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1 Session #15: Agenda for of MM2– MARKETING STRATEGY Brief Review The Zantac Case: Market Leadership.

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Presentation on theme: "1 Session #15: Agenda for of MM2– MARKETING STRATEGY Brief Review The Zantac Case: Market Leadership."— Presentation transcript:

1 1 Session #15: Agenda for of MM2– MARKETING STRATEGY Brief Review The Zantac Case: Market Leadership

2 2 Review of Class Session 13: Major Points of the ODI Case Successfully introducing really new products is very difficult and most likely to fail (for variety of reasons) Simple implementation problems can kill an otherwise good product Important to anticipate & confront consumer objections to product adoption Various types of risks

3 3 Attributes of Innovations that Improve/Detract from their Chances of Adoption by Consumers The Relative advantage of the innovation over the products/procedures it is designed to supersede. Its perceived complexity. Its compatibility in use with present behavior patterns and complementary products. The ease with which its features (especially its benefits) can be observed and communicated. The degree of risk (physical, financial & social) attached to adoption of the innovation in preference to existing products or procedures. The extent to which the innovation can be tried on a limited basis before being adopted on a large scale, permanent basis.

4 4 Extent of Zantacs Success (time of case) Zantac is #1 pharmaceutical product worldwide 1.8% share whole of #10 firm (Sandoz; 2.1% share) Glaxo rose from minor pharmaceutical firm to #3 worldwide on strength of Zantac In 1981 Glaxos US sales were small; By 1989 held 53% of US market US accounted for 41% of Glaxos sales Between 81-89 Glaxo was the most profitable large company in the world in any sector ROI increased from 16.5% (1981) to 30% (1989).

5 Ideal PerformanceTagametZantac Pain Relief|-----------2------------|Immediatelyafter several days (p. 5) no difference indicated in case Healing Speed*|--------T---Z----------|Immediatelyafter 6 weeksafter 4 weeks Healing Efficacy|----------------2-------|100%80% of patients Side Effects**|----------------------2-|None breast swelling in males reversible liver damage mental confusion none known Interactions**|----------------------2-|None Anti-Coagulants Valium none known Convenience|------T-----Z----------| Once a day or less 4/day 2/day approved 2/day Recurrence (after healing) |-----2------------------|None66% within a year same as Tagamet (see Ex. 10) Recurrence (during continuous treatment) |-------------------------|Noneunknown in 1981 **Perception: Tagamet is very safe Customer Needs (by order of importance) *actual healing is difficult to judge for patients and doctors without a test after treatment (p. 3) Tagament vs. Zantac

6 6 Zantac Sales Potential Zantac is a me-too product Pioneers enjoy a lasting advantage Tagamets side effects not an issue Tagamets safety record will be more important than Zantacs zero side effects Tagamets economies of scale make low- price policy unattractive Weak Glaxo presence in US True Only if they stay awake True, but are they known Who says? Net profit margin of 28% on Tagamet leaves room True Conventional logic Observation

7 Obstacles vs. Glaxo Actions Obstacles to Zantac's SuccessHow Glaxo Overcame the Obstacles Zantac is a me-too productPrice premium ( high price = high quality ) Tagamet's pioneering advantagePosition as superior H2-blocker: all the benefits of Tagamet, yet… faster, simpler, more specific higher promotional intensity Tagamet's side effects are not major deterrents to prescribing Create awareness of side-effetcs: emphasis on Zantac's benefits PR: "…cuts out sex problems" Tagamet already has superior safety track record Glaxo has good reputation for R&D & providing information for doctors Tagamet's economies of scalePrice premium Weak presence in big US marketCo-promotion agreement with Roche Poor marketing track recordCo-marketing and co-promotion

8 Zantac: What Next? Milk ZantacContinue to Invest in Zantac Zantac mature product ; inevitable decline Product life cycles made by man not God Cannot further expand Zatnac's useSignificant market expansion opportunities exist: NSAID co-prescription : 13-40% growth maintenance treatment non-ulcer indications The pharmaceutical industry is driven by technology Industry driven by perceptions: at Glaxo 25% of sales in marketing & 12.5% in R&D Zantac is an obsolete productZantac -- optimal benefit-risk combination Losec-- new more advanced product generation Losec has significant weaknesses Losec will take market by stormGlaxo can slow Losec's market penetration Glaxo is better off concentrating on its new products Even if successful, new products wont continue Glaxos sales & profit growth

9 9 Zantac: Key Points A minor product advantage can be leveraged into a competitive advantage by creating the right customer perceptions. Good & consistent positioning Zantac: fast, simple, specific Align all Ps to create this positioning Price: understand customers interpretation (quality) understand economic incentives Sales effort/communication: high share-of-voice Focused & clear advertising messages Having ineffective competitors helps..

10 10 Attacking Market Leader To overcome disadvantage (poor fit): size & resources Strategic partnerships (Glaxo-Menarini, Glaxo-Roche, …) Focus (Glaxo concentrated on Zantac, while SK diluted its resources) Overcome disadvantage: Dominant incumbent Attack under-defended markets (European markets first before attacking SK in U.S. market) Attack competitors blind spots (safety and convenience) Anticipate competitive reactions Understand history and competitors past behavior (Glaxo understands SKs mistakes; Glaxo is a very aggressive competitor) Analyze competitors motivation to react (Zantac is Glaxos life) Prepare contingency plans (Need to think several steps ahead)

11 11 Defending Leadership Despite patent protection, product advantages are not sustainable for long; for optimal leverage of such advantages, continuous innovation & speed are essential. Markets are speeding up: During product development: time-to-market During roll-out: time to global coverage During market penetration: time to market share peak To sustain a differentiated position, market leaders ought to Understand the gaps between customer needs and existing product offerings, and close them faster than competitors Develop new market segments Maintain high levels of marketing investments Understand competitors weaknesses and utilize them appropriately

12 12 Threats to Sustainability (S.I.S.) Slack complacency, inefficiency Imitation copy-cats Zantac to Tagamet Substitutes satisfy same customer needs in a different way Tagamet to stomach surgery

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