Unique selling proposition for community pharmacies

Despite community pharmacies crucial job of advising customers, and providing medication and healthcare products, they are coming under increased pressure from larger retail pharmacy chains (Schmidt and Pioch, 2005). However, it is not only pressure from large retail pharmacies that is affecting them, some of the pressure also comes from supermarket chains that have their own in store pharmacists. The real issue that community pharmacists face is developing a unique selling proposition that meets the needs and requirements of the pharmacies current and future clientele while at the same time developing relationships with them, and therefore strengthening their loyalty with the store (Schmidt and Pioch, 2005). This unique selling proposition can be communicated by the pharmacy to the public through branding. Kapferer (2008) states that there is more to branding than just naming a product or service and letting the public see that it has been stamped with the logo and imprint of a certain organisation. Instead he insists that branding involves long-term association, a large amount of commitment as well as good resources and skills. Wood (2000) states that it is essential that the management of brands is carried out strategically because when a consumer is making a purchase decision a brand is regularly the main reason for differentiation between competitive offerings, therefore the branding of a product is crucial to the success of a company. Kapferer (2008) believes that brands make the choice for the consumer easier, the leading brand on the market is obviously well known, used, and purchased by a lot of people therefore it is presumed that the product is very good if not the best on the market, this reduces the likelihood of customers choosing alternative brands. Kara et al. (2009) shares this belief by stating that brands can give confidence to customers when making purchase decisions; purchasing a well known brand implies a lower risk to the customer.

Brands are developed in ways to promote positive images, values and prestige, if a customer uses a certain brand it is saying something about what kind of lifestyle they have and can generate a positive identity for them (Ginden, 1993, Cited in Rooney, 1995). Woods (2000) adds that a brands image is customized to meet a target markets need and wants by using the four P’s of marketing (product, place, price, and promotion). Consequently, the success of the use of this method depends on the customer’s loyalty to the brand. In addition, the value of a brand is also depending on loyalty; if customers are loyal to your brand then this will guarantee future sales and therefore future cash flows (Wood, 2000). From Woods’ (2000) belief of using the four P’s of marketing to position your brand he points out that each element of the marketing mix is important when sending out your brands message. For example the price of a brand says a lot about the prestige associated with it. However, Jenkinson (1995, p.116) believes that “real brand quality comes from an emotional bond created by trust, dialogue, frequency, ease of use and a sense of value and added satisfaction. Loyalty is the reflection of a customer’s subconscious emotional and psychological need to find a constant source of value, satisfaction and identity”. To create a brand image the customers must first of all be made aware that the brand exists and once you have distinguished your particular brand from the others, it is easier to develop its image (Rooney, 1995).

If we wish to examine how successful a particular brand is it is important to look at its brand equity. “Brand equity is the current financial value of the flow of future profits attached to the brand itself” (Kapferer, 2008, p.143). Kapferer (2008) states that brands have developed their financial value because they have created a lasting impression in the minds and hearts of influential characters as well as customers. Spence and Essoussi (2010) proposes that differences in consumers’ knowledge of a certain brand changes their responses to marketing activities, for example; a strong brand is one in which customers respond more favourably to marketing activities when the brand is identified, compared to when it is not. Therefore, to build a successful brand the management must create and develop a positive brand identity (Spence and Essoussi, 2010).

In 1993, Wentz and Suchard pointed out that firms were applying branding to more unfamiliar settings where the role of branding is becoming more popular (Cited in Rooney, 1995). This is obvious in the area of pharmacy branding, Schmidt and Pioch acknowledged in 2005 that independent pharmacies constitute more than half of the pharmacy retail market in the UK. Extreme polarisation is seen in the market: it is greatly concentrated on one side, with the highly branded Boots, Lloyds and other big names at the forefront of the market, and on the other side divided into a great number of small and medium sized enterprises (Schmidt and Pioch, 2005). See Figure 1 for a detailed view of the market concentration.

(Figure 1: Source: Schmidt and Pioch, 2005)

A study by Clark and White (2009) examined the attitudes of members of the Australian retail pharmacy industry) to potential entry by one or more powerful competitors. This study showed that the retail pharmacy market in Australia is similar to that in the UK (see figure 1). However, unlike the UK market the Australian pharmacy guild has an agreement with their government which ensures that retail pharmacies are the only channel for distribution of prescription drugs (Clark and White, 2009). They state that in Australia “approximately 45 per cent of pharmacies are members of a branded chain or banner group” whereas approximately 80% of their grocery industry is held by only 3 companies- making it the most highly concentrated industry in the developed world (Clarke and White, 2009, p.281). Factors like these cause many small businesses to close and discourage new pharmacies from opening. Clark and White (2009) add that the Australian supermarket industry has pressured the government to open the supply of prescription pharmaceuticals to them but have so far not been successful. This would lead to supermarket chains becoming powerful players in the distribution of medicines, similar to the UK market. “A dominant brand is an entry barrier to competitors because it acts as a reference in its category” (Kapferer, 2008, p.24). In other words the dominating and leading brand sets the standards for new competitors on the market.

Schmidt and Pioch (2005) found that small to medium sizes retail pharmacies were not making use of branding and add that branding, when thought of in respect to retail, can take many different forms, for example, store brands, store sub-brands, and use of national brands. Perhaps this is one of the reasons that supermarkets in store pharmacies are becoming more successful. In 2007, sales of own-brands accounted for 49% of grocery sales in the UK and over 20% in the USA (marketing, 2007). Distributors’ brands, in the past, were thought of as ‘non-brands’, and these seamed to attract only price sensitive customers (Kapferer, 2008). However, retailer own-brands are now ranked as top brands in many categories (Huang and Huddleston, 2009). Huang and Huddleston (2009) suggest that the change we see today in relation to own brands comes from the fact that retailers are now keen to develop and market their own-brands rather than just passively distributing the main national brands. Researchers seem to agree on an emerging pattern when referring to own-brands and even though the old variety of low price, low quality retailer own-brands do still exist, the new general trend has been to go form low price, low- to high-quality products (Huang and Huddleston, 2009). In the current era own brands now vary their range to attempt to cover different price levels from low to high compared to national brands, they also make use of new emerging needs known as ‘trends’ for example Tesco Fair Trade, Tesco Organic, and Tesco Healthy Eating (Kapferer, 2008). According to Huang and Huddleston’s (2009) positioning of retailer own-brands graph (see figure 2) there are 3 types of retailer own brands.

ImageFigure 1Positioning of retailer own-brands

(Figure 2: Source: Huang and Huddleston, 2009)

According to Corstjens and Corstjens (1995) generics give consumers the lowest possible price by cutting out all expenses on advertising, packaging, and marketing. Corstjens and Corstjens (1995) state that the majority of generic goods are basic, functional products and often have a commodity-style presentation with minimalist black and white packaging. Generics do not compete with national brands; instead they are available as product alternatives for them, and usually have lower quality and inferior image compared to national brands (Laaksonen and Reynolds, 1994).

Mimic brands are the largest group on the market; these were made to directly compete with national brands on the market by mimicking them (Huang and Huddleston, 2009). Mimic brands aim to have an acceptable quality while at the same time being cheaper than national brands, they often have similar packaging and are available mainly to offer alternatives to the more expensive national brands (Burt and Davis, 1999). There have been many occasions in the past were the manufactures of national brands have taken legal action against the mimic brand manufacturers because the product was so similar to the national brand (Huang and Huddleston, 2009).

The third types are retailer own-brands. The most common of retailer own-brands, are premium own-brands (Huang and Huddleston, 2009). According to Huang and Huddleston (2009) the introduction of premium own-brands was aimed to provide customers with a high value-added product with a modern design and sometimes even better quality than leading national brands. Often premium own-brands are not priced lower that national brands (Laaksonen and Reynolds, 1994). Huang and Huddleston (2009) state that in the UK the use of these premium own-brands is increasing rapidly, they are earning widespread acceptance and they can now compete with leading national brands which gives the consumers a range of brands to choose from. Davies (1998) states that when the store brand name is based on quality appeal then it will be easier to market the own-brand as a premium product (Cited in Schmidt and Pioch, 2005); an example of this is the branding of Marks and Spencer’s own-brand products.

However, Rao and Monroe (1989) provided a model form a study relating price, perceived quality, perceived sacrifice, perceived value, and willingness to buy. In this model they confirmed that price has both objective external properties and subjective internal representations that are derived from the perception of price: higher prices lead to a higher perceived quality and to greater willingness to buy (Cited in Kara et al. 2009). Therefore consumers may be wary about the quality of a product if the price is too low. According to Kim and Sung (2009) when customers are purchasing a drug such as a pain reliever they often question whether they should choose a generic or a brand name drug. They say that if pharmacists were asked about the differences between generic and brand drugs they might say there is little difference, except for the name and price. This is because, according to the US Food and Drug Administration ‘a generic drug is identical or bioequivalent to a brand name drug in dosage form, safety strength, route of administration, quality, performance characteristics and intended use’ (Cited in Kim and Sung, 2009). Therefore when purchasing branded drugs like these the consumer is clearly only choosing the brand name because of their loyalty to the brand or perception of quality they have built around the brand. Geuens (2004) also believes that store brand and private labels are becoming increasingly popular and there is continued decreasing differentiation between competitive offers these days, therefore having a strong brand name can make a huge difference in customer purchase decisions.

In consumer behaviour research, a considerable amount of attention has been given to the construct ‘brand personality’; this refers to the set of human characteristics associated with a brand (Aaker, 1997). Halliday (1996) says that practitioners view brand personality as a key way to differentiate a brand in a product category (Cited in Aaker, 1997). Research has shown that brand personality can even be applied to medicines; doctors and specialists can attribute human personality traits to different medicines. Kapferer (2008) found that some of the personality traits the experts attributed to drugs were linked with prescription levels. Kapferer (2008) states that; a product (an active ingredient) cannot be given personality traits whereas a brand can. Therefore, brands of drugs do have a mental existence and influence in the minds of the prescribers (Kapferer, 2008). The study also found that although experts recognised that products themselves are identical and that brands of these products are the same in the functional benefits they deliver the experts still prescribed one brand three times more frequently than the other (Kapferer, 2008). This shows that even in professional sectors, brands are a psychological reality, which are present even in the minds of rational decision makers (Kapferer, 2008).

Another factor to consider when examining a company’s branding is its corporate social responsibility. This is a growing concern among firms due to the populations increased interest in eco-friendly goods. Ethics show that buyers are expecting, more and more, responsible behaviours from their brands (Kapferer, 2008). Companies are showing willingness to demonstrate socially responsible behaviour, as this may have an effect on the socio-economic context in which they operate, as well as on their own performance (Morsing and Perrini, 2009). Of course it matters greatly whether multi-national companies have good ethical business practices and strong social responsibility however it is also an issue for small business to address. There are many ways SMEs can engage in corporate social responsibility: “formal engagement, networking within and across sectors, volunteerism and giving to charity provide an extremely fruitful opportunity to invest in social capital, cultivating close relationships within the social and business environment” (Morsing and Perrini, 2009, p.3).

Customers may choose to shop in larger stores in comparison to small chains to take advantage of their loyalty/ Club cards. Loyalty cards are even more valuable to shoppers since the economic downturn. According to Colloqy (a US loyalty marketing research and education firm) retail pharmacy sales have increased 1.5% last year (according to data published in 2009) despite the fact that sales were declining in most retail sectors. Experts in the US suggest that this industry is strong and will see continued growth due to the ageing of the population and the increase of chronic conditions such as diabetes and high blood pressure Blank, 2009). Reward and loyalty cards are becoming increasingly popular in all types of retail environments. Customers can collect ‘points’ from purchasing goods or services from pharmacies (Boots advantage card), Supermarkets (Tesco club card), airlines (Virgin Atlantic airlines flying club), as well as hotels, clothing stores, hardware stores etc. Blank (2009) states that, in the US, membership of drug chains in retail reward programs now account for the largest share of all US loyalty programs and that these schemes expand the sales of both pharmacy orders and in-store products.

Liesse (1990) states that; brands that constantly advertise and regularly change and update their product will excel in their industries and; companies that believe in outstanding advertising are those who build leadership brands (Cited in Rooney, 1995). A study carried out by Kim and Sung (2009) about purchase-decision involvement stated that if brand names carry a great weight for consumers looking at a certain product category then they will make their purchase decision based mainly on brand names and in this case product-decision involvement would be high because of the importance of the brand. They also stated that when a customer is loyal to a brand and purchases the brand regularly the person’s product-decision involvement will still be high because of the perceived strong difference between brands within a product category (Kim and Sung, 2009). In contrast to this the state that “if brand names do not meaningfully differentiate (in terms of value- expressive motives) from other competing brands within a product category (for example, some popular over-the-counter drugs), consumers will make purchase decisions based on the utilitarian and functional features of the product, regardless of brand names (Kim and Sung, 2009 p.511). Their research suggested that purchase- decision involvement should be measured in terms of four different involvement constructs: cognitive Vs affective involvement and product Vs brand involvement. The cognitive Vs affective involvement is similar to the think product Vs Feel products in the FCB (Foote, Cone, and Belding) grid for analysing consumer product relationships (Vaughn, 1980). Kara et al. (2009) suggest that the purchase and use of a product may evoke feeling, emotions, or provide a means for a person’s self expression and identity formation. Kim and Sung (2009) describe the product Vs brand involvement as ‘utilitarian Vs value -expressive’ (Kim and Sung, 2009). They use the following example to further explain what is meant by this type of involvement: a customer may be involved in their MP3 player purchase decision out of many types and features (storage, sound, design) of the products in the market, and he may also be involved in his brand decision out of many different brands (Apple, Sony, etc.) (Kim and Sung, 2009). Their study emphasises that if marketers know the varying level and kind of involvement their customers have with their brands and how (cognitively or affectively) their customers are involved with what product attributes (product functionality or brand) then they could develop optimal and effective marketing strategies (Kim and Sung, 2005). Figure 2 shows the affective-cognitive purchase-decision involvement plot.

http://imageserver.ebscohost.com/img/imageqv/actual/g0u/20090701/9039940.jpg?ephost1=dGJyMNLe80Sepq84v%2bbwOLCmr0iepq5Srqa4SK6WxWXS

(Figure 2: Source: Kim and Sung, 2009)

The Cognitive-Affective purchase- decision involvement is a tool which allows researchers and practitioners to compare certain areas of involvement not only within a product category but also across product categories (Kim and Sung, 2009).

However, Schmidt and Pioch (2005) found that when pharmacists are selling medicines they are guided by the ethics of not overcharging their clients who are looked at as patients rather than consumers. In their study they found that pharmacists are more focused on improving and maintaining the services they offer as therapeutic experts than maintaining a good retail environment. The respondents to their study agreed that they were healthcare providers first and foremost, and the retail side of thing come in with a poor second. Pharmacists see themselves as service providers with a retail element, rather than as retailers with a service element, which might be a more fitting description of the competing brands of the multiples where typically the pharmacy is the smaller section within a much larger commercially oriented retail shop (Schmidt and Pioch, 2005). Similarly, Brower (2009) states that one of the biggest sources of conflict between pharmacists and store managers is a misunderstanding about their respective roles and goals. Store managers may not understand the very strict rules governing the pharmacy department and pharmacist practice. On one hand, store managers often do not recognise customers as patients and on the other, pharmacists do not recognise each patient as a store customer (Brower, 2009). Brower (2009) states that the lack of business education and experience often leaves pharmacists unprepared to meet non-patient-orientated tasks like preparing a budget or managing employee relations and suggests that pharmacists should complete a management course while store managers in turn should understand the legalities involved with operating a pharmacy.