketing channel is a type of distribution channel in which only
manufacturing functions are performed by the manufacturer. However, drugs are
sold and marketed by an intermediary agent called as marketing company.
11 ) Many Indian pharmaceutical companies have recently used the franchisee
system for sales, distribution and marketing of the drugs.
12 ) Channel design decisions are significant to the company because they define
the market presence and buyer’s accessibility to the product . In addition,
channel design is of great importance as it involves long -term investments by
the company.
13) Market size can be determined by the number of customers that form a
marketplace. From the view point of channel design, the numbers of
customers are directly proportional to the market size.
14) The behaviour of one channel member founds to be obstructing by the other
channel member in achievement of goal or effective operations is defined as
the channel conflict .
15 ) Latent conflict stage is the initial stage from where the conflict starts.
6.6 . EXERCISE
6.6. 1. Very Short Answer Type Questions
1 ) What do you understand by physical distribution management ?
2) List the criteria for effective channel designing.
3) What is channel conflict?
4) Who are retailers?
5 ) What is direct marketing channel ?

1 ) Briefly explain about the types of channel members.
2) Write a note on pharmaceutical marketing channels.
3) Describe the impact of channel conflicts.
4 ) Mentions different types of distribution channels.

1 ) Describe the tasks in physical distribution management. Mention the strategic
importance of distribution.
2 ) Mention the determinants for selecting the appropriate channel .
3) Explain the process involve in channel design. Also describe the channel design.
4 ) Discuss the conflicts in pharmaceutical marketing. Also mention the technique to
resolve the channel conflicts.
CHAPTER Professional Sales

7 Representative
7.1. PROFESSIONAL SALES REPRESENTATIVE

A professional whose job is to sell the product and services of the company is
known as sales representatives. Generally, non -technical products are sold by
these representatives. Handling and using these products does not require any
kind of specialised knowledge possessed by seller and consumer. Sales
representative’s works directly with the manufacturer or providers of the goods
or services. The actual customers of these representatives are the companies that
sell these products to the ultimate customer.
Sales Associate and sales representatives should not be used interchangeably.

Business-to-Customers ( B2C) and Business-to-Business ( B2B ) are the two groups in
which professional working in the field of sales can be categorised. These categories
are formed on the basis of whom the product is being sold by the professionals. The
situation where product is being sold directly to the customer is known as Business-
to-Customers (B2C) marketing. Whereas, when the products are sold to smaller
business then it is known as Business-to-Business ( B2B ) marketing. The job of the
sales representative is to sell the products and services of one company to another
company, i.e., they are B2B Oriented. On the other hand, the job of the Sales
Associate is to sell the goods and services directly to the salesperson.
Extensive R & D ( research and development ) campaigns and promotional activities

have greatly changed the face of pharmaceutical industry. These activities have
helped a lot in tapping new opportunities in the market. They play an important
role in restructuring and simplifying the operations associated with pharmaceutical
industry and directs them towards fulfilment of customers’ needs. The success of a
pharmaceutical company depends upon its sales force effectiveness. Thus a
pharmaceutical company needs to formulate effective sales strategy and efficiently
coordinate its sales and marketing activities. Besides several other activities, such
as, re-sizing and restructuring sales force, setting appropriate goals and objectives,
sales performance management, sales force motivation , and developing strong
sales force culture are also crucial in achieving sales force effectiveness.
For boosting the sales and attaining highest sales target, the pharmaceutical
companies should focus on hiring best sales force. The pharmaceutical
companies should also be aware about the ways to incorporate the strategic
business objectives with selected program strategies. The roles associated with
sales force have also undergone changes due to the changing pharmaceutical
market environment. In top companies, the sales representatives are held
responsible for effectively communicating the marketing messages. They are
Professional Sales Representative ( Chapter 7 ) 231
required to provide appropriate information and educational opportunities to

physicians for building effective relationships with them as well as influencing
their behaviour towards pharmaceutical industry and its products. The need for
interacting with the physicians is increasing day by day as they require more
details about the pharmaceutical products and services. This calls for the need to
hire new sales representatives to serve the purpose. The physicians compare the
information gathered from various representatives and accordingly take further
decisions. Therefore, required skills should be developed by the sales
representatives to enhance their role in the pharmaceutical industry.
7.1 . 2. Duties of Pharmaceutical Sales Representatives ( PSR )

Following are the duties of pharmaceutical sales representatives:
1 ) Establishing New Accounts and Orders: Most of the time of
pharmaceutical sales reps is spend on phone or on paying visit to private care
facilities, retirement homes, hospitals, pharmacies, patient advocacy groups
or physicians’ offices . Depending upon the type of facility and client, the
sales reps should prepare and give their presentation. Sales reps should have
knowledge regarding current pharmaceutical supplies of the prospects,
potential volume and the company ’s products that benefits the patients of the
facilities. Orders should be submitted by representatives on behalf of the
customer. Reps should explain information related to a product to the patient.
2 ) Research and Reporting: Sale reps must examine market and collect
information related to emerging technologies and product. He/ she should
also obtain information regarding competitors pricing, product , strategies,
clinical trials and merchandising techniques. The responsibility of creating
activity reports such as weekly meeting reports, activity reports, daily call
logs and territory analysis lies on the sales representatives.
3) Customer Recommendations and Resolution: In case if there is change in
the policies, services or product , a sales reps can recommend customers to
change product, discontinue products or increase purchases. The job of the
sales reps is to contact and remind customers regarding potential recalls and
health related concerns of the product. Managing customer complaints,
developing solutions and filing reports with the pharmaceutical company are
the responsibilities of a pharmaceutical sales reps.
4 ) Continuing Education: Pharmaceutical sales reps should remain up-to-date
with current technical research because of the changing nature of
pharmaceutical industry. Sales reps can remain up-to-date by reviewing
publications, developing professional networks, reading medical journals,
involving in professional associations and by attending workshops. Formal
education in the field of science, chemistry, biology, biochemistry and degree
in finance or public relations provides several benefits to the reps.
7.1 .3. Recruitment of PSR

As we know, recruitment is referred to the process of finding new candidates and
hiring them to fill the vacant positions in the organisation or expanding the
existing team’s size . A sales manager in the pharmaceutical company is usually
responsible for the recruitment and selection of the new sales force. Pharmacists
( sales representatives ) are recruited by following a defined set of legal processes
and activities. These processes are used to hire required number of pharmacist by
ensuring that their job needs and interests are given appropriate consideration .
The main objective of recruitment here is to hire a pool of potential candidates who
qualify the job requirements. Different ways such as job advertisements in
newspaper, career/professional journals, websites, etc., are used by the pharmacy
managers for recruiting the pharmacists. Other methods of recruitment may include
hiring of candidates through various placement service providers. These placement
agencies keep in touch with employers who require fresh pharmacy graduates and
experienced pharmacists to fill the on-going vacancies in the pharmaceutical
company. Similarly, top management executives ( like directors and managers ) in the
pharmaceutical companies are recruited through executive search firms. Recruitment
is done on local and regional basis depending upon the required category of
candidate, i.e., if a pharmacist or clinical specialist or clinical pharmacist is required.
Recruitment may also depend on the availability of candidates in a particular

region . If a town or city has less number of qualified candidates, recruitment will
be done from other cities or towns. As an equal opportunity employer, federal
guidelines are to be followed by human resource department of hospitals and
pharmaceutical companies. These guidelines prohibit any kind of discrimination on
the basis of age, gender, colour, religion, etc. Nowadays, the terms of recruitment
have become more complex. The manager of the pharmaceutical company has to
comply with all the rules and procedures laid down under the recruitment policy of
the pharmaceutical company or hospital. A pharmaceutical graduate or experienced
professional in pharmaceutical industry will analyse the job details before
applying. They will ensure if the job description matches with their knowledge and
experience, or if the location is apt , the cost of living is less or more as compared to
other regions. Comparisons are made on the basis of salary and fringe benefits,
growth opportunities in the job, goodwill of the organisation, etc.
The very first step in the recruitment process of pharmaceutical company is to do

the screening of applicants and shortlisting the candidates for interview.
Screening is done by going through CVs, resume , and letter of interest sent by
various candidates and choosing the suitable ones among these.
Sources of Recruitment
Recruitment of a proficient sales force helps in successful operation of the
pharmaceutical company. It also helps in forming a pool of right candidates forming
the sales force. There are mainly two sources of recruitment which are as follows:
1 ) Internal Sources: When recruitment is done choosing the right candidate
from within the organisation, it is known as internal source of recruitment.
Following are the different types of internal sources:
i) Employees Already Working in the Organisation: Individuals who are
already working in one of the departments are hired for filling the new
vacancy. This is the most feasible way of recruitment involving less risk as
the organisation is already aware about the potential of the existing candidate.
Professional Sales Representative (Chapter 7 ) 233
ii) Recommendation of the Existing Pharmacist: The pharmacist already

working in the organisation may recommend names of candidates for
filling the new vacancy. Here, the existing person knows well the job
requirements and accordingly gives a suitable recommendation .
iii ) Promotions: As the name suggests, here the employees from lower post
are promoted to higher post. The benefit of this method is that the
employees here get appreciation and recognition for their good work,
honesty and sincerity. This motivates them to work harder in their future
endeavours as well .
iv) Transfers: Employees of one functional department are sometimes
transferred to other department of the organisation for filling the
vacancy. The organisation implements this by considering the previous
records of employees. For example, individual working infinance,
production, warehousing, or marketing department can be transferred to
pharmaceutical department as sales representative have to manage the
targets and generating leads.
-
v ) Re employment of Former Employee: Employees who earlier worked
with the company but now are somewhere else and have a clean work
records can be re -hired as per their interest. It is believed that the
potential of such experienced candidates is much higher when compared
to newly recruited employees.
vi ) Employee Referral Programs: Referral programs are the one where an
existing pharmacist recommends names of his friends, relatives, or other
acquaintances who are seeking jobs in the pharmaceutical industry. The
pharmacist here has to maintain network with the other executives, sales
representatives, and friends so as to gather information about current
opening that are not advertised publicly.
vii ) Interns and Cooperative Students: Many times organisations recruit
candidates that are still pursuing their studies. These interns and
cooperative students are recruited on a part-time basis. Interns generally
fall under the part -time payment or non - payment category. They work
for a very short time span in an organisation to gain work experience
while studying. While cooperative students are those who take a break
from studies and join full -time job.
2 ) External Sources: External sources of recruitment are both time consuming
and expensive. Wide range of external sources of recruitment is available for
the organisations. These sources are like new blood in the organisation.
Following are the various external sources of recruitment:
-
i ) Direct Unsolicited Applications/Walk ins: For filling the pharmacist
positions, pharmaceutical companies receive lot of “ write-in”
applications and “walk-in” responses. The reason behind giving
preference to these candidates is only due to the high selling
aggressiveness which the managers assume these interested candidates
may have. However, most of the managers reject such applicants since
they find them unqualified on the basis of knowledge and education.
ii) Employment Agencies: The recruiters in the pharmaceutical company

may also contact the employment agencies as a source for recruitment.
When other sources prove futile, managers may resort to these agencies.
However, it is seen that efficient pharmaceutical candidates make less
contact with these agencies which means the employment agencies
generally have a pool of inefficient candidates rather than experienced ones.
iii ) Pharmacists Making Calls on the Company: Here, the purchasing
director of the organisation is usually in contact with the pharmaceutical
sales representative of other companies due to their professional terms.
They get the chance to evaluate the on -job-performance of these
pharmaceutical sales representatives. The purchasing director now finds
out the suitable candidate who would be ready to work with the company
agreeing to the jobs and compensation terms.
iv ) Sales Forces of Non-competing Companies /Other Industry Sources:
Pharmacists from other non-competing companies ( which may deal with
other product lines) are recruited by the pharmaceutical companies. These
individuals may have good experience and knowledge of the basics and may
seek for job advancements where they get an opportunity to leam more.
They may hold interest in learning more about the new product lines.
v) Sales Forces of Competing Companies: Competing companies are
those which deal in similar products and services. The candidates from
such companies have wide range of experience and as seen as potential
candidate.
vi ) Educational Institutions & Campus Placement: Universities, colleges,
vocational - institutes, community colleges, business colleges, etc., are
included in such sources of recruitment. The pharmaceutical companies
hire graduates from these institutions having certain level of education
based on the type of institute they have joined. The institutions generally
provide training to their student in the field of marketing, sales and
general management of business.
vii ) Wholesalers, Retailers and Customers: Wholesalers, retailers and
customers having considerable knowledge of pharmaceutical industry
may also be considered as a source of recruitment. Here, the wholesalers,
retailers and customers are directly considered for joining the company
as pharmacist depending on their interest and knowledge. They just need
to have general aptitude and other requisite qualifications.
viii ) Advertising: Advertisements in newspaper, journals, online job portals,
etc., also play an important role in recruitment of pharmacists. Trade
publications and job columns in newspaper helps in reaching highly
qualified individuals having technical know -how of the pharmaceutical
industry. Blind advertisement ( where only least information related to
job is provided ) helps in inviting a pool of applicant having wide ranging
educational qualifications and experience. Such type of job often attaches
low salary but a huge incentive depends on the performance of the
pharmacist or sales representatives.
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ix ) Web Sources: Web-based service providers are also considered as a best
source for recruitment by pharmaceutical and other industries. These web
providers allow accessing their database against which they charge some
commission or fee. The candidates seeking job usually update their
resumes on such websites and the employers can find them here. In
today ’s time of digitisation, mostly all companies rely or use online job
portals and sites for finding suitable candidates. They further do the
screening of the resumes which the candidates upload on the online
websites and call the selected ones for the interview.
Recruitment Procedure
The recruitment procedure for a pharmacist involves different activities through
which competent potential candidates are searched as specified by human
resource planning, job description and job specification. Recruitment procedure
is shown in figure 7.1:
Identifying Selection
Recruitment Contacting Application
Recruitment Process
Planning Sources Pool
Sources
Evaluation and Control

Figure 7.1: Recruitment Procedure
1 ) Recruitment Planning: Recruitment planning is the initial step of the

recruitment process. It involves determining the following:
i ) Number of Contacts: Pharmaceutical organisations always intend to attract
more than the required candidates as they want to make the best choice out
of a larger number of candidates. It is also done because many candidates
are not willing to join the organisation and a few of them may not be
fulfilling the selection criteria. So, whenever a recruitment programme is
thought of, the organisation has to think about the quantity of applications it
should get in so as to fill all its vacancies with suitable candidates.
ii ) Type of Contacts: It involves the type of people to be made aware about
the job vacancies in pharmaceutical companies according to the job
description and job specification.
2) Identifying Recruitment Sources: Once a recruitment plan is finalised
representing the number and type of potential candidates; they must be
attracted in such a way that they offer themselves for employment. Hence, it is
essential to identify the sources from which these candidates can be attracted.
3) Contacting Sources: After the final decision about the sources of selecting
the potential pharmacists, the procedure of contacting these sources is
initiated. Recruitment is a two-way process and there are mainly two parties,
i.e., recruiter and a recruitee. Based on the information about the candidate,
recruiter can select the candidate. Similarly, the recruitee, on the basis of the
information about the organisation, takes the decision to join the organisation
or apply somewhere else. Hence, the pharmaceutical organisation must
choose which information is to be shared with the candidates, especially in
case of external sources.
4) Application Pool: The final aim is to attract more and more candidates so as
to maintain flexibility in selection , no matter what method of recruitment is
used. The organisation starts receiving applications from potential candidates
as soon as the sources of recruitment are contacted . The type of organisation,
kind of jobs, and the conditions in specific human resource markets
determine the number of applications.
5) Selection Process: The process of classifying applicants, in order to hire
those who are more competent for the job, is called selection. Selection
process requires extremely specialised techniques. Thus, the selection
process involves expert employees who are proficient in using selection tests,
conducting interviews, etc.
6) Evaluation and Control: It is necessary to enhance the efficiency of
recruitment attempts in future. It should be kept in mind that recruitment is
an expensive process, involving costs such as the recruiter’s salary,
advertising costs, managers’ salaries and various other costs. It is thus
necessary to evaluate the process of recruitment .
7.1.4. Selection of PSR

Different pharmaceutical firms possess different abilities to influence qualified
and competent pharmacist. It is very important for a pharmaceutical firm to know
the characteristics that distinguish a good pharmacist from others. For the
purpose of recruitment , a sales manager of pharmaceutical firm seeks for
database during recruitment stage . The quality of organisation ’s human resource
department is determined by the type of candidates selected by the firm. Further,
selection process identifies whether the candidate will be able to meet the
qualification needed or not and finally recruit the most appropriate candidate for
the post vacant.
The process for selection of candidate must be well planned and prepared in
advance. This preparation for selection builds a good image of both the employer
and pharmaceutical firm on a whole. Whereas, an unorganised system of selection
could form a bad image in the minds of applicants. Applicants have a perception to
build a long-term relationship with the firm; hence, they assess both management
and pharmacy in the similar way like employer appraises their employees.
Selection Process
The process of selection must be standardised till the level possible and it should
also be easy to implement. The process of selection consists of following steps:
Step 1: The candidates should be given a form which they need to fill as
application for the post they are applying.
Step 2: The application form filled by the applicants must be reviewed and those
applicants whose eligibility criteria matches should be called for a personal
interview.
Step 3: The reference provided by the candidates in their application form must
be verified and while checking this, it must be kept in mind that candidate should
not have any criminal case pending in court.
Step 4: The recruiter must arrange for skill and personality test. This could help
the organisation in getting better candidates.
Step 5: The recruiter must also make sure that applicants are physically fit or not.
For this, they must make their applicants to pass through physical and drug test.
Step 6: In case, organisation finds a suitable candidate for the post then that
applicant must be hired immediately.
A sales-person acts as a firm ’s representative in front of the customer. Hence,

selection of a good sales-person can create goodwill for the firm in the market ,
whereas, in adverse case the candidate can destroy the company’s image in the
market . A wrong selection of candidate can affect the company in many ways
like- it affect the functioning of that department and other departments as well , it
raises company ’s expenses for training.
Criteria Used for Selection of Sales Force

There are large numbers of applicant available in market to be chosen for a
pharmaceutical firm. Coverage of market and knowledge of market are some
important standards for the selection of sales-person or medical representative.
There are several dimensions which are considered while selecting a sales-man
or representatives. Some of these dimensions are given below:
1 ) Mental Alertness: Mental alertness dimension means the ability to think
quickly. The candidate scoring good or high marks in this dimension indicate
that they possess the quality to think and learn faster. This quality is
beneficial for pharmacist and medical representatives because it helps them
to understand the needs of customers easily and bring quick solution to them.
2) Business Terms and Memory Recall Aptitude: This dimension indicates
the curiosity of the candidate to stay updated and informed about the market
competitions. A medical representative of a pharma company who possess
good knowledge of market can have good conversation with perspective
customer about different available competitive products.
3) Communication Skills: Since, medical representatives have to interact with
the doctors and physicians; they need to possess good oral communication
skill. The medical representatives have to make reports on the sale calls and
hence they must also possess good written communication skill as well.
4 ) Numerical Ability: Numerical ability means the ability to calculate numbers
accurately and quickly. A medical representative needs to have accuracy in
calculating sales order.
5 ) Personality Dimensions: Personality dimension includes high level of
energy, emotional maturity, character strength , honesty, work motivation,
dominance, etc. A sales representative in the pharma industry need to comply
with the characteristics associated with personality dimensions.
6 ) Honesty or Character Strength: It is very important for a medical
representative to be honest . A strong character and honesty helps them in
earning respect and winning trust of the customers. This results in building
good image of company in the eyes of customer.
7 ) Sociability: It is an ability of an individual to generate sense of love in others

and connect or interact with different people. People often prefer to interact
with such people, who can make them sociable as well . Hence, the
pharmacists or sales representatives should be sociable.
8) High Level of Energy: For the medical representatives of pharmaceutical
firms, it is very important to be energetic and enthusiastic in order to raise
sales and business potential. Only energetic sales representative possess the
quality to market the pharmaceutical products at every door and at different
store and company without getting tired.
9) Competitiveness: In an organisation if a medical representative wants to be
among the high performing members he/she has to be competitive in nature.
The competitive behaviour among medical representatives brings high level
of performance. They also support the bottom-line of the organisation.
10 ) Emotional Maturity: Emotional maturity is tested by the employer during
the selection of the medical representatives. It is very important for the sales
representatives to be emotionally mature because they have to keep patience
while having conversation with customers. Neither they can lose their
temperament nor can they show their frustration.
11 ) Work Habits: In order to achieve high level of sales, the process of sale
must be scheduled and organised in a planned way, hence the work habit of
the medical representative have to be planned and organised.
12) Work Motivation: Recognition and security are the two factors that
motivate the medical representative. When a medical representative feels
motivated with recognition, then he/she is ready to take risk and possess
enthusiasm to perform better. Hence, these people should be passionate, self -
motivated and have a go-getter kind of attitude.
7.1 .5. Training of PSR

In pharmaceutical companies, training is an activity carried out to offer job-
related skills, attitudes, culture and knowledge to pharmacists so that they can
perform better. Training is a systematic procedure of providing guidance and
teaching in order to develop the skills and abilities of the pharmacists.
Demonstration, action and evaluation are the key components of the training.
According to Edwin B. Flippo, “Training is the act of increasing knowledge and
skill of an employee for doing a particular job”.
Training and development is the next step that is to be taken after putting efforts
in hiring the right pharmacists. Training motivates the pharmacists, develops
their skills and guarantees respect to them.
Sales representatives are given rigorous pharmaceutical classroom training for

one month after they join the pharmaceutical firms. It is normally a round -the-
clock certification course, where medical sales managers and doctors train the
sales representatives. After the training is completed , the sales representatives
enter the market and sell the medical products.
Professional Sales Representative (Chapter 7 ) 239
The experience of sales representatives and pharmacists is supplemented through

training which in turn helps them to perform better. Both the existing and the
new sales personnel are offered training which helps them in performing their
jobs. The learning process in pharmacists is increased with the help of sales
training.
Contents of Training
The training contents are prepared in order to transform the raw employees to
fully skilled pharmacists. Some of the contents covered in training are as follows:
1 ) Training of Anatomy & Physiology: The Normal and Abnormal: Doctors
usually conduct such training sessions. In this, an extensive training in
physiology and human anatomy is provided. The training is provided
regarding different parts and functions of the organs and if these organs does
not perform normally then what would be its consequences.
2 ) Training about Diseases: Training is given to the trainee pharmacists on
various diseases for which the company offers medicines. The symptoms of
various diseases and its future effects are also explained in this training
session.
3) Training about Drugs: Trainee pharmacists are also trained regarding the
availability of the drugs for particular disease and how those drugs helps in
the curing the disease. Various indications and contraindications associated
with the drugs are also explained in the training session . A pharmaceutical
specialist gives such kind of training.
4) Sales Process: After the medical training is completed, trainee pharmacists
are given training on the complete sales process. This includes training about
company ’s products as well as on sales and promotion of the firm .
This training helps the pharmacists in communicating effectively with the
doctors; therefore, they are also offered training on soft skills. A senior sales
trainer delivers this training.
5) Handling Objections: Pharmacists are provided training to tackle the
objections of the doctors without being aggressive with them.
6) Training about Sales Policy: In training about sales policy, the pharmacists
are trained about the channels of distribution in pharmaceuticals and the
channel policies.
For example, selling through company branches or involving middlemen .
7 ) Training about Reporting Systems: Medical representatives or pharmacist
sales personnel act as the reporting system ’s nose, eyes and ears . The
activities that take place in the market determine the existence of a sales
manager. This is because market is the place where the actual competition
takes place.
In this training period the pharmacist trainees should always be motivated and
supported in order to maintain their productivity. After the training is completed ,
they are ready to face the market and perform their jobs.
Methods of Training
There are two different methods of training the pharmacists. These methods are
as follows:
1 ) Group Training Method: There are various methods of group training.
They are given below:
i ) Lecture Method : The lecture method is an oral form of training in
which a lecturer or an expert explains about the different aspects that are
involved in selling. This method of training is most commonly used. It
involves two-way communication as trainees listen to the lecture and can
also raise their doubts.
ii ) Audio- Visual Method: Audio-Visual method acts as a supplement to
the lecture method. In this, audio-visual aids like, slides, films, posters,
etc., are used to develop the interest of the trainees.
iii ) Discussion Method: This method helps in enhancing the problem-solving
skills of the trainees. Under this method , cases ( which can be real or
hypothetical ) are provided to the various groups of sales representatives.
The groups have to solve the case and come up with a solution.
iv ) Conference Method: Sales meetings and conferences can be held once
in a week/ month where the concerned parties get together. This is a
motivating and an effective training method as all the members of
meeting are given equal opportunities to express their ideas and they get
involved in the creative thinking process.
v ) Role Playing Method: In this method, medical representatives are given
a situation and are asked to prepare a role play. They are asked to
perform the roles of various characters like, customers and salespersons.
The problems are artificial on which trainees have to act.
vi ) Panel Method: Under this method of training, a problem is given to the
panel groups to discuss and offer a solution. The sales trainee groups are
then provided with the solutions of the panel groups so that they can carry
on the discussions. However, this method of training is not effective.
vii ) Round Table Method: In this method, few members are involved to
have a discussion of the real cases. The discussion leader and sales
personnel sit around the table and take part in the discussion of the
problem in order to offer a solution. It is like the discussion method . One
of the advantages of this method is that new ideas also come from the
side of sales personnel or pharmacists.
viii ) Brain Storming Method: This method is quite alike the round table
method. In this method, pharmacists and leader sit around the table and
leader offers the problem in front of the pharmacists so that they could
discuss it and provide a solution .
2 ) Individual Training Method: Various training methods come under the
individual training method . These are described below:
i ) Training on the Job: This method is one of the most common and
popular training methods. Under this method of individual training, the
medical sales trainee works alongside senior supervisor and gains
experiences regarding the overall process. Until and unless the senior
supervisor is satisfied that the pharmacist is ready to work independently,
he/she works with the trainee. Other names for this type of training are
‘coach and pupil training’ and ‘training within industry’ .
ii ) Training through Correspondence: Here, the sales trainees are

provided training through correspondence. A renowned institute is chosen
from where the trainees are provided with the study material . This
material is delivered to their place and then the trainees have to come up
with answers or solutions to the questions that are asked. A panel is
constituted that examines the answers of the trainee on regular basis.
iii ) Internship Training: In this method of training, the organisation and the
technical institution conduct a combined training program. Offering both
technical and theoretical knowledge to the trainees is the main purpose of
this method of training. After the completion of training, they work in the
organisation as a regular employee.
iv) Training through Study Courses: In this training method , the sales
trainees are asked to have a thorough study of the courses. There are
experts who guide and supervise the formulation of such courses.
Pictures and photos are also used for illustration purposes. These study
courses are forwarded to the trainees on timely basis
v) Training through Special Assignments: In this training method, the
pharma trainees are given some special assignments. They are given the
full liberty to finish the assignments as per their comfort. The main
objective of this method is build confidence among the pharma trainees
so that they can give their best.
vi ) Training through Observation: Under this method of individual
training , the pharmacists are given the position of assistants with the aim
of developing their observational skills. The pharmacists can easily and
effectively grasp the issues related to their specific posts by holding such
positions.
vii ) Training through Individual Coaching: The other method of
individual training is training through individual coaching. In this
method, kits containing information and material are prepared by the
trainer. Such kits are useful in providing learning opportunities to the
trainee pharmacists. This training is provided to pharma trainees because
they deal with products which are of scientific nature.
7.1 .6. Compensation to PSR

Compensation literally means ‘what is given in return’. In the terms of human
resource management, the monetary and non -monetary benefits given to an
employee for his/her services are termed as compensation. These benefits can be
given in several forms. The monetary benefits will include the base pay whereas,
the non- monetary benefits are the facilities or services given to the employees.
These can be provident fund, insurance scheme, gratuity, pensions, etc. Payment
and benefits other than these may also be offered to employees as compensation.
Therefore, sales force compensation is the sum total of monetary and non -
monetary expenditures incurred on the organisational sales force for
recompensing its services. This implies that compensation is the sum total of
contractual ( wages and salary ) and non-contractual payments ( welfare services).
The sales manager in accordance with the HR department of the organisation
determines the level of such payments for each individual appointed in the sales
force. Pharmaceutical companies generally adopt a comprehensive compensation
philosophy across their workforce, including the full range of positions.
Compensation is a key for retaining good people on professional positions, such
as pharmacists or medical representatives in the competitive marketplace.
In past, pharmaceutical companies were able to attract a good sales team with the
help of competitive compensation packages and these packages included many
components like, basic salary, bonuses, recognition programme and other benefits.
Whereas, now a days, pharmaceutical companies have tried to build a balance
between compensation and budgetary challenges with the help of planning the
variable pay system ( which involves greater compensation ratio) and also by
offering high return for high performing members. The main objective for
effective compensation philosophy in an organisation is to make effective use of
its fund for motivating, attracting and retaining employee in organisations.
Similarly, the main function of marketing managers of pharmaceutical companies
is to recognise the reasons that tend to high turnover of employees and pay
attention towards the compensation policy of the firm. Such compensation will be
based on the compensation philosophy and methods of the firm.
Rules for Pharmacy Sales Force Compensation

The recent research done in the field of pharmacy discloses that since past few
years, the overall cost per sale representative has remained consistent. Even after
being consistent , a high fluctuation in the compensation of pharmacists or sales
representatives is observed. With an objective to achieve a perfect compensation
plan , managers of pharmaceutical companies continuously keeps on making
adjustments in the components of compensation like, bonus, base pay, eligibility
norms for bonuses, bonus packages, etc. Amendments in the company’s
compensation plans can help company to develop changes in product line and to
improve superior practices.
Since, companies make adjustments in their compensation plans, there are some
rules which need to be followed for boosting sales:
1 ) Develop a Compensation Plan while Keeping Product Offerings and
Sales Force in Mind: The Company ’s plan for compensation must be
designed in such a way that it raises firm ’s drug portfolio and it also makes
the firm strong by providing a pool of talented and highly skilled sales force.
There are different types of products that pharmaceutical companies sell,
therefore, management must keep in mind the type of product medical
representatives are discussing with physicians or doctors. Accordingly, the
stipulated compensation against sale must reflect the key skill needed to sell
the specific product. The plan for payment must have a close relation with
sales strategies, experience needed for sale, and field forces personalities.
2) Clear Disclosure of Compensation Structure to the Representatives: When

a pharmaceutical firm has a clear compensation structure, its employees are
clearly aware about the amount that will be paid to them and this will affect
their sales performance. Contrary to this, when sales team is unclear about the
compensation structure, they do not feel much motivated to raise their sales or
work better. Hence, for a pharmaceutical company, it is very important that
sales representative must understand the compensation structure of the
organisation. To make sales team understand compensation easily,
organisation must design the compensation plan in a systematic manner.
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3) Elimination of Difficult to Measure Factor: The target assigned by the sales
managers must be easy to measure as it helps the sales representative to identify
how close he/she is to achieve the target, where he/she can earn more bonus or
incentive. A clear measurement also motivates employee to earn high
incentives. For example, medical representatives have to meet different doctors
or physicians to convince them and if their target is attached to the level of
satisfaction of these doctors and physicians, then medical representatives are
unable to evaluate whether they have achieved the desired result or not which
could result in their demotivation. Whereas, when medical representative are
able to measure their success then it can build their confidence.
4 ) Raising the Effect of Incentive Compensation: When there is greater
compensation for higher level of performance then medical representative
looks at greater reward and hence they try to reach more number of doctors
or physicians. The pay structure must be made in such a way that closer the
medical representative is towards his/her goal, higher should be the incentive
paid to him/her. This is because such compensation plan for medical
representatives acts as a driving force to reach the desired target. This
strategy can be termed as paying on multiplier. Similarly, if a pharmaceutical
company involves team-based pay system in its compensation structure then
it can raise strength of sales team; develop strong support and behaviour of
helpfulness among the team members.
Types of PSR Compensation

Following are the types of sales force compensation:
Types of PSR Compensation
Monetary Compensation
Non - Monetary Compensation
— Straight Salary Method
— Straight Commission Method — Promotions
— Recognition Programmes
— Combination of Salary and — Fringe Benefits
Commission
- Travelling Expense Account
— Commission
Drawing Account and
Plan — Perks
Sales Contests
1 ) Monetary Compensation: Among the several kinds of compensation plan, the
most popular is the monetary compensation. In this, a fixed and a variable
component are attached to the productivity, fringe benefits, and expenses of a
salesperson. The fixed component is reserved for supporting the family needs of
the individual, whereas, the variable component ( like bonus, commission,
shared profit, etc.) is used by the sales manager to improve his/her productivity.
Additionally, reimbursements are also provided to the sales force to recompense
their expenses (on travel and other activities ) which incurred while making the
sales. Following are the sub-types of monetary compensation plan:
i ) Straight Salary Method: It is the oldest and most common compensation
method. In this, a pre-set amount is given to the salespersons at the end of
every month , as salary , i.e., irrespective of the sales made by the
salesperson, a fixed amount is given as compensation. Once the salary is
fixed , no variation occurs. This amount is fixed for a particular time-scale
and in case of continued service, annual increments are also made.
Generally, dearness allowance, HRA, basic salary, travel allowance and any
other business expense made by the employee are included in the salary.
ii ) Straight Commission Method: Straight commission method is just
opposite to the straight salary method as it is not based on time. The
basis of this commission method is the volume of sales, i.e., the
outcome. A particular percentage of the total sales volume is paid to the
individual as commission. Hence, the amount paid to the sales personnel
does not remain fixed. This commission is paid in two ways, either flat
or differential . Under differential system, the individual is paid a certain
rate upto a fixed level of performance and the rate tends to increase
above that level of performance.
iii ) Combination of Salary and Commission: To draw the benefits of
salary and commission methods, a combined method is used comprising
the features of both the above methods. Under this method , the
employees are assured of economic stability through fixed salary and can
also enjoy an extra sum of money as commission for the amount of sales
volume achieved by them.
iv ) Drawing Account and Commission Plan: This plan has emerged after
a few modifications in the straight commission method. In this method,
the amount of commission to be given to the salesperson is credited
every month into a drawing account opened by the company in his/her
name. A limit to withdrawal is set. If there is a credit balance at the end
of the month, the amount can be withdrawn by the sales person. While
on the contrary, the amount is written off if there is a debit balance. The
amount written off is considered to be his remuneration for that month .
2) Non-Monetary Compensation: Another type of sales-force compensation is
the non - monetary compensation. This compensation plan motivates the sales
force to contribute towards the long-term organisational objectives. Some of
the non -monetary compensations are promotions, fringe benefits,
recognition, perks, etc. However, these compensation plans are non -financial
in nature, but they directly or indirectly influence the financial status of the
salespeople. Following are the major non- monetary compensation benefits:
i ) Promotions: When an individual is entitled to increased responsibilities at
the job, it is termed as promotion. Every sales personnel who is working in
the organisation for a long period of time and is committed towards his
services needs recognition in form of promotion. Subsequently, higher
positions in the organisation have limited openings therefore the
management must plan its promotional programme in such a manner that
the position appears to be aspiring and challenging to the salespeople.
ii ) Recognition Programmes: Promotions alone cannot help in retaining
employees in an organisation . Their hard work and commitment must
also be recognised by the organisations. Thus, recognition programmes
are organised by many organisations to acknowledge the extra -ordinary
contribution and outstanding performance of individuals.
These programmes whether formal or informal , are held on the annual
days, foundation days or conferences of the company. The awardees are
also featured in companies’ bulletins and websites.
iii ) Fringe Benefits: This type of benefit is very common in the
organisations for compensating the salespeople. Fringe benefits are the
employment benefits which are awarded to the salespeople in addition to
their wages and salary. These benefits include retirement benefits,
medical benefits, life insurance, sharing of profit and stock options.
Some of the retirement benefits under this plan include pension plans,
provident funds, and gratuity. The medical expenses comprise of
reimbursement of hospitalisation costs in case of emergency and
compensation for all running medical expenditures. Other fringe benefits
involve paid vacations, sick leaves, medical leaves, maternity leaves,
leave travel concessions, etc. All these benefits are used by almost all
companies in different forms.
iv) Travelling Expense Account: If the travel expenses are paid by the
salesperson himself out of the commission he receives, the organisation
does not have to be concerned regarding his conveyance.
However, in cases where the organisation pays the travel expenses
incurred by the salesperson , there the reimbursement systems must be
formulated cautiously and looked in that the reimbursements are subject
to business purposes only. These reimbursements are time -specific and
have certain expense limits. The travel expenses can be of two types:
a ) Local Travel Expense: Under this system, those expenses are
reimbursed which are incurred by the salesperson for travelling the
town of allotted territory where he is positioned to meet the customers,
associates and dealers. It can be in the form of fixed daily allowance,
fixed fuel expenses, total mileage covered, conveyance expenses, etc.
b ) Upcountry Travel Expense: Under this system, those travel
expenses are reimbursed which are incurred while travelling to other
towns of the allotted territory. These expenses are of two kinds, i.e.,
the expenses for travelling to another town and expenses for
travelling and staying in that town for the period of time.
v ) Perks: This compensation comes under a special category of company ’s
compensation programme. Perks are given only to those salespersons
who are experts in a specialised field or hold a special status. This type
of compensation includes entitlement to a car, driver, house, gardener,
club membership, educational and training opportunities, etc. Perks can
be categorised into following types:
a ) Status: These perks are based on the individual ’s performance and
are far more effective than any other perks. These are noticeable
rewards like job title, cabin, assigned parking space, etc.
b ) Financial Perks: The highest motivating financial perk provided by
the company, is the use of company ’s vehicle to a salesperson . In
addition , other financial perks include expenses of their support staff
like drivers, cooks, gardeners, membership of clubs, vehicle fuel
expense, maintenance and insurance cost to the salespersons.
c) Personal Growth: These perks involve paying for higher education
and training programmes of a salesperson.
vi ) Sales Contests: These compensation plans are not permanent and their
sole motive is to increase sales. Sales contests are organised to tackle the
competitors, to stimulate sales force commitment among the sales
personnel for a new product launch, and to sell off the stock in an off -
season. Sales contests are provided to the sales force for gaining their
support in the most crucial stage of the product life cycle, i.e., maturity
stage. Sales contests motivate the sales force to increase sales and are not
included in the usual compensation plan.
7.1 .7. Supervising the PSR

Supervising salesperson is important for realising their full potential and to
improve their performance. The salesmen perform their job in the field which is
located far away from the company ’s headquarters and its regional sales offices.
Though sales managers and regional sales executive regularly visit sales
territories but then also the direct supervision of the sales force is quite difficult.
Sales meeting, sales quotas, periodical reports are the ways through which most
of the salesmen operate. Performance appraisal, remuneration system and
expense account regulation also act as a tool of control and supervision.
Along with providing territory, compensation package and training to the new
sales representatives they should also be supervised properly. Commission based
representatives receive less supervision as compared to salaried reps. Companies
establish guidelines regarding the ways in which the customer or prospects
should be approached by the sales representative. These companies helps reps in
utilising their sales time efficiently.
7.1.7.1. Norms for Customer Calls

The average salesperson made 5 calls a day in the early 1980s; by 1989, the
figure had fallen to just 4.2 sales calls per day . Salespeople are making far less
in-person sales calls today since they sell by phone , fax, and e-mail. Moreover, to
minimise reliance on sales calls, more businesses are using automated ordering
systems.
How many calls per year does a business make on a specific account ? Studies
indicate that more profits are usually generated through increased calls, but
businesses also need to decide that the increase in sales justifies the increase in
sales costs. Experiences and studies have suggested that the time which should be
spent by sales reps on selling to more profitable people are utilised in selling to
less profitable people. Norms should be established in such a manner that the call
made justifies the profit payback for that account.
7.1 . 7.2. Norms for Prospect Calls

The time which a rep should spend on prospecting for new accounts is specified
by companies after acknowledging high cost of sales calls.
For example, Spector Freight needs its sales representatives to spend 25 percent
of their time prospecting and avoid calling after three unsuccessful calls on a
prospect.
Some organisations have established prospects and consumer standards on the basis
of product sales, for example, 80% time of the sales reps can be spent on selling
already established products whereas the remaining 20% is spent on selling new
products. The reason behind setting prospecting standard is that the unsupervised
and unattended reps spent most of the time with current customers rather than
prospective one. Selling to current people expand the customer base of the sales reps
and increases their sales. Selling to a prospective client is more difficult and time-
consuming as compared to selling to the current customer. This is the reason behind
deploying a special missionary salesforce for opening new accounts.
7.1 .8. Motivating the PSR

The internal force which governs the behaviour of an individual can be known as
motivation. Every person has a unique motivation factor. A number of different
methods can be adopted by the sales manager in order to keep the sales personnel
motivated. The sales people can be motivated identifying and pursuing their
individual needs. A process of making people feel inspired so that they perform
the necessary tasks and achieve goals and objectives is known as motivation. It is
mainly a psychological phenomenon which results from the needs and wants of
individuals. It causes a behaviour which is goal oriented. This can be seen as a
force which compels the person to perform.
A very important role is played by the salesforce in revenue generation and in

maintaining the existence and growth of the organisation. The salesforce of any
organisation has the responsibility to increase the sales of the organisation on a
continuous basis. When it comes to personal selling, there may or may not be
direct supervision apart from reporting to the Sales manager about the target
accomplishments and to come up with the new sales plan or to make some changes
in the existing ones. It is the nature of the job which demands the sales personnel to
be self -motivated so that maximum satisfaction can be obtained by them out of the
job. In case the salespersons are not self -motivated, the sales manager has the
responsibility to motivate the team and ensure their commitment towards the job.
According to Berelson and Sterier, “Motivation consists of all those inner

striving conditions described as wishes, desires, drives, needs, impulses, etc. It is
an inner state that activates or motivates”.
According to Sharetle, “Motivation is a reported urge or tension to move in a
given direction to achieve a certain goal ”.
.
According to Dalton E McFarland, “Motivation refers to the way in which
urges, desires, aspirations, strivings or needs direct, control or explain the
behaviour of human beings”.
7.1.8.1. Process of Motivation

Different steps which are included in the motivation process are described below:
1 ) Motive: The motivation process is initiated when motive is identified by an
individual to perform a certain action. Behaviour is stimulated by the motives
and these motives are the basis of the behaviour. Majorly, motives are
personal in nature and reflect the individual ’s thought process. It is the
motives which direct the person.
2) Behaviour: Behaviour is formed by the activities performed by an individual
when he has the motivation to accomplish some organisational and personal
objectives. The objectives of a person are
Motive
reflected by the motives. There are some
incidences where the situation of
inequality is resulted from these motives Tension
Behaviour Reduction
due to the imbalance between the
physiological and the psychological
conditions of the individual. Therefore, the
Goal
goal -oriented behaviour of an individual
also helps in striking a balance between the Figure 7.2: Process of Motivation
physiological and the psychological
conditions of the individual.
3) Goal: There are various factors which inspire the goals of a person. For
example, morals, customs, experiences, and his social and physical
surroundings, personal learning, inherited potentials, etc.
4) Tension Reduction: Because of the cultural environment of the organisation
and the duties towards accomplishing objectives, motivational urges are
developed in the employees of the organisation . The perception of the
manpower about the job and the personal and professional life is also
influenced by these urges.
7.1.8.2. Methods of PSR Motivation

Apart from the fixed compensation , there are some specific motivations which
are required. Some of them are given below:
1 ) Sales Contests: A sales contest mainly indicates the competition among the
sales force in order to maximize their efforts to increase the sales volume and
to win the position of superior salesperson. The main objective of this contest
is to have increased sales, inculcating the feeling of team spirit, morale
boosting, motivating for hard work, pushing the slow moving products, to
come out of depression phase of the business cycle, etc. The prizes are given
to the successful salespersons during the contest in the form of merit
certificate, travel vouchers, price money, incentives, etc.
2 ) Incentives: Incentive can be seen as financial or non -financial factor which
motivates a person towards a certain action or it can be seen as a reason
behind selecting a particular alternative over others. It is mainly an official
plan which is aimed to have a certain result or to encourage a particular
behaviour in a group of individuals in a stipulated time period. Motivating
the manpower and increasing the sales to attract and maintain the flow of
customers are the main objectives of incentives programmes.
3) Bonus: The extra pay which is received due to good performance is called
bonus. By facilitating bonus, the performance of sales force can be improved
and company can also ensure retention of loyal employees.
4) Sales Meetings: There is a meeting of all the salespersons at a place. This
form of group motivation enables the salesmen to get in touch with fellow
staff members. Here people share their ideas and opinions. Solution of
problems is found and new policies are formulated in these meetings.
An opportunity to come together and share the experiences, ideas and
resolving the sales related issues with the sales persons working at different
levels is provided by the sales meeting. During a sales meeting, information,
ideas and viewpoints are shared among the sales persons.
5) Recognition and Honour: The sales persons are motivated to perform more
and put their best when they receive recognition and honour - title , e.g.,
“Salesman for the year”, appreciation letters, medal , congratulatory
greetings, trophies, etc. A lot of satisfaction is received by the salesperson
from these recognitions and honours.
6) Personal Meet: With the help of the reports, the performance of the sales
persons can be analysed. In order to boost additional sales, the meeting of
salesmen with the sales manager can be arranged in order to come up with
the solutions to the various issues. Satisfactory solutions to the problems can
be provided by the sales manager or a discussion can be held to come up with
an appropriate solution.
7 ) Promotions: The promotion of a sales person to a higher post and higher
salary can be facilitated by taking account of the experiences and the
abilities. This helps in improving the status, self -respect , compensation and
obviously, it is the best motivation for the sales force.
8) Personal Communication: Writing personal letters by the sales manager to
the salesman is always considered as a good gesture for providing the
solution of the problems faced by the sales person. Goodwill, morale,
confidence and co-operation can be ensured with the help of two-way
communication of ideas, opinions, facts and feelings.
9 ) Freedom: There should not be a high level of control on the sales person
while performing the job. While performing the job, it is important for the
salesman to have the suitable degree of freedom. The salesman should be

provided with a chance to perform the job as per his choice. One should
avoid calling him to collect reports. A good stimulus is provided by these
things and the feeling of being important for the firm is created.
10 ) Timely Information: The salesperson must be informed about the newly
launched product, modifications in policy, new technology, etc., so that he
has the required important information . Magazines and bulletins containing
current information are also published by big organization especially for the
sales persons. When the information about all the changes such as change in
prices, promotions, quality, guarantee, product , policies, colours, after sales
services, etc., are provided to the sales persons, they can use that information
to successfully compete in the market.
11 ) Compensation: The most commonly used method for motivating the sales
force is the compensation. This is significant in bringing change in the
behaviour of the salespeople. With the help of a sound compensation plan,
sales forces are assisted in direct selling activities and in attaining the sales
goals. It also has an impact on efficient execution of the marketing plan of
the organisation.
7.1.9. Evaluation of PSR

The efficient management of sales performance in a pharmaceutical firm
determines its success or failure upto a greater extent. Hence, for the modern day
sales executives and managers of a pharmacy firm, refining the performance
appraisals must be among the top priorities. The extent to which organisational
goals of a pharmaceutical firm is influenced by an employee’s behaviour and
associated result of such behaviours is known as performance evaluation or
appraisal. Evaluation of performance is always based on comparison made with
the success standards of the firm.
Today, pharmaceutical companies have strong appraisal system that evaluates the
performance activity or sales as well as the skills possessed by the sales executives.
These systems give the rational assessment of sales or activity performance as well
as the skills that the sales executives bring in with them. When one is working in a
region with three or more person selling a certain product , these evaluation systems
are most helpful. Front-line managers in most of the pharmaceutical companies are
asked to consistently assess the performance of each sales representative. Though
the framework and regularity of such review reports differ from firm to firm, these
reports are commonly employed tools for yearly promotion and evaluation of sales
executive’s capability for future career prospects.
Hence, performance appraisal is very crucial for sales representatives. In case if
the sales representatives do not know the process and timing of the performance
appraisal, he or she should get the information from his/her superior.
Important decision regarding motivation, retention and training are taken on the
bases of assessment of pharmacist. Regular assessment makes available the
necessary information required to decide which medical representative or sales
person to be retained and which to be dropped. By suitable training programmes

and assessments prepared by the producer, gaps in sales representative’s skills
and capabilities can be broadly recognised. However, it should be noted that
when power lies with the sales representatives the possibility and regularity of
assessment gets limited.
In a way evaluation of performance is defined as the degree of competence of an

employee against set standard of knowledge and skills.
Performance = Ability x Motivation x Support
Since the process of selling takes place outside the view of the pharmacy
marketing manager, evaluating performance of sales representative becomes
difficult.
In addition to sales standards, behavioural standards must also be inculcated in

the evaluation process. Ascertaining how well an individual has performed is the
principle objective of a performance evaluation program. These performance
evaluations may be used for many other sales management purposes such as to
assess which sale representives can be promoted or to make sure that the
compensation and rewards are based on actual performances of pharmacists, etc.
7. I .9. I . Determinants of PSR Appraisal

There are several internal and external factors which determine the appraisal of
sales representative/ pharmacists:
1 ) Internal Factors: Internal factors depend upon the medical representative or
sales representative. These factors have been discussed below:
i ) Motivation: Among all internal factors that affect the performance of a
sales representative, motivation is the most crucial factor. Owing to lack
of motivation, one may perform poorly in spite off have having the right
skill, knowledge and aptitude.
ii) Skill Level: The performance of a sales representative in the
organisation is greatly affected by the level of skills possessed by them.
The level of skill is the expertise of an individual in a specific area.
Therefore, it is required by the sales representatives to have requisite
skills such as communication and interpersonal skills, developing public
relations, ability to speak in public, etc.
iii ) Job Satisfaction: Performance of an employee enhances when he/she is
contented at work. An important factor that determines satisfaction level
at job among the sales representatives and other employees is
' compensation ' . Employees are satisfied in organisations that have well -
developed compensation system, which is directly proportional to

performance.
iv) Role Performance: Degree of awareness about the responsibilities and
operations helps the sales person in clear determination of their own
roles at work . These responsibilities include, determining the customer’s
needs, product portfolio of the company and cater customer needs.
v) Personal Factors: All the internal individual factors that affect the
performance of sales force fall under personal factor, except those that lie
under motivation , role perception , skill level, and aptitude. These
personal factors include age, gender, level of education, marital status,
number of dependents, appearance and height .
vi ) Empathy: Empathy simply means understanding feelings of others.
Sales representatives should be able to relate the feelings of the
customers efficiently. An empathetic sales person has improved
possibilities of recognising the customer’s needs and cultivate a long-
term friendly relation with them .
2 ) External Factors: External factors influencing performance of sales
representatives can be divided into organisational variables, environmental
variable and sales management function.
i ) Environmental Factors: The performance of sales force can be affected
by external environmental factors like demographics, economics and the
terrain of a particular region. These factors can affect the sales force
output , expenses while undertaking sales activities, number of calls made
per day and number of sales order.
ii ) Organisational Factors: Performance of sales force is also affected by
the organisation and its culture. Companies can improve sales force
performance by simplifying the workflow and communication processes
to assisting interaction between sales personnel.
iii ) Sales Management Functions: Sales management functions include
compensation, control , planning territory management and forecasting.
Performance of sales force is also affected by sales force structure, job
description and organisational structure.
7.1.9.2. Methods of PSR Evaluation

The methods used in the process of evaluation of PSR are as follows:
1 ) Essays: It is the most feasible among all the other methods of evaluating
medical representative or pharmacist sales representative. Performance of the
salesperson is defined in few passages by the marketing or sales manager
under this method of evaluation. The manager mentions the relevant details
like weakness, potential , strength and other important details in the essay.
Use of this method is based on the premises that a written or oral statement is
trustworthy like the other formal methods of evaluation.
2 ) Rating Scales: It is the most widely used method for evaluating the
performance of sales force. In this method the sales manager recognises
some definite criteria for a specific type of job. These standards may be
associated with performance or may be based on behavioural factors and
personality traits. Evaluation of sales personnel is based on the degree to
which their behaviour meets the desired performance standards.
This method provides advantage of identifying the areas where the
salesperson needs to maintain his/her level of performance and areas where
his/her performance is lagging.
-
3) Forced Choice Method: In this method of rating, the performance of sales
personnel is compared against the set standards developed for measuring the
performance of sales force. Here, the sales manager is asked to undergo
groups of statements and select the most appropriate statement that best
describes the sales representative. Normally, both or all the statements in a
group are either negative or positive.
The person rating the statement is forced to select a particular statement that
best defines the sales representative from all the positive and negative
statements. Evaluator is not aware of weights given to each statement. The
personnel department evaluates the form and the sales representative
securing the highest score is rated the maximum.
4 ) Ranking: When each sales personnel working in different areas in the
pharmaceutical firm have to be compared, this method is used. It helps in
evaluating the performance of the sales force. All the sales personnel are
arranged in descending order of their performance.
This method is used where other methods (appraisal form, essays, rating
scale ) are not applicable. This method is favoured when sales personnel
working in distinct areas have to be evaluated for doing increment in
compensation or for promotion.
Here, subjective approach is needed instead of an objective approach ( based
on numbers) for the evaluation of sales force performance.
7.1. 10. Future Prospects of PSR ( Pharmaceutical Medical

Representative )
The regulations of government have declined the job opportunities for
pharmaceutical sales reps. Ever since, the pharmaceutical firms are working on
market-influencing factors. Though the pharmaceutical industry is trying to
recover but the competitive demand for pharmaceutical sales reps jobs and
government regulations are still limiting their position in the market.
1 ) Job Shortage: Declining earnings in 2012 forced pharmaceutical companies
to reduce expenses by decreasing their number of staffs. Though jobs in
pharmaceutical field do not require certification but sales reps having
pharmaceutical sales certificate and experience in sales will surely be able to
achieve job in limited job market. In order to grow in their field, sale reps
should focus on finding a pharmaceutical company whose features include
reliant sales, less expiring patents, and healthy product pipeline.
2 ) Digital Marketing: Traditional advertising was costly. Thus, the
pharmaceutical companies are shifting towards IT media. Sales reps should
have strong digital marketing knowledge for achieving job in pharmaceutical
company. Strong digital marketing knowledge will help the representative to
increase their customer.
Brian D. Smith in his book “The Future of Pharma,'’ states that in order to
meet physicians regularly the reps are no longer required to travel. Social
media and websites will be utilised by them to advertise and market products
to the patients, physicians and other customers.
3) Emerging Markets: The pharmaceutical reps whose goal is to travel

internationally has a bright and promising future. As per Roland Berger
Strategy Consultants, decreasing drugs sales in U.S. will force their
pharmaceutical firms to shift their sales divisions to developing markets such
as Russia, India, Brazil and China. The pharmaceutical market will grow
internationally in the coming future. The pharmaceutical companies that can
offer high quality product at reasonable price will be preferred by the local
sales representatives.
7.2 . DETAILING
7.2.1. Introduction
The most significant method of promotion is personal selling and detailing. But it
requires a lot of expenditure too. Medical representatives and detailment are
employed by pharmaceutical companies. The estimated amount spent on
promotion activity is between 40 and 50 per cent of the overall budget of
promotional activities. Two-way personal communication between manufacturer
and prescriber is established by this method. Detailed information regarding the
products, its use, pharmacological and chemical actions, its chemistry, indications,
dose, side-effects and precautions are provided by representatives during these
visits. The information that is not covered under other promotional means is also
provided to physicians. New products are tried by a physician on the basis of
information that is provided by the company representatives. They give preference
to the information that is shared by reps and not by any other promotional activity.
According to Harold White Head, “The art of presenting and offering that the
prospect appreciates the need for it and that a mutually satisfactory sale follows”.
Selling can be of two types, i.e., personal or impersonal. Personal selling is a

direct sales promotion activity in which a face-to-face relationship is established
between sellers and prospective customer. Personal selling is a costly yet flexible
and effective form of sales promotion. It is two-way or mutual communication.
Detailing is the most effective and expensive means of promotion . An average of

six to eight calls per day can be made by representatives and less than five
minutes can be spent by them with a single physician. It is an efficient means of
providing physicians the knowledge on new medications, but it has also attracted
criticism from different organisations, including the health profession, as a result
of its high cost . As a result, the minimum ethical requirements for their members
have been set by many countries. In the United States, the trend is to create
specialised representatives instead of general representatives.
The key advertising method used by all pharmaceutical companies is detailing

through salesforce. Unique promotional packages endorse personal calls to
doctors in their offices and hospitals, such as 10 percent free products with an
order, free samples, selling gimmicks to decorate the pharmacy, brochures, daily
visits to medical schools, etc. The direct support given to this activity by the
social marketing is the provision of brochures and gimmicks.
7.2.2. Purpose of Detailing

Following are the purpose of detailing:
1 ) Advertising the company ’s products.
2 ) Creating and arousing interests in the mind of the doctors regarding products
this eventually influencing his prescribing habit.
3) To highlights the benefit/advantages and prominent characteristics of the product.
4) Generating more prescription .
7.2.3. Product Detailing Tips for Medical Representative

Following are the product detailing tips for medical representative:
1 ) Ask yourself whether you’re in a Great Detailing or a Short One: Long call
allows more thorough detailing as compared to a short call. A standard long call
helps medical reps to go through series of steps of asking questions, making an
initial statement of benefit, confirming acceptance, validating one’s claim with
studies, addressing a complaint and asking for a commitment. In short call only
important messages are discussed and a further meeting is scheduled.
2 ) Is it a Technical or Follow Up Call: In a technical call or follow-up call, the
medical representative call customer for the first time and requires time to
introduce a company and its products. Whereas, follow up call is a
continuation of what the medical reps had discussed with the client in their
prior meeting ( progressing into the sales cycle).
3) Are you Seeing a Decision Maker or Non- Decision Maker: A decision-
maker makes each and every effort for making a final call whereas a non -
decision maker needs to be updated regarding the progress of the sales
process or negotiation.
4) Practice with those who know the Product or Customer: Practicing with
someone who knows about the product or customer is known as “mock
detailing” in detailing practice . In this process, medical reps learn how to
present their product in the best possible way; they receive feedback, learn
more and finally approach their customer. In the beginning, this may seem
uninteresting, but after a period of time everything looks quite interesting.
5) Deliver the Call and Record your Performance Afterward: It would be
better for the medical representative that someone else points out their mistake
as they may neglect or ignore their sloppy behaviour. For example, pointing at
a brochure with a pen, etc. Marketing reps should also record their best
performance and the activities required for maintaining good performance.
6) Polish your Detailing and Keep Polishing it until you Develop your Own
Style: Medical representative must keep practising as it takes time to achieve
mastery in detailing. They can also change their job for a better career opportunity.
7.2.4. Advantages of Detailing

Following are the advantages of detailing in pharmaceutical sales:
1 ) Allowing for Two- Way Interaction: The interaction ability of the medical
reps with doctors and pharmacists helps the sender in determining the impact
of the message.
2 ) Tailoring of the Message: Messages can be personalised to the receiver

because of direct contact. This more precise message content helps the
medical representative to discuss the individual issues, problems, and needs
of the doctors or pharmacists.
3) Lack of Distraction: One-to-one presentation is performed in detailing. The
Buyer pays direct attention to the sales message and therefore the chances of
distraction get reduced .
4 ) Involvement in the Decision Process: In relationship marketing and
consultative detailing the seller seems to be more of a partner in buying
decision process as he/she helps the buyer in solving their problem.
5) Source of Research Information: The information related to the promotion,
pricing, buying needs and wants, competitors’ products and services can be
collected by medical reps.
7.2.5. Disadvantages of Detailing

Following are the significant disadvantages of detailing in pharmaceutical sales:
1 ) Inconsistent Messages: The unique advantage of personal selling is its
capability to transfer the message to the receiver. However, one of the
disadvantages can be the lack of a standardised message.
2) High Cost: Hiring reps for detailing purpose can cost high to the companies.
Increasing sales cost will force marketers to use mass communication as an
alternative cost -effective method.
3) Poor Reach: The number of a targeted audience and the frequency to which
the message is delivered through detailing is quite less.
4) Potential Ethical Problems: The Message communicated by the medical
reps is not looked upon by the manager and therefore just for the sake of
increasing their sales the medical reps often try to break the rules. They do so
because their income is directly linked to sales.
7.3. SUMMARY
1 ) A professional whose job is to sell the product and services of the company
is known as sales representatives.
2) Pharmaceutical sales reps should remain up-to-date with current technical
research because of the changing nature of pharmaceutical industry.
3) Recruitment is done on local and regional basis depending upon the required
category of candidate, i.e., if a pharmacist or clinical specialist or clinical
pharmacist is required.
4) There are large numbers of applicant available in market to be chosen for a
pharmaceutical firm. Coverage of market and knowledge of market are some
important standards for the selection of sales-person or medical representative.
5) Training is a systematic procedure of providing guidance and teaching in
order to develop the skills and abilities of the pharmacists. Demonstration,
action and evaluation are the key components of the training.
6 ) Pharmaceutical companies generally adopt a comprehensive compensation

philosophy across their workforce, including the full range of positions.
Compensation is a key for retaining good people on professional positions,
such as pharmacists or medical representatives in the competitive marketplace.
7) Supervising salesperson is important for realising their full potential and to
improve their performance. The salesmen perform their job in the field which is
located far away from the company’s headquarters and its regional sales offices.
8) Incentive can be seen as financial or non -financial factor which motivates a
person towards a certain action or it can be seen as a reason behind selecting
a particular alternative over others.
9 ) Sales management functions include compensation, control , planning
territory management and forecasting.
10) Detailing is the most effective and expensive means of promotion . An
average of six to eight calls per day can be made by representatives and less
than five minutes can be spent by them with a single physician.
7.4 . EXERCISE
1) What is PSR?
2) What is compensation?
3) Define detailing.
4) Give any two advantages of detailing.
5) Explain the term ‘sales meeting’.

1 ) Mention the duties of PSR.
2) How to motivate the sales force?
3) Describe the future prospects of PSR.
4 ) Discuss the methods of motivating the PSRs.
5 ) What are the rules for PSR compensation?

1 ) Explain the selection and training of PSR in detail.
2 ) What do you mean by supervising the PSR ? Give the norms for customer calls and
prospect calls.
3) Discuss the types of compensation plans for PSRs.
4 ) Describe the evaluation of PSR . Explain the determinants of PSR appraisal.
5) Explain the product detailing tips for medical representative. Also give the purpose
for detailing.
CHAPTER
8 Pricing
8.1. PRICING
8.1.1. Meaning and Definition of Price and Pricing
The only component of marketing mix that generates returns is called price,
however, others only generate costs. Price can be easily altered, whereas, other
product aspects like channel obligations and product attributes cannot be changed
so easily. Therefore, price is the most flexible component of the marketing mix.
For a manufacturer, price is that amount of money (or in case of barter trade,
goods or services) which he will receive from the buyer for his product. For a
customer, price is something he sacrifices for owning the product or service and
therefore, it displays his perception for the product value. It can conceptually be
defined as:
Quantity of money received by the seller
Price =
Quantity of goods and services rendered/ received by the buyer
As per this equation, the numerator as well as the denominator is crucial while
taking price decisions. A product’s price is based on the seller’s decision
regarding its monetary worth to the buyer. The method used to convert the worth
of a product or a unit of service into quantitative form ( i.e., rupees and paisa) at a
given time for customers is called ' pricing’.
Medicines demands are one of the driving force behind the pharmaceutical
expenses. The increasing prices of the medicines is the major challenge faced by
health system managers as medicines are gradually being priced at the level that
does not seems to be fair. Price management is the critical challenge for the
manager or pharmacy owner. Extremely high price margin will lose the customer
and too low will not be able to cover up the pharmacy’s operating cost .
Over 55 million individuals are pushed into poverty every year because of the
costly healthcare facilities of India. The prices or cost of medicines has been a
delicate topic in India. Out of total expenses incurred on healthcare more than
50% is utilised for purchasing medicines only. When the poor section of the
society is able to purchase medicines then one can say that the prices of the
medicines are reasonable in the country.
Price control is the only option available for government to make drugs
inexpensive. As per AIOCD-AWACS, approx. 14% of drugs by value and 25%
by volume are under price control strategy of government. Till September the
worth of India’s pharmaceutical industry was ?1.36 trillion.
Pricing ( Chapter 8 ) 259
According to Prof. K.C. Kite, “ Pricing is a managerial task that involves

establishing pricing objectives, identifying the factors governing the price,
ascertaining their relevance and significance, determining the product value in
monetary terms and formulation of price policies and the strategies,
implementing them and controlling them for the best results”.
8.1 . 2. Objectives of Pricing

There always exists a motive behind pricing a product or service, may it be
revenue, survival, or any other competitive advantage. Following are some of the
pricing objectives:
1 ) Profit Maximisation: The basic aim of a pricing decision is to increase the
profits of the firm. The pricing policy thus must be made in a way that it can
help the firm achieve to maximum profits.
Objective of Pricing
Profit Maximisation
Price Stability
Facing Competition
Achieving a Target -return
Capturing the Market Firm ’s Wellbeing in the Long-run
Profit Margin of Middlemen Mobilisation of Resources
Survival Product -Quality Leadership
2 ) Price Stability: It must be ensured that prices remain as stable as possible.

When a pricing policy is stable, it gains customer confidence and enhances
the reputation of the company. This can be done by taking into account long-
term and short-term elements.
3) Facing Competition: Another objective of price decision is to handle the
market competition effectively. The competitive situation must be kept in
mind while finalising the prices of products and services. At times,
management prices its product very low as compared to its competitors in
order to discourage all the possibilities of competition .
4) Achieving a Target - return: The reputed and well set-up firms aim to set a
specific rate of return on investment (either for the product quality or for the
company ’s/brand ’s name ) .
They calculate the product’s price in such a manner so as to achieve the
desired rate of return on investment . Different products may have different
target returns, but they must all be associated with one final targeted rate of
return.
5) Capturing the Market: Capturing the market is also an important objective
of pricing. When a big organisation introduces its product in the market , it
fixes the price of its product lower than its competitors. This is done keeping
in mind the competitive structure of the market and with the aim to capture a
big market share.
6 ) Firm ’ s Wellbeing in the Long -run: The prime objective of certain

organisations is to set the price of their product in a manner that best suits the
organisation in the long-run. While doing this, the economic situation and
market conditions must be kept in mind.
7 ) Profit Margin of Middlemen: The product must be priced with the aim of
providing the middlemen a reasonable return on the sale of a product. If this
does not happen , they will not take relevant interest in facilitating the
product ’s sales.
8 ) Mobilisation of Resources: Another objective relating to pricing is the
mobilisation of appropriate resources for the growth and development of the
organisation. Therefore, organisations aim to price its products in such a
manner that it can acquire enough resources.
9) Survival: Survival strategy is preferred by firms dealing with it 's over
capacity, extreme and fresh competition or varying consumer behaviour. It is
also an important objective of pricing in certain organisations. It helps
companies sail through rough waters and is hence a short -term objective. The
company prefers this strategy until the price is more than variable costs and
some of the fixed costs are retrieved . However, the company must strive to
add value in the long-term.
10 ) Product -Quality Leadership: To achieve product -quality leadership is also
one of the important pricing objectives. Firms producing products that are
better in quality than the competitor frequently try to become the product -
quality leaders in the market. They price their products higher, but try to
convince the customers that due to the enhanced quality , reliability, product
experience and other such benefits, the prices are worth the product values.
They convince the price sensitive customers by assuring them that they will
be benefitted in the long-run.
The point of importance here is that rather than allowing cost to decide the
price, it is better to use price as a strategic tool. If an organisation has a product
that is better than the competitor’s, it should make it known in the market and
charge higher price for it. Then, it will be able to earn more profits.
8.1.3. Determinants of Price: Factors Influencing Pricing

Decisions
The following factors are taken into consideration while determining the prices
of drugs:
1 ) Unit Prices: The unit prices influences the price determination. The unit
price is influenced by the government policies on registration, licensing for
manufacturing and distribution, authority to prescribe and dispense, generic
substitution and price control. There are chances that some suppliers may
provide discount in the unit price is not related to the sales volume.
2 ) Reorder Frequency and Total Cost of Purchasing: The price associated
with the purchase of pharmaceutical product is only one part of the total cost
of purchasing pharmaceutical product , the other part is the cost linked to the
holding of inventory, costs of operating the purchase system and additional

cost arises at the time of stockouts( shortage costs). The total cost of
purchasing can be reduced by making an optimum choice of reorder
frequency model. It is very difficult to make a choice of reorder frequency
model. The system can reduce the cost by noticing their correct balance
between the various elements.
The low reordering frequency can reduce the purchasing process. However,
the inventory holding cost will rise. The reorder frequency model may be
different from one supply chain to another and from one type of
pharmaceutical product to another.
3) Visible and Hidden Costs: The total cost of purchasing includes four costs
such as pharmaceutical acquisition prices, inventory holding costs,
purchasing operations cost and shortage costs. However, among these costs
some are easily visible while some are not ( i.e. some are hidden cost ).
The cost which is easily visible includes the total expenses for acquiring the
drugs or the salaries of the purchasing department , etc. On the other hand, the
hidden cost linked to the shortage and poor performance of the supplier may
consist of the following costs:
i ) Rise in acquiring cost due to frequent purchasing of drugs.
ii ) Replacement cost due to loss and rejection of medicines resulting from
poor packaging, improper shipping conditions, rapid spoilage, etc.
iii ) Replacement cost for short shipment , incorrect concentration of liquid
preparation , wrong dosage, etc.
iv) Storage cost, port costs, administrative overheads, etc., resulting from
ineffective clearing procedures, deficiency of funds or proper
documentation.
v) Health and economic costs of stockouts due to delay in delivery of medicines.
8.1. 4. Cost Structure in Pharmaceutical Products

The cost structure in pharmaceutical products is as follows:
1) Cost of Active Ingredient: Active ingredient cost is usually the highest. It
costs around 10-30% of the overall cost of the product.
2 ) Cost of Other Ingredients: These types of cost are usually low and can cost
around 3% of overall cost.
3) Cost of Packaging Material: These types of cost are directly proportional to
material being used. Cost can be between ?5- 10 per 60 ml bottle of liquid ,
per 5 ml injection , per pack of 10 tablet/capsules and per 50 grams tube of
ointments.
4) Cost of Manufacturing: Cost of manufacturing depends upon the volume
being manufactured . Research and development cost can also be amortised
by the company. It also acts as an additional cost component . In
pharmaceutical industry , 60% or more gross margin is considered good. The
gross margin can be as high as 500-1000% in case of new research module.
8.1.5. Pricing Methods

Cost consideration and consumer situation are the two fundamentals that impact
price decisions. Unfortunately, there are many firms that do not have
comprehensible pricing methods. Below mentioned are the general pricing
methods:
Methods of Pricing
Cost-based Customer Demand-based Market Competitor-based Other Pricing Methods

Mark- up Cost - plus ‘ What the Traffic
Going Rate Value-based
Pricing Can Bear’ Pricing Pricing/Parity Pricing Pricing
Full Cost / Absorption Skimming-based Pricing Below the Affordability -
Cost Pricing Pricing Level of based Pricing
Incremental Penetration-based Competition/Discount Prestige-based
Cost/Marginal Cost Pricing Pricing Pricing
Pricing Pricing Above the Market and
Break Even Level of Demand-based
Point/B . E. P. Pricing Competition/Premium Pricing
Target Pricing/Rate Pricing Cycle- based
of Return Pricing Tender Pricing/Sealed Prif 'ino
Bid/Competitive
Bidding
-
1 ) Cost based Pricing: The most important variable as well as the basis of
pricing a particular product, is the production cost of that product . Costs may
be of different kinds like total cost, variable cost, fixed cost, marginal cost,
average cost , etc. These costs must be critically analysed in order to set a
product s price. Methods for finding out the cost oriented price are as
follows:
- -
i ) Mark up/Cost plus Pricing: This method requires the marketer to
approximately calculate the total production or manufacturing cost of the
product and after that adding a mark -up or the margin ( that the firm
intends to earn ) to it. This is the most basic pricing method which is used
to price a number of projects and services. The below mentioned formula
can be used to calculate the mark- up price:
Mark up price =
where, cx - Unit cost (Fixed cost + Variable cost ); r = Expected sales

returns ( expressed as per cent )
ii ) Full Cost/Absorption Cost Pricing: In absorption/full cost pricing, the
unit cost is finalised with reference to regular production and sales level .
With the help of standard costing approach, variable as well as fixed
costs concerning the production, sales, and administration of the product
are finalised. It is called full cost pricing as it aims to recover total costs
incurred on the product from its sales.
iii ) Incremental Cost/Marginal Cost Pricing: In this method of pricing,
the company strives to recover its marginal cost so as to aid its
overheads. This pricing method gives best results in the market, where
Pricing (Chapter 8 ) 263
large firms operate or where there is extreme competition and the firm
works with the sole aim of establishing itself in the market . The firm
adopts this pricing method when it:
a ) Encounters intense competition,
b ) Focuses on a new market, and
c) Possesses unexploited capacity.
iv) Break Even Point/B.E.P. Pricing: The sales volume, where the total
cost becomes equal to the product’s total sales revenue is known as
break-even point’. In other words, the sales volume of the product,
which neither witnesses profit nor loss, is break-even point. Hence, this
method is also called ‘No Profit No Loss Method of Pricing’. In order to
calculate price using this method, total production cost is divided into
fixed and variable cost. The final price is same as the product’s
production cost. It is believed that the firm will not earn any profits in the
short -term, but in the long -term it will begin earning profits. The price of
a competitive product can be easily calculated by using this method.
B.E.P can be calculated by the formula mentioned below:
Fixed Costs
B.E. P. ( InUnits ) =
Selling Price per unit - Variable Costs per unit
Fixed Costs x Total Sales
B.E.P. ( In ) =
Total Sales - Total Variable Costs
v) Target Pricing/Rate of Return Pricing: In this pricing method , the
company needs to calculate the desired rate of return on the capital it has
invested in producing the product . This rate of return helps in calculating
the desired quantity of profit. This ‘quantity of profit’ and ‘production
cost’ are summed up to find the ‘ per unit price’ of the product . A
company can employ this pricing method, when it needs to get a specific
return on the capital it has invested. This method can be used only in
markets with no competition at all .
-
2 ) Customer Demand based Pricing: The fundamental aspect of the
demand oriented costing is that the cost involved does not have an impact
on the profits but on the demand . This method, contrary to cost -based
pricing, begins by finding out the price that the consumer market intends
to pay for the product . Then , a backward estimation of the level of cost
and profit ( that the organisation can afford due to that price ) is
undertaken . Following methods are used to determine the customer
demand - based pricing:
i ) ‘What the Traffic Can Bear’ Pricing: Using this method , the seller
charges the customer with the maximum possible price that they will pay
willingly under the present situation. This method is far from being
sophisticated and is followed by retail traders and few manufacturers. In
the short-run, it provides the company with large profits but is an unsafe
method in the long-run. Error in judgments can easily take place as it is
based on trial and error. But in markets with monopoly/oligopoly and
price-inelastic demand , it can conveniently be applied.
ii ) Skimming- based Pricing: Skimming pricing is the commonest pricing

method . In this method, the companies by selling at premium prices fulfil
their desire of skimming the market. The results are obtained in the
below mentioned situations:
a ) When high price is supposed to be a testimony of high product
quality, especially in an environment, where target market relates
product quality with its price.
b ) When a customer willingly purchases the product at higher price, just
in order to become the opinion leader.
c) When the customer’s status is believed to be increased by product.
d ) When the entry as well as exit barriers are so low that there is almost
no competition in the industry or the industry fears a threat from
potential competition .
e) When a visible technological advancement is displayed by the
product, which makes the product a ‘ high technology product’.
When the firm adopts skimming pricing technique, it aims to attain its
break-even point at an early stage and takes lesser time to maximise its
profits (or find a niche to earn profits).
-
iii ) Penetration based Pricing: Contrary to skimming pricing, penetration -
based pricing focuses on keeping the prices low as compared to current
competitors. Market penetration or gaining initial market share in an
intensely competitive market , is the main objective of this pricing
method. Below mentioned are the situations in which this method gives
results:
a ) When the market is large in size and is still growing,
b ) When the brands are bought by the customers not because of some
definite inclinations but because of habit, i .e., customer loyalty is
low,
c) When a stiff competition dominates the market,
d ) When an entry strategy is employed by the firm,
e ) When the company has weak price-quality coordination .
-
3) Competitor/Market based Pricing: Under this method, prices are
determined by observing the competitors’ prices in a particular market .
Generally, small organisations follow such pricing method in presence of a
market leader. For example, a small tyre manufacturer may follow the prices
of Apollo Tyres. Also in case of entering a new market , a low -cost supplier
may follow the market/competitor-based pricing. A large number of
companies carefully analyse the price structure of the competitors, before
setting their product’s price . Firms formulate premeditated policies and
choose a competitive market for selling their products. When a company
prices its products using this method , it has four pricing options:
i ) Going Rate Pricing/Parity Pricing: In this method, the competitor’s
product is taken as the benchmark to set the price of the product. A firm
follows this approach either when it is new in market or when an already
established firm launches a new product in the existing market. This type
of pricing is suitable for the markets with severe competition.
ii ) Pricing Below the Level of Conipetition/Discount Pricing: When a

company sets the price of its product lower than the level of competition,
i.e., below the price that the competitor is charging for a similar product,
it is called ‘ pricing below the level of competition’ or ‘discount pricing’.
This method is effective in markets, where customers equate to price. It
is implemented by firms that are new in the market .
iii ) Pricing Above the Level of Competition/Premium Pricing: When a
company sets the price of its product upper than the level of competition ,
i.e., above the price that the competitor is charging for a similar product ,
it is called ‘pricing above the level of competition’ or ‘premium pricing’.
This is done to depict a better quality product by the company. This
pricing policy can be implemented only by firms that have a good
reputation in the market (as their image is that of a quality producer in
the customer’s mind ). This makes them the market leader.
iv) Tender Pricing/Sealed Bid/Competitive Bidding: The sealed bid is
another competitive pricing method followed by firms. There are
numerous projects, government purchases and industrial marketing
activities where suppliers are called to submit their quotations to get the
tender. The prices that are quoted, show the cost incurred by the
company and what it understands about competition.
A firm that offers a price at the cost level may become the lowest bidder
and bag the contract , but would not earn any profit from the deal. Thus, it
is crucial for the firms to take into account expected profits at various
price levels and finally quote the price that is most profitable.
4) Other Pricing Methods: Below mentioned are the other main pricing
methods:
i ) Value-based Pricing: Understanding the value offered to customers is
essential for accurately pricing the product or service of an organisation. In
this method, cost is not the determining factor for pricing. Customer’s
perception of the value associated with the product or service is the key to
pricing decision. Here, first the product or service is designed, thereafter the
marketing strategy, and finally the price is set by analysing the other
marketing mix elements. It will be clearly seen in the analysis that the below
mentioned conditions can be obtained with the cost-value-price chain:
a ) Value>Price>Costs: In the first condition, price of the product is
kept lesser than the value offered, to attract the potential customers.
However, significant profit is generated by maintaining the price
above the cost of production.
b ) Price> Value>Costs: In this condition, value offered to customers
through product is more than its cost of production. In order to
maintain a significant level of profit companies set price more than
value offered.
c) Price>Costs> Value: Sometimes, cost of production is more than the
value offered through product. Profitability is maintained in this
condition by setting the price above the production cost.
=
d ) Price Value>Costs: A condition may also occur, where production
cost is lower than value offered. A reasonable amount of profit is
generated by setting the price equal to the value offered.
-
ii ) Affordability based Pricing: The basic commodities that are used by
every section of the society are priced using this method of pricing. The
prices are set in such a manner that the people from every section of the
society are able to purchase and consume the products to a required
level. The cost involved has no impact on the price, but many times,
some aspect of state subsidy is considered while pricing the product.
-
iii ) Prestige based Pricing: Customers do not openly admit that their
purchase is prestige-oriented. At times buyers are not even able to realise
that they might be driven by prestige when they strongly intend to
purchase a particular product . This is also termed as ‘ psychological
pricing' .
Product Normal Demand Curve

- Mix Price Discounts
Pricing and Rebates
Price Inverse Demand
Curve
Sale
Figure 8.1: Graphical Illustration
of Prestige Pricing
Figure 8.1 depicts a demand curve that describes ‘ prestige pricing’ ,
-
iv ) Market and Demand based Pricing: An effective pricing understands
the way, a customer’s perception of value, impacts his/her willingness to
pay a particular price for a particular product . Generally, the price of a
product is balanced against the benefits associated with it . Hence, the
marketer must comprehend the relation between demand of a product
and its price, before setting the final price.
Pricing in Different Types of Markets

a ) Under Pure Competition: In this situation, multiple buyers and
sellers are engaged in trade of similar commodities like wheat , rice,
garments, banking, etc. Here, the prevailing market price is not much
affected by the sellers or buyers. At prevalent market price, buyers
generally buy as much as they require, therefore, sellers avoid
charging more than the prevalent price. Sellers also avoid charging
less than the prevalent market price as they can sell as much as they
want at this price. It is very easy for new players to enter the market
in case of price and profit being increased.
b ) Under Monopolistic Competition: Under this condition , no single
prevailing market price is present. Different buyers and sellers are
engaged in trade of differentiated commodities with different prices.
Sellers offer variety of differentiation in commodities for different
customer segments. Differentiation lies within the style, features,
quality, or the services associated with the commodities. In order to

make their offers noticeable , they spontaneously utilise branding,
promotion and personal selling activities. As the difference between
the products of different sellers is easily recognised, buyers pay
different prices for each of them.
c) Under Oligopolistic Competition: Under this condition , only few
key sellers are available in the market with similar or dissimilar
commodities. Marketing and pricing policies of one seller majorly
affect the marketing and pricing policies of other sellers. It is not
easy for new players to enter this market , therefore, only few sellers
compete in this market. They are highly responsive to changes in
strategies and actions of each other. For example, reduction in
prices of automobile parts would quickly attract the buyers. This
action is counteracted by other sellers by way of reducing their prices
or providing additional services.
d ) Under Pure Monopoly: Under this condition, a single seller
supplies commodities to different buyers. It may be of any type like a
government , private regulated , or private non -regulated monopoly.
Each monopoly has different pricing policy. In a government
monopoly, the prices are determined by government itself .
Government , in case of a regulated monopoly , allows the company
to fix prices for its products ensuring a good return . Company is free
to determine the price for its products ( it may be highest price what
the traffic can bear ) in case of non -regulated monopoly. Although,
generally , they avoid charging full price due to certain factors like to
penetrate the market , to avoid the entry of new competitors, or to
follow government regulations.
-
v) Cycle based Pricing: Pricing commodities according to the cyclical
changes in the economic events over time is called as ‘cyclical pricing’
or ‘cycle-based pricing’. According to time series data analysis, cyclical
variations within the economic event are called as business cycles/trade
cycles. The given figure highlights the different phases of business cycle.
Economic !
Activity T - Trough ( price
decrease )
E - Expansion
B - Boom ( price
increase )
R - Recession
Years
Figure 8.2: Business Cycles and Cyclical Pricing
The point highlighting the lowest economic activity or national output in

relation to full employment level ( i.e. the total amount of commodities
produced in case of full employment ) is known as trough . Under such
conditions, prices are lowered by the company. The phase reflecting the
rise of national output is known as expansion . The point, at which

national output is maximum in relation to the full employment level , is
known as boom or peak. This situation is characterised by high prices.
The next phase in the business cycle is recession, which is characterised
by poor national output.
8.1 .6. Pricing Strategies

Factors such as company’s objective, product category, competition, market
sensitivity, etc., are considered while establishing pricing strategies. The
selective pricing strategies in pharmaceutical marketing are as follows:
1) Marginal Cost Pricing: The cost by which there is rise or fall in total cost as
a result of either increasing or decreasing a unit to the existing volume of
production is known as marginal cost. The pricing done on this basis is
known as marginal pricing. This implies that the business uses its ability for
additional production where profit on small sales does not change, but
additional margin opportunities may increase. When a business receives a
bulk order from any institution , tender or hospital then the marginal cost
pricing strategy is beneficial . A Gujarat based pharmaceutical company
named Torrent Pharmaceutical Ltd has a well -established brand Hexidol .
Hexidol is an anti -psychotic drug that contains Halo- peridol molecule. The
price per strip of 10 tablets of Hexidol is ?30.
Bulk purchase above 10000 strips of Hexidol cost ?12 per strips of 10 tablets
to the purchaser. The purchaser can be any hospital or institute.
These forms of lowest -rate marginal cost pricing quantities proved to be the
best way for the company to preserve its leading position in the anti-
psychotic sector and also to make maximum use of production resources.
2) Penetration Strategy: Penetration- based pricing focuses on keeping the prices
low as compared to current competitors. Market penetration or gaining initial
market share in an intensely competitive market, is the main objective of this
pricing method. Following are the situations in which this method gives results:
i ) When the market is large in size and is still growing.
ii ) When the brands are bought by the customers not because of some
definite inclinations but because of habit , i.e., customer loyalty is low .
iii ) When a stiff competition dominates the market.
iv) When an entry strategy is employed by the firm.
v) When the company has weak price-quality coordination.
3) Skimming Pricing Strategy: ‘Skimming’ term is derived from skimming of
the creamy layer of customer segments because later the prices are lowered
for attracting other customers. Price skimming is one of the methods selected
by firms who intend to launch new product in the market. Here, the launch
price of the product is kept high, which is gradually decreased within a given
time period to recoup the value of the product in a faster way. The companies
by selling at premium prices fulfil their desire of skimming the market. When
the firm adopts skimming pricing technique, it aims to attain its break -even
point at an early stage and takes lesser time to maximise its profits (or find a
niche to earn profits).
Pricing (Chapter 8 ) 269
Deplatt-25, a Gujarat based Torrent Pharmaceutical Ltd adopted price

skimming strategy when they launched Clopidogrel , an anti -platelet agent in
cardiovascular therapy. In June 2001, they launched Clopidogrel at the cost
of ?299 per strip of 10 tablets and within six months sales had reached up to
?3 Crore.
The price of the tablets is gradually decreased by the company . Per strip of
10 tablets is charged for 199 and within six months approx. 30 to 40 new
^
brands of the same medicines was launched by different companies in the
market. The company lost its first position in the market as soon as they
further decreased the price to ?39 per strip of 10 tablets. According to the
ORG-MARG report the company landed at sixth position in March 2002.
8.1.7. Importance of Pricing

Following points highlight the importance of pricing:
1 ) More Flexible Marketing Mix Variable: Out of all the marketing
decisions, pricing is the most elastic one for the marketers . This flexibility is
especially important when the firm intends to promptly increase the demand
of his product or act in response to a price action taken by the competitor.
2) Fixing the Right Price: If pricing decisions are taken in hurry and the
required research, strategic evaluation and analysis are not undertaken, the
organisation is prone to lose revenue. A lot of market knowledge is needed to
set the exact price level . Specifically, when the product is new, various
pricing options need to be tested .
3) Trigger of First Impressions: The customer may finally decide upon
purchasing the product on the basis of the market offering as a whole ( i.e.,
entire product ). The customer might not judge a product only by its price. In
such a case, pricing might become the most crucial element while making
decisions as the marketer can establish that the customers are not showing
interest in the product due to its price.
4) Important Aspect of Sales Promotion: At times, as a feature of sales
promotion, marketers opt for price adjustments. They decrease the price of
their product for a small duration to enhance the customer’s interest in the
product. Price adjustments must not be done very frequently as this may
result in customers getting used to anticipating a reduction in price and
withholding purchase until the prices are reduced again.
5) Supply and Demand: Demand and supply are inversely proportional to each
other. When one rises, the other falls. Items like gas, food, etc., that are
always in demand experience this more. If the business regularly reviews the
demand and supply of the products and services, it can adjust its prices
consequently.
6 ) Position: In simple words, the way the target market perceives a firm ’s
offerings, as compared to firms selling similar product or service, define its
position. There are firms, whose products or services are perceived to be of a
high quality, and can hence charge more for their offerings.
7 ) Sales Volumes: The most prominent impact of pricing on business is an

increase or decrease in the volume of sales. Price elasticity and how
consumers react to a change in price are studied by economists.
8) Loss Leaders: In order to attract customers, certain firms use cost pricing or
below cost pricing strategy . In this way, they drive customers to spend
somewhere else the saved money.
8.1.8. Issues in Price Management in Pharmaceutical Industry

The incorrect pricing of drug is one of the major mistakes that could be made by
the company . The probability that the drug will succeed or fail in the market
totally depends on its price. The price should neither be too high nor too low. For
example, Doctors and payers will not be in favour to prescribe or reimburse for
drugs that are of high price. The benefits derived from the drugs should be
directly proportional to their price. Physicians or doctors consider too low priced
drugs ineffective for the treatment.
Pharmaceutical company will face hard time if they are unable to adapt
healthcare industry trends such as healthcare analytics and other data analytics.
Proper tools and techniques are required by pharmaceutical industry in order to
examine pricing structure for boosting profit margins. One of the major key
issues faced by pharmaceutical industry is to analyse the price fluctuation and
changing customer behaviour.
Following are the contradictions made in regards to pharmaceutical pricing:
1 ) Medicines that are produced at very low cost are priced thousands of dollar.
2 ) Same medicines having different names are sold at different price.
3) Same medicine is charged two times more as compared to what it is charged
in other countries.
The complex nature of price charged by pharmacy is explainable. Price of a drug
depends upon its manufacturing, researching and other costs. In order to support
the establishment of cost -saving approach, the first step is to understand the
complexities and details of pricing.
NPPA
National Pharmaceutical Pricing Authority, under Department of
Pharmaceuticals, Ministry of Chemicals and Fertilisers administers whether
or not drugs are priced according to the provisions of the Drug Price Control
Order ( DPCO ) and National Pharmaceutical Pricing Policy .
“Scheduled drugs” or “scheduled formulations” are the drugs that are listed in
schedule I of Drug Price Control Order ( DPCO ). These kinds of drugs are
applicable to price control. The Government of India issues these orders from
time to time.
The word “Scheduled formulation ” is used in the latest DPCO 2013 for the
medicines specified under its first schedule because the bulk drugs that are used
as single ingredient also acts as formulation.
From the viewpoint of pricing regulation, these drugs are still termed as
“scheduled drugs”. After 2013, the “Essential Medicines” announced by the
Government through its National List of Essential Medicines ( NLEM ) are
covered under scheduled formulations.
8.2.2. NPPA ( National Pharmaceutical Pricing Authority )

An independent body of expert known as National Pharmaceutical Pricing
Authority ( NPPA ) was established on 29lh August 1997 in compliance with the
decision made by the Cabinet committee in September 1994 while re-examining
Drug Policy.
NPPA was established with an aim to revise and fix the price of controlled bulk
drugs and formulations and to ensure that the drugs available in the country are
priced in accordance with the orders passed under the Drugs ( Prices Control)
Order, 1995. NPPA also recovers the overcharged amount that the manufacturer
charges from consumer for the controlled drugs. The decontrolled drugs prices are
also monitored by NPPA so that they can be sold at reasonable and affordable
prices.
Functions of National Pharmaceutical Pricing Authority

Following are the functions of National Pharmaceutical Pricing Authority:
1 ) NPPA implement and enforce Drugs Order provisions in accordance with the
power assigned to them.
2 ) Any legal matter that arises out of their decision is dealt by them.
3) They observe and identify the availability and unavailability of the drugs and
take remedial actions for the same.
4 ) Collecting and maintaining data on export and import, profitability of
companies, market share of specific company.
5) Undertaking or sponsoring studies related to drugs/ pharmaceutical pricing.
6 ) Recruiting and appointing officers and other staffs of the authority in
accordance with the procedures and rules prescribed by the government.
7 ) Rendering advice to Central Government in regards to revisions/changes
made in drug policy.
8 ) Assisting Central Government in matters related to pricing of drugs.
8.2.3. National Pharmaceutical Pricing Policy -2012 -

Governing Drug Pricing Policy
The National Pharmaceutical Pricing Policy-2012 came into effect on 7 th
December, 2012 for helping in directing the rules and regulations for drug price
control. The main objective behind the implementation of this policy is to
provide a framework for the regulation of prices of drugs with the intention to
obtain conformity for the essential medicines will be made available at fair prices
in the market.
However, this policy also provides equal chances of making innovation in the
medicines which instantly improves the health of a person. It also provides scope
for the chances of increasing competition in order to aid in the development of
pharmaceutical industry.
Hence, by these objectives both ( i.e. the drug owner and the economy ) are
benefited.
NPPP, 2012 forecasts only the formulation of price regulation recognized

according to the essential drugs. In NPPP-2012, the fixation of ceiling price of
formulations of drugs is changed from Cost Based to Market Based Pricing
( MBP).
8.2. 3.1 . NPPP Regulation for Scheduled Formulation/ Drug Prices

The Regulation of Scheduled Formulation/Drug Prices are based on the
following:
1 ) Under National List of Essential Medicines ( NLEM )-2011 , the prices of
essential medicines does not change due to their essentiality. This was done
to act in accordance with the rules of the Supreme Court. The Supreme Court
had advised the government to plan the standards for producing important
and life saving drugs in such a way that they do not go out of price control .
2 ) Regulating the prices of formulations only ( i.e, medicines used by consumers
and not applicable to any upstream products such as bulk drugs or
intermediaries ), as opposed to regulation of both bulk drugs and their
formulations under DPCO-1995. Thus, even though the NLEM -2011 list
contains 348 drugs with various dosages/strength, any formulations based on
combination of any one of these drugs can be subject to price fixation.
3) In DPCO- 1995, the establishment of ceiling price of formulation is done on
the basis of market based pricing ( MBP) rather than the cost based pricing
because it is simple to gather price data as compared to cost data. On the
other hand, in case there is considerable increase in the input cost owing to
increase in the prices of bulk drugs or active pharmaceutical ingredient above
the 25% then a provision was formulated in August 2014 in order to make
alterations in the prices of medicines.
The comprehensive rationale for implementing the above three principles can be
known from NPPP-2012.
1) According to the provisions of NPPP-2012, the entire producers who are
producing the medicines as prescribed by the NLEM -2011 will fall in the
category of price control. The prices of these medicines will be equal to or
lower than the ceiling price i.e. maximum retail price ( MRP ) in addition with
the local taxes as prescribed by the government for the required medicines.
2 ) According to the provisions of DPCO-2013, the ceiling price of the drugs is
set at average retail price of the drugs produced by the pharmaceutical
companies involved in producing the medicines with the market share of less
than 1% of the total market turnover and by adding 16% of profit to the
stockist.
3) Under DPCO-2013, no retailet or the pharmacist is permitted to sell the

scheduled drugs to the consumer at a price more than the price prescribed by
the NPPA. There is amendment on the ceiling price of scheduled formulation
on Is' April every year and this is done on the basis of wholesale price index
( WPI ) of the past year. According to DPCO-2013, it is not necessary to get it
approved by the government. Hence, if the producer wanted to have the
benefit of revised ceiling price then they must give a notification to the
NPPA within 15 days of such amendment. There is fall in the prices when
there is decline in the wholesale price index .
8.2.3.2. NPPP Regulation for Non-Seheduled Formulation/ Drug Prices

There is no control on the launch price of drugs which are not under the control
of prices i.e. non-scheduled formulations. An internal guideline was set -up in 29th
May , 2014 to provide a method for fixing the launch price of drugs for non -
scheduled formulation but this method was not very effective. Hence, this
method was withdrawn on 22nd September, 2014. Under this policy, the retailer
was allowed to increase the prices by 10% annually above the maximum retail
price ( MRP ) for non -scheduled drugs. On the other hand, the total price control is
done in the form of ceiling price for essential medicines and for non -essential
medicines, the increase in the prices or change in ceiling price.
8.2.4. Overview of DPCO ( Drug Price Control Order)

In India, the Drugs Prices Control Order ( DPCO) was first established in 1970 in
order to regulate the prices of drugs. After 1970, the DPCO was further amended
in 1979, 1987 and 1995. The present Drug Price Control Order was passed on 6th
January 1995. Under Section 3 of the Essential Commodities Act, 1955, an order
issued by the government authorizing it to set and control the prices of scheduled
( essential ) drugs and their formulations which are known as DPCO. This order
includes the list of bulk drugs to regulate the prices of such medicines, method
for setting up and amendment of the prices, method for implementation, method
for recovery of dues and penalties imposed for any violation and further it
consists of various other rules and regulations.
In September 1994, modifications were made in Drug Policy 1986. Following are
the objectives of drug policy according to such modification :
1) To make sure that lifesaving essential and prophylactic medicines are
available in abundance.
2) It tries to strengthen the quality control system and promote correct use of drugs.
3) To strengthen indigenous capability for producing drugs.
4) To create an environment that is suitable for attracting investment in
pharmaceutical industry. It aims to promote large size inexpensive
production. Introducing new technologies and drugs are also one of its
objectives.
DPCO mainly focuses on the rules regarding the Drug policy and the objective of
DPCO is to make sure that there is equality in the distribution of bulk drugs, to
ensure that bulk drugs are obtained at low price and to have increased supply.
.
8.2.4. I Pricing of Bulk Drugs
“ Bulk drug” means any substance including pharmaceutical , chemical,
biological or plant product or medicinal gas conforming to pharmacopoeia or
other standards accepted under the Drugs and Cosmetics Act , 1940 ( 23 of 1940),
which is used as such or as an ingredient in any formulations.
“ Formulation ” means a medicine processed out of , or containing one or more
bulk drugs or drugs, with or without the use of any pharmaceutical aids for
internal or external use for, or in the diagnosis, treatment, mitigation or
prevention of disease in human beings or animals.
The First Schedule of the order contains the prices of 76 bulk drugs regulated by
DPCO, 1995. The following are the method by which fixation of the prices of
DPCO-controlled bulk drugs are done:
1 ) The government must give a post -tax return of 14% on net worth or a return
of 22% on capital employed at the time of setting the highest sale price of
bulk drugs.
2 ) Every pharmaceutical firm have the freedom to select any one of the above
two methods. Hence, the selection of the method is company -specific rather
than the product-specific.
3) After this, an elaborative analysis regarding the prices of different bulk drugs
is submitted by every pharmaceutical company to the government on the
basis of the chosen method.
4 ) The prices of various bulk drugs submitted by the companies must include
the profits of the company ’s i .e. the final price submitted by companies must
have the desired profits.
5) Before, the fixation of final price of the bulk drug, the government thoroughly
analyses all the applications submitted by various medicinal companies and also
take into consideration the cost audit reports of the retailer.
6 ) After the price of bulk drug is analysed, the government fixes the price and
that price must be followed by each of the retailer without considering the
actual cost incurred at the time of production i.e. it is mandatory to consider
the price quoted by the government.
The National Pharmaceutical Pricing Authority ( NPPA ) has set the retail and
ceiling prices of 22 formulatioas in the local market useful in the treatment of
different diseases such as HIV , bacterial infections and cardiac condition, among
others. The NPPA has fixed the retail price and ceiling price of various drugs
such as co-trimoxazole sulphamethoxazole and trimethoprim tablets for which
ceiling price is fixed and this is beneficial in treating bacterial infection.
In order to protect the inflamed fungal skin infections the clotrimazole

beclomethasone cream is used. The retail price for the drugs such as omeprazole
domperidone capsule is also fixed by NPPA to treat the patients suffering from
acidity.
The price of rosuvastatin clopidogrel , used to lower cholesterol levels and
triglycerides and tenofovir disoproxil fumarate lamivudine efavirenz tablet , an
HIV treatment , have also been lowered.
8.2.4.2. Steps of Pricing a Bulk Drugs

The pricing of a bulk drugs includes the following steps:
1 ) Identification of Bulk Drugs: In the first step, the bulk drug is identified
based on the following points:
i ) The validity period of drugs is about to expire.
ii ) Request from the concerned retailer/company .
iii ) No price has been informed under DPCO, 1995 for the drug which is
produced in the country.
2 ) Collection of Data : In this step, the collection of data is done by making the
issue of questionnaire/Form I of DPCO, 1995/cost audit report, etc., and if
there is a need then the data are verified by visiting the plant from which the
drugs are produced.
3) Preparation of Actual Cost Statement: This is the step in a statement of
actual cost is prepared on the basis of the verification and collection of the
data by visiting the actual plant site. Hence, the statement of actual cost of
the year is submitted by the companies to the government.
4) Preparation of Technical Parameters: According to the verification,
collection and submission of the data the technical parameters are prepared.
The capacity of the plant is evaluated by taking into account the 330 working
days for normal operation of plant leaving 35 days for scheduled
maintenance of plant.
The production level is thought to be achieved at 90% utilization of the
evaluated capacity in which 10% is considered as the loss of production due
to unexpected break down and non -scheduled maintenance.
5) Preparation of Estimated Cost: In the next step, the estimated costs are
prepared on the basis of the actual cost and technical parameters. The
increase in salaries and wages is identified at 5% per annum at the time of
predicting future cost . During the preparation of estimates, if there is any
wage agreement been finalized and signed is also identified. In order to cover
the normal incremental effects, the rise in other overheads of fixed/semi
variable nature is done at 2.5% per annum.
6) Calculation of Fair Price of Bulk Drug: The estimation of the fair prices is
done by giving the returns. At the time of fixation of highest sale price of the
bulk drug, a post -tax return of 14% on net worth or a return of 22% of capital
employed or with regard to a new plant an internal rate of return of 12% is
charged on the basis of long-term marginal costing subjected to the decision
taken up by the manufacturer regarding the price of bulk drugs.
7 ) Fixation of Maximum Sale Price of the Drug: In case the manufacturers of
the above drugs is more than one then on the basis of the existing condition
the maximum sale price is fixed at 2/3rd cut off level or weighted average
price.
8) Notification of Bulk Drug Price in Official Gazette: In the last step, the
notification of the price of bulk drug is done in the official gazette after the
fixation of maximum sale price of the bulk drug.
S.2.4.3. Calculation of Retail Price of Formulation

The government estimates the retail price of the formulation on the basis of the
following formula:
RP = ( MC + CC + PM + PC) x ( 1 + MAPE/ 100) + ED
Where,
RP = Retail Price
MC= Material Cost
It involves the prices of drugs, other essential medicines containing averages with
the process loss therein as mentioned in the rules timely formulated in the
announcement of official gazette.
CC = Conversion Cost
It is incurred based on the formulation costing method and it is fixed as the rule
for every year by making the announcement in the official gazette.
PM = Cost of Packing Material

The packing material utilised in the respective formulation comprises of process
loss and it must be fixed as a rule for every year by making the announcement in
the official gazette.
PC = Packing Charges
It is incurred based on the formulation costing method and it is fixed as the rule
for every year by making the announcement in the official gazette .
MAPE= Maximum Allowable Post -manufacturing Expenses

MAPE refers to all the originated costs from the point of ex -factory cost till the
period of retailing by the manufacturer and it also consists of trade discount and
profits of the manufacturer. MAPE should not be more than 100% for
indigenously manufactured scheduled formulations.
MAPE shall not exceed:

1) 75% in case of formulations specified in category 1 , and
2 ) 100% in case of formulations specified in category 2.
Category 1 formulations include drugs required for national health programme

and category 2 formulation includes other essential drugs.
ED = Excise Duty.
On the basis of the above provisions, the retail price of scheduled formulation is
fixed by the government. Once, the retail price of the formulation is fixed by the
government then it is not allowed to increase on the part of the manufacturer with
the exception of having the prior approval of the government. Hence , the fixation
of retail price of the drugs is on the basis of the provisions of DPCO, 1995 and it
also consists of ceiling price.
8.2.4.4. Price to Wholesaler and Retailer

The price of wholesaler and retailer are as follows:
1 ) Price to the Wholesaler: There is no manufacturer, importer or distributor
allowed to sell a formulation to a wholesaler unless otherwise permitted
under the provisions of this order at a price higher than:
i ) The retail price minus 20% thereof , in the case of ethical drugs, and
ii ) The retail price minus 18% thereof , in the case of non -ethical drugs.
2 ) Price to the Retailer: There is no manufacturer, importer, distributor or
wholesaler shall sell a formulation to a retailer unless otherwise permitted
under the provisions of this order at a price higher than:
i ) The retail price minus 17% thereof , in the case of ethical drugs, and
ii ) The retail price minus 15% thereof , in the case of non-ethical drugs.
8.3. SUMMARY
1) The only component of marketing mix that generates returns is called price,
however, others only generate costs.
2 ) It must be ensured that prices remain as stable as possible. When a pricing
policy is stable, it gains customer confidence and enhances the reputation of
the company .
3) The fundamental aspect of the demand oriented costing is that the cost
involved does not have an impact on the profits but on the demand.
4 ) Skimming pricing is the commonest pricing method. In this method, the
companies by selling at premium prices fulfil their desire of skimming the
market.
5) Under monopolistic competition condition, no single prevailing market price
is present. Different buyers and sellers are engaged in trade of differentiated
commodities with different prices.
6 ) Pricing commodities according to the cyclical changes in the economic
events over time is called as ‘cyclical pricing’ or ‘cycle -based pricing’
7 ) The most prominent impact of pricing on business is an increase or decrease
in the volume of sales. Price elasticity and how consumers react to a change
in price are studied by economists.
8) The complex nature of price charged by pharmacy is explainable. Price of a
drug depends upon its manufacturing, researching and other costs.
9) An independent body of expert known as National Pharmaceutical Pricing
Authority ( NPPA ) was established on 29th August 1997 in compliance with
the decision made by the Cabinet committee in September 1994 while re-
examining Drug Policy.
10) The National Pharmaceutical Pricing Policy -2012 came into effect on 7 th
December, 2012 for helping in directing the rules and regulations for drug
price control.
11 ) In India , the Drugs Prices Control Order ( DPCO ) was first established in
1970 in order to regulate the prices of drugs. After 1970, the DPCO was
further amended in 1979, 1987 and 1995. The present Drug Price Control
Order was passed on 6th January 1995.
8.4 . EXERCISE
1) Define pricing.
2) Give any two objectives of pricing.
3) What is schedule drug?
4) State the full form of DPCO and NPPA.

1) Describe the cost structure in pharmaceutical products.
2) What is Consumerism? Mention the advantage of healthcare consumerism.
3) Explain vertical and horizontal marketing.
4) Briefly explain the term NPPA.
5) What do you understand by price to wholesaler and retailer in bulk drugs?

1 ) Explain the pricing methods and pricing strategies in detail.
2 ) Describe the issues in price management in pharmaceutical industry. Also mention
the importance of pricing.
3) What do you mean by NPPP? Explain the NPPP regulation for schedule and non -
schedule formulation.
4 ) Give the overview of DPCO. How to do calculation of retail price of formulation.
5) What do you mean by pricing of bulk drugs? Explain the steps for pricing bulk
drugs.
Emerging Concepts in Marketing ( Chapter 9 ) 279
CHAPTER Emerging Concepts in

9 Marketing
9.1. EMERGING CONCEPT OF MARKETING

9.1 . 1 . Introduction
In recent times, the demanding nature of sophisticated and aware consumers has
emerged at a swift pace. As a result, consumers’ expectations from marketers have
increased right from the communication stage till the after-sales service. Marketers
are now expected to respond to the communication made by consumers without
any delay. This communication can be regarding offers, consumer queries, same-
day delivery, marketer’s return policy, etc.
In order to serve customer expectations successfully and instantly, a marketer
needs to combine more than one tool . Automation is considered as the most
responsive tool for marketers, specifically in case of advertising. Through
advertisements, marketers can create consumer awareness about the products and
services irrespective of their locations and activities. It is also believed that small
piece of information about the consumer also helps the marketer to respond
promptly towards business challenges.
New marketing patterns have been developed, with the changing practices, which
are discussed below:
9.1.2. Vertical Marketing Systems ( VMS): Vertical Integration

It is a type of integration which empowers a company to manage all the facets of
its business activity by acquiring other companies. Unlike horizontal integration,
vertical integration purchases companies which are above or below from the
existing company in the supply chain network. One example of vertical
marketing is laboratory equipment market. This market consists of buyers and
laboratory equipment developers. These buyers or purchasers can be clinics,
hospitals, university laboratories and pharmaceutical company labs.
Vertical channel integration combines two or more levels of channel which are
managed by one management . This type of situation may occur when a channel
member takes over the functions of another channel member or simply carries
out the functions of another member, therefore eliminating that intermediary
from the distribution channel .
Vertical integration is the situation where the companies across health care value
chain such as pharmacy benefit managers, health insurance companies, etc.,
combine together with an aim to develop more effective cost containment
strategy, to make health care systems available and to enhance patient
involvement and connection. In order to cut cost the landscape is being
restructured by health care and pharmaceutical companies. Vertical integration

and industry consolidation strategies are being adopted by both pharmaceutical
and health care industry in order to decrease the cost of health care facilities and
drugs for the patients.
Pharmaceutical companies are growing by adopting vertical integration as one of
their strategies. Vertical integration is also helping companies to interact directly
with the customer without the involvement of intermediaries and to enhance their
competitiveness and margins. This process is now being more simplified because
of the rising trend of pharmacies digitisation .
Digital vertical integration is helping companies to reach beyond country ’s
border. Sales of laboratories and other suppliers of pharmacy product can be
increased by approaching European market. Physical presence in any of the
country of the European Union is not required by laboratories and suppliers.
9.1 .2.1 . Advantages of VMS

The advantages of vertical marketing systems are:
1 ) It is simpler to control the channel behaviour.
2 ) It is easy to resolve the disputes caused by independent channel members
who follow their own objectives.
3) It integrates the efforts of independent channel members which increases the
efficiency of distribution channel.
4) It attains economies of scale by eliminating duplicate services and bargaining
power.
9.1 . 2.2. Disadvantages of VMS

Some of the disadvantages related to VMS are:
1 ) A lot of additional cost is involved in the administration of processes. These
are related to the costs incurred in the establishment and maintenance of the
system.
2 ) The operations of the company are inflexible in nature due to the significant
investments made in the channel . Thus, it becomes complex to alter the
policies, strategies and processes of the company to tackle the external
situations.
3) There are no opportunities to gain expertise in a specific area of distribution
channel as the company controls several functions in the channel .
9.1.3. Horizontal Marketing Systems ( HMS): Horizontal

Integration
Horizontal channel integration refers to the process of combining firms of similar
functional level in the marketing channel under one management. In horizontal
integration, heterogeneous systems and technologies are used for delivering a
single pack of medicines via supply chain along with information related to its
characteristics and state. Considerable advantages are provided to pharmaceutical
and medical device manufacturers by horizontal and vertical integration. It helps
in improving productivity, resilience, flexibility, decision -making and
competitiveness level of the company.
Only participants and market share increases in horizontal integration and the
scope of the business remains unchanged. For example, when Sun
Pharmaceuticals acquired Ranbaxy its product portfolio, customer-base and
profit got increased.
9.1 .3.1 . Advantages of HMS

The major advantages of HMS are as follows:
1 ) Integration of businesses horizontally helps the company to achieve
economies of scale by selling more homogenous products through
geographic expansion.
2) In HMS, economies of scope can be attained by sharing resources that are
common in producing different products and the cost of international trade can
be reduced by incorporating production units in foreign countries.
9. I .3.2. Disadvantages of HMS

The disadvantages of HMS are:
1 ) Due to the integration of businesses, size of the company may cause
problems like lack of coordination, mis-communication, etc.
2 ) There are greater possibilities of conflict between the channel members.
3) This marketing system is very rigid in nature.
9.1 .4. Rural Marketing

Rural marketing is the process of developing the marketing mix ( product , price,
place and promotion ) for a product or service which involves interaction between
rural and urban market , satisfaction of consumer demands and achievement of
organisational targets.
Rural marketing is subjected to complexities and distinctiveness of its own. There

has been a remarkable growth of agricultural industry in India due to which rural
consumers are now using numerous urban products and services. The development
in the process of rural agricultural consumption and production has led to the
growth of a new process called rural marketing. This significantly fosters the
growth of Indian economy. Few years back distributing goods in rural markets was
unprofitable but now it has become profitable. Pharmaceutical companies are
increasing their focus towards rural areas so as to increase their sales volume. Still
urban markets are more profitable source for generating profit and sales but the
untouched Indian rural market potential is viewed as next volume driver.
According to the National Commission on Agriculture, “Rural marketing is a

process of developing, pricing, promoting and distributing rural specific goods
and services leading to desired exchange with rural customers to satisfy their
needs and wants and also to achieve organisational objectives”.
According to Thomsen, “The study of Rural Marketing comprises all the
operations, and the agencies conducting them, involved in the movement of farm
produced food, raw materials and their derivatives, such as textiles, from the
farms to the final consumers, and the effects of such operations on producers,
middlemen and consumers”.
9.1 .4.1 . Features of Rural Marketing

The features of rural marketing are as follows:
1 ) Large and Scattered Market: The rural market in India is huge in terms of
its size as it consists of more than 700 million customers. It is also very
scattered region with a geographic spread of about 6,38,596 villages across
the country. It also generates a business of more than ?22,000 Cr of non -food
consumer products every year.
2 ) Major Income from Agriculture: A major part of rural income
( approximately 60 per cent ) is derived from agriculture. At present, there is a
greater growth in rural incomes and prosperity in the rural areas of India as
their household incomes are increasing. The percentage of lower income
households has come down from the earlier 60 per cent. There is also an
increase in the upper income households of rural areas.
1 ) Improvements in Agricultural Productivity: Agricultural productivity in
India has increased significantly due to the following reasons:
i ) Better Land Use Pattern: Farmers are increasingly focussing on cash
crops.
ii ) More Use of High Yielding Varieties: Farmers have been helped by
agricultural universities to obtain crops of high yields.
iii ) Irrigation: The facilities for irrigation have been improved significantly.
However, there is still room for further improvement.
2 ) Improvements in the Standard of Living: The rural consumers have been
plagued by poor standard of living, low per capita incomes, poor savings
culture, etc. This has often been called as the vicious cycle of poverty.
However , the living conditions in rural India are now changing rapidly.
Moreover, there has been an explosion of demand in the rural FMCG market.
3) Traditional Outlook , But no Stereotype Consumer: The Indian rural
customer base is bound by traditions and customs. It is tempting for the
organisations to target rural markets as low purchasing power, high illiteracy
rates, strongly influenced by traditions and cultures.
The general perception is that the rural consumers are bound by traditional
values that influence their consumer behaviour. However, in the real
picture, all such perceptions are partially correct, as many rural consumers
are entirely different in their behaviour. The stereotyping of rural
consumers is therefore erroneous and sufficient bases exist to segment the
rural market.
4 ) Infrastructure Facilities: There is insufficient infrastructure development in
the rural areas as there are limited roads, warehouses, financial facilities and
communication system. In such conditions, physical distribution of goods
becomes difficult, which increases the cost of distribution.
5) Dynamic: Rural marketing has undergone a lot of changes over time. It has
changed from a very transactional behaviour to developmental one and is
now increasingly based on sustainable relationships. Further, it has gained
immensely from the developments in information technology.
6 ) Innovation- Driven: Innovation has now become a keystone for rural

marketing. Innovation -oriented techniques of social change have successfully
transformed the traditional outlook of the society and have increasingly
reduced the gap between rural and urban markets.
9.1 .4.2. Challenges faced by the Companies During Rural Penetration

The challenges faced by the companies during rural penetration are as follows:
1 ) Undefined Distribution Ecosystem: The stereotype distribution system
where goods are transferred from manufacturer to clearing and forwarding
agents to stockiest to wholesaler to retailer does not work for rural areas. In
rural areas, financial strong business partner is rarely present to distribute
goods and services of Pharma companies. Both the distribution of stocks and
the payment collection are serious problem faced by businesses because of
such a vague and unclear ecosystem.
2 ) Poor Accessibility: Distance and poor infrastructure are another barriers
faced by pharma companies. Medical reps travel long distance carrying sales
stock for retailers and 10- 12 doctors. There are times when the efforts of
medical reps do not provide them fruitful result. Other barriers faced by
pharma companies while rural penetration is local medication and quacks.
3) Purchasing Power of Patients: Low income and expensive medicines
forces village people to substitute high priced medicine with counterfeit
medicines. They try to delay their treatment as a result of high treatment cost.
4 ) Counterfeiting and Knockoffs: Counterfeit or fake medicines sold in the
name of famous brands such as Crocin, Betadin, Voveran and Cosalin are
another challenge faced by pharma companies. It is very difficult for the
regulatory authorities to find out knockoffs and counterfeits medicines
because each off -patented drug has over hundred brands.
Various other factors that have encouraged fake drugs in rural markets are lack
of awareness, insufficient drugs inspectors, unauthentic drug procurement by
chemist, inadequate lab facilities close to rural areas and unclear regulations.
9.1 .4.3. Guidelines for Pharmaceutical Industries in Rural Markets

Rural market full potential can be realised by Pharma companies by:
1) Generating demand through making people aware and educated.
2 ) Collaborating with government through public-private partnership so as to
enhance infrastructure and hygiene conditions.
3) Mobilising paramedics and primary care giver through diagnostic and health
camps.
4 ) Using local language and bringing product solution to the market.
5) Using technology and innovative distribution channel for improving
medicines availability.
6) Developing products that are affordable by each section of the society.
9.1.5. Consumerism
Consumerism can be seen as an organised movement of the government and
citizens for reinforcing the power and rights of customers with reference to
sellers. It is a concept and ideology which is used quite a lot in business

literatures. Due to unfair trade practices, a consumer faces several harmful
environmental and physical exploitations for which he/she needs protection.
Consumerism in healthcare can be explained as the patient’s empowerment . It
represents the changing role of the patients, i.e., from inactive patient to a more
active participant in their healthcare. Consumerism in healthcare is an economic
paradigm that indicates the shift to value- based care from “free-for-service”
Because of the COVID - 19 pandemic, the future healthcare consumer is arriving
faster than expected. There has been a rapid growth in the healthcare
consumerism, today, which was beginning to play out slowly across the world.
There are dramatic changed in the healthcare consumerism as, now, stakeholders,
including marketers of pharmaceutical industries engage with patients as well as
physician audiences.
One-size-fits-all model is no longer significant for the current generation of
patient services. By going beyond the one-size-fits-all or traditional model to
developing a programme for patient that concentrates on each patient’s specific
requirements, manufacturers can gain greater value. Marketers should aim to
provide customised patient and HCP healthcare experiences just like as the TV
and music related services have become super personalised.
9.1 .5.1 . Technological Trends in Patient Consumerism

The key technological trends that affect the patient consumerism industry are as
follows:
1 ) Mobile Health Applications: Mobile health applications or mHealth apps
allow patients to take care of their own health either by transforming a
mobile platform into a medical device or as an accessory to a regulated
medical device. The increase in smartphones penetration, high internet usage
and easy availability increases the use of mHealth apps. There will be
significant growth in the patient compliance and adherence and impact of by
the mHealth apps.
2 ) Wearable Tech: Wearable tech also allows people to track their health status
in real time by themself . Patients are able to collect their real - time data to
present their doctors. In some patient monitoring programme, Fitbit activity
tracker can also be used.
3) Data Protection: Digitalisation of the patient’s health records is another

trend which leads to the growth of healthcare consumerism. By enabling an
integrated complete medical history, digital health record highlights
personalise healthcare of patient and helps in patient consumerism.
4) Telemedicine: It refers to exercise of medicine using technology to deliver

care at a distance. Telecommunication infrastructure has been used by the
physician to deliver care to the patients living at distant location. Patients
living in the remote areas or in the areas with lack of medical professionals
are able to easily access the medical facilities with the help of telemedicine.
9.1 .5.2. Advantages of Healthcare Consumerism

Following are the advantages of healthcare consumerism:
1 ) Healthcare consumerism enhances the transparency in the pharmaceutical
marketing.
2) It improves the quality of care.
3) Healthcare consumerism facilitates the decrease in the cost of healthcare
services.
4 ) It facilitates pharmaceutical marketers with number of opportunities in order to
differentiate themselves from the competitors and helps to retain customers.
9. I .5.3. Disadvantages of Healthcare Consumerism

Following are the disadvantages of healthcare consumerism:
1 ) Patients who are “WebMD-literate” may not seek for professional advices.
2 ) Too many healthcare jargons, which patients must read to make informed
decisions, may confuse and frustrate the patients.
3) If the experience of patient is not optimised, it becomes difficult to retain them.
9.1 .6. Industrial Marketing

Industrial marketing, also known as business marketing or B2B marketing,
can be understood as the marketing of products, services or solutions to firms like
large organisations, governmental bodies, and other institutions. Industrial
products/services are usually used in the form of input for producing other
consumption -related products/services. To identify and describe the requirements
of a target market alongwith modifying the product/service in order to fulfil the
identified needs better than the competitors is the main marketing concept for
business organisations. Industrial customers which mostly include organisations,
business houses, government agencies and institutions have unique requirements.
There has been vast difference in the industrial marketing strategies of the
companies that market with the medical or pharmaceutical device industries.
When it comes to products and services, there are lot of things covered under the
drug development , healthcare, biotech, and medical device industries. Indian
Drug Services ( IDS ) offer enterprises that support these markets with marketing
packages and uses crucial tactics to help them meet their ideal consumer base.
Each and every pharmaceutical company can engage in industrial marketing.
Pfizer, Roche, GlaxoSmithKline, Eli Lily co., etc., companies are some of the
perfect examples of the industrial marketers. Physicians or doctors who are the
end customers or buyer can be approached by the sales team of these companies.
However, this is possible only when the products include diagnostic and medical
equipment’s. In case of medicines, companies are unable to reach the end
consumers directly and thus doctors or physicians become the resellers because
of the medical guidelines.
9.1 .6.1. Characteristics of Industrial Marketing

The characteristics of industrial marketing are described below:
1) Demand Characteristics: The demand characteristics of industrial goods
are usually derived. In simple terms, the demand for industrial products is
determined by the demand for consumer products. There is an increase in the

demand for industrial products when the demand for consumer goods
increases. Often, the demand for industrial products/services varies according
to the government regulations and policies. For example, if the customs duty
on imported steel is decreased , it will adversely influence the demand for
domestic industrial goods.
2 ) Market Characteristics: Both consumer and industrial markets differ from
each other in terms of market size, number of customers and market location.
There are a limited number of customers for industrial products/services as
compared to the large number of customers for consumer products. However,
this limited number of industrial buyers creates repetitive and large-scale
buying. As compared to the consumer markets which are widely distributed ,
industrial markets are concerted to particular geographical regions. For
example, a range of manufacturing companies of Maharashtra, Gujarat and
Karnataka are situated in their respective regions as assigned by the State
Industrial Development Corporation. Thus, from the viewpoint of marketing,
these organisations as customers are easy to locate.
3) Product Characteristics: Both customised, as well as standardised products,
are included in industrial products. Products that are manufactured according
to the needs and specifications of the customers are known as customised
products, while the products that are manufactured according to the
specifications of manufacturers ( usually meant for general consumption of
large public ) are known as standardised products.
However, machine tools and equipment like drilling machines, milling
machines, lathes, etc., can be both customised and standardised. In general ,
bearings, belts, electric motors, compressors, excavators, wheel loaders, and
cutting tools are considered as standardised, while products like conveyor
belts, machine tools, and flexible manufacturing systems are customised and
made on orders. The level of complexity while manufacturing increases with
tailor-made products and decreases with standardised products.
4) Price Characteristics: The prices of standardised industrial products are
usually governed by the price lists. However, a deal of better prices can be
made through negotiation . Negotiation is also done across many other
commercial terms and conditions like payment terms, delivery schedules,
delivery, quantity per shipment, freight, insurance, etc. There are numerous big
organisations and governmental institutions that follow a rate contract system’
under which there are fixed prices of products/services for a fixed time.
5) Place or Distribution Characteristics: In most of the cases, the channel
lengths under industrial marketing are direct and short. Also, its marketing
implication is the streamlined distribution functions.
6) Promotion Characteristics: Under the promotion characteristics, it has been
observed that a sustained and close pre- and post-sale interaction between the
customers and the suppliers is required under industrial marketing. With the help
of personal selling, this interaction can be achieved. There are various reasons for
which advertising and sales promotions are used. Often, the industrial customers
know the suppliers of the required products/services and consequently, they

purchase only when they felt the need. Hence, advertising and promotional
activities become significant for reminding customers about purchasing.
7 ) Behaviour Characteristics: Industrial customers have knowledge about the
products. They are technically aware of the products characteristics and have
expertise of negotiation. They require suitable pre - as well as post-sales
support from the suppliers as they are rational buyers that are driven by task
purposes. Pre-sales support are provided in the form of technical details,
engineering drawings, providing suggestions, quick dealing with queries,
providing offers, etc., while on the other hand, post -sales support is provided
in the form of courtesy calls, informing customers of design changes, advice
to buy spares, timely supply of spares, company news, special services, etc.
Some firms conduct training of mechanics, engineers and operators that are
employed by its buyers. This process assures the maintenance of equipment
and decreases the service demands from customers. Further, it also aids in
the development of goodwill and brand loyalty.
9.1 .6.2. Consumers in Pharmaceutical Industrial Marketing

Consumers in pharmaceutical industrial marketing are as given below:
1 ) For Suppliers/Manufacturers: For suppliers or manufacturers the
consumers in pharmaceutical marketing are:
i ) Wholesalers or Distributors
ii ) Vertical Markets
2 ) For Vertical Markets ( e- Procurement or Fulfilment ) : The pharmaceutical
consumers for vertical markets are:
i ) Suppliers of pharmaceutical companies.
ii) Buyers.
iii ) Distributors and customers of distributors.
iv) Lab researchers
3) For Distributors: The pharmaceutical industrial consumers for distributors are:
i ) Governments
ii) Chain warehouses or stores
iii ) Home Health Agencies, Hospitals
iv ) Pharmacies such as CVS.com, Merck -Medco, More.com, etc.
9.1.6.3. Comparison between B2 B and B2C Pharmaceutical Marketing

Anyone has ever thought about how a large company, e.g., Sun Pharma or Cipla
buys raw materials, stationary or other useful products of their company and
employees. Such transactions are essential for the success of pharmaceutical
companies.
Pharmaceutical industries require proper industrial marketing strategies with

significant production and procurement planning.
1) B2B marketing can be accessed by the pharmaceutical companies when
purchases are expensive and in bulk while when company sold formulations
to hospitals and customers, it uses B2C marketing.
2 ) Similar to that of the transactions between manufacturer and wholesaler or

wholesaler or retailer, B2B can be defined as the transaction between
companies and businesses. B 2 B marketing format is used by most of the
pharmaceutical companies. In contrast , B2C pharmaceutical companies
directly sell their products or the final customers.
3) In comparison with B2C, the B2 B pharmaceutical companies have higher
transaction volume. This is so because in B 2C, only one dealing is involved
and that is selling of final product to the end customer. While, there are
number of dealings such as supply chain of raw materials, number of
intermediaries, final drug, formulation of specific need and so on are
involved in B 2 B marketing.
4) B2C marketing focuses on fulfilling the needs of the customers while B 2 B
focuses on attaining other business’s needs . That is, in case of
pharmaceutical B2B marketing, there are number of suppliers from raw
material at varied steps to end product to final destination to final user of the
medicine. Though , end consumers are the only basis for the demand of these
products and services.
5) The most challenging decisions in B 2C marketing are restricted to the whole
family unit while decision- making in B 2 B marketing is more difficult and
challenging. B2 B marketing has decision - making unit and that unit is
responsible for making all the decisions related to buying and selling.
9.1.7. Global Marketing

Global marketing is defined as the marketing activity which is carried out across
the national boundaries. Hence, it involves the process of marketing the goods
and services from one nation to another nation. A company can market its
products in more than one country at a time. One should not misunderstand
global marketing as international trade. Global marketing is just a part of
international trade.
As pharmaceutical industries did 10 years ago, several pharma and life sciences
companies are already approaching global activity ; defining global objectives
that set the stage for local planning. Indian pharmaceutical industries have
opportunities to play significant role in the international supply -security of drugs
with the help of financial and policy incentives. Indian pharmaceutical has only
5% of market share in the Indian market while the major 95% was occupied by
the global pharmaceutical in 1969. But , in 2020, the situation is just opposite.
The global pharmaceutical has only 15% of market share in the Indian market
while the major 85% is occupied by the Indian pharmaceutical itself.
Over the past five decades, Indian pharmaceutical firms have achieved great
success, both in terms of meeting local needs requirements of the customers and
building significant position in the landscape of global pharmaceutical. In terms
of value, India now contributes more than 20% to the global generics industry,
with Indian products contributing more than 40% ( by volume ) of US medicines.
Indian pharmaceutical gets opportunity to play more important role in the global
healthcare because of the coronavirus pandemic.
According to AMA ( American Marketing Association ), “International

marketing is the multinational process of planning and executing the conception,
pricing, promotion , and distribution of ideas, goods, and services to create
exchanges that satisfy individual and organisational objectives”.
To understand the concept of global marketing, the following similar concepts
should be understood:
1 ) Domestic Marketing: Domestic marketing refers to those marketing
activities that are carried out in marketers’ country . It takes place in the home
country, keeping in mind all the requirements of customers.
2 ) Foreign Marketing: In foreign marketing, the company operates in other
country, other than the home nation. The goods and services produced are
based on the tastes and preferences of that particular country. For example,
if an Indian company does marketing in India, then it is called as domestic
marketing, on the other hand if the Indian company is conducting marketing
in U.S. and U. K ., then it is termed as foreign marketing.
3) Comparative Marketing: The concept of comparative marketing involves
comparison between two or more marketing systems. This is done by
companies in order to analyse a specific country more effectively. It also
helps in identifying the similarities and the dissimilarities between different
marketing systems. Hence, this type of marketing consists of two or more
countries and for this purpose various analytical tools are used.
4) International Trade: International Trade refers to the flow of goods and
services across different nations. The main aim of international trade is to
enhance the commercial and monetary conditions of a country which
influences the balance of payment and foreign exchange scenario.
9.1.7.1 . Systematic Approach of Entering New or International Market

The systematic approach of entering new or international market is as follows:
1) International Product Portfolio: Developing international product portfolio
offers great opportunities to the pharmaceutical industries to enter into the
new or global market. Since the data can be quite confusing and misleading
when not analysed in depth therefore it is essential to go beyond the IMS
data and to study the market individually.
There might be growth in one market but there might be also issues related to
the registration rights, high costs of market entry and trademarks. The new
niche sector will be accessed based on the products and customer price for
the product will be determined depending upon their position in the potential
market in this stage of global pharmacy strategy.
The key product recognition is the result obtained from this step can be
introduced in the global market in order to get more sales. It also highlights
the reasons for the suitability of the product.
2) Country Selection: BRIC has no importance for Pharma and success is not
guaranteed for those who simply enter into the emerging market are the two
aspects one should keep in mind while selecting countries. Entering into a
new market involves both opportunities and challenges and it is essential to

determine the best-fitting market for particular portfolio. Following are the
three considerations one should keep in mind:
i ) Knowledge of the Particular Market Regulations: In order to develop
a business, it is essential to know the norms and policies as this
knowledge helps in determining and recognising the domestic investors
and partners.
ii ) Consideration of the Market's Incalculability: Since, it is essential to
rapidly adapt the changes in the market and therefore it important to get
knowledge of specific market drivers and market knowledge.
iii ) Importance of Previously Gained Knowledge of the Particular
Sector: This is important in every aspect of the process of integration
such as creating mixed marketing strategy and identification of local
investors or partners.
3) Market Entry Plan and Strategy: In order to know the real product
potential in the particular market, it is suggested to work on market entry
plan and strategy after the country selection. At this stage of global pharma
strategy, factors such as market entry cost, potential of business in the new
market and competitors within and outside the pharmacy should be analysed.
A proper business plan can be created at this stage that fits the both product
and market plans along with a proper overall market entry strategy.
4) Regulatory: While struggling to enter into the market, it is essential to have
knowledge and understanding of regulatory entrance process of each country.
This is so because there has been significant difference in each country 's
entrance criteria and the local status of the product is the basis for the success
such as food supplements, Medical Devices, Pharma Rx., Cosmetics,
Consumer Health and so on . The product registration criteria mostly include
a CTD-dossier before it is registered in a new market . The right category and
criteria for registration should be recognised and product labelling and fast-
track registration options should be sought.
5) Systematic Local Partner Selection Process: More than 70% of success is
based on identifying the right partner as with any global market success.
Therefore, as a global Pharma strategy, systematic search for a right partner
should be conducted. When a business selects the wrong partner , it will have
to change partners within a few years of launch , causing time, resources, and
energy to be re-invested, particularly when retail outlets must be persuaded
to sign for a product a second time.
International trade fairs and exhibits will not always be attended by dynamic
and relevant local partners, and too often the interest of businesses pursuing
international growth lies in how well local companies choose to present
themselves internationally. The best -fitting local businesses also do not
intentionally aim to change their exterior image to match international, i.e.,
foreign standards, so it is more difficult to find the best -fitting partner for the
brand than it looks at first.
It will be required to do the screening of partners available in order to
determine which company better matches the needs and vice-versa.
9.1 . 7.2. Global Pharmaceutical Industry Analysis

Though, there has been slowdown in key markets across the world recently, the
future of global pharmaceutical marketing is expected to have growth. Increasing
population, ageing, increasing income level , emergence of new diseases and
medical conditions could some of the common reasons for the growth of
pharmaceutical marketing.
By 2023, the worth of global pharmaceutical industry will be USD 1.57 trillion
according to the research. The various factors such as current and upcoming
trends, market challenges, market drivers and current growth patterns are the
several factors considered for the growth of this sector.
By 2023, with the total global market share of 45.33% , North America is
expected to maintain its top position in the global pharmaceuticals market. On
contrary, Europe is expected to have a market share of 20.24% by 2023 in global
pharmaceutical , i.e., a decline in its market position in global pharmaceutical as
compared to 2017.
With a market share of 24.07% by 2023, Asia Pacific is expected to retain second
position in global pharmaceuticals market . In 2023, Latin America and the
Middle East and Africa ( MEA ) are estimated to hold 7.53 per cent and 2.96 per
cent of the global pharmaceuticals industry, respectively.
Ageing and growing population in key markets are the basic reasons for this
massive growth in the pharmaceutical industries. The global population would
likely to cross 9.3 billion by 2050, including 21 % of this population is expected
to be aged of 60 and above according to the United Nation’s World Population
Prospects.
The growth in buying power and access to quality pharmaceutical and healthcare
to middle-class and poor families across the globe could be other reasons for this
massive growth in the global pharmaceutical markets. Increasing focus of
pharmaceutical companies to tap the speciality and rare diseases market is
another leading aspect for the growth of this sector. Even non -pharmaceutical
firms like Facebook have drawn investment in nucleic acid therapeutics,
experimental biologies, cell therapies and bioelectronics and implantables.
9.1 . 7.3. Importance of Global Marketing

Points highlighting the importance of global marketing are as follows:
1) Diversification Opportunities: Due to global marketing, companies prefer to
invest in variety of segments of products/services and utilise their resources
extensively in new product development. This provides diversification
opportunities for majority of companies in the nation.
2 ) Expansion Opportunities: Due to global marketing , it becomes the
necessity of the nation to expand its production and marketing activities. This
causes the generation of new economy which ultimately results in new
expansion opportunities.
3) Increased Market Share: Global marketing brings new markets and

customers, as the company operates in more than one nation. This helps in
increasing market share.
4 ) Career Opportunities: Due to the globalisation , more and more companies
are attracting towards global marketing, thus, requiring highly qualified
individuals. Many educational institutions are now offering special courses
and subjects in order to cater the demands of qualified persons. There is
demand for individuals in the field of production, distribution , finance,
marketing, and after sales services. Therefore, vast career opportunities are
developed through global marketing.
5 ) Global Recognition: The global marketing of products and services is
helpful in providing global recognition to both country and the enterprise. By
providing products and services of global standard , companies establish a
significant brand image in the global market. To maintain the brand image,
the enterprises need to provide value to customers by providing better quality
products/services at competitive rates.
6 ) Investment Opportunities: Variety of investment opportunities are
generated through global marketing. These investments can be in terms of
new technology, better infrastructure, new machinery, new marketing
strategies and new production methods.
7 ) Increased Standard of Living: With the help of global marketing, the
domestic economy gets better quality products and services at highly
affordable and competitive prices, which ultimately increases the standard of
living. The global companies also provide employment opportunities which
help in reducing unemployment.
8) Mobility of Factors of Production: Due to global marketing, companies are
able to transfer their production plants to any nation. Suppliers can be easily
arranged in these nations. Thus, global marketing causes mobility of factors
of production.
9.2 . SUMMARY
1 ) Vertical channel integration combines two or more levels of channel which
are managed by one management.
2 ) Horizontal channel integration refers to the process of combining firms of
similar functional level in the marketing channel under one management .
3) Rural marketing is a process of developing, pricing, promoting and
distributing rural specific goods and services leading to desired exchange
with rural customers to satisfy their needs and wants and also to achieve
organisational objectives
4 ) Consumerism can be seen as an organised movement of the government and
citizens for reinforcing the power and rights of customers with reference to
sellers.
5 ) Mobile health applications or mHealth apps allow patients to take care of

their own health either by transforming a mobile platform into a medical
device or as an accessory to a regulated medical device.
6 ) Industrial marketing, also known as business marketing or B2B
marketing, can be understood as the marketing of products, services or
solutions to firms like large organisations, governmental bodies , and other
institutions.
7 ) Global marketing is defined as the marketing activity which is carried out
across the national boundaries. Hence , it involves the process of marketing
the goods and services from one nation to another nation .
9.3 . EXERCISE
1) Define rural marketing.
2) State industrial market.
3) What is global marketing?
4) Define consumerism.

1) Explain vertical marketing systems and horizontal marketing systems.
2) Mention the features of rural marketing.
3) Describe advantages and disadvantages of healthcare consumerism.
4) What are the technological trends that affect the patient consumerism?
5) Mention the characteristics of industrial marketing.
6) Describe the systematic approach of entering new or international market.

1 ) Explain the challenges faced by the companies during rural penetration. Also give
the guidelines for the pharmaceutical industries in rural marketing.
2) Who are the consumers in pharmaceutical industries in marketing? Differentiate
between B 2 B and B2C pharmaceutical marketing.
3) Discuss global pharmaceutical industries analysis. Also mention the importance of
global marketing.
4 ) Describe the advantages and disadvantages of vertical marketing systems and
horizontal marketing systems.
Index
A E
Advertising 174 . Economic Environment 28 .
-
Affordability based Pricing, 266 Evaluation of PSR , 250
Attribute Positioning 152 . .
Exhibition 182
Audio-Visual Method. 240 .
Exhibitions 183
Augmented Product 114 . Expected Product 114 .
B External Marketing Environment 26 .
Bargaining Power of Buyer 38 . F
Bargaining Power of Suppliers 38 . Feedback Information , 71
Basic Product 114 . Finance, 70
BCG Matrix 140 . - .
Forced Choice Method 253 .
Behavioural Segmentation, 80 Form Utility 19
Benefit Positioning, 153 .
Formulation 274
Bonus 249 . Fringe Benefits 245 .
Brain Storming Method, 240 Full Cost/ Absorption Cost Pricing, 262
Brand Endorsement Positioning 153 . G
Break Even Point/B.E. P. Pricing 263 .
Bulk drug. 274 GE 9 Cell Model 142 .
Geographic Segmentation. 78
c Global Marketing 288 .
Category Positioning, 153 Going Rate Pricing/Parity Pricing, 264
Changing Indian Consumer Behaviour 99
Channel Conflicts. 222
. Goods-Services Continuum 18 .
Group Training Method, 240
Channel Design 212 . H
Channels of Distribution 203 .
Classification of Pharmaceutical Products, 115 Habitual Buying Behaviour/Routinised Response
Combination of Salary and Commission 244 . Behaviour/ Straight Rebuy/ Brand Loyalty 48 .
Compensation to PSR. 241 Horizontal Marketing Systems ( HMS ), 280
Competitive Parity Method 170 . I
Competitive Positioning, 153
Consumer Buying Behaviour 46 . Incentives, 249
Incremental Cost/Marginal Cost Pricing, 262
Consumer Profile, 92
Consumerism, 283 Indian Consumers, 92
Core Benefit. 114 Individual Training Method , 240
Corporate Identity Positioning, 153 Industrial Buying 54 .
Corporate Parenting Analysis. 145 Industrial Buying Behaviour 54 .
Cost Structure in Pharmaceutical Products, 261 Industrial Marketing 285 .
-
Cost based Pricing. 262 Industry Analysis 32 .
Customer Delight 20 . Internal Marketing Environment 25 .
Customer Demand based Pricing 263 - . Internship Training 241 .
Customers, 27 L
-
Cycle based Pricing, 267
Labelling Decisions. 133
D Lecture Method. 240
Demands 18 . Legal Environment, 31
Legal Requirements in Price Control on Drugs 270 .
Demographic Environment, 30
Demographic Segmentation, 78 Limited Market Coverage Targeting 85 .
Detailing, 254 M
Differentiated Marketing, 88 Macro Environment, 28
Direct Mail 178 . Major Product Decisions 120 .
Direct Mailing 177 . Manifest Conflict 225 .
Direct Marketing Channel ( Zero Level ), 210
Discussion Method, 240
Manufacturer 208 .
Market and Demand-based Pricing, 266
-
Dissonance Reducing Buying Behaviour/Limited
Market Intermediaries 27 .
Problem Solving/ Modified Buy 47 . Market Research 107 .
Downward Stretch 122 . Market Segmentation 77 .
DPCO ( Drug Price Control Order ) 273 . Market Specialisation , 87
Drawing Account and Commission Plan 244
Duties of Pharmaceutical Sales Representatives, 231
. Marketing, 15
Marketing Environment, 23
- -
Mark up/Cost plus Pricing, 262
Mass Marketing 87 .
Index 295
Methods of Promotion. 164 R

Micro Environment 26 . Rating Scales 252 .
Monetary Compensation 243 .
Motivating the PSR 247 . Recognition Programs, 245
Recruitment of PSR , 231
N Relationship Marketing, 20
Retailer, 209
National Pharmaceutical Pricing Policy 2012, 271
Natural Environment, 31
- Retailing 187 .
Needs 18. Rivalry Inside Industry 35 .
New Product Development, 154 Role Playing Method , 240
Non - Monetary Compensation, 244 Round Table Method , 240
NPPA ( National Pharmaceutical Pricing Authority ), Rural Marketing, 281
271 S
O Sales Contests, 246
Online Promotional Techniques for OTC Products, Sales Meetings, 249
196 Selecting the Appropriate Channel of Distribution,
Organisational Buying, 54 207
OTC Products, 193 Selection of PSR, 236
Outdoor Advertisement , 177 Selective Specialisation, 86
Ownership Utility, 19 Selling 69 .
P
-
Single Segment Concentration, 86
Skimming-based Pricing, 264
Panel Method 240 . T
Pharmaceutical Market Segmentation 82 . Target Pricing/Rate of Return Pricing, 263
Pharmaceutical Marketing, 66
Pharmaceutical Marketing Channels 206 . Targeting, 83
Physical Distribution Management 200 . Tasks in Physical Distribution Management , 201
Place Utility 19 .
Political Environment, 28
Technological Environment, 30
Tender Pricing/Sealed Bid/Competitive Bidding,
Porter ’s 5 Forces Model, 34 265
Portfolio Analysis Techniques 140 . Threat of New Entrants, 39
Threat of Substitutes. 37
Potential Product 115 .
-
Prestige based Pricing, 266 Time Utility, 19
Trade Channels 203 .
Price/Quality Positioning, 152
Pricing Methods, 262 Trade Journal, 181
Pricing Strategies, 268 Training of PSR 238 .
Print Advertising, 177 Training on the Job, 240
Product 113 . Training through Correspondence, 241
Product Branding 125 . Transaction, 20
Transportation, 70
Product Class Positioning, 153
Product Life Cycle ( PLC ), 136 Traveling Expense Account 245 .
Product Line Decisions, 121 -
Two way Stretch, 122
Product Management in Pharmaceutical Industry, U
116 Undifferentiated Marketing, 87
Product Mix 123 . Upward Stretch, 122
Product Packaging Decisions, 129
Usage and Use Time Positioning, 152
Product Postioning, 149
Product Specialisation, 86
Use or Application Positioning 152 .
Utility. 18
Product User Positioning 152 .
Products 18 . V
Professional Sales Representative, 230 Value, 19
Promotion 162 . Value- Added Resellers ( VARs ), 210
Promotional Budget 166 . -
Value based Pricing, 265
Promotional Mix, 164
Prospecting, 173
-
Variety Seeking Buying Behaviour/Brand
Switching, 48
Psychographic Segmentation, 79 Vertical Marketing Systems ( VMS ) 279 .
Psychological Influences on Consumer Behaviour,
95 W
.
Public 27 Wants 18.
Public Relations, 189 Wholesalers, 209
Bibliography
Martin Bischoff , Successful Pharmaceutical Selling. TMH
Philip Kotler, Kelvin Lane Keller, Abraham Koshy, Mithileshwar Jha,
Marketing Management ( A South Asian Perpective ) 13 th Edition, Pearson
VS Ramaswamy, S Namakumari , Marketing Management , Planning,
Implementation and Control , Macmillan
Tapan Panda , Marketing Management , Excel Publications
Richard R Still , Edward W Cundif Norman A Govoni , Sales Management
( Decision, Strategy and Cases ) 5th Edition , Pearson
Charles M Futrell , Sales Management , Thomson
George E Belch, Michael A. Belch, Advertising and Promotion , McGraw Hill
S H H Kaztni , Satish K Batra , Advertising and Sales Promotion , Excel Books
Subba Rao Changanti , Pharmaceutical Marketing in India , Excel
Publications .
Selected Sites
• http: //www.scribd .com
• http: / /nsdl .niscair. res. in
• http:// www. pharmainfo. net
• http: //www. slideshare. net
• http://www. pharmpress.com
• http://www.authorstream. com
• www. managementparadise .com
• www. wise geek , com
• www. clijfsnotes.com
• www. enotes.com
• www. ehow. com
• www. management studyguide , com
• www. books . google .co.in

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Pharma Marketing

According to the syllabus based on ‘Pharmacy Council of India’

Dr. Ritu Kataria

THAKUR PUBLICATION PVT. LTD., LUCKNOW

Books are Available for Online Purchase at: tppl.org.in

ISBN No. 978-93-90570-06-5

Copyright © All Rights Reserved

- Dr. Ritu Kataria

We sincerely believe that students should acquire balanced knowledge of theory

Please e-mail us at, thakurpublication@gmail.com

- Dr. Ritu Kataria

Emerging Concepts in Marketing

1 .5.3. Objectives of Industrial Buying Behaviour 56

Chapter-2: Pharmaceutical Market Aspects

Chapter-3: Analysing the Market and Consumers

Chapter-4: Product Decisions

Chapter-6: Pharmaceutical Marketing Channels

Chapter-7: Professional Sales Representative

Chapter-9: Emerging Concepts in Marketing

1.1.2. Nature of Marketing

3) Marketing is a System: Marketing functions as a system in which several

1.1.3. Scope of Marketing

The scope of marketing is described below:

1.1.4. General and Core Concepts of Marketing

Customer Delight 1 Exchange and Transactions

Quality is the distinctive attribute of a product or service which is perceived

Needs-^Wants^Demand^ Exchange Research

Figure 1.1: Needs, Wants, Demand, and Exchange

The basic unit of exchange is transaction. Transaction is an act of

1.1.5. Importance of Marketing

or image enables a company to expand worldwide and increase its sales-

ii) Job Opportunities: Marketing provides several job opportunities to the

1.1.6. Distinction between Marketing and Selling

1.2. MARKETING ENVIRONMENT

Therefore, it is imperative to understand the influences that the environment has

1.2.2. Factors Affecting Marketing Environment

1.2.3. Internal Marketing Environment

1) Top Management: One of the major factors present in internal environment

5) Purchasing: Purchasing is the activity of acquiring goods and services to

1.2.4. External Marketing Environment

1.2.5. Micro Environment

2) Market Intermediaries: Market intermediaries are individuals or business

1.2.6. Macro Environment

1.2.6. 1. Political Environment

For example, most socialist countries follow a centrally planned economic

I.2.6.2. Economic Environment

I.2.6.3. Socio-Cultural Environment

While analysing the effect of socio-cultural factors on marketing, the managers

I.2.6.4. Technological Environment

I.2.6.5. Demographic Environment

must be identified. If the management is attentive, it will be able to gauge the

L2.6.6. Natural Environment

1. 2.6.7. Legal Environment

1.2.7. Significance of Marketing Environment Analysis

2) Facilitating Strategic Response to Environment: The basic purpose of

1.3. INDUSTRY AND COMPETITIVE ANALYSIS

Their primary focus is on increasing market share within defined industry

13.1.1. Factors Analysed in Industry Analysis

6) Industry Practices: The practices of an industry can be defined as the

1.3. 1.2. Porter’s 5 Forces Model

This helps in the following ways:

Components of Porter’s Five Forces Model

Figure 1.3: Components of Porter's Five Forces Model

1) Rivalry inside Industry: According to perfect competition model, no firm