Industrial revolutions and it it’s impact on humans and career opportunities

Humans and their career choices have evolved alongside the industrial evolution. The evolution to modern world has been through Pre World War era, Post World War era and Information era.

Pre World War era

The industrial revolution was fuelled with game changing steam power. Textile industry emerged amongst the 1st powerful industry along with paper, printing and coal mining. This was the era when telephone,telegram and ships that run on steam were developed. Suez and Panama canals shrunk the distance dramatically and facilitated world towards globalisation. The focus was on products, business was through traders and retailers. There was scarcity of goods and economy was dependent on agricultural produced.

Post World War Era

World Wars are most devastating events in the history of human civilizations, However, IInd World War was one of the transformative events of 20th centu. .lThe focus went on agricultural produce. Green revolution and white revolution strengthened agricultural and milk produced. Major innovations of this time were computer, semiconductor, fibre optic, cellular phone, jet engine, internet alongside the green and white revolutions.

Information Era

This ere is also known as Computer Age, Digital Age, New Media Age. Emergence of sophisticated technologies enabled producers to reach its customers directly. Industries such as airlines, banking, insurance, computer software, appliances, consumables are adopting de-intermediation process and this is changing the nature of business and relationship marketing is becoming popular. Emergence of ecommerce platform such as Amazon, Alibaba, Flipkart are fuelling the growth of the sector by updating customers knowledge and understanding their buying behaviours.

To summarise, the focus went on from produce to meet the basic needs has gone to find out market place and consumers for overproduce now. Thus industrial revolution has impacted the lives of humans by creating products and services to meet needs of respective time. This also has created employment and career opportunities alongside the evolution.

Relation between Market Share & Profitability

PIMS Survey revealed

  • Business with MS more than 40% will earn on average 30% ROI
  • ROI rises with  its relative market share
  • MS orientation can be represented on two dimensions “Need Satisfied” and Customer Reached”

It is clear that market share depends on the number of customers taking buying products and their need is being satisfied.  The customer share of wallet is the amount an existing customer spends regularly on a particular brand rather than buying from competing brands. A marketing campaign might focus on boosting spending by existing customers rather than increasing the product’s overall market share. High customer share is high profit as marketing cost is low and these customers are sweet spots.

Amazon : CRM in Pharmaceutical and Healthcare Marketing

Google Books : CRM in Pharmaceutical and Healthcare Marketing

Customer retention Vs Acquisition

Companies lose 18% of customers every year – not knowing why

Costs 5 to 25 times more to gain a new customer than to retain current customers

•Customers are profitable over  a period of time • The longer they stay, more profitable likely they are • Increasing retention by 5%, profit increases by 25 to 95% • About 68% of customer switch to competitors due to perceived indifference in the service of current service provider •(Indifference here is: Lack of proper response to query, Inefficient complaint handling, Lack of curtsy)

The primary purpose of any business is to win and keep customers. Its competitors also seek to do the same. Most successful firms have developed capabilities for attracting customers through their marketing programs. But they have shown mixed results when it comes to retaining these customers. Customer Relationship Management helps businesses in successfully implementing strategies aimed at winning and retaining customers profitably. It is also helping businesses shift from a short-term transaction based mode of operation in their interactions with customers to a long-term relationship mode

Reference: CRM in Pharmaceuticals and Healthcare Marketing

Evolution of Marketing Practices

Marketing practices have evolved over last 50 yrs and is evolving continuously. Product centric approach was from inside out, product focused. The availability was at the centre of thought.

In product centric approach product is at the center of promotion. The approach is mostly inside out. A segment of people having similar need. For example in Pharmaceutical marketing, set of patients having similar symptoms are defined as particular patient segment. The customer centric approach outside in and is market driven. Thus the mass marketing ie mass production, mass distribution and mass communication was practiced by organisations. Emphasis was on products rather than on marketing. When the availability issue was under control and production capacity was increased to level of overproduce, market oriented marketing approach evolved keeping a particular segment’s need in mind. Outside in evolved as marketing practices. Now this practice is evolving further and going beyond a particular group or segment to a particular customer. The customer centric approach is again outside in approach keeping customer at the centre and customising product or services according to their need. Let us consider the example of cough syrup to understand this. Conventional cough syrup to sugar free cough syrup for diabetic and calorie conscious patients. The sugar free preparation is for a particular segment of patients.  Now further customisation is making it extended release for people who are missing their second dose while they are out of home

Customer share Vs Market Share

.

Market ShareCustomer Share
Product or brand as a source of all company value
Product/brand manager sells one product to as many customer as possible
Differentiates products Sells to customer
Finds constant stream of new customers
Company ensures each product and likely each transaction is profitable
Uses of mass media to build product  
Customer as the only source of  revenue
As many products as possible to same customer at a time
Differentiate with customers
Collaborates with customer
Finds a new stream of business from the same customer
Company ensures each customer is profitable, even if losing money on occasional product or transaction
Uses interactive communication to determine individual need and communicate with each individual  

Reference: CRM in pharmaceutical and healthcare marketing

How to Calculate Customer Life Time Value

Acquiring and retaining a customer requires investment. The question arises here that are all the acquisitions worthwhile? Should a company thrive to retain all the customers? There might be customers that are very high maintenance with relation to the profit that they give. There will be customers who will not generate enough profit even being with company throughout their life time. Customer life time here is the total continued period of time they stay with the company availing products or services.

In marketing, customer lifetime value is a prediction of the net profit attributed to the entire future relationship with a customer. It is also called as CLV or CLTV, lifetime customer value (LCV), or life-time value (LTV)

We define customer lifetime value (CLV) as “the net present value” of “the future profit” that flows over the lifetime of the customer relationship. This represents the entire expected profit flow, adjusted by an appropriate discount rate, over a customer’s lifetime including the elements outlined above including cross-selling, upselling, advocacy etc.

The CLV should be calculated at the level of segmentation granularity appropriate to that business. A thorough care should be taken to be sensibly conservative when making future estimates. Though it is difficult to predict exact future value as certain amount of uncertainty will always be there. Even if there is perfect data to predict future, putting exact future value is going to be difficult. You don’t need to be that accurate also; the whole purpose is to compare one marketing program Vs other in terms of investment Vs profit. A careful estimation should help calculate a reasonable customer life time value.

Let us consider an example. A customer is giving  profit of Rs 1000/- every year and estimated period is 5 years from now. With all the cross selling and upselling the incremental profit is Rs 1000/- every year. Thus year 1 profit is Rs 1000/-, year 2 profit is Rs 2000/- . Thus at the end of 5th year the profit for the 5th year is Rs 5000/- and thus total profit earned from this customer is Rs 15000/-. This is normal way of calculation total profit that is not a correct reflection. As the investment is being done today and the total value of future profit in terms of today may not be the same.

The net present value of future profit of Rs 15000/- is Rs 10653/-. This means the estimated profit in terms of today’s value is Rs 10653 as the investment is being made today.

We have used here a discount rate of 10 per cent as profit made in the future which is not as valuable as profit made today. The discount rate is used to reduce these future profits down to their net present value (NPV) to make future profits values comparable to any current profits or costs.

Discount factor  D = 1/(1+i)n

where i = the market rate of interest including risk , n = the number of years.

NPV = Future profit X D

Reference: CRM in Pharmaceutical Healthcare Marketing by Shailendra Tripathi

Why do customers defect?

Customer defects are common but in most of the cases it is possible to control the defects. According to a study, 82 percent of customer shift is controllable by companies. 68 percent of customers shifted due to service issues, 14 percent of customers shifted due to product problems, 9 percent of customers shifted due to competitors and 9 percent shift was due to other reasons.

If you look closely at above reason to Defects Company can solve service and product related issues as it is in the hand of the companies. Only 18 percent of the reasons like competitions and other unknown reason may be beyond the control of the company. Surprising fact is that only 14 percent shift is due to product related issues. The problem is not product defects, the problem is how the customer is being responded and treated while seeking the resolution.

The customers may defects under following circumstances –

  1. Price defectors:

Shifting due to price is big as affordability is always back of the mind and customers are highly price sensitive. If customers are not getting value for money they ae investing in products or services, they are likely to shift.

  • Product or Service defectors

Customers’ expectations are very high against what they have paid for product or services. Service plays very high role and it should not vary regardless of the channel customer purchased your product or services. Any dip in the standard of services causes customer defect. A bad product is biggest reason for dissatisfaction leading towards not only defecting but also negative word of mouth publicity.

  • Category defectors

Customers shift to a products of new category or adjacent category that are seen as interchangeable, convenient to use and having some benefit over the current product that they are using. For example soap based hand wash to alcohol based hand sanitizer. In soap based hand sanitizer (wash) one need to wash the hands with water whereas in alcohol based sanitizer one has to just rub the hands. Now moving further in alcohol based hand sanitizer, again you have choice of gel and spray forms. In pharmaceutical marketing doctors might choose the newer molecule of the same of even adjacent category that is seen interchangeable. 

  • Technological defectors

Technology offers convenience and cost advantage and hence becomes one of the important reasons to shift from current product to technologically advanced products. For example type writer to printers, fax to email, photocopy to scanning, Conventional cameras to digital cameras, traditional computing to cloud computing, and keypad mobile phones to touch screen mobile phones. If your competitors have technologically superior products that are affordable too, there is every reason for a customer to shift.

Reference

CRM in Pharmaceutical and Healthcare management

Creating WOW: Good customer service is not enough

Gone are the days when just replying back to customer’s mail and offering resolution were the good customer service. The customers’ expectations have gone up over during the previous decade. Customer service includes any interaction online or offline of face to face with the customer or potential customer right from the initial interaction to sales process to beyond sales. The definition of good customer service is evolving. In the past when Pizza was ordered, it was expected to reach in half an hour and if delivered in half an hour it was really a good customer service by any standard. Today the same Pizza is ordered and expected to be delivered in same half an hour but you see the various stages of delivery realtime like – your order is placed, your order is getting ready, your delivery boy is so and so, your order is out for delivery etc..

Today only good customer service is not enough; one has to create wow and customer delight

Good customer service

  • Answer your phone.
  • Don’t make promises unless you WILL keep them.
  • Listen to your customers.
  • Deal with complaints.
  • Be helpful – even if there’s no immediate profit in it.
  • Train staff to be ALWAYS helpful, courteous, and knowledgeable.
  • Take the extra step.
  • Throw in something extra

Creating Wow

  • Customers have more options than ever before-and feel less loyalty.
  • They want products and services fast, cheap, quickly-from whoever will provide them.
  • The competitive advantage is now in our ability to KEEP customers and build repeat business and this applies in education sector as well
  • It has to be superior, WOW, unexpected service. In a nutshell, it means doing what you say you will, at the price you promised-plus a little extra tossed

Reference:

Need of Customer Relationship Marketing in Pharmaceuticals and Healthcare

Cost of acquiring a new customer and getting profitable business from them is always higher than the cost of maintaining existing relationship and enhancing profitable business from it. In pharmaceutical industry the drug discovery cost, marketing cost and customer acquisition cost are very high. On the other hand competitors gain prescribers on their products reducing your prescribers base. Following are key reasons why CRM is important in pharmaceutical marketing-

  1. High cost of drug development
  2. High marketing cost
  3. Poor product differentiation
  4. High cost of customer acquisition
  5. Challenging customer retention

High cost of drug development

According to a recent study by Tufts Center for the Study of Drug Development, published in the Journal of Health Economics reveals that estimated cost of a new drug development is about $ 2.6 Bn. There is increase in the cost by 145% over last 10 years. While the average time it takes to bring a drug through clinical trials has decreased, the rate of success has gone down by almost half, to just 12 percent. When a product after such a huge investment is out in the market, there is need of loyal customers.

High marketing cost

A study published in the Journal of the American Medical Association, reveals that spending on medical marketing significantly increased over the past two decades, going from $17.7 billion in 1997 to $29.9 billion in 2016. This means there has been marked growth in expenditures on medical marketing in the United States from 1997 through 2016. Pharmaceutical spending on promotion to healthcare profession accounts the most of it and remains higher. When we co relate this with India, the situation remains similar. The investment per customer is high and going up further. To get profitable business, it is important to have loyal customer base.

Poor product differentiation

Technological advantage of a pharmaceutical product over other is diminishing globally. Products are becoming commodity and are seen interchangeable. Right from manufacturing process, packaging to promotion, brands look similar. This is one of the key reasons why clinicians switch from one brand to other. A good CRM may help differentiate your brand and thereby customer retention.

High cost of customer acquisition

Acquiring customers is costly affairs and it takes time whether you launch a new product or expand the usage of existing product to new customers or even try to gain back customers lost to competitors. Good relationship marketing can help with customer retention and enhance business from them. This is again is very effective in strategic marketing like portfolio approach or adding additional brands to current satisfied customers.

Challenging customer retention

Due to poor differentiation, many generic brands with similar benefit, gap in service due to attrition or better relation with competitors, it is extremely challenging to retain a customer. Customers switch or even sometimes they don’t use enough of your products. Hence CRM is important to engage clinicians on the brand, keeping them loyal and increasing the Rx share. That is more no of products per prescription or more numbers of products to different patients

Ref: CRM in Pharmaceuticals and Healthcare marketing by Shailendra Tripathi

Google Books

Changing Pharmaceutical Business Environment

Indian pharmaceutical is recognised as pharmacy of world due to its contribution in global generic medicine. It is a highly fragmented industry comprising of a mix of patented technologically advanced products , branded generics and commodity generics with the presence of more than 10,500 registered manufacturers as per the National Pharmaceutical Pricing Authority [NPPA] .Indian pharmaceutical industry is  undergoing various changes due to political, economic and technological changes

High competition

Around 90 % of the Indian market is branded generics. This creates very high competition and major challenges for pharmaceutical marketing in India. There are more than 10500 SMEs and about 300 manufacturing organizations. These facilities manufacture over 64000 formulations. The severity of competition can be understood by the fact that there are almost 20 to 150 brands with similar compositions.

Access and affordability – DPCO & NLEM

High out of pocket expense is limiting access to healthcare and medicines. There is inadequate insurance penetration to take care of health care needs. Average Indian is un- aware of healthcare expense budgeting. Government is putting high pressure to make drugs affordable. The government has taken various policy decisions that include new pharmaceutical pricing policy such as DPCO and National List of Essential Medicines (NLEM),

Quality – Good Manufacturing Practices (GMP)

Change in licensing policy and approval of new drugs through clinical trials making the norms more stringent.

In the increasingly globalized economy, strict conformance to high regulatory standards like, Good Manufacturing Practices (GMP), Good Clinical Practices (GCP) and Good Laboratory Practices (GLP) pose another major challenge for the pharmaceutical industry in India

Ethical Practice – UCPMP Code

The industry is highly regulated and has been facing challenges due to ethical practice concern across clinical trial and marketing practices. In order to improve ethical practice central government published Uniform Code of Pharmaceuticals Marketing Practices (UCPMP) as a guideline for promotion of drugs and medical devices.

Prescription in generic names of drugs

While prescribing, physicians should preferably use the generic name  of the drug and avoid prescribing brand name as for as possible. He/she should also ensure the rational of prescription and rational use of drug. There has been apprehension and confusion regarding the prescription practice. However, it was cleared that doctors can write the brand name in bracket in front of the generic names. Prescription should be in capital letter or legible.

Janaushadhi Yojana

Pradhan Mantri Bhartiya Jan Aushadhi Pariyojana is campaign launched by Department of Pharmaceuticals, Government of India to provide quality medicines at affordable price.

Chemist may be allowed to substitute

In order to make healthcare affordable, Government is planning to allow chemists to substitute the prescribed drug with cheaper generics provided the patients want to change. This is being proposed to serve the dual objectives of empowering patients and making healthcare affordable. Current guideline does not allow changing. The law has not been amended yet.

Adapted from : CRM in Pharmaceutical and Healthcare Marketing by Shailendra Tripathi

Google Books : CRM in Pharmaceutical and Healthcare Marketing

Evolution of Indian Healthcare

Hospitals have existed in India from ancient time. About 2200 yrs to 2600 yrs before during the period of Buddha and Ashoka many hospitals were built. This was the time when study of medicine in India was at peak. During 10th century, invaders attacked India and brought their Hakims. Similarly during British rule allopathy gained ground and many hospitals were constructed. Thus the organised medical training started in 19th century.

In 1923 Pondichery medical college was established by French government that was renamed in 1956 as Jawaharlal Institute of Postgraduate Medical Education and Research (JIPMER). 1835 witnessed special event in the history of Indian medical education when Calcutta Medical College and Madras Medical College started functioning. Calcutta Medical College is the first medical college to teach modern medical science in Asia. In 1845 the Grant Medical College, named after Sir Robert Grant the governor of Bombay (Mumbai). Agra Medical College, known as S N Medical College was established in 1854. King George’s Medical College and Hospital was established in 1911. Prince Of Wales Medical College was founded in the year 1925 in Patna. KEM ( King Edward Memorial) Hospital and Gordhandas Sundardas Medical College (G S Medical College) was established in 1926 in Mumbai.

Today, according to Medical Council of India ( New name National Medical Council of India) there are 539 Medical colleges in India with total 76,928 seats for MBBS course.

As per the press release of Ministry of Health and Family Welfare July 2018, Number of Primary Health Centers (PHCs), Community Health Centers (CHCs), Sub-District/Divisional Hospitals(SDHs), District Hospitals(DHs) are 37,725 with 7,39,024 beds.

There are 19.810 rural hospitals with 2,79,588 beds and 3,772 urban hospital with 4,31 173 beds. There are 3943 AYUSH hospitals with 55,242 beds.

There are 151 Employees State Insurance Corporation Hospitals with 19765 beds

Additionally there are 133 defence hospitals with 34, 520 beds and 126 railways hospitals with 13748 beds. Thus there are total 45,870 government hospitals with 15,73,060 beds.

Appollo Hospital, Arvind Eye Hospital, Care Hospital, Fortis Healthcare, Max Hospital, Manipal Hospital and Narayana Health are some of key players in the market with 39,332 beds combined. Thus the private sector has strong presence in India’s healthcare system.

  • IMS Reports Approx. 3.21 lakh doctors in India  (MCI 10.2 L Registered, 8.2 L May be available for service)
  • 539 Medical colleges (Govt+Pvt), 76928 seats
  • 9 AIIMs + 10 upcoming AIIMs
  • 36 % are General Practitioners (GP)
  • Specialty doctors constitute 64 %
  • Doctors are being met by at least 60 – 100 companies
  • No advertising mentioning brand names is allowed in the lay press
  •  Medical representatives play a major role in the promotion process by directly meeting the doctors. Other media like Direct mail, journal, advertising and conferences also play a role but a limited one

Indian Healthcare System and emerging trend

India has less than one doctor for every 1000 population which is less than the World Health Organisation standard. As per Medical Council of India, there were a total 10, 22,859 allopathic doctors registered with the state medical councils or Medical Council of India as on March 31, 2017.”Assuming 80 per cent availability, it is estimated that around 8.18 lakh doctors may actually be available for active service. It gives a doctor-population ratio of 0.62:1000 as per current population which is estimated to be of around 1.33 billion.

 The WHO prescribes a doctor population ratio of 1:1000.The doctor-population ratios of the some of the countries are:

Australia – 3.374:1000,       Brazil – 1.852:1000, 

China – 1.49:1000,   France – 3.227:1000,

Germany – 4.125:1000,       Russia – 3.306:1000,

USA – 2.554:1000,         Afghanistan – 0.304:1000,

Bangladesh – 0.389:1000,  Pakistan – 0.806:1000

  • There is shift from communicable disease to lifestyle disease due to sedentary life style. Most lifestyle disease are caused by high cholesterol, high blood pressure, obesity, poor diet, smoking and alcohol
  • Hospitals and pharmacy chains are expanding to tier II to III markets.
  • Telemedicine is emerging fast in India. Appollo, AIIMS and Narayana Hrudayalaya have already entered into telemarketing services. Telemedicine can bridge the rural-urban divide in terms of medical facilities, extending low-cost consultation and diagnosis facilities to the remotest of areas via high-speed internet and telecommunication.
  • Healthcare insurance is gaining ground in India. The trend will benefit both the individual and healthcare providers.
  • Digital initiatives like Electronic Medical Record, Electronic Health Record, and Hospital Management Information System, Cashless transaction system are gaining quick ground.
  • Advance technologies in pathology, home collection of samples are driving better diagnostics and health check-up than ever.

Adapted from CRM in Pharmaceuticals and Healthcare Marketing by Shailendra Tripathi

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