Thursday, January 31, 2013

CASE STUDY ANALYSIS



CASE STUDY ANALYSIS
Executive summary
The strategies that were employed by Pfizer, for instance the focus on sales and marketing rather than the production has ensured that the firm achieves the largest market share in the statin segment of the pharmaceutical industry. The use of personal selling, comparative clinical tests and the lower pricing strategy have ensured greater benefits for the firm’s effectiveness in the capturing of the market.  The patent that was help by Pfizer expired in 2009. The firm could employ a number of strategies for instance partnership with other firms to offer generics, lowering of the prices at which Lipitor is offered or even the entry of Pfizer into the generic market. The marketing strategies that can be employed by the firm include the use of a new marketing mix where the price is lower for instance through ‘co-pay’ strategy or discounting.








Contents












Introduction

            Lipitor is a pharmaceutical drug which was developed in 1998 and is currently marketed by Pfizer. In 2002, it was the pharmaceutical which was the largest selling in the history of the industry. The sales of the drug hit $7.4 billion in 2002 and it occupied 42 per cent of the market share in which it was operating. The fiercest and closest rival of the firm had a market share of 32 per cent during the period. With the aging population especially the aging of the baby boomers, the market for the statins was expected to increase to US$23.6 billion from 2007 from the US $ 18.8 billion in 2002. Pfizer Company entered into the statin market as a latecomer but through the use of effective marketing ventures, the financial capabilities and the proper timing of the entry, the firm was able to become the market leader especially through the patent protections that played a great role in the success of the firm. The paper will compare and contrast the strategic directions that were employed by Pfizer and Merck and how the strategic directions played a role in influencing their performance in the statin drugs market. The current status of the patent held by Lipitor and the recommendations with regards to the strategic directions and related marketing objectives that should be employed by the firm in reference to the patent expiry. Finally, the paper also entails an evaluation Pfizer’s marketing campaigns to both consumers and doctors. The effectiveness of the campaigns will be evaluated.

Strategic directions of Pfizer and Merck

            There are a number of contrasts that existed between the strategies which were employed by the firms. First, Merck was focused on the development and the actual testing of the drugs especially with regards to the long-term effects of their usage. The clinical tests which were carried out under the 4-S study proved successful as they indicted that the usage of the drugs would lead to 35% reduction in levels of cholesterol. Merck focused on ground breaking research through its R&D while Pfizer on the other hand focused on the acquisition of the new cutting edge research through M&A’s especially the acquisition of Warner-Lambert (Aaker and Mills 2005, 75). The latter was able to focus their core resources on the marketing of the products and not on their actual development. The focus of Merck on the novel and ground breaking research led to a situation where little resources at the firm were left for the marketing of the products. The dependence of Merck on the clinical findings rather than on the benefits as compared to the other firms proved, to put the firm at a disadvantage as compared to Pfizer (Parry 2001, 46).
            The second contrast between Pfizer and Merck can be found in the fact that Pfizer had more experience in the marketing and sales as compared to the latter. The late entry into the market was a blessing in disguise as the firm was able to commission clinical tests which could b significantly compared against the performance of the other statins that were already available in the market. Pfizer was able to build their success on the effectiveness of their products. The firm was able to use the elements of health consciousness of the consumers to be able to capture the market from the main competitor, Merck, which had the largest market share during the period. The effectiveness was in line with the needs of the consumers to for products that were both safe and could significantly lower the levels of the cholesterol of the different consumers of the firm (Mullins and Walker 2012, 202). Merck did not use their market leadership capability to ensure that the market forever was dominated by the firm (Porter 1980, 45). The firm did not invest in consumer needs studies and the marketing practices of the firm did not indicate the unique nature of the products thus significantly allowing Pfizer to capture the bulk of the market from Merck.
            The other contrasts that were noted were the differences between the pricing strategies and promotion strategies that were used. The products of Merck especially Zocor statin was highly priced and thus significantly locked out some potential consumers. The low pricing model of Pfizer ($66 for drugs that were valued at $120 for the products of the competitors) lead to a situation where the firm was able to gain more market share. The strategy greatly increased the sales levels of the products of the firm. The final difference between the strategies can be found in the value addition and the enhancement of the brand equity (Hunt 2010, 210). Merck focused mostly on the potency of the products while Pfizer concentrated on the products as well as the information that would play a great role in aiding the consumers in decision making.
            The similarities between the strategies of the firms included the direct marketing to the consumers as well as to the doctors. The focus was on the psychological metrics especially the levels of safety of the usage of the products. Also, the firms focused on direct advertisement to the consumers so that they could be able to increase the levels of awareness of the consumers. The above similarities can help to explain the dominance of the two firms in the market (Jain and Haley 2009, 89). As at 2002, Pfizer commanded 42 per cent of the market share while 32 per cent of the market share was held by Merck. 

Patent held by Lipitor

            According to the case, the patent for Lipitor expired in 2009 and thus the firm was more open to direct competition from the different competitors. The expiry of the patent would pose a number of risks to the firm as the controls that the other firms faced in terms of the use of the technology of the firm have significantly been removed (Jain and Haley 2009, 86). The rise of generic drugs developed from Pfizer will lead to a situation where the cash cow of the firm, Lipitor, significantly faces more competition from cheaper pharmaceutical products.
            There are a number of recommended strategies to help the firm deal with the expiry of the patent. First, the firm can secured a number of authorized deals for generics. This strategy will see the firm enter into partnerships with a number of firms that will take up the generic production. The strategy will ensure that the firms that deal in the generics submit profits (up to 70 per cent to Pfizer. Secondly, through the focus on the acquisitions and mergers, the firm will be able to inject fresh blood of innovation. The huge financial base of the firm will act as insurance for the new ventures as the firm will be engaged in the innovation and research and development of new pharmaceutical products which would be protected by patents. This innovation may include the introduction of improvements into the formulation or the molecules of Lipitor so as to warrant the issuance of a new patent for the drugs (Aaker and Mills 2005, 72). The final strategy that can be used by Pfizer is to ensure that the firm takes advantage of the drug going generic by reestablishing itself in the consumer market place through the establishment of the firms own division that deals in the manufacture of the generic drugs.
            The marketing strategy that can be employed by the firm includes the reconsideration of the marketing mix especially through the change in the pricing model that is used so as to make the products of the firm to be more cost effective. The new pricing strategies can include the use of discounts, co-payments where the consumer pays just half of the price while the rest is paid for by the firm (Jain and Haley 2009, 58).

Evaluation of the marketing campaigns of Pfizer

The marketing campaigns of the firm to the consumers have entailed significant cost reduction. Lipitor is priced at $66 as compared with Zocor which is almost priced at double ($120). The firm has been able to acquire many consumers especially due to the cost consciousness of the baby boomers who are mostly faced with retirement. The focus in the safety especially the effectiveness of the drugs in lower doses such as 10mg has led to a situation where the trust and loyalty of the consumers have been gained by the firm thus leading to higher market share and higher customer retention by the firm (Aaker and Mills 2005, 67). Thirdly, the direct to consumer advertising which was employed by the firm following the $90 billion dollar acquisition of Warner-Lambert by Pfizer has led to a situation where the different products of the firm, are highly recognized in the market.
For the doctors, there has been the use of the direct selling where the very highly skilled salespeople of the firm visit the doctors to offer the products as well as information with regards to the new trends that are taking place in the pharmaceutical industry. The information that accompanies the sales process aids the doctors in the purchase decision making thus significantly increasing the probability of the purchase (Parry 2001, 106). The strategy has played an instrumental role in ensuring that the products are purchased by the doctors. The information removes the doctors’ skepticism and thus opening them up to prescribe the drugs to their customers.

Conclusion

The strategies that were employed by Pfizer, for instance the focus on sales and marketing rather than the production has ensured that the firm achieves the largest market share in the statin segment of the pharmaceutical industry. The use of personal selling, comparative clinical tests and the lower pricing strategy have ensured greater benefits for the firm’s effectiveness in the capturing of the market. 




References

Aaker, David A. and Mills, Michael K. 2005. Strategic market management. Australia: Wiley.
Hunt, Shelby D. 2010. Marketing theory: Foundations, Controversy, Strategy, Resource-Advantage Theory. Armonk, NY: M.E Sharpe, Inc.
Jain, Subhash C. and Haley, George T. 2009. Marketing Planning and Strategy. Mason, Ohio: Cengage Learning.
Mullins, John W. and Walker, Orville C. 2012. Marketing management: a strategic decision-making approach. New York: McGraw-Hill.
Parry, Mark E. 2001. Strategic marketing management: a means-end approach. New York, NY: McGraw-Hill.
Porter, Michael E. 1980. Competitive Strategy. New York: Free Press