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MARKETING AND SALES What is Marketing…?? • Selling? • Advertising? • Promotions? • Making products available in stores? • Maintaining inventories? All of the above, plus much more! 2 Marketing Marketing is the art and science of choosing target markets and getting, keeping, and growing customers through creating, communicating, delivering, and superior customer value. 3 Simple Marketing System Communication Goods/services Industry Market (a collection of sellers) (a collection of Buyers) Money Information 4 Selling vs. Marketing Dimension Selling Marketing Concepts Integral part of Marketing Broader concept, includes selling, brand, Mkt research, distribution, promotion, strategy Objective Transaction Exchange, Customer, Demand management Target Buyer Needs/ wants of the customer Focus Product Brand/ service USP Price Value Strategy Sales force + promotion Marketing mix Period Short term Long term Controls Sales/Delivery/ Collections Customer satisfaction, market share Skills Selling/ Communication Analytical Orientation People Team Begins When you have a product Much before & long after a product Usp- unique selling proposition (the focus attribute) Difference Between - Sales & Marketing ? Sales trying to get the customer to want what the company produces Marketing trying to get the company produce what the customer wants 6 Scope of marketing Goods Services Events Experiences Personalities Place Organizations Properties Information Ideas and concepts What can be marketed or sold ? Anything under the sun ………… 7 Core Concepts of Marketing Needs, wants demands Markets Products Marketing & Marketers Utility, Value & Satisfaction Exchange, Transaction Relationships 8 Core Concepts of Marketing Need – food ( is a must ) Want – Pizza, Burger, French fry's ( translation of a need as per our experience ) Demand – Burger ( translation of a want as per our willingness and ability to buy ) Desire – Have a Burger in a Mac-D 9 In order to understand Marketing let us begin with the Marketing Triangle Customers Company Competition 10 Who is a Customer ?? CUSTOMER IS . . . . . Anyone who is in the market looking at a product / service for attention, acquisition, use or consumption that satisfies a want or a need 11 Product is . . . . . Anything that is offered to the market for attention, acquisition, use or consumption that satisfies a want or a need 12 Market A Public place where buyers and sellers make transactions, directly or via intermediaries 13 Types of Products PRODUCTS Consumer Products Services Industrial Products 14 Uniqueness of medical products marketing • Customer and consumer are two separate entities • Customer is more aware and informed about the products • Marketing is regulated by various guidelines (example: advertising not allowed for schedule H drugs) • Medical council of india( MCI) governs the inputs provided to medical practitioner (doctor i.e customer for pharma companies) • While Drugs and Magic remedies act governs the content of advertising of the medical products • Direct to consumer marketing is not allowed for on prescription medical products Uniqueness of medical products marketing • Marketing of product and claims has to be backed by clinical evidences for medical products • Evidence based marketing is desirable • For OTC ( over the counter products) marketing can be done by advertising directly to the patient (eg: ranbaxy’s revital) medical products selling process products Pharma company detailing Sales representative Product sample Doctors Clinical data Prescribes Rx money Retail chemist Patient medicine Distribution The Distribution Function • distribution is about getting the product or service to the customer as conveniently as possible; it deals with access and availability • intermediaries perform many of the distribution functions on behalf of suppliers • merchant intermediaries actually take title to physical products that they distribute • agents do not ever own the products, but they arrange the transfer of title • Distribution happens through various channels 15 - 19 Distribution Channel What is a Distribution Channel? • A set of organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user. • Used to move the customer towards the product • Selling through wholesalers and retailers usually is much more efficient and cost effective than direct sales. Distribution Channels • The role of distribution entails: • Arranging for its sale and transfer of title • Promoting the product • Storing the product • Assuming some risk during distribution. • Intermediaries often perform these activities for producer or consumer. All roads lead to Rome Distribution Channel Functions • Information: gathering and distributing marketing research and intelligence information about the marketing environment. • Promotion: developing and spreading persuasive communications about an offer • Contact: finding and communicating with prospective buyers • Matching: shaping and fitting the offer to the buyer’s needs, including such activities as manufacturing, grading, assembling, and packaging. Number of Channel Levels Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the Final Buyer. 0-level channel Producer Consumer 1-level channel Producer Retailer Consumer Retailer Consumer Retailer Consumer 2-level channel Producer Wholesaler 3-level channel Producer Wholesaler In Pharma Jobber Factory Branch/C & F Agent HUB Distributor Chemist All India organization of Chemists & Druggists Association (AIOCD) 24 Evaluation of Domestic Pharmaceutical Distribution 1970 National distributors 1980 Own Branches Early 1990’s CFAs Mid 90’s Hubs, CFAs, Consignment Agent 2000 to2006 Hubs, CFAs Rs.650 Cr Rs.2,750- Rs.3,000cr Rs.8,000-Rs.8,500 cr Rs.14,000- 14,500cr Rs 23,500cr (8% & 10%) (8% & 10%) (16% & 20%) (16% & 20%) Increase in Institutional sales Entry of government Pharmacy chains (2002 onwards) 28,500 4 lakhs 55,000 5 lakhs Stockist margins (4% & 6%) (6% & 8%) (8% & 10%) Retailer margins (8% & 12%) (12% & 16%) (16% & 20%) Entry of Sub- stockists Stockists- 18,000 Retailers- 1,25 lakhs 20,700 2 lakhs 23,500 3 lakhs Stockists Chemists Price Control 8% 16% Out of Price control 10% 20% Source: EY research & trade bodies 25 Pharma distribution channel Pharma company Cental govt or state govt 1 CFA 2 Distributor ( stockist) Selected Institutes (hospitals) Sub Distributor ( sub stockist) 3 Retailer ( chemist) 3-level channel of distribution Patient (consumer) Role of carrying and forwarding agent (CFA) • A extended part of pharma company ( single pharma company) • CFA can also be a manufacturer owned warehouse or an independent service provider paid a certain commission per unit handled • They help in the routinization of transactions • adjustment of assortment discrepancy and sorting-breaking down a heterogeneous supply into separate stocks that are relatively homogeneous • ALLOCATION- breaking down a homogeneous supply into smaller slots & ASSORTING-Building assortments that are readily consumable • Accumulation-BRINGING SIMILAR STOCKS from different suppliers • Does not have a fixed margin for doing that but operates on share of revenue on the volumes that it trades ( 1.5 to 2% commission) • Appointed at a state level ( at max 2-3 CFA’s per state) Role of a stockist ( distributor) • Keep stock of multiple pharma companies to distribute it to the retail chemist • They get fix margins for selling the medicines from the pharma companies ( 10% for the product out of price order and 8% for the product within price order) • They are appointed by the pharma company and have to operate to distribute products for a particular region (territory) • Pharma company appoints minimum1 and max 3 distributers for one region) • Order stock at every month end from the respective CFA’S (termed as closing 28th to 31st or 1st week of every month) • Is take a permission from All India Organisation of Chemist and Druggist ( AIOCD) Role of a sub-stockist • They share the stock with stockist to distribute it to the area not covered by the stockist • Shares the margins with the stockist • Act as mediator between stockist and retailer • Have a limited existence in pharma supply chain • For rural and extra urban regions a pharma company appoints a sub-stockist to increase their reach in those areas Role of a retail chemist • Is a point of purchase for the patient • Operates on fixed margins(20% for products not under price order and 16% for products under price order) • Order stock from stockist as and when required and do not have a fixed ordering schedule • Keeps stock of all the companies and sells to the patients at maximum retail price (MRP) • They are registered with state FDA authorities Retail chains Patterns of Distribution • Determines the intensity of the distribution • Intensity decides the service level provided • Types of distribution intensity: • Intensive • Selective • Exclusive Distribution Intensity • Intensive: distribution through every reasonable outlet available – FMCG • Selective: multiple, but not all outlets in the market – pharma, frozen food • Exclusive: may be only one outlet in a market - car dealers Intensive Distribution • Strategy is to make sure that the product is available in as many outlets as possible • Preferred for consumer, pharmaceutical products and automobile spares Selective Distribution • A few select outlets will be permitted to keep the products • Outlets selected in line with the image the company wants to project • Preferred for high value products • Tanishque jewelry • Keeps distribution costs lower Exclusive Distribution • Highly selective choice of outlets – may be even one outlet in an entire market • Could include outlets set up by companies – Titan, Bata • Producer wants a close watch and control on the distribution of his products. Great Words on Marketing 1. “The purpose of a company is ‘to create a customer…The only profit center is the customer.’” 2. “A business has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results: all the rest are costs.” 3. “The aim of marketing is to make selling unnecessary.” 4. “While great devices are invented in the Laboratory, great products are invented in the Marketing department.” 5. “Marketing is too important to be left to the marketing department.” THANK YOU -PHARMA STREET