Paradigm Shifts: Pharmaceuticals Marketing - A Case Study of Elder Health Care Ltd Mumbai (ECHL)

Abstract

In India, Pharmaceutical Marketing moving to a new era, where relationship with key customers is very vital for achievement of targets.  Companies have moved on from being primarily sales-oriented to now realizing the significance of services marketing with the focus on cross selling. In this era, importance of Customer Relationship Department can not be ignored and the success of organization is depends upon it. This department is responsible for providing service to the customer, who may be Doctor, Chemist and Patients. Successful implementation of relationship development strategy is the only key to achieve higher returns in terms of money and image in Indian market.

Key words: Customer Relation,Pharmaceutical, Elder

Overview

The traditional model of pharmaceutical marketing has undergone a sea change.  Companies have moved on from being primarily sales-oriented to now realizing the significance of services marketing with the focus on cross selling.

Apart from their regular distribution channels, which end with the Retail Chemist, Companies involved in pharmaceutical sales & marketing operations have to deal with doctors, and to some extent, patients too. With this recognition of the importance of services marketing, most top companies have set up separate Customer Relations Departments, and   ELDER HEALTH CARE LTD (EHCL) is no exception to the trend. Such a department is usually responsible for providing an above average level of service to Doctors and Patients, who are both the actual customers, giving business.

With a diversified business approach to its products, EHCL has a team of Marketing Executives (ME) with the Area Business Manager(ABM) supporting them by coordinating, directing and trying  to solve their problems related to service for doctors located in their respective markets.

In 2004-2005, the Customer Relations Department of EHCL invested a disproportionately large amount in the market on both Doctors as well as Retailers through the launch of a totally new Division ELKIDZ in January 2005. This was done with a great deal of trepidation, since hitherto, such expenses unfortunately, did not translate into improved bottom lines and the Return on Investment was far below expectations.

The Company already had a record of loss in the financial year 2001-2002. Assorted ABM’s invested on Doctors trip abroad, their clinical equipments and in some cases even under the accounting head of education; as a Company strategy the concerned ME’s followed up closely with such identified Doctors in terms of business. However, the game was completely one-sided and the Doctors just did not reciprocate positively.

At the next annual review of the Customer Relations Department, the Company felt that bagging the business failed since the gathering and using of information on the customer and his loyalty before any investment was an art as well a  science.  To succeed in their CRM Program, the Company needed to match the products on offer with the campaign to prospects –in other word, to manage the customer’s ROI intelligently.

 The Management saw the point and decided to invest only after the completion of a full information-gathering exercise.  In addition, Regional Business Managers (RBM) would henceforth be responsible for any investment towards the CRM Program. The new financial year of 2004-2005 had become a crucial year to the extent that losses again, after two years of profit could put on hold all current and future expansion plans.

Company profile

Elder Health Care Ltd came into existence in 1988. Its first manufacturing facility dedicated to manufacture capsules, tablets and liquids got into production in April 1989 at Vashi, 35 kilometers from central Mumbai.  It went on to create facilities for manufacturing inject able ampoules and vials in a separate location at Patalganga, an industrial town 30 kilometers away from the factory at Vashi.  Adjoining Patalganga, at a place called Nerul, a unit to manufacture balms/ointments was established.  Close to the Nerul plant, a facility was commissioned to manufacture semi-synthetic penicillin’s and cephalosporin’s largely to support its export activity.  EHCL later also acquired a similar unit to manufacture larger volumes.  Very recently, it has commissioned an API plant to cater to both, the regulatory and non- regulatory market.

The Company started its operations largely identifying products in specific disease categories and has succeeded in creating a therapeutic category in the Indian market in which it category it enjoys a leadership status.  The main emphasis of EHCL is to identify molecules specifically for disease treatment and today it has three products in the leading category in the Indian pharmaceutical market starting from Shelcal (oyster shell calcium), Chymoral (a proteolysis enzyme for hastening traumatic and post operative wound healing),and Eldervit (a multivitamin with B-Complex Capsules and injections). 

The strength of the organization is in pursuing to launch molecules claiming to be the first in the country.  Besides the above three, products to follow were those for treatment of hypertension, carnitine deficiency, and other products the Company could succeed in establishing its brand presence.

Apart from establishing a therapeutic category, its policy was never to market a product where there was patent violation and that did not allow the Company to get into the mass market and stay in the niche category where it created a substantial value presence.  EHCL achieved major success in establishing brand presence but the growth, which comes through the anti-infective market, was not possible. It also faced a major pressure with several copies appearing in the form of branded generics, which posed a little problem, eventually overcome by the sheer pursuance of a therapeutic quality product.

The Company ranks 31st in the Indian ORG market and enjoy the status of an export house.  The introduction of patent regime in India opens up new opportunities to launch new products, and enter into license agreements, prevented earlier to manufacture and market products for fear of copies appearing.  It is now pursuing its growth plans, again diversifying into different growth areas, launching products for skin care and treatment, for pediatric use and for treating cardio vascular disorders, diabetes and other cerebral disorders. 

Elder Ltd has entered into a strategic relation with Angelina from Rome , Italy that will help them introduce several new research molecules, support their R & D activities in India and help the regulatory market. It now has plans to expand its operations in nutraceuticals disease-related products for respiratory ailments. The effort is to reach a turnover of at least Rs. 900 crores in the next five years. This growth will look after building up the strength of the Organization as well as protect and enhance shareholder value. It is currently in discussions with several international corporations, which are interested in entering the Indian market from where some of them were earlier staying away because of the absence of patent protection. Since the Indian market clearly offers substantial product consumption opportunities, they are obviously eager to enter.

Company Organizational Structure

The ME has to meet Stockists and Retail Chemists for promotion of the products (Medicines) and Doctors to get prescriptions issued in its favor. The ABM, the RBM, and the Head of the Strategic Business Unit have to help the ME, to bring in this business from Doctors in terms of prescriptions, with the proviso that Retail Chemists would honor these prescriptions.

Customer focus through Marketing strategy

The diagram given below shows the strategy of capturing business.  The doctor writes his advice to patients in terms of medicines / treatment and the patients purchase these medicines from the Retail Chemist.  The Retail Chemists purchase their stocks of medicines from the Company through its distribution channel.  Very often, between the Company stockist and the Retail Chemist, there may be two or three more levels of Wholesalers, Mini Wholesalers and the like. This thus demonstrates the existence of a long supply chain to sell company medicine and gain market share.

The doctor is thus a pivot around which all non-Institutional sales of the Company hang. If he decides not to patronize its products, the Company has no option but to knock on the door of another doctor, and another doctor, and so on. Therefore, it is becomes necessary to promote and maintain strong relations with the medical profession. This establishes the rationale of a separate and full-fledged CRD.

CRD & The Strategy of Investment

The Department is competent to decide on various types and heads of different investments on doctors, like their education, trips abroad, purchase of specific clinical equipments and the like. The ME is required to provide detailed information on a highly structured basis; in some cases, his personal judgment and experience may become the basis of reporting information. For example, the question as to whether or not the doctor has a sufficient number of regular patients, which will result in a minimum volume of Retail Chemist sales for the basket of products on offer, is an issue, which needs a careful and periodic analysis by the ME. Based on information collected and submitted, about the customer, CRD decided on the quantum and frequency of investments. Making the investment automatically ensures that the ME becomes responsible to bring in the level of ROI planned. Through this process the ME, is relieved of the onus of a decision having a financial dimension but remains the source of major inputs on detailed customer information.

However, the basis of information from this source alone was evidently not sufficient for the CRD to decide on investments.  To start with, verification and corroboration of the information received was necessary. Then, investments ignoring the activities of the competition would be foolish or hazardous depending on the degree of its impact. Thirdly, the individual contribution of each product to the bottom line was a serious constraint. CRD would need to work out a product-wise investment mix to overcome unintended losses. Much of the success of all this would also depend on the accuracy of the cost sheets prepared by the Accounts Department. The failure of a single individual in this chain will make the entire investment a colossal waste. This is exactly what happened in the case of the CRD of EHCL. The Head Office decided investment levels, stages and locations and a routine   system of checks and balances was not in place. Notwithstanding the transfer of investment authority to a higher level in the organizational hierarchy, innumerable instances of wasteful expenditure came to light.

Company need

The Company required a comprehensive evaluation of the performance of the CRD, which failed in achieving the ROI, budgeted. The Department, thus also failed to provide the necessary support and help to RBM’s, ABM’s and ME’s whose job profile entailed accessing and building relationship with the key decision maker (Doctors and Chemists),to achieve their strategic goals of  ROI

The ratios emerging from the Balance Sheets and Profit & Loss Accounts of the Company for the three years 2001 – 02 to 2003 – 04 are erratic at best.

Exhibit 1

Similarly, while the amount of profit appropriated in the P & L amount displays a respectable growth, the heavy increase in expenditure stands out starkly

Exhibit 2

Company approach to this need

The CRD was not successful in achieving the desired Return on Investment. As mentioned above, the science and art of gathering and using information about the customer and developing customer loyalty before taking any investment decision, is the basis of any CRM Program. In this light, the Company conducted an assessment of the CRD as well as the responsibility of the ME and ABM, who implemented specific sales performances and productivity goals of doctors who were the beneficiaries.

The assessments were conducted at the level of the RBM, who was a part of sales and service team of company. It covered the procedure of information collection and analysis of this information by the ME, and its review by the ABM before any action was taken on the investment recommendation.

This assessment brought the “voice of customer” into the organization. Plainly, it showed that to succeed with CRM the company needed to match products with prospects and customers --in other words intelligently manage customers ROI.  In addition, it provided an effective approach to both the ME and the ABM on a multi dimensional insight into collaborative information intelligence and relationship building skills. 

Based on this assessment the Company transferred the responsibility to the RBM who created a customer- focused profile of the current sales and services processes and a control over how effectively it was operating. Moreover, to succeed with CRM, the RBM made a strategy to match products and campaign to prospects and customer –in other word, to manage the customer’s ROI intelligently.

Future plan

From this assessment, the RBM built a blueprint to guide the process, to ensure ROI, which was now his sole responsibility to achieve.  In addition, EHCL used this blueprint to set guidelines for other divisions also including ELKIDZ. The Company felt that this new approach would finally resolve the burning issue of wasteful promotional investments.

Questions FOR Discussion

1.Identify and make a list of all the problems faced by EHCL in the light of the data of the case and the figures in the Balance Sheets and P & L accounts

2.The Company follows a distribution channel policy dictated by the wisdom of the pharmaceutical industry. Do you think this policy suits the goals it has set for itself? Why, or why not?

3.Now that the Company has evolved a blueprint for close monitoring of investments in relation to business generated, project the sales turnover growth for the next two years. After this exercise, visit the web site of the Company and compare your projections with their actual performance .

Case Guide

The contents of this case should be able to take the student through the entire gamut of Customer Relationship Management including the building up of Company and brand loyalty on a sustainable basis. Initially the Company was unable to get even close to the very narrowest definition of ‘loyalty’, confusing the mere act of promotion as an element of their marketing mix as sufficient to generate commitment to itself or product portfolio. The case also readily presents the well-known adage of satisfaction not being a definitive indicator of loyalty.

Most companies do not want to compete on price. Even those whose business models are initially predicated upon providing the lowest cost service often find that that they must focus on providing value beyond price as they mature, their costs rise and new upstarts beat them on price. A loyalty program’s key goal and most important metric of success is improved profitability. This, the Company was singularly unable to achieve.

Expect the student to want to fall back on his theories and definitions, and elements, and tools of CRM. The set of problems has enough meat for him to get his teeth into. For example, even a simple break-up of the most and least profitable doctors was not available with the Company. He can also make a rudimentary analysis by combining the available facts with figures. Virtually all the problems faced by the Company are typical run-of-the-mill ones, which any good book on CRM will help the student to resolve. However, the data is not sufficient, nor can enough assumptions be made for any major recommendations, for example, the total design of a fresh loyalty program. To this extent, the case study is limited in its scope.

Some typical issues have been left open-ended by design. For example, issues like switching costs, competitive differentiation, lengthy process of creating the promotion etc. On these, there is an option of making reasonable assumptions within the existing framework of the Case Study, leading the student to a greater level of joy in “solving the Case”.

This original Case Study on CRM has been researched, developed and submitted by

Gajendra Pal Singh- Corresponding Author
Assistant Professor, Dewan Institute of Management, Meerut-India

Dr. SS Chauhan-Co-Author
Assistant Professor, Dr. KN Modi Institute of Management, Modinagar, Meerut - India,