A study of attitude and perceptions of pharmaceutical value chain members towards consumer promotions.

Srivastava, Shweta ; Sharma, Anand

Introduction: The Indian Pharmaceuticals sector has come a long way, being almost non-existing during 1970s, to a prominent provider of health care products, meeting almost 95% of country's pharmaceutical needs. Indian pharmaceutical industry has also scaled up in the value chain , from being a pure reverse engineering industry focused on the domestic market, to an industry which is research-driven, export-oriented, showing its global presence by providing wide range of value added quality products and services. In the present scenario, Indian pharmaceutical market has witnessed an enormous proliferation of products/brands leading to severe competition. This trend has led to increased promotion costs forcing many companies to increase expenditure on sales promotion activities. It has been recognized that well planned sales promotion activities have a strategic role to play in brand building and enhancing customer loyalty.

Review of literature: Consumer sales promotions are an integral part of the promotional mix and are affecting the purchase behavior of firm's customers throughout the world [Blattberg and Neslin, 1989; Huff & Alden 1998]. [Kotler 1988, Blattberg & Neslin 1989]. Consumer sales promotions are aimed at creating a 'pull' for end customers as opposed to trade and retail promotions that are aimed at creating a 'push' through channel members. Studies have demonstrated that consumers form reference points for both price and promotional activity which influences subsequent choice behavior [Lattin and Bucklin 1989; Kalwani and Yim 1992]. During the literature review , it is observed that in the past attempts have been made (i) to understand the rationale behind such promotional activity : Blattberg et al. (1981), Narasimhan [1984], Jeuland and Narasimhan [1985], Narasimhan [1988a and 1988b], Blattberg and Neslin [1989]; (ii) to understand the impact of promotions on consumer purchase behavior: Blattberg et al. [1978], Guadagni and Little [1983], Narasimhan [1984], Neslin et. al. [1985]; and (iii) to evaluate the profitability of promotions: Neslin and Shoemaker [1983], Abraham and Lodish [1987], Blattberg and Levin [1987]. Few researches have also addressed the issue of managerial perceptions about promotions Quelch [1982], Montgomery [1983], Curhan and Kopp [1986], Chakravarthi Narasimhan [1990].

Need of the study: In pharmaceutical business the main objective of promotion activities is to make an impression long lasting. In the current rat race several national and multinational pharma companies have gained remarkably for their exceptional strategies for sales promotion. While many pharmaceutical companies have successfully deployed a plethora of strategies to target the various customer types and customer trends for creating new opportunities for increasing profitability. Pharmaceutical manufacturers spend huge money on promotion of their products which includes expenditure on sales representatives, samples, advertisements in broadcast and print media and sponsorship of educational events, conferences etc.. There is a dearth of research on promotions in markets like India, which is one of the most lucrative markets particularly with reference to Pharmaceuticals. The non-price promotional tools are increasing day by day. The purpose of this study is: i) To find different types of promotions and their preferences in Pharmaceutical Industry in India, ii) To identify the most frequently promoted product categories in Pharma industry, and iii) To determine the factors that managers/sales staff believe are important in their decisions to offer trade/consumer promotions.

Research Methodology: For the present study data was collected with the help of well-structured questionnaire, from 100 Doctors and 200 Medical Representatives randomly, located at Chandigarh, Mohali and Panchkula (Northern India). Only 80 and 153 complete responses of Doctors and Medical Representatives respectively were finally used for analysis. The collected data was analyzed by using SPSS.

A). Analysis of Data Collected From Doctors :

Sales Promotion by company representatives: In the present study it was observed that MRs is continuously visiting Doctors for promoting the products. 83.8% Doctors says that medical representatives visiting them use sales promotion tools. The collected data revealed that most commonly offered gifts/incentives include Free Samples [79%], Literature or reading material [71%], Utility items like Pens, writing pads, paper weights [65%] etc. & free visits to conferences/seminars (58%). Maximum number i.e. 72.5% of doctors has been offered incentives on specific occasions so as to get preference in prescription. On the other hand for doctors the most preferred gifts/incentives are viz.; the items useful for helping patients [mean 3.95], literature material [3.71] free samples [mean-3.69], followed by visits to conferences/seminars [mean-3.34]. Antibiotics, Anti-inflammatory, analgesic, and antihypertensive, ant diabetic, anti-allergic and nutrients are more promoted as compared to other products.

Reasons for offering Gifts: The collected data revealed that the most important reasons for sales promotion are: 1) For introducing new product [Mean--5.93] ; 2) For meeting competition [Mean--4.65] ; 3) For achieving sales target [Mean--4.81] ; 4) For meeting competition [Mean--4.65] ; 5) To maintain long term relationship [Mean--3.67] ; 6) for Brand Switching [Mean--3.32]. Thus according to doctors sales promotion is important for meeting competition, achieving targets & introducing new products.

Demographics of Doctors and preferences of gifts/incentives: The null hypothesis of equal mean preferences for gifts by different age groups was rejected for promotions like 'Free Samples' [p = 0.018], 'Literature Material' [p = 0.004] and 'Items which are useful for Helping Patients [p = 0.024]. Thus different age groups have unequal preferences for these gifts/incentives. it was found that Doctors with age group A1 [less than 30 years] has more preference more for 'Free Samples' than doctors in age group A2 and A3 [A2 -30 -40 years and A3--more than 40 years] [Mean--0.841] . Similar preference for literature material [Mean-1.092] as gifts is maximum for A1 [young age] group doctors. This age group doctors also like to receive gifts which are useful for patients [mean 0.684, p = 0.05] like diagnostic kits further Multiple comparison [Multiple Comparisons Tukey HSD] showed that mean scores for 'Free Samples' of A1 > A2 [mean differences = 0. 841; p = .014], but not significant difference between A2 and A3 or A1 and A3. That mean scores for 'Literature Material' of A1 > A3 [mean differences = 1.092; p = .003], A2 > A3 [mean differences = 0.957; p = 0.036] but not significant difference between A1 and A2. Also that mean scores for "Items Those Are Useful for Helping Patients of A1 > A3 [mean differences = 0.684; p = .027], but not significant difference between A1 and A2 or A2 and A3. Thus it can be inferred that younger doctors are more knowledge seeking and patient oriented (Annexure-1). Thus, Companies should approach these doctors [age group of < 30 years] with promotional tools which increase their knowledge about the products and which are also useful in helping patients and the promotions for old age group doctors should be more noble, delivered with different method so that acceptability becomes easier.

The null hypothesis of equal mean preferences for gifts by different Genders was rejected for 'Free Samples' [p = 0.00], 'Utilitarian goods' [p = 0.026] and 'Items which Are Useful for Helping Patients' [0.050]. Thus there is variation in type of gift preferences depending upon gender of doctors. As, it was observed that male doctors prefer more of 'Free Samples' [Mean of males = 4.08 SD = .0964, Females = 3.1, SD = .096] and 'Utilitarian goods' [mean-3.458] as compared to female doctors who prefer items which are Useful for Helping Patients'--like diagnostic kits, clinical aids etc. as gifts/incentives [Mean--4.21] (Table--1).

B.) Analysis of Medical Representatives Responses:

Scale Reliability and validity Analysis: In this study Researchers have used Cronbach's alpha or coefficient alpha method of internal consistency. The value of Cronbach's alpha was much more than 0.5. For scale of statements pertaining to purpose of trade promos in OTC drugs [.68], for prescription drugs [0.71], and for the measure of consumer promotion [0.7] showed consistency and reliability and convergent validity.

Factor analysis of importance ratings: Table--2, Table--3, and Table--4 shows the responses of statements pertaining to trade promotions in OTC, Prescription and consumer promotion respectively. Higher Mean values showed that sales target, motivating sales force and introducing new products are very important reasons for offering trade promotion in OTC drugs [Table--2]. In case of prescription drugs mean score indicated that introducing new product, achieving sales target, retaining customers, meeting competition and motivating sales force are most important reasons for offering trade promotion [Table--3]. It can also be observed that consumer promotions are favored for the reasons of introducing new product, increasing sales, getting more push for the product, tapping new customer & meeting competition , taken in that order [Table--4].

In order to understand underlying factors of sales promotions, the MRs responses were analyzed using the principal components method and the resulting factor pattern was rotated using the Varimax method. Since the value of KMO was low [.0429 than 0.5] the Statements related to trade promotion in OTC drugs cannot be factor analyzed. Value of KMO less than 0.5 signifies inadequacy of sample. However the value of KMO was high [close to 1], the Statements related to trade promotion in prescription drugs [0.79] and Bartlett's Test of Sphericity was significant [p = 0.000] hence data was suitable for factor analysis.

The factor analysis of trade promotion in prescription drugs revealed two underlying discriminating factors. The first factor is highly correlated with the attributes like: Motivating sales force, reducing inventory, maintaining shelf space & retaining loyal customers. These are focused on specific objectives & maintaining status quo, maintaining relationships and staying in market at desired level. The second factor loads heavily on statements like; getting more retail push, achieving sales/contribution targets, introducing new products & meeting competition. These are therefore focused on achieving targets, defending one's own territory & aggressiveness behind trade promotion decisions. Thus specific objective orientation (e.g. motivating the sales force, maintaining status quo) & using promotion aggressively to push the products while defending one's territory are the two major factors that explain the importance behind the decision to offer trade promotions. First factor can be considered as soft issue related to 'Staying Power' of company and second factor related to hard component of 'Enhancing Market Power' of the company (Table--5).

In case consumer promotions, the value of KMO was high [close to 1], i.e. 0.81, and Bartlett's Test of Sphericity was significant [p = 0.000] ; hence data was factor analyzed. Two factors were extracted. First factor is highly correlated with the following attributes: Retaining loyal customers, increasing sales, introducing new products, achieving sales target & expanding category volume. These are focused achieving targets (both long term as well as short term). Expanding category volume & retaining loyal customers will provide dividends in the long run whereas use of promotion to increase sales, introduction of new product and achieving sales targets pertain to current goals. The second factor loads heavily towards: lower price to more price sensitive customers, inducing brand switching, getting retail push and tapping new customers. These are therefore focused towards exploring new customers and achieving better market share. Thus second factor focuses on achieving short-term goals. In nut shell First factor is concerned with increasing sales from retained customers i.e. 'Customer Loyalty Increasing Factor'. Second factor concerned with increasing sales from new or less loyal customers i.e. 'Brand Switching Inducements' related factor (Table--6).

The results of the present study are consistent with the conventional practice i.e. the trade promotions in case of pharmaceuticals are essentially oriented toward specific objectives and are used as a necessary evil. Whereas consumer promotions offer greater flexibility, perhaps through their ability to target specific segments to build market share/volume and also improve the profitability of a brand.

Relationship between 'Sales force perspective towards Sales Promotion' and Structural Variables: Responses of MRs for different structural variables related to brand and consumers were also analyzed. In Table--7 the mean ratings of various structural variables are given for the sample. The various structural variables (category and brand variables), brand age was measured on a six point scale, rate of growth and gross margin on five point scale, product differentiation and frequency of buying on four point scale and introduction of new products, purchase of brands, consumer planning, proportion of heavy buyers & turn over are measured on a three point scale.

The importance, which a Medical Representative attached to a particular factor, will depend upon his own perception about his brand's and category's position in the market place. For example, if a product has a high turnover rate and equity, sales representatives do not give significance to achieving his targets. On the other hand, in case of new products or improved activity, the sales people like to maintain regular presence in order to achieve the targets.

Factor scores were computed for each respondent by averaging the importance ratings of those variables which are highly correlated [> 0.5 loading] with a factor. These factor scores were then correlated with standardizes scores of all the structural variables. In the Table--8 correlations between the four types of factor scores--two for trade promotions [TP1-TP2] and two for consumer promotions [CP1-CP2] and the structural variables is given.

From the correlations matrix (Table--8) it is clear that first factor--Staying Power' [specific objectives & maintaining status quo oriented] is inversely related to growth rate [r = -0.16442], heavy buyers [r = -0.2016] and positively to margins [r = 0.224241] indicate that Staying Power' [TP--1] should be used when growth rate is low, heavy buyers are decreasing and product margins are higher. The second factor--Enhancing Market Power' [TP--2] (achieving targets, defending one's own territory & aggressiveness in trade promotion decisions) is positively related to age of the brand [r = 0.218] and negatively to number of new products introduced [r = -0.212] that means trade promotions [TP--2] is more useful in 'Enhancing Market Power' when brand age is more and less new products are introduced in the market. The same has been reflected by mean scores--when brand exists in between 10-15 years [mean--3.76] & new product activity is less [Mean--2.2].

The relationship between among consumer promotion factor scores and structural variables have been studied and it has been observed that--'Loyalty Increasing Factors' i.e. CP--1 (focused on target achieving & long term as well as short term goals like retaining loyal customers, increasing sales, introducing new products, achieving sales target & expanding category volume) are more important when the proportion of heavy buyers of the brands are low [r = -0.2]. There is no significant correlation observed between second factor 'Brand Switching Inducements' i.e. CP--2 (focused on objectives like exploring new customers & aggressiveness behind the decision of offering consumer promotion to get more market share) & the various structural variables.

Perception of medical representatives towards sales promotion offered by Companies: The scale used for the measurement of perception of sales personnel towards companies Sale promotions is consistent and highly reliable (Cranach's alpha greater than 0.7, KMO = 0.812). The factor loadings are presented in Table--9, employing Eigen value cutoff of one, three factors were extracted from the statements pertaining to measurement of attitude and perceptions of Medical Representatives towards sales promotion. The extracted factors explain nearly two third of the variance in the attitudes and Perceptions. First factor--'Behaviour response' that means sales personnel think that companies are rational in offering sales promotions and main cause of promotions is inducing behavioral response in form of more sales or prescriptions etc. The second factor--'Interests response' signifies that sales promotions creates Doctors interest in brands and they give more time and considerations to it and further increases motivation of Sales personals by expecting a positive response from Doctors. That means using sales promotion tools helps sales personnel in detailing their products & they get more response from the customers when they are approached with gifts/incentives. The third factor--'Attention response' highlights the attention gathering purpose of promotions which act as entry point to enter into Doctors mind and heart. All these three factors act in Tandem to achieve desired response of promotional objectives.

Summary and Implications: In this paper the authors studied the role of sales promotion targeted at value chain members. It was observed that all pharmaceutical companies use sales promotion for various products (OTC drugs and prescription drugs) to compete, to achieve sales target, to maintain long term relationship with their customers and to establish markets for new products. It has been noticed that preferences of doctors for gifts/incentives offered to them vary with respect to their age gender.

Trade promotions are oriented towards achieving specific objectives like motivating the sales force in the competitive market. Thus the importance behind the decision to offer trade promotions is to withstand the competition and to push the products aggressively in the market while defending one's territory. Consumer promotions are focused on long term as well as short term goals of the company. Success of a sales program depends mainly on sales force, so it is suggested that the companies should have a better understanding of its sales staff and their perspective towards sales promotion tools. It is also observed that there is a close relationship between sales promotion and the structural variables of the company. Therefore it is recommended that companies should critically analyze its structural variables before formulating and implementing its sales promotion strategies.

Annexure--1 Demographics of Doctors & preferences of gifts/incentives

Dependent Variable (I) (J) Mean Std. Sig.
 VAR00011 VAR00011 Difference Error
 (I-J)

GiftsLikingfs A1 A2 .841(*) .292 .014
 A3 .163 .275 .824
 A2 A1 -.841(*) .292 .014
 A3 -.677 .321 .095
 A3 A1 -.163 .275 .824
 A2 .677 .321 .095
GLIit A1 A2 .135 .345 .919
 A3 1.092(*) .324 .003
 A2 A1 -.135 .345 .919
 A3 .957(*) .378 .036
 A3 A1 -1.092(*) .324 .003
 A2 -.957(*) .378 .036
GLcontest A1 A2 -.191 .259 .744
 A3 -.504 .244 .104
 A2 A1 .191 .259 .744
 A3 -.314 .285 .517
 A3 A1 .504 .244 .104
 A2 .314 .285 .517
GLcoupon A1 A2 -.195 .252 .721
 A3 -.536 .237 .068
 A2 A1 .195 .252 .721
 A3 -.341 .277 .439
 A3 A1 .536 .237 .068
 A2 .341 .277 .439
GLconf A1 A2 .411 .399 .560
 A3 .622 .375 .229
 A2 A1 -.411 .399 .560
 A3 .211 .438 .881
 A3 A1 -.622 .375 .229
 A2 -.211 .438 .881
GLutility A1 A2 -.368 .346 .538
 A3 -.391 .325 .455
 A2 A1 .368 .346 .538
 A3 -.023 .380 .998
 A3 A1 .391 .325 .455
 A2 .023 .380 .998
GLforpatients A1 A2 .057 .276 .977
 A3 .684(*) .259 .027
 A2 A1 -.057 .276 .977
 A3 .627 .303 .103
 A3 A1 -.684(*) .259 .027

The mean difference is significant at the .05 level.

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Shweta Srivastava and Anand Sharma

Department of Pharmaceutical Management, National Institute of Pharmaceutical Education and Research (NIPER), S.A.S. Nagar, Mohali Pb. INDIA

Table 1: Gender & gifts/incentive preference Scores :

Gift Type Gender N Mean Scores Std. Devi

Gifts Liking f s Male 48 4.0833 0.9638
 Female 32 3.0937 0.9625
 Total 80 3.6875 1.0743
GL lit Male 48 3.8958 1.3874
 Female 32 3.5625 1.1622
 Total 80 3.7625 1.3047
GL contest Male 48 3.0416 1.0907
 Female 32 2.8125 0.5922
 Total 80 2.95 0.9264
GL coupon Male 48 2.8541 1.0103
 Female 32 2.75 0.7620
 Total 80 2.8125 0.9153
GL conf Male 48 3.4791 1.5572
 Female 32 3.125 1.1570
 Total 80 3.3375 1.4137
GL utility Male 48 3.4583 1.3039
 Female 32 2.8437 0.9873
 Total 80 3.2125 1.2189
GL for patients Male 48 3.7708 1.1712
 Female 32 4.2187 0.6082
 Total 80 3.95 1.0050

Table--2: Purposes of Promotions--OTC Products

VARIABLES Mean Std. Dev. Rank

Sales Target 4.19 0.67 1
Motivating sales force 4.1 1.16 2
Intro New product 4.05 0.96 3
Shelf Space 3.78 0.62 4
Competition 3.73 0.89 5
Retail Push 3.69 1 6
Retaining customers 3.5 0.97 7
Reduce inventory 3.41 0.86 8

Table--3: Purposes of Promotions--
Prescription Products

Variables Mean Std. Dev. Rank

New product 4.4 0.79 1
Sales target 4.04 0.95 2
Retaining customer 3.98 1 3
Competition 3.93 0.94 4
Motivating sales force 3.89 1 5
Shelf Space 3.63 1.05 6
Retail Push 3.59 1.1 7
Reduce Inventory 3.44 0.97 8

Table--4: Purposes of Promotions--Consumer Promotions

Variable Mean Std. Dev. Rank

New product 4.2 0.78 1
Increasing sales 4.17 0.77 2
More push 4.06 0.89 3
Tapping new customer 4 0.9 4
Competition 3.99 0.81 5
Sales target 3.86 0.9 6
Retaining customer 3.83 0.94 7
Brand switch 3.79 0.83 8
Price sensitivity 3.61 1.06 9
Expanding category volume 3.51 0.9 10

Table--5: Rotated Component Matrix--Trade
Promotions for Prescription Drugs

Statement Factors

 1. Staying 2.'Enhancing
 Power' Market Power'

Rx New product .246 .513
Rx retail Push -.124 .772
Rx sales target .298 .743
Rx shelf space .639 .290
Rx competition .331 .557
Rx motivating sales force .825 .109
Rx Reduce inventory .749 .066
Rx Retaining customer .548 .432

Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization,
(a) Rotation converged in 3 iterations.

Table--6: Rotated Component Matrix--statements
for offering consumer Promotions

Statements Factor

 1. Loyalty 2. 'Brand
 Increasing Switching
 Factor'. Inducements'

New product .547 .265
Increasing sales .645 .350
Brand switch .256 .624
Sales target .512 .390
Price sensitivity -.055 .713
Retaining customer .804 -.280
Competition .476 .470
Expanding category volume .508 .236
Tapping new customer .480 .536
More push .414 .566

Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
(a) Rotation converged in 3 iterations.

Table--7: Descriptive Statistics of all the structural variables

Structural
variables/
Brand variables Variables Measurement

Brand Age How long brand is existence:
 < 1 Yr., 1-5Yrs., 5-10Yrs., 10-15Yrs., 15-
 20Yrs., >20Yrs

Degree of Degree of differentiation: Little, Moderate,
Product A lot, Not Different
Differentiation

Growth Rate On annual basis

Products How Many New Products: None, Few, Many
Introduced

Consumer Do the consumers plan for purchase? Planned,
Planning/Brand Somewhat planned, impulse
purchase habit

Brand Purchase Habit of purchase : Planned,

Consumer Loyalty In terms of locality: Few are loyal, some are
 loyal, maximum are loyal

Freq. of Buying How frequent purchase is made? < 4 weeks, 4-8
 weeks, 8-12

Prop. Of Heavy Proportion of heavy buyers relative to the
Buyer category--Less, About same , More

Turnover As compared to average product in same category

Other Brands How many other brands in your category?

Gross Margin % to wholesale prices

Structural
variables/ Std. Standardize
Brand variables Mean Dev. value at 5

Brand Age 3.76 1.694 0.74

Degree of 2.38 .722 3.63
Product
Differentiation

Growth Rate 3.04 1.127 1.74

Products 2.20 .613 4.57
Introduced

Consumer 1.61 .490 4.92
Planning/Brand
purchase habit

Brand Purchase 1.70 .679 4.87

Consumer Loyalty 2.36 .694 3.81

Freq. of Buying 1.84 1.024 3.09

Prop. Of Heavy 1.92 .593 5.2
Buyer

Turnover 2.24 .912 3.03

Other Brands 2.74 1.154 1.96

Gross Margin 2.36 .812 3.26

Table--8: Correlation matrix between the four types of
factor scores and structural variables.

 Dimensions

Structural Enhancing Loyalty Brand
Variables Staying Market Increasing Switching
 Power' Power' Factor' Inducements'
 (TP--1) (TP--2) (CP--1) (CP--2)

Brand Age 0.089 0.218 ** -0.138 -0.15
Your brand Diff -0.046 -0.121 -0.148 -0.042
Degree Of Diff 0.066 -0.044 -0.011 -0.121
Growth Rate -0.165 * 0.02 0.05 0.029
Product Intro -0.131 -0.211 ** 0.046 0.095
Consumer Plan 0.037 -0.058 0.155 0.019
Brand Purchase 0.233 0.033 0.082 0.017
Rate Consumer 0.009 -0.028 0.042 -0.044
Freq Buying 0.031 0.127 0.127 -0.095
Heavy Buyer -0.202 * 0.037 -0.2 * -0.147
Turnover -0.059 0.032 -0.036 -0.011
Other Brands 0.056 -0.08 -0.079 0.023
Gross Margin 0.225 ** 0.109 0.078 0.085

**- significant at p=.001; *--significant at p=.05

Table--9 : Rotated Component Matrix--Causes of Sale Promotions

Statements Components
 'Behaviour 'Interests
 response' response'

A. Like free gifts -.039 .078
B. Approach doctors with gifts .283 .225
C. Doctors prefer promoted products .548 .183
D. Promos beneficial for Co. .514 .357
E. Co. rational in offering exp gifts -.056 .557
F. Dr listen if offered gifts .176 .802
G. Promos helps in detailing .146 .629
H. Dr give more time if offered gifts .533 .538
I. Promos helps in relationship .795 -.045
J. Promos helps as reminders .678 .208
K. Dr more Responsive if offered gifts .602 .418
L. Promos increases no of prescriptions .563 .391
M. it increase sale of promoted product .801 .120
N. Promos necessary for Co. .780 .022
O. More promo more sales of Co. .583 .064

Statements
 Attention
 response"

A. Like free gifts .854
B. Approach doctors with gifts .778
C. Doctors prefer promoted products .038
D. Promos beneficial for Co. -.297
E. Co. rational in offering exp gifts .281
F. Dr listen if offered gifts .055
G. Promos helps in detailing -.003
H. Dr give more time if offered gifts .143
I. Promos helps in relationship .202
J. Promos helps as reminders .050
K. Dr more Responsive if offered gifts .225
L. Promos increases no of prescriptions .080
M. it increase sale of promoted product -.026
N. Promos necessary for Co. -.006
O. More promo more sales of Co. .019

Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.

(a) Rotation converged in 4 iterations