Chapter 8: PLACE MIX (Decisions and Strategies) efficiently and effectively deliver the drug products to the target

Place markets at the precise time, quantity, cost and conditions.

- distribution channel and physical distribution
- a very vital element of the total marketing mix, that ensures
the adequate availability
Pharmaceutical Companies
- Metro drug, Marsman, Philusa, Zuellig, Pharma
- United Laboratories Inc.- largest pharmaceutical firm in the
country
- Mercury Drug Corporation (MDC)- largest drugstore chain that
operates more than 200 branches and franchises
- Frank Yap Enterprises- sells only at wholesale to smaller
drugstores, sari-sari stores, jobbers, peddlers and the like.
Pharmaceutical Distribution Channels
- set of pharmaceutical firms and individuals that takes title or
assist in transferring title, to a drug product or service as it
moves from the drug manufacturer to the final consumer.
Distribution Channel
- route along which the right pharmaceutical industry basically
want drug products that satisfies the following criteria:
1. Right standards of quality
2. Right specifications in terms of packaging and formulation
3. Right commercial stock levels at all times or when needed;
4. Right savings in terms of price, efficacy and safety, and
5. Right service warranties
* Place or distribution, ensures outmost availability and visibility
of the right drug products to its right market through the right
distribution channel at the right place, right quantity, right
condition and right cost.
Distribution Channel Functions
- moves drug products and related goods from the drug
manufacturer to the final end-users, thereby saving time,
money and effort in readily making it available to the intended
markets
- key functions of members of the pharmaceutical marketing
channels:
1. Physical transport and storing of drug products of various
therapeutic categories
2. Financing the costs of drug distribution and related market
channel services
3. Conducting sales and market activities to target clientele
4. Building a data bank of market information for marketing
plans to work and achieve desired goals ahead of competition.
* Whenever a drug manufacturer performs the specific channel
Channel Levels
- the number of channel levels varies in bringing the drug
products and its ownership closer to the final buyer, the
end-user.
Channel 1
- drug manufacturer selling directly to the DOH or government
health units and hospitals who will in turn make the medicines
available to the end-users practically for free.
- a local drug trader may serve as the intermediary level in
behalf of the drug manufacturer in transacting business with
DOH
Channel 2
- contains 2 middlemen level
- a sales representative of a drug manufacturer selling to
dispensing physician who in turn sells the medicines to the
patients (end-users) charging the latter consultation fees and
medicines given
Channel 3
- only 1 middleman level, either an independent distributor or
retailer, who in turn sells the drug products to end-users
Channel 4
- 2 middlemen level (wholesaler and retailer drugstore outlets
who in turn sells to the end-users.
- in some companies, 3 middlemen level when it’s their
salesman that facilitates the transactions
Channel 5
- 3 middlemen level, reflecting jobbers who sell to the smaller
retailers who generally are not served by the large wholesaler
drugstores.
Pharmaceutical Company Distribution Flowchart
- shows a typical distribution flowchart of a pharmaceutical
company mostly of multinationals and local drug companies
operating in the Philippines.
Drug Manufacturer
National Distributor
Dispensing Government
Private Institution Distributors
Physicians

functions themselves, the costs go up and correspondingly its

prices tend to be higher.
Wholesaler/Retailer Government
* When channel functions are relegated or assigned to (Drugstores) Agencies
middlemen, the drug products costs and prices are lower and it
will now then be up to the middlemen to adjust their prices to
cover the channel work. Pure retailers
* The drug manufacturers has to be very careful and decisive in (Drugstores)
assigning the various functions to channel members, who can -
End
Consumers
Wholesalers Distribution Flowchart Middlemen
(Channels of Distribution in the Drug Industry)
Drug Manufacturer 1. Wholesalers
2. Retailers
3. Jobbers
Independent Company 4. Manufacturer’s Representative (Sales Force)
Distributors warehouse 5. Manufacturer’s Branches and Franchises
6. Distributors and dealers
7. Dispensing physicians
Wholesalers 8. DOH, Gov’t Health Units, Gov’t Hospitals and Industrial
Trading stores
Clinics
9. NGO’s, Socio-Civic-Charitable organizations
Wholesalers
Panel van Innovative Distribution Channels
- drugstores, hospitals, pharmacies, industrial clinics, gov’t
health units and agencies and dispensing physician’s clinics,
new channels:
Retailers Retailers
1. Groceries and supermarkets
2. Trading and sari-sari stores
3. Boutiques and gift shops of 5 star hotels and resorts
Jobbers
4. Post office and air cargo forwarders
End users
Peddlers 5. Convenience stores such as: 7/11, Discount shops, etc
Sari-sari stores 6. School clinics, health and fitness centers, barangay centers,
botica sa barrio/ cooperative drugs/ home remedy stores,
Drug Industry Channel Geometry botica sa binhi
- shows the typical channel geometry practiced in the Philippine
drug industry. Number of Middlemen
- 3 strategies in deciding on the number of middlemen to use:
Drug Manufacturer
1. Intensive distribution
- drug companies stock-up their product lines in as many sales
outlet as possible, in both traditional and non-traditional
markets.
Sales Rep Wholesaler Sales Rep

2. Exclusive distribution
- the drug manufacturer requires the sales outlets such as
hospitals and industrial clinics not to carry competing lines in
Dispensing MDs exchange for higher discounts, promotions support and other
Jobber Wholesaler
service amenities

3. Selective distribution
- where the drug manufacturer does not have to spread its
Gov’t
efforts over many sales outlets in order to develop long-lasting
Retailer Retailer Retailer working relationships fast
agencies

Channel members are expected to comply the ff

responsibilities:
 Satisfactorily complying company standards for physical
facilities
 Utmost support and cooperation on promo programs and
End Users other marketing activities.
 Provide freely, statistical data and other information
 Periodically buy drug products
Multichannels Marketing System
- a single pharmaceutical company may decide to have 2 or Selecting Channel Members
more marketing channels in order to reach one or more 1. Profile of middleman in terms of years in business
customer segments. 2. Product lines carried other than pharmaceuticals
3. Overall reputation and image in the drug industry
4. Track record with respect to sales growth and profitability Physical Distribution and Other Functional Areas
5. Future growth potential - interact with the various aspects of marketing mix, likewise,
6. Store;s customers and location with closer coordination with other functional areas within the
company
How do Drug Companies motivate channel members? - distribution to channel members should be appropriately
- provide channel members, monetary and non-monetary coordinated with Promotions Divisions to ensure adequate
incentives rewards such as: supply of drug products during the promotions campaign period
1. Product deals or prior to the launching of new products to physicians and
2. Higher discounts dentists.
3. Liberal credit terms - the objectives are spelled out in terms of getting the drug
4. Display allowances products at the right places, at the right time for the least cost
5. Cooperative advertising allowances possible
6. Sale and promo contests - major decisions must be addressed on a total system basis, by
7. Pin money and rebates finding out what customers want and what competitors are
8. Priority in stock deliveries and allocation of new products offering.
9. Sales training
10. Free travel and hotel accommodations What Customer’s wants from Drug Companies
11. Personalized services 1. Adequate inventories for fast-moving and/or advertised
brands
Checklist for Evaluating Channel Members 2. Ability to meet emergency requirements of hospital
1. Achievement of sales quotas pharmacies and industrial clinics
2. Support provided in company’s sales and promo-programs 3. Excellent after-sales service such as fast withdrawal and
3. After-sales customer services replacement of about-to-expire or spoiled products
4. Average inventory levels 4. Prompt deliveries of sales orders
5. Stock transfer movements 5. Technical assistance in drugstores lay-outs, merchandise
6. Customer delivery time displays and training of personnel
7. Decisions made on damaged, lost and expired products 6. In-store promotions support during branch openings, sales
anniversaries, and special occasions of the year
Physical Distribution System 7. Computer installation
- customer service, warehousing, transportation, inventory 8. Liaison activities at BFAD, DOH and other gov’t health
management and control, packaging, receiving, materials agencies for licensing requirements
handling, store location
- encompasses the broad range of activities concerned with Benchmarking in setting up own phyical distribution system:
planning, implementing and controlling the physical flow of raw - by providing higher levels of service relative to competition
materials, semifinished and finished drug products to - firming up physical distribution objectives to guide its planning
designated places, at designated time and in proper conditions geared to ultimately reduce the cost of attaining desired goals
to promptly meet the needs of customers at a profit. It may be in the areas of
undertaken by a member of a channel from the drug 1. Order processing
manufacturer to the final consumer. 2. Warehousing
- important for the following reasons: its cost, the value of - receive, identify and sort merchandise such as drugs,
customers service and its relationship with other functional cosmetics, skin care lines and toiletries
areas. - store goods, implement product recall programs, select goods
for shipments and dispatch sales orders
Customer service - should reflect the ff factors for considerations:
- encompasses major decisions on: a. Locations either at or near the plant or in key areas of the
1. Speed and consistency country
2. Frequency of deliveries b. To own, lease or rent warehouses
3. Accepting minimal sales orders c. Warehousing facilities and equipment technology;
4. Returned goods policy multi-storied or single storied automated warehouses with
5. Providing order progress reports advanced materials handling systems under the control of a
6. Policies on expired and about-to-expire drug products central computer
7. Coordinating assortments a) Private warehouses- owned and operated by the
8. Service levels in filing sales orders from existing inventory company which stores and distributes their own drug
9. Responding to customer request for list price products of various therapeutic categories
10. Product samples and brochures within the day b) Public warehouses- provide storage and related
11. Limiting merchandise damaged or pilfered in transit to the physical distribution services to any interested
minimum individual or firm on a rental basis
 c) Bonded warehousing- made available to public
warehouses; allows drug firms to postpone tax
payments until they are ready to make deliveries to
target customers
d) Field warehousing- a receipt is issued by a public
warehouse for finished goods stored in a private
warehouse or in transit to intended customers
3. Inventory
- 2 major concers:
1. When to order
2. How much to order
- Just-in-Time (JIT) Inventory system is highly recommended
- 4 aspects of inventory management
a. Stock turnover- balance between sales and inventory
on hand
- advantages of high inventory turnover:
1. Inventory investments are productive
2. Merchandise is fresh
3. Losses from changes in styles and packaging
are reduced
4. Cost of maintaining inventory are lessened to
the minimum
- disadvantages:
1. Small qty or loose purchases can cause the
loss of volume discounts and service amenities
2. Low product assortment can reduce sales if
end-users are unable to compare or related items are
not carried
b. When to order- depends on
i. order lead time- period from the date a sales
order is placed until the date goods are ready
for sale or use
ii. usage rate- the average sales in units per day or
the rate at which a product is used in a
production process
iii. safety stock- must take into consideration the
company policy toward experiencing stock-outs
of drug products
c. How much to order
i. Availability of qty discounts
ii. Inventory turnover
iii. Resources of the firm
iv. Costs of processing each order
v. Costs of maintaining goods in inventory
d. Warehousing
4. Transportation
a) Railroads
b) Motor carriers
c) Waterways
d) Airways
 E. Forecasts and Budgets
F. Contingency Plan
Chapter 9: FORMULATING AND IMPLEMENTING THE a) Possible actions if the anticipated planning
MARKETING PLAN AND BUDGET environment is different from what actually occurs

3 vital ingredients Exhibit 2

1. A high quality product beyond reasonable doubt Annual Marketing Plan
2. A well-oiled sales and marketing organization responsive to 1. Brief marketing and sales history
the dynamics of a fast-changing environment; and 2. Company, division or product standing in the marketplace
3. A well-balanced marketing plan that indicates what the 3. Marketing objectives and goals
strategic actions are to be accomplished, and how they are to 4. Target markets and customer analysis
be accomplished 5. Marketing strategy and tactics
6. Implementation steps
Marketing Plan 7. A formalized way to evaluate how well the plan has worked
- vary widely in scope and detail, for proprietary and ethical at the end of the operating period
drug products, in the various therapeutic segments and
sub-segments Exhibit 3
- planning process should be based on a thorough analysis of Marketing Plan Format
the product-market and customer segments, competitive I. Strategic position, marketing personnel, factbook summary
structure, competitive advantage and the company’s overall II. Product/Service Plan
strategic mission and objectives III. Marketing Communication Plan
- a comprehensive marketing plan should be written for each IV. Research Plan
business unit, each product and customer segment V. Customer Service Plan
VI. Sales Management Plan
Purpose of Marketing Plan: VII. Budget, Timing, Plans and Action Plans
1. To evaluate significant business trends in the health care
delivery system thereby providing an in-depth knowledge of the Exhibit 4
facts to modify or update the marketing strategy into a more The Contents of a Marketing Plan
unified and cohesive program 1. Development of Objectives
2. To provide a timely reference for everyone to follow 2. Preparation of the Sales Forecast
throughout the year including appropriation to be allocated for 3. Appraisal of Competitor Profiles
sales, advertising, promotions, and related marketing expenses 4. Analysis of Market Shares
3. To guide marketing operations to clearly understand what 5. Control of Distribution
key marketing elements a plan focuses on, and when each 6. Schedule of Publicity
planned tactic is scheduled to be implemented. 7. Organization of Personnel
8. Arrangement of Budgets
The Marketing Plan Format 9. Provision of Contingencies
- varies from one company to the other 10. Realization of Plans

Exhibit 1 Exhibit 5
Outline for Preparing an Annual Marketing Plan Essentials of a Marketing Plan Format
A. Strategic Situation Summary 1. A statement of Facts
a) Market definition and its important characteristics, 2. A list of problems and opportunities
size estimates and growth projection 3. A list of objectives
B. Market Target (s)- Description 4. A complete marketing program
a) Clear definition of each target, size and growth rate, 5. A recommended marketing appropriation
description of end-users, positioning strategy 6. A forecast of sales volume, gross profit and profit before
guidelines and other available info useful in planning taxes
and implementation
C. Objectives for the Market Target (s) Exhibit 6
a) What the plan is expected to accomplish The Marketing Plan Format
D. Marketing Program Positioning Strategy 1. Objectives
a) Product strategy 2. Sales history
b) Distribution strategy 3. Market share trends
c) Price strategy 4. Commentary
d) Promotion strategy 5. Competition
e) Marketing research 6. Pricecomparison
f) Coordination with other business functions 7. Problems/ Opportunities
8. Major Thrust Recommended Pharmaceutical Marketing Plan
9. Minor Thrust 1. Executive summary
10. Positioning statement 2. Current pharma marketing situation
11. Tactics 3. Objectives and issues
12. Where will the Business come from? 4. Marketing strategies
13. Timetable 5. Action programs
14. Key risks 6. Budgets
7. Controls
Exhibit 7
The Components of a Marketing Plan Exhibit 12
1. Executive summary Brand Position Report
2. Current marketing situation A. The market
3. Threats and opportunities B. Consumer
4. Objective and issues a) Trial and usage
5. Marketing strategies b) Purchase data
6. Action programs c) Buying source
7. Budgets d) Brand switching patterm
8. Controls e) Consumer attitudes towards brand
C. Competitive activities
Exhibit 8
Annual Marketing Plan Exhibit 13
- the master blueprint, the game plan, the bible, the battle plan Brand review
- becomes the “how-to-do-it” master business plan that serves A. Analysis of current performance
to guide marketing executives in each phase B. Consumer
1. Statement of objectives C. Key considerations as to brand status
2. Identification of target markets
3. Strategies and tactics pertaining to the marketing mix
4. Information regarding budgetary support for the marketing
activity

Exhibit 9
The Marketing Plan
1. Understanding the marketing process
2. The marketing planning process
3. The customer and market audit
4. The product audit
5. Setting marketing objectives and strategies
6. The communication plan
7. The pricing plan
8. The distribution plan
9. Marketing information, forecasting and organization
10. Designing and implementating a marketing planning system

Exhibit 10
Product Plan Format
I. Objective
II. Background
III. Marketing spending
IV. Marketing strategy/ Action Programs
V. Controls

4 step Process in Strategic Marketing Planning

1. Conduct a situation analysis
2. Determining marketing objectives
3. Select target markets and measure market demand
4. Design a strategic marketing mix

Exhibit 11