Marketing Strategy and Planning Tools

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RESOURCE: Fortenberry, John L. (01/2009). Health Care Marketing, 3rd Edition. [VitalSource Bookshelf Online]. Retrieved from https://strayer.vitalsource.com/#/books/9781449637255/

  1. Determine whether or not health care marketers need to recognize the value results from implementing marketing best practices across the multiple, varying activities that health care organizations carry out. Provide one (1) example of such recognition of value to support your rationale.
  2. Characterized by intense competition and rivalry, the healthcare environment poses extreme challenges for marketers seeking to successfully address the wants and needs of their target markets and ultimately achieve growth and prosperity. In addressing this turbulent environment, marketers must be armed with appropriate strategies that will allow them to outperform industry competitors. The process of formulating such strategies, however, is quite complex. Fortunately, marketers can turn to the work of Michael Porter for guidance in determining appropriate marketing strategies.
  3. In an effort to assist marketers in determining appropriate strategies to pursue, Michael Porter developed a diagram that illustrates three strategies that can be employed to outperform industry competitors. Porter termed these alternatives generic strategies because of their applicability across industries. These strategies include overall cost leadership, differentiation, and focus. The particular strategy selected by entities depends on their strategic advantages and target markets.
  4. The first strategy that organizations can employ to outperform industry competitors is termed overall cost leadership. This strategy, which entails targeting broad markets, is based on organizations achieving efficiencies of greater magnitude than those achieved by their competitors. These entities essentially incorporate every available cost-saving feature into their operations to gain strategic advantages over their competitors. Such cost savings can be derived from building efficient facilities; incorporating cost-saving technologies; maintaining strict overhead expenditure controls; and minimizing expenditures in the areas of research and development, advertising, and so on. By achieving operational efficiencies that are greater than those of competitors, organizations can produce and provide goods and services at reduced costs, thus allowing them to garner above average returns in comparison to their competitors.
  5. Another strategy that can be employed by organizations to outperform industry competitors is known as differentiation. This strategy, which involves targeting broad markets, is based on producing and providing goods and services that are perceived by customers to be unique. Entities can differentiate their products through such methods as technology leadership, product design and functionality, product efficiency and effectiveness, and customer services.
  6. The exclusivity associated with these unique offerings grants entities a degree of leverage over customers. After all, customers cannot purchase these differentiated offerings from any other entity. This aspect also reduces customer price sensitivity, allowing for enhanced pricing latitude and greater possible returns.
  7. A final strategy that organizations can employ to outperform industry competitors is termed focus. Organizations using this strategy focus exclusively on particular market segments in an effort to serve those segments better than any other entity. By concentrating on serving the wants and needs of particular market segments, entities can potentially achieve success through cost leadership, differentiation, or both.
  8. EX: Hospitals, medical clinics, home health agencies, and other entities involved in the direct delivery of patient care services are primarily segment oriented, often limiting service delivery to defined geographic markets and sometimes further segmenting those markets by addressing only certain populations, medical conditions, and so on. These entities would do well to adopt the focus strategy, where they could potentially achieve success through cost leadership, differentiation, or both. As these examples clearly illustrate, the strategy selected is dependent on institutional capabilities and markets sought.

The term competitive advantage refers to anything possessed by an organization that gives it an edge over its competitors. One key source of competitive advantage is value. Customers seek and base their purchase decisions on value, and those entities that can deliver it will be rewarded. Given the importance of value, its meaning to customers, and its ability to create a competitive advantage, marketers must possess a detailed understanding of this concept and the methods through which value is created—a task greatly facilitated by Michael Porter’s Value Chain. Porter’s Value Chain is depicted as an arrow-shaped diagram that identifies value-producing activities that are common to all organizations. These value-producing activities are divided into two groups: primary activities (i.e., inbound logistics, operations, outbound logistics, marketing and sales, and service) and support activities (i.e., firm infrastructure, human resource management, technology development, and procurement). Each of these activities represents a building block of value and has associated costs. The difference between the total value produced and the collective costs of performing value activities represents the available margin, which varies depending on the skills demonstrated by entities at performing value activities.

  1. Evaluate the value of Michael Porter’s Value Chain as a marketing strategy and planning instrument for engendering an understanding of value-producing activities within health care organizations. Provide at least two (2) specific examples of the Michael Porter’s Value Chain Model that apply within a health care organization with which you are familiar.

Primary activities consist of those pursuits that directly contribute to the production of specific goods and services. There are five primary activities that are common to all entities: inbound logistics, operations, outbound logistics, marketing and sales, and service.

Inbound Logistics: Inbound logistics activities involve all pursuits associated with the management of raw materials necessary to produce goods and services. Typical inbound logistics concerns include materials delivery, materials handling, inventory control, and warehousing. Pharmaceutical manufacturers, for example, must coordinate deliveries of raw materials to produce their therapeutic and curative offerings. Medical centers, too, must coordinate deliveries of raw materials (e.g., medical equipment and supplies, pharmaceuticals, environmental service equipment and supplies, food products for patient meals) to deliver care to patients. 

Operations: Operations activities involve all pursuits associated with the development and assembly of the goods and services that are to be offered to target markets. Goods-producing firms, such as durable medical equipment manufacturers, must assemble, test, and package their products. Likewise, pharmaceutical firms must produce their various therapeutic and curative offerings and package these goods.

Service-producing entities, such as hospitals, clinics, and nursing homes, must assemble and maintain diagnostic equipment, fixtures, and other service implements and ensure that their facilities are organized for effective service delivery. Operations activities essentially ready products for future purchase and consumption by customers.

Outbound Logistics: Outbound logistics activities involve all pursuits associated with making goods and services available to customers. Pharmaceutical firms and durable medical equipment manufacturers must, for example, determine inventory levels, warehouse finished goods, identify distribution channels, and coordinate product deliveries to distributors. Medical clinics must determine hours of operation and coordinate the schedules of practitioners and other staff members accordingly. 

Marketing & Sales: Marketing and sales activities involve all pursuits associated with encouraging customers to purchase and consume product offerings. Such activities include pricing products and promoting these offerings through advertising, personal selling, sales promotion, and other means. Ultimately, these activities seek to encourage exchange between entities and their target markets.

Service: Service activities involve those pursuits that support post purchase/post consumption needs. Pharmaceutical firms might offer toll-free product information hotlines to address customer inquiries. Durable medical equipment manufacturers might supply replacement parts for their products and repair damaged items.

Hospitals and medical clinics might provide follow-up inquiries to check the status of patients who were recently treated. These follow-up activities greatly influence customer perceptions regarding the quality of delivered goods and services and are, therefore, critical to the success of any organization.

Support activities consist of those pursuits that indirectly contribute to the production of specific goods and services. These are broad-based activities that influence all departments within organizations, regardless of role or function.

There are four support activities that are common to all organizations: firm infrastructure, human resource management, technology development, and procurement. These four support activities are identified as follows.

Firm Infrastructure: Firm infrastructure activities involve general administration pursuits (e.g., management, accounting). Instead of benefiting single departments or small groups of departments, these activities impact organizations in their entirety.

Human Resource Management: Human resource management activities involve all employee and employment-related pursuits of organizations, including staffing, training, employee and labor relations, and compensation. These activities focus on the numerous workforce management issues and concerns that impact organizations.

Technology Development: Technology development activities involve all pursuits associated with the discovery and implementation of technologies that benefit organizations. Technology takes many forms, including know-how, product design, servicing procedures, and innovative equipment. These activities seek to incorporate innovations into organizations to reap associated benefits.

Procurement: Procurement activities involve all pursuits related to the acquisition of goods and services from suppliers. Examples include purchases of raw materials, buildings, furniture and fixtures, machinery, office equipment and supplies (e.g., copiers, fax machines, computers, paper, pens), and so on. These acquisitions activities supply entities with the wealth of components necessary to pursue their missions.

RESOURCE: Fortenberry, John L. (01/2009). Health Care Marketing, 3rd Edition. [VitalSource Bookshelf Online]. Retrieved from https://strayer.vitalsource.com/#/books/9781449637255/

EX: Porter’s Five Forces can be applied not just to industries, but to discrete markets as well. For example, one metro area may be more profitable than another because it has fewer hospitals or has insurers with limited leverage. The Five Forces framework brings discipline to the challenge of understanding market dynamics and defining strategies within an informed context. It is a superior substitute for SWOT (strengths, weaknesses, opportunities and threats) assessment which is, in my experience, a weak and overused tool.

RESOURCE: http://www.hhnmag.com/articles/3394-thinking-like-michael-porter




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