Pharma marketing: Strategic approaches to market segmentation
Rita E. Numerof explores marketing strategies that enable organizations to move beyond simple brand position and product benefits
By on Nov 17, 2011Given the fact that the global pharmaceutical and medical device industry is in the midst of a redefining transformation, new approaches to uncovering and better defining unmet needs and translating these into operational areas of focus (e.g. new product growth platforms, new commercial models) is essential to market success.
Rising costs and demands for affordable health care continue to challenge the economics and traditional business assumptions of the industry. The costs of product innovation continue to rise at the same time that increased regulatory scrutiny is raising internal development costs, risks and time requirements for clinical trials.
Often considered an attractive alternative to internal development, licensing and acquisition markets remain quite competitive. To add to the complexity, markets have become fragmented as physicians, providers, patients, and payers look for focused solutions that have optimal efficacy and safety profits for narrower patient populations.
Add to this mix, the role of reference pricing, greater transparency, and changes in decision-making—essentially shifting decision-making authority away from individual physicians to payers and healthcare administrators. These dynamics increase the complexity of product decision-making and continue to challenge the effectiveness of traditional commercial models.
Strategic market research
Market research that enables organizations to move beyond brand position or product features and benefits to see unique needs through the eyes of specific market segments is an essential ingredient of success. Such strategic market research needs to enable a number of key activities.
One of these is market segmentation, and it needs to be done in new ways, with the ultimate objective being the identification of specific customer segments a company can ‘own’ and use to sustain competitive differentiation.
While it sounds straightforward on paper, the reality of doing it is much more difficult. Most product manufacturing companies look at their products first and attempt to define what markets would be attractive ones in which to promote these products.
This approach looks at the marketing question, not from a strategic view, but from a more tactical product market communication perspective. It takes the product and looks at ways to ‘push’ it into a variety of markets, looking at similarities between markets where a product may already be sold.
Critical considerations
While this orientation has a place in the mix and raises a legitimate set of questions to answer (i.e., are there markets that are similar to existing markets where our product has utility and therefore can grow?), it misses some critical considerations that have to be addressed in a highly dynamic market where the rules are changing.
Namely, what are the existing and emerging needs in different markets and what are the implications for the development of unique products and solutions that would serve to differentiate the firm from its competition?
Unfortunately, large ‘regions’ are often defined as markets, missing the identification of nuance (and thus real product or service innovation), and the products are typically constructed as solutions similar to those that work in the country in which the firm is based. Thus, ‘global’ for many US-based companies is finding markets outside the US that appear to mirror the characteristics of the markets the firm sells into in the US.
This firm-centered approach isn’t the liability of only US-based companies. It’s a characteristic behavior of most firms, regardless of where they’re based.
And the US isn’t one monolithic market. For companies selling into hospitals, this fact is becoming increasingly clear.
Academic medical centers are very different from community-based hospital systems, and most importantly, neither group represents a coherent whole. Some academic centers have barred pharma reps from calling on their doctors; others are engaged in active research collaborations with manufacturers; others are aggressively standardizing on products and services historically the domain of individual physician decision-makers.
Some of these physicians are employed; some are not. Furthermore, geographic or regional variation within the US isn’t as good a basis for differentiation as might have been true in years past. Thus, the old adage, ‘When you’ve seen one academic medical center, you’ve seen one …’ seems to be a reasonable starting point.
The bottom line is clear: Changes in market dynamics, shifts in the power of who makes decisions and the basis for those decisions requires more sophisticated strategic approaches to market segmentation. Those who take the time to understand submarkets and master nuances are in a better position to provide insights that will lead to competitive advantage.
Rita E. Numerof is president of Numerof & Associates, Inc.
For more on marketing, join the sector’s key players at Marketing Europe on November 22-23 in Berlin.
For exclusive business insights, download eyeforpharma's Pharma Emerging Markets Report 2011-12 and Pharma Key Account Management Report 2011-12.
For all the latest business analysis and insight for the pharma industry, sign up to eyeforpharma’s newsletters and follow us on Twitter.