This action might not be possible to undo. Are you sure you want to continue?
Alexandra Heide 12/4/2010
Eli Lilly and ICOS are faced with key decisions regarding the launch of their new erectile dysfunction (ED) treatment, Cialis. The rivalry currently consists of market pioneer Pfizer and upcoming entrant, Bayer, who is waiting patiently to anticipate Lilly’s market entry strategy while concurrently assessing the competitive landscape prior to entry. Lilly is faced with the daunting task of launching a product in a market that is currently controlled by Pfizer’s erectile dysfunction medication, Viagra, but with careful consideration of the competitive context and an understanding of consumer needs, Cialis has potential for a successful launch and a new blockbuster drug.
Competitive Industry Analysis
Pfizer Pfizer is the top player and largest research-based company in the biopharmaceutical industry. The company operates in the biopharmaceutical, consumer healthcare, animal health and nutrition divisions, though the majority of the company’s revenues are derived from its biopharmaceuticals sector. 1In 1998, Pfizer was the first-mover in the ED treatment market with its launch of Viagra, a drug that reaps over $1 billion annually for the company. Pfizer’s resources include its brand, market leadership, sales force and capital. The company is driven by operations because it reduces costs (often through workforce minimization) and seeks productivity efficiencies by consolidating its manufacturing real estate and creating flexible cost structures.2 Strategically, Pfizer plans to pursue a differentiation strategy through diversification as evidenced via the company’s acquisitions within emerging markets and future deals will be largely driven by the business units. The company also made a commitment to stand behind its medicines that have either already lost or will lose their patents.3 Launch of Viagra Pfizer’s strategy for the launch of Viagra began with augmenting consumers’ problem recognition by redefining impotence as “erectile dysfunction” since the former conveyed hopelessness, weakness and a sense of permanence.4 This change in terminology was initiated to make males more willing to discuss their condition to enable Pfizer to expand its market from 10 million men with “impotence” to 30 million with “erectile dysfunction.” 5 Pfizer’s target consumer in the United States is the “ageless” “playboy” male, around the age of 55 who is seeking to maintain his youthfulness and sexual activity.6Pfizer’s direct-to-consumer strategy consists of generating awareness and educating consumers with regards to both ED and Viagra via television commercials aired on sports networks and LifeDrive, a Viagra-sponsored magazine that offers relationship advice and talking points to help men discuss ED with their partners. Pfizer also uses celebrity spokesman Bob Dole in television advertisements to incite the “Perception” and “Consultation” phases of the Health Care Transaction Model. In addition to direct-to-consumer advertising, Pfizer
1 "Pfizer.com | Pfizer: the world's largest research-based pharmaceutical company."Pfizer.com | Pfizer: the world's largest research-based pharmaceutical company. N.p., n.d. Web. 28 Oct. 2010. <http://www.pfizer.com/home/>. 2 "2009 Annual Review."Pfizer.com. N.p., n.d. Web. 23 Nov. 2010 <http://media.pfizer.com/files/annualreport/2009/annual/review2009.pdf.> 3 Tufts University E-News. "Tufts E-News: Tufts Graduate Named CEO of Pfizer." Tufts E-News: Daily News. Tufts University's official electronic news source.. N.p., 14 Aug. 2006. Web. 28 Oct. 2010. <http://enews.tufts.edu/stories/ 4 Bradfield, Owen, Caroline Parker, and Leonie Goodwin. "Sustaining performance: Learning from buyers' experience of Viagra." Journal of Medical Marketing 9.4 (2009): 343-353. Print. 5 Bradfield, Owen, Caroline Parker, and Leonie Goodwin. "Sustaining performance: Learning from buyers' experience of Viagra." Journal of Medical Marketing 9.4 (2009): 343-353. Print. 6 Bradfield, Owen, Caroline Parker, and Leonie Goodwin. "Sustaining performance: Learning from buyers' experience of Viagra." Journal of Medical Marketing 9.4 (2009): 343-353. Print.
targets doctors since they are key intermediaries. Pfizer funds the continual medical education doctors need to maintain their registration (which gives Pfizer greater influence on their prescribing habits) advertises in medical journals and sends its sales force to persuade doctors to prescribe Viagra.7 When Lilly launches Cialis, Pfizer will likely advertise heavily to defend its originator/market leader status (the company already spent over $303 million in direct-toconsumer advertising between 1999 and 20018) and utilize its 30,000-member sales force to convince doctors of Viagra’s superiority. Bayer Bayer is German and a conglomerate of 302 global companies with key product offerings that include ethical pharmaceuticals, agricultural products and polymers, to name a few. Unlike Pfizer and Lilly who receive approximately 90% of sales from pharmaceuticals, Bayer’s pharmaceuticals account for less than half of the company’s sales.9Bayer’s CEO has a science background and is focused on the production of chemical compounds, indicating that the company possesses an operations focus. Bayer’s resources include its potential to penetrate European markets (European consumers are more familiar with the company) and its ability to foresee potential challenges. The company’s growth strategy for its pharmaceuticals sector includes the pursuit of joint ventures and co-licensing agreements. Launch of Levitra Bayer is waiting to launch Levitra after it can analyze Pfizer and Lilly’s strategies. Compared to Viagra, Levitra is more effective at lower dosages, even though its duration is comparable. Currently, Bayer is intending to pursue a niche strategy by focusing on diabetic men. However, as a European company, Bayer’s marketing presence in the United States is relatively weak, so the company is attempting to improve this setback by entering into a copromotion agreement with GlaxoSmithKline. On a global scale, this may put Bayer at an advantage when the rivalry begins seeking new markets to penetrate because the brand is more established amongst European consumers.
Bradfield, Owen, Caroline Parker, and Leonie Goodwin. "Sustaining performance: Learning from buyers' experience of Viagra." Journal of Medical Marketing 9.4 (2009): 343-353. Print. 8 Bradfield, Owen, Caroline Parker, and Leonie Goodwin. "Sustaining performance: Learning from buyers' experience of Viagra." Journal of Medical Marketing 9.4 (2009): 343-353. Print. 9 Clinton, Patrick, and Mark Mozeson. "Pharm Exec 50." Euro RSCG Life (2010). Web. 9 Nov. 2010.
Aaker’s Competitive Analysis The figure below represents how the rivalry and its erectile dysfunction medications meausure up against competitors and keyattributes. (Note that the white blocks represent indeterminable status.) Eli Lilly Cialis Pfizer/Viagra’s Strengths Include: Bayer Levitra
Pfizer Viagra ASSETS & SKILLS Keys for Success Advertising/promotion skills Brand Name Recognition Distribution End-user Satisfaction Growth of Segments Served Market Share New Product Capability Patent Product Differentiation Product Quality Reputation R&D Sales force Treatment of ED Longer Use Treatment of High Blood Pressure No Diet Change Required Minimal Side Effects Short Onset Time
Advertising/promotional skills Brand Name Recognition Growth of Segments Served Market Share R&D Investment Sales Force Treatment of ED
Eli Lilly/Cialis’ Strengths Include:
Growth of Segments Served Product Differentiation R&D Investment Treatment of ED Longer Use
Bayer/Levitra’s Strengths Include:
Growth of Segments Served Treatment of ED
Key Strong Above Average Average Less than Average Weak Undetermined 3
Cialis SWOT Analysis
Given the actions of Pfizer and Bayer and the conditions present in the external environment, these are the considerations Lilly must address.
- Quicker onset time than Viagra (comparable - Medication effectiveness is not affected by diet - Longer half-life than Viagra or Levitra - Less incidence of visual irregularities than Viagra (does not significantly inhibit other PDE enzymes) - Less side effects compared to Viagra or Levitra - Lesser dosage needed for effective treatment compared to Viagra - Efficiency in working with ICOS (sped up the time to market)
- ICOS lacks marketing capabilities and experience bringing a product to market (potential to slow pipeline) - Profits split 50/50 between companies (could cause issues and hinder Lilly's R&D investment capabilities) - Unknown safety profile (consumers now aware of Viagra's safety after scare) - GMSO is disjointed (potential for unclear messages to consumers)
- Large "Baby Boomer" population is within ED prevelant age range - Viagra's patent will expire before Cialis' - Viagra dropouts seek features Cialis offers (onset, duration, etc.) - Consumer push for "Lifestyle" drugs - Consumer willingness to try a new ED medication - Consumers are more open to discussing ED than in the past - Reductions on direct-to-consumer advertising
- Pfizer's 30,000-member sales force - Pfizer's increased R&D expenditures - Viagra has highest brand recognition in market - Introduction of Levitra - Male reluctance to seek erecticle dysfunction treatment - Because it is a lifestyle drug, it can only be marketed direct-to-consumer in the United States and New Zealand - Viagra's patent expiration will introduce new competition for Cialis
Mission Statement To improve the lives and relationships of males suffering with ED by giving couples the power to decide when the time is right. Goals Capture 30% of the erectile dysfunction treatment market share by the end of the 2004 fiscal year 4
Convert 75% of ex-Viagra users to Cialis users within two years after Cialis’ launch (measure via customer survey) Get 75% of males diagnosed with ED to ask their doctor about Cialis within 6 months after Cialis’ launch (measure via customer survey and response from doctors)
Analysis of Company Eli Lilly is a finance-driven organization because the company practices cost-cutting measures such as lay-offs and price increases to offset lower sales volumes, stimulate financial growth and facilitate reinvestment. To offset its patent losses and minimal acquisitions, Lilly plans to allocate approximately one third of its pharmaceutical sales on R&D, the largest allotment of any of its rivals. Lilly differs from the other rivalry members because the company has been creating new research centers rather than cutting costs, and while many large pharmaceutical companies embrace a “high-risk, high-return” strategy, Lilly’s main focus is to generate innovative drugs that are expected to top $500 million in sales. Although Lilly tends to avoid “me-too” product alternatives, its launch of fast follower Cialis indicates that Lilly expects it to achieve “best-in-class” status (because the company perceives Cialis as a competitive product possessing distinctive benefits) and high earnings. Because Cialis is a fast follower, it will need to observe Pfizer’s actions and address issues consumers have with Viagra. One way Lilly is trying to do this is by uniting marketing with product development through the formation of its Global Marketing Sales Organization (GMSO), however the company needs to make sure that the GMSO is still fullyintegrated with other key business areas (R&D investment, for example) so that decisions are being made from a holistic perspective. Analysis of Customers According to a 1999 study, the average ED treatment consumer is a male in his 50s and more than 80% have a sexual partner. Erectile dysfunction is an embarrassing discussion topic, so although many males perceive that they are suffering from the condition, fewer than half consult a doctor. Additionally, some older males also believe that ED is a normal occurrence and therefore choose not to seek treatment. When men do consult their doctors however, it can usually be attributed to partner influence. Approximately 150 million men suffer from ED worldwide and the growing demand for lifestyle drugs and perception of erectile dysfunction as an ‘endemic’ that impairs quality of life will increase that number.10 Customers are mainly concerned with product attributes like onset time, safety, duration and time on market and over ¾ of the ED patients surveyed by Bayer possess interest in trying a treatment other than Viagra because they are dissatisfied with the product’s performance on one or more of those attributes. Analysis of Collaborators The collaborators involved with Cialis include Lilly’s joint venture partner ICOS, doctors, pharmacies and the FDA. ICOS developed an ED medication with potential and sought a partnership with Lilly so it could prepare for self-sufficiency by learning how to clinically develop and successfully take a product to market. By teaming up with ICOS, Lilly gains access to a potential blockbuster drug that could rob the “best-in-class” category title from Viagra. In addition, ICOS’ medication complements Lilly’s pursuit of “quality-of-life” medicines so the partnership is viewed as mutually-beneficial. Lilly considers doctors key influencers in the success of Cialis because end
Bradfield, Owen, Caroline Parker, and Leonie Goodwin. "Sustaining performance: Learning from buyers' experience of Viagra." Journal of Medical Marketing 9.4 (2009): 343-353. Print.
users ultimately cannot purchase the medication without a prescription and they are trusted by their patients. Doctors are concerned with providing patients medications that are effective and safe and are not very comfortable discussing their patients’ sexual problems. To influence this collaborator, Lilly will have to perform a balancing act between educating and influencing doctors via visits from sales representatives to promote Cialis and the funding of doctors’ continuing education programs to encourage them to prescribe Cialis.11 Although Pharmacies are a main distributor, they have little influence on Cialis’ success because they are required to order and fill whatever prescription they receive. The only thing Lilly should address with regards to this collaborator is how Cialis’ usage is communicated from pharmacist to end user. If the pharmacist incorrectly explains the medication’s instructions and the patient has a negative experience with it, the problems could be attributed to Cialis rather than ill-informed instruction or improper use. The FDA can be considered a collaborator because without its approval, Cialis could not enter the ED market. The FDA’s concerns are similar to doctors in that its purpose is to protect its stakeholders from harm (American consumers), but the FDA is less likely to be influenced by a pharmaceutical company. Analysis of Context Porter’s 5 Forces The rivalry under examination consists of Pfizer, Eli Lilly and Bayer. In the erectile dysfunction (ED) drug market, the Barriers to Entry are high because large amounts of capital, brand and human resources with specific qualifications are necessary to be a competitive player in this industry. In addition, new entrants will be subjected to compliance with government regulations and a high amount of risk since the firms that dominate this industry are established and well-known. The Threat of Substitutes is moderate because currently herbal supplements, ginseng, penile injections, testosterone supplements, unbranded nasal delivery treatments or no treatment at all constitute the possible substitutes. Additionally, the extent of the threat depends on whether the drug is currently protected by a patent. Right now, all of the drugs are protected, but as they approach patent expiration, the Threat of Substitutes will be higher, as generic brands quickly replicate the product and fight for market share. The Bargaining Power of Consumers differs among intermediaries and end users. The intermediary consumers (doctors and pharmacies) have a high bargaining power because they can choose which ED drugs to carry and whether or not to discuss it with patients. In addition, before a consumer can receive the treatment, they need to have a prescription. The bargaining power of end users is moderate because although there are limited treatment options available, ED treatments are within the lifestyle drug category. The Bargaining Power of Suppliers is low because the industry is concentrated into large firms and the chemical industry is dependent upon the business of the pharmaceutical industry. In addition, chemical firms are incentivized to maintain competitive prices because it augments the competitiveness of the pharmaceutical firms’ products in the market. In addition, the rivalry is moving towards vertical integration, so suppliers will be at the mercy of pharmaceutical companies.
Bradfield, Owen, Caroline Parker, and Leonie Goodwin. "Sustaining performance: Learning from buyers' experience of Viagra." Journal of Medical Marketing 9.4 (2009): 343-353. Print.
Environmental Scan The following components constitute the environmental factors the firms in the ED industry need to be cognizant of:
Socio-Cultural: - Males' reluctance to discus erectile dysfunction issues and seek treatment - American consumers' growing demand for lifestyle drugs - Heightened awareness of drug safety due to Viagra scare - Increasing social pressure on older men to maintain busy lives and perfect bodies - Greater consumer demand for quick and easy solutions Legal/Regulatory: - Drug safety regulations vary from market to market - Advertising restrictions (e.g. Pharmaceutical companies can only advertise direct-to-consumer in the United States and New Zealand) - Patent approval needs to be granted to protect drug earnings - Drugs may only be purchased with a prescription
Economic: - ED drugs are lifestyle products, so it's suceptible to economic fluctuations (people don't need the medication to survive) - Declining economy could reduce health benefits companies offer employees which could hurt ED treatment sales
Natural Environment: - Consumer concerns with regards to hazardous waste and emissions from pharmaceutical facilities
Technological: - Advances in technology could make current products obsolete regardless of patent protection - Advances in technology could enable firms to forecast more accurately and keep better customer records (e.g. CRM software)
Segmenting Cialis has the opportunity to segment its users according to the problems they are seeking to alleviate or via specific demographic identifiers. In Rediscovering Market Segmentation, Yankelovich and Meer state that nondemographic traits like values, tastes, and preferences are “more likely to influence consumers’ purchases than their demographic traits,” so Eli Lilly should examine those 7
characteristics to find its most receptive segments.12 (Similarly, consumers’ price sensitivity is not the most appropriate form of segmentation for Eli Lilly due to the luxury product status Cialis possesses.) We can think of Cialis’ potential segments as males and/or partners who are concerned with the medication’s efficacy in treating ED, males with high blood pressure, males and/or partners concerned with longer use, males concerned with dietary restrictions and males seeking fewer side effects than Viagra. The specific individuals concerned with these characteristics are listed in the table below.
Older Males with Illness x
Older Males with High Income x
ED Treatment High Blood Pressure Longer Use No Diet Change Fewer Side Effects than Viagra
x x x x x x x x x x
Targeting Because Eli Lilly is an established pharmaceutical company in the United States and Pfizer has already educated consumers regarding erectile dysfunction, the company should begin by targeting American consumers. Specifically, Cialis should be targeted towards partners, older males diagnosed with erectile dysfunction and ex-Viagra users due to the overlap of these users’ concerns and the favorable opportunities these groups present as segments that are currently un-served (i.e. partners) and under-served (i.e. ex-Viagra users). Additionally, Lilly should focus on doctors due to the large role they play in consumers’ evaluations and decisions regarding ED treatment options. Partners represent a significant segment for Cialis since the vast majority of men with ED reported that they are in a relationship and according to the Journal of Medical Marketing, “women and partners play a significant role in influencing the buying decision process, yet their perspective is rarely considered in most marketing messages.”13 In fact, a study conducted by Nurse Researcher on the factors that determine when treatment is sought states that “43% of men seek help for erectile dysfunction as a result of partner pressure” and getting men to the “Consultation” phase of the Health Care Transaction Model is a significant barrier.
BNET - The CBS Interactive Business Network. "Rediscovering Market Segmentation | BNET." BNET - The CBS Interactive Business Network. N.p., n.d. Web. 22 Nov. 2010. <http://www.bnet.com/cp/rediscovering-market-segmentation/200231>. 13 Bradfield, Owen, Caroline Parker, and Leonie Goodwin. "Sustaining performance: Learning from buyers' experience of Viagra." Journal of Medical Marketing 9.4 (2009): 343-353. Print.
Ex-Viagra users also constitute a lucrative segment because they have already made it through the “Compliance” stage of the Health Care Transaction Model and are dissatisfied with Viagra’s performance. Doctors should be targeted because they ultimately determine which medication to prescribe and of the males who did seek treatment in the 1999 study mentioned in the case, most of them filled the first prescription they received.
Health Care Transaction Model Perception
Perceive they have condition
Consult their doctor about their condition
Receive a prescription
Fill the prescription
Actually take the medication
Intend to refill prescription
Positioning Cialis should be positioned as couples’ safer and longer-lasting Viagra alternative. This positioning will enable Cialis to speak directly to males suffering with ED and their partners by highlighting ED as a shared issue. Unlike Viagra which is positioned as a macho drug for playboys, Cialis’ positioning will acknowledge partners as key participants in the conversation by leveraging the significance consumers place on their relationships. Similarly, those dissatisfied with Viagra will be informed of a Viagra-like product that has enhanced attributes and fewer side effects.
Allergic reactions Chest pain Cyanopsia Dizziness Dyspepsia (indigestion) Fatigue Facial Flushing Headache Impaired vision Increased risk of hearing loss Low blood pressure Memory loss Nasal congestion Nausea Numbness in the limbs Photophobia Priapism Stuffy nose Tinnitus Unnatural and prolonged erections Upset Stomach Weakness
Back pain Dyspepsia (indigestion) Facial flushing Headache Myalgia (muscle pain) Nasal congestion Pain in the arms or legs
Accidental injury Back pain Dizziness Dyspepsia (indigestion) Facial Flushing Flu-like symptoms Headache Increased levels of creatine kinase Nausea Rhinitis (stuffy or runny nose) Sinusitis (inflammation of the sinuses)
According to the Bass Diffusion Model based off of Viagra’s worldwide quarterly sales since its introduction, Lilly should launch Cialis at a competitive price because it will follow a successful path similar to Viagra’s and even beat the product’s sales in 13th quarter. Lilly should start by selling Cialis in the 20mg tablet form it is preparing for the urology conference. After the drug has been in the marketplace, Lilly can assess whether or not different dosages should be introduced like a smaller offering for “weekend” users or a heavier dosage for those who need more of a boost. Price In order to capture 30% of Viagra’s ED treatment market share, Eli Lilly will need to price Cialis at $10 per pill to its end users. Lilly’s pricing strategy will be based off of the concept of “value as perceived by the customer” because Cialis will communicate its superior product performance to doctors and end users. In addition, the article How Do You Know When the Price is Right? Dolan states that “heavy users generally value a product more than light users,” 14 which indicates that Lilly has a solid rationalization for charging a competitive price because “heavy users” are males diagnosed with ED and couples. That being said, it does not make sense for Lilly to charge more
"How Do You Know When the Price is Right? - Harvard Business Review ." Harvard Business Review Case Studies, Articles, Books . N.p., n.d. Web. 24 Nov. 2010. <http://hbr.org/1995/09/how-do-you-know-when-the-price-is-right/ar/1>.
than Viagra because ED medication is a lifestyle drug and therefore not covered by insurance plans, but rather paid for out-of-pocket by consumers. Promotions Lilly should utilize the same direct-to-consumer advertising channels as Pfizer (namely television and print) with a few minor adjustments. Besides reaching males with erectile dysfunction via sports networks as Viagra does, Lilly should examine consumer data to determine which television programs are most frequently viewed by couples or favored equally amongst older male and female viewers. To reach doctors, Lilly will need to compensate for its smaller sales force (relative to Pfizer’s) by producing more educational pamphlets and investing more in doctors’ continual education programs. Distribution Channels Lilly’s distribution channels include pharmacies, wholesalers and hospitals which will receive a margin of Cialis’ sales. Because these channels act as intermediaries between Lilly and the end consumer, it is imperative that they are commonly educated with regards to Cialis’ proper use and key benefits.
"2009 Annual Review."Pfizer.com. N.p., n.d. Web. 23 Nov. 2010 <http://media.pfizer.com/files/annualreport/2009/annual/review2009.pdf.>
"Bayer HealthCare - Homepage." Bayer HealthCare. N.p., n.d. Web. 9 Nov. 2010. <http://www.bayerhealthcare.com/>. BNET - The CBS Interactive Business Network. "Rediscovering Market Segmentation | BNET." BNET - The CBS Interactive Business Network. N.p., n.d. Web. 22 Nov. 2010. <http://www.bnet.com/cp/rediscovering-market-segmentation/200231>. Bradfield, Owen, Caroline Parker, and Leonie Goodwin. "Sustaining performance: Learning from buyers' experience of Viagra." Journal of Medical Marketing 9.4 (2009): 343-353. Print. Clinton, Patrick, and Mark Mozeson. "Pharm Exec 50." Euro RSCG Life (2010). Web. 9 Nov. 2010. "Eli Lilly and Company."Eli Lilly and Company. N.p., n.d. Web. 9 Nov. 2010. <http://www.lilly.com>.
"How Do You Know When the Price is Right? - Harvard Business Review ." Harvard Business Review Case Studies, Articles, Books . N.p., n.d. Web. 24 Nov. 2010. <http://hbr.org/1995/09/howdo-you-know-when-the-price-is-right/ar/1>. "Pfizer.com | Pfizer: the world's largest research-based pharmaceutical company."Pfizer.com | Pfizer: the world's largest research-based pharmaceutical company. N.p., n.d. Web. 28 Oct. 2010. <http://www.pfizer.com/home/>. "Pfizer.com | Pfizer: the world's largest research-based pharmaceutical company."Pfizer. N.p., n.d. Web. 9 Nov. 2010. <http://www.pfizer.com>. Tufts University E-News. "Tufts E-News: Tufts Graduate Named CEO of Pfizer." Tufts E-News: Daily News. Tufts University's official electronic news source.. N.p., 14 Aug. 2006. Web. 28 Oct. 2010. <http://enews.tufts.edu/stories/