Thursday, January 28, 2010

Era of market segmentation

Market segmentation is an important criterion of marketing. Pharmaceutical marketing has traditionally been a bastion of marketing activity based on market segmentation strategies. Broadly speaking, pharma marketing is done by matching product profile to the specialty of doctor (ie., market segment). There are two aspects here, one is specialty by qualification and the other is specialty by practice. There are doctors who may have a certain specialty like D Ortho, but their practice is mainly general practice. Similarly, there are certain lady doctors, particularly in semi rural areas, who are GPs by qualification, but the size of their gynecology practice will put a qualified gynecologist to shame! The ability to understand the market, and then create and implement market segmentation strategies helps avoid wastage in pharma marketing. Market segmentation strategy is in fact, the crux of pharma marketing.

I got the above interesting image from here.

Understanding market segments

Market segmentation is done based on:

a) qualification of doctors
b) no. of patients a doctor sees
c) type of patients the doctor gets (ie., purchasing capacity of the patient)
d) practice type of doctor (whether the doctor's practice matches his or her qualifications)
e) mindset of doctor with reference to his or her needs (whether the doctor is gift oriented, cash oriented, sample oriented, scheme oriented, regularity oriented, information oriented etc).

The above approach is a ground level tactic.

At the strategic and policy level, pharma companies also take a call on the market segment to focus on. For eg., pharma companies hive off divisions with a product portfolio that caters to a specific segment of doctors. Pharma companies have divisions that concentrate on, say, the paediatric segment. Another division to focus on gynaecology segment (doctors - both by practice and qualification will be targeted) or a further division for catering to coverage of Vet segment. These days there are divisions focusing on rural and semi rural segments too. Thus, thinking in terms of market segmentation, plays a key role in pharma marketing.

Today, there are still newer forms of market segmentation.

Market segmentation is done based on geographic coverage. There are companies that launch and concentrate on REGIONAL BRANDS to cater to specific geographic areas. It is done strategically to avoid unnecessary inventory and promotional clutter. For example, certain antimalarial drug brands to endemic areas only.

Another example: let us say, a company has a brand of paracetamol that sells well in the North zone but the sales despite many promotional campaigns does not take off in South. However, in the South, let us say the company's diclofenac brand does very well. Based on such market trends, certain companies take a strategic call.

Marketing and product promotional resources are concentrated as per the nature of market acceptance. So for the North zone, more inputs will go for the paracetamol brand and for the South zone, more inputs will go for the diclofenac brand (in above example). Basically, the market trends are followed for building REGIONAL BRANDS rather than focusing on building National Brands. This helps in ROI justification which is also an important corporate goal given to the marketing guys.

Actually, the above strategy helps avoid OPPORTUNITY LOSSES.

This is an important concept. Markets offer opportunities for products. Let us continue with the above line of thinking ...

Imagine an obdurate product manager who in spite of market realities focuses his efforts on building the paracetamol brand in South zone.

What will happen?
There is an opportunity loss, resources and field force time will be utilized for building the paracetamol brand, in lieu of the diclofenac brand, resulting in an opportunity loss for the diclofenac brand in South zone.

Hence, marketing strategists do take a call on where to allocate precious resources, how best to use field force time and energies, and how to manage the attention time of the vital 2 minutes that the MR gets with the doctor and chemist.

Today, with doctors giving less time and attention to each MR, the focus of field force and strategists is on how to optimally and judiciously use the short interaction time with doctors.

One just cannot dump an umpteen brand names. This is the attention age. In fact, it is the era of the ATTENTION ECONOMY. Gaining the attention of doctor and chemist and judiciously using the same is the real contemporary challenge in pharma marketing. This is more so because there are some 75000 pharma brands, and a no. of regional pharma companies all vying for mindshare of prescribers.

And the solution for the above problem of market clutter is product portfolio rationalization, understanding where to put in the precious promotional inputs - resources - and field force time; and clearly understanding the MARKET SEGMENTATION with respect to doctor covered, and products chosen for active promotion in specific segments and geographies.

When I was fresh in to the pharma marketing field, I had the good fortune to work for a short time with one of the best pharma brains - MR. RAJJIV KUMAR SEHGAL. In his speeches to the field force he would oft repeat, if the Americans knew in which bunker Saddam Hussein was holed up, the Gulf war would have been over with just one smart bomb. So market intelligence and market strategy is most important, no point wasting precious time and resources.

Targeted marketing is very purposeful marketing. It takes up the purpose with market segment and ensures that there is best ROI. When Digene is available in various flavors, Abbot has the data for the regional preferences of various flavors, and accordingly inventory management and promotional efforts are done.

Relevance is the main theme of market segmentation strategies. Relevant products, relevant services, relevant promotional messages, relevant gifts and all other relevant value delivery works, are done in market segmentation based marketing.

Business people often ask during expansion strategies can I become all things to all people?! For example, can every company become like Cipla, a giant supermarket! Very likely not!! So an element of focus on market segments that are relevant, ensures monies, time and resources are not scattered. Market segmentation helps rationalize the financial picture and cash flows too!

Today, with divisionalization in big pharma companies, development of regional pharma companies and PCD (propaganda cum distribution) businesses, it is not at all easy to market pharma goods. ROI has become very important in pharma marketing. To justify market spends and marketing budgets (that only increase), some of the market segmentation strategies relied on are:

a) regional brand building strategies
b) regional product launches
c) strengthening field operations in certain geographies only, where company sales are strong
d) product portfolio rationalization to ensure field force focuses on profitable brands.

Market segmentation has to be balanced very keenly with the tendency to do everything and scale up businesses to mass markets! If scaling up clicks it is great, but many a times, it can spell doom. Because ROI suffers. Thanks for spending time reading this blogpost, please scroll down, read all other posts (click on older posts if required, feel free to recommend this blog to your acquaintances).

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