Marketing decisions and planning - Essay Example

22 August 2007 Marketing Marketing decisions and planning is one of the main and most important parts of successful product management. The marketing team must constantly analyze and evaluate alternative situations and choose among them. To do so requires the simplification of marketing reality and the resolution of conflicts. Given conflicting marketing situations, choice is often difficult and involves balancing risks and payoffs, knowledge, attitudes, opinions, feelings, judgments and facts, and current situations and future opportunities. In case of Biopure Corporation, the decision-making process shapes a company's destiny, since today's decisions are a prelude to tomorrow's marketing situations. Analysis of Potential Customer Base Understanding buyer behavior is one of the more perplexing tasks confronting Biopure Corporation. Difficulty arises from the heterogeneity of buyers, from their being groups of individuals who differ from one another (Cooper 4). Biopure Corporation's market is divided into two main segments human and animal markets. Human market has been influenced greatly and transformed by AIDS infection. "Since the AIDS crisis, it has been illegal for an individual to sell his/her blood in the USA", Biopure Corporation has developed a unique product that better satisfies customer wants and needs. For Hemopure, market potential involves emergency rooms and hospitals who lack RBCs and donated blood. For instance, "RBCs transfusions were required in 500,000 trauma cases while only 10% of trauma victims received RBCs in the field" (Biopure Corporation 4). So, the minimal market potential for Oxyglobin is 450, 000 individuals per year. Technological and scientific innovations will also have a great impact on market potential for Hemopure. According to the case study, RBCs are widely used to 'treat chronic anemia". The market segment for individuals over 65+ will double during the next 15 years. In comparison with human market, the veterinary market is smaller including only 15,000 small-animal veterinary practices. On the other hand, this market lacks an adequate blood supply. Over 30% of dogs suffered from acute blood loss do not receive adequate care. Also, most practices "lacked the time and resources to properly type both the donor and recipient blood" (Biopure Corporation 6). Many veterinary practices would benefit using such products as Oxyglobin. Competitive Environment For Hemopure, competitive market is represented by the donor blood market and substitute products. The main competitors of Biopure are Baxter and Northfield. Both companies are market leaders relying on high quality of products and selling history. Competition refers to the creation of differential advantage particularly by the effective management of innovation to meet changing marketing opportunities (Cooper et al 133). Programmed innovation, like Hemopure, is the method of achieving continuous market adjustment; competition is its stimulus. The main difference between Baxter's and Northfield's products and Hemopure is that the latter is based on cattle blood used as the main source of hemoglobin. External factors that place a limit on competition and innovation include various types of governmental regulation, accepted industry practices and agreements, and the social. The main strengths of Hemopure are innovative methods of production and hemoglobin extraction. The main weakness is that the product is not ready for immediate launch and will need two additional years for research and development. Also, Northfield laboratories received FDI approval in 1999 (Biopure Corporation 8-9). Veterinary market proposes enormous opportunities for Biopure because it will be the only company producing such products. The main strength is that for the next 3-5 years, Biopure will be the only market leader in this sector. The main weakness is that any other company can enter this market and reduce the price level. Thus, even such leaders as Baxter and Northfield will need large cash reserves on research and development. These reserves also enable them to take risks in spending large sums for advertising and promotion. Today, Biopure has full advantage of the quality and unique image of its products (Biopure Corporation 9) Price Potential Prices are the terms of exchange among goods and services, and price policy is a central element in the marketing program of any company. Under competitive conditions, prices are determined primarily by costs. Researchers explain that prices may vary as part of the marketing policy of a company and costs may vary correspondingly (Cooper 92). The price potential for Oxyglobin varies from 80% to $400. Price should be seen as the ingredient of the marketing mix that has been subjected to the most intensive analysis. But as an aspect of the mix, it cannot be divorced from other ingredients. A lower price does not necessarily mean expanded sales. The market analysis suggests that all veterinaries would buy a product at $50 per unit. Thus, 95% of veterinaries would buy a product at $100 per unit and 80% agree to buy it at $150 in critical cases. Consumer market shows that 75% of consumers are willing to buy this product at 300% per unit in critical cases. These results show that the best price for Oxyglobin is $160 per unit in both critical and non-critical cases. This price is the best one for Biopure because pricing decision should be viewed from the perspective of a company's total product line, since products have complementary and competitive demands, joint and common costs, and by-products. In this case, a skimming policy is effective because demand is relatively inelastic. It pays with new products, where smaller volumes can be produced economically and a high price does not attract heavy competition. On the other hand, penetration pricing is suited to markets that are price sensitive. Its value is greatest in situations where production or distribution costs, or both, decrease with volume and low prices discourage competition. Also, it is important to note that "at a low price Biopure could never hope to recoup the massive cost of production development" (Biopure Corporation 1999, p. 10). The best price for Oxyglobin is $150-160 per unit because pricing strategies are perceived in terms of the whole product line rather than in terms of each individual product. Oxyglobin should be priced to engender prestige for the rest of the line rather than to gain their own sale. Marketing Plan Oxyglobin would be positioned as a market leader and a top brand. Thus, intention to buy would be treated as a dependent variable as well as an independent variable. Regarding the consideration of intention as a consequent of the internal processes, it is generally the intention-behavior issue is larger than the attitude-behavior issue. The unique image and perception of the product would be supported by the fact that Oxyglobin is the first in the product category (Cooper 129). Segmentation would be based on behavior and psychographics characteristics (Cooper et al 109). The target audience would involve pets' owners who are willing to pay high price for both pet's care and veterinary services. A special group would involve those customers who have insurance. Biopure should locate a brand in customers' minds as a unique and innovative solution. Positioning of product can be characterized by establishing trustworthiness, confidence, and competence for customers. The image of the innovative product will help Biopure to locate it in customers' mind. Usually, customers integrate all their experiences of observing, using and consuming the product with everything they hear and read about it. Information about this product should come from a variety of sources, including advertising, publicity, sales personnel, and packaging. Perceptions of price and distribution should be also taken into account (Cooper 16). The sum of impressions is the image, a unified image about both the products and service. The product would be distributed through direct agents and representatives of the company and through the retail chain. Agents will be representatives who act on behalf of Biopure. The agents will be paid on the basis of commission. This is the best way to reach a customer and familiarize veterinary practices with an innovative product. Also, marketing communication is based on psychographics characteristics which group people in terms of their attitudes, values, and lifestyles (Biopure Corporation 10-11). TV programs and press clubs, trade shows newsletters, press releases would help to inform potential clients about recent developments and innovations, about future directions and strategy of the company. Newsletters would inform all clients about recent changes and innovations applied by the company. This information will help to create an image as a unique brand (Cooper et al 208). Promotion and communication by Biopure would be tied intimately to consumer and buyer behavior. But not all consumers will necessarily respond to marketing promotion in the same way, following the same sequence with respect to hierarchy of effects in the dimensions of attitude and behavior - cognitive, affective, connative. Most buyers are driven by success and bran prestige, brand loyaly and qugh quolities of the products and services. Marketing communication has a direct impact on buyer behaviour. Biopure markeing communication would appeal to rational choice of consumers proposing high quality goods. Biopure should base its stratgy on a rational approach appealing to logic and speak to the customers intellect. Pricing policy is therefore a vital strand of strategy, which because of the complexities involved is often difficult for management to judge. Pricing strategies should consider both cost and demand conditions, and the dynamics of markets, thereby accounting for both internal and external variables. Although the determination of an optimal price is usually impossible, a satisfactory one can be developed by analysis. (Cooper et al 26). A skimming policy should be used for Oxyglobin. This strategy is valued by those who believe that a concentration on a unit that focuses their efforts is better able to serve their needs of a narrow strategic target more effectively than their competition. A low price would decrease brand image and does not allow Biopure to sell Hemopure at a premium price. Too high price would have a great impact on sales because only a limited number of customers would buy Oxyglobin at $400 and high. The main risks of launching Oxyglobin is that Biopure would not be able to set a premium price ($600-$800 per unit) for its next product Hemopure. Biopure management supposes that the company "will jeopardize its ability to price Hemopure at $800" (Biopure Corporation 1). On the other hand, the launch of Oxyglobin would help to position Biopure as a market leader and create a strong brand image. Also, it would help Biopure to pass ahead of its competitors. To minimize these risks, Biopure should create a strong brand image and establish trustworthiness, confidence, and competence for customers. This strategy would be supported by the buying process and the pricing, and as the most important this positioning strategy. Branding would be crucial for Biopure because it enables customers to better organize their marketplace experience by helping them seek out and zero in on particular products. Works Cited 1. Cooper, R.G., Edgett, S.J., Kleinschmidt, E. J. Portfolio Management for New Products. Perseus Books Group; 2nd edition, 2001. 2. Cooper, R.G. Winning at New Products: Accelerating the Process from Idea to Launch, Third Edition. Perseus Books Group; Third Edition edition, 2001. 3. Biopure Corporation. Harvard Business School. 1999. Read More