Convincing the Critical. The Importance Of Over-the-counter Drug (OTC) Product PR To OTC Integrated Marketing Communications
Master's Thesis 2009 85 Pages
Table of contents
List of abbreviations (with explanation)
2. The OTC Market
2.1 OTC drug definition and legal regulations
2.2 Economic impact and status quo of the German OTC market
2.3 Comparison to other EU Markets
2.4 Increasing competition in the German OTC-market
3. The Method: Guideline-based qualitative Interviews
3.1 Consideration and discussion ofthe method
3.2 Central research questions and the development ofthe guidelines
3.3 The Interviews: Preparation, conduction and transcription
4. From Marketing to IMC to PR
4.1 Competition and the market system
4.2 Marketing: Needs and wants meet products and services
4.3 Integrated Marketing Communications: To bunch communication tools
4.4 Public Relations (PR): To manage autonomy, to create favourable images.
4.5 PR and marketing: Bosom buddies instead ofsquabbling sisters
4.6 Discussion of PR's strengths and weaknesses
4.7 Product PR
5. OTC PR
5.1 A discussion ofthe actual German OTC market
5.2 OTC product PR: Discussing reasons, tools and perspectives
5.2.1 Is product PR a strong means within IMC to promote OTC?
5.2.2 Why is product PR a strong means to promote OTC?
5.2.3 Who are the addressees and what are tools of an OTC product PR?..
5.2.4 OTC product or OTC company brands?
5.3 Reflection of the expert interviews
6. Conclusion and Future Research
7. List of Strategic Guidance for an OTC PR
A) Guideline Expert Interviews
b) Table of Experts
C) - K) Transcripts of the Interviews
The German OTC market as well as many other EU OTC markets has faced considerable change in recent times. The non-refunding of the statutory health insurance, the rising competition with the market entrants of generics and decreasing spend for OTC demand from pharmaceutical companies to think about brand strategies for their OTC drugs, either on the corporate or the product level in order to distinguish themselves from the competitors, attract consumers and finally to win, maintain and enhance market share. Therefore the importance of a professional OTC marketing orientation with an integration ofall relevant communication tools is key.
In this thesis it is found with the help of literary reviews and 9 expert interviews that an OTC product PR can play a major role within an OTC integrated marketing communication (IMC) mix because product PR is regarded as being more trustworthy, third-party and informative than classical communication tools such as advertising. Thus it is able to address all relevant audiences, end consumers, pharmacists and physicians in order to convince them and so to support successful OTC sales. These strengths are key to an OTC promotion as OTC due to their nature as pharmaceuticals are concerned with human health and thus are confronted with a critical and sceptical consumer who does not act as in case of fast moving consumer good (FMCG) purchases.
List of abbreviations (with explanation)
illustration not visible in this excerpt
Recently, the reputable German TV and radio station WDR, subject to public law, repeatedly reported that Ratiopharm, a German generics company, purposefully wrote out cheques to physicians between 2002 and 2005 when they prescribed Ratiopharm pharmaceuticals to their patients (Brönstrup 2009). In the following, criminal charges are levelled against both Ratiopharm employees and several physicians. This report continued an article of the Stern (Grill 2005) who earlier investigated and discovered these criminal methods of the Ratiopharm sales force with the help of an insider.
These developments underpin both the high market pressure and the criminal as well as morally questionable methods in the pharmaceutical market to increase sales and market share. Even though some academics might argue that tools such as advertising and Public Relations are morally as bad as the aforementioned, these tools are more honest and legal possibilities to promote pharmaceutical products.
This MA thesis focuses on the application and importance of Public Relations (PR) tools to the marketing communication of Over-the-Counter (OTC) pharmaceuticals on the German OTC market, also referred to as OTC drugs. These medicaments are prescription-free but pharmacy- only, although it is often discussed whether those products sold in supermarkets can also be called OTC.
While a lot of analyses of the management and marketing (including marketing communications) strategies of health care institutions constantly appeared with their rising importance, e. g. for UK's NHS see Sheaff 1991, 0vretveit 1995 and Barrick 2009, still very little work is done both on product PR and PR in case of healthcare issues such as OTC products. This thesis might then enlighten this exciting gap as the rise of healthcare PR is seemingly an urgent topic in business practice like the increasing number of companies in that field shows, e. g. for the German market: The Medical Consulting Group, Patzer PR, Weber Shandwick or Pleon Healthcare Munich.
It is purpose of this paper to analyse from a company's perspective the complex and difficult progressions and intentions that generate and shape PR in the broad field of Integrated Marketing Communications (IMC). The focus of this thesis is the OTC instead of the prescription-only drug (Rx) market as in case of OTC, it is the patient besides physicians and pharmacists who is becoming a new important addressee of professional pharmaceutical communication. It is our aim to provide both theoretical insights from the theory of Public Relations and marketing communications as well as practical insights of OTC experts. This should be combined and analysed to offer some new theoretical thoughts and to provide some central strategic guidance (chapter 7) to all those working in the field of OTC in Germany.
Therefore, the introduction will be followed by a chapter that introduces OTC drugs and their legal regulations as well as the status quo of the German OTC market. It is argued that an increasing competition has led and will lead to increased marketing, marketing communication and PR efforts. Chapter 3 will describe the applied method. It is explained that guideline-based qualitative interviews with OTC PR and marketing experts as well as academics of the OTC field helped us to enrich the theoretical discussion with precious practitioner experiences and opinions. This chapter will also introduce central research questions and describe the preparation, conduction and transcription of the interviews. The interviews are designed to support all chapters. Thus, results of the interviews were interspersed throughout the thesis to support the theoretical analysis.
Chapter 4 will provide, compare and analyse the necessary theoretical background of marketing, IMC and PR to understand the later discussed OTC PR. It comprises a discussion of PR's strengths and weaknesses compared to other IMC tools as well as a probable concept of product PR.
The following chapter will deal with the possible concept of an OTC product PR. Starting from the theoretical discussion led in chapter 4, this chapter will mainly evaluate, compare and sum up the results of the expert interviews (cf. guideline in appendix A). It is found that an OTC product PR could be a strong means within the IMC mix to support OTC sales by convincing critical consumers. Furthermore, this chapter contains a critical reflection ofthe interviews.
Chapter 6 will finally conclude and illustrate the results ofthis thesis.
The appendices will provide information about the interviewed experts (appendix B) thus proving their qualification for the applied interviews. Additionally, all English transcripts are attached in written form (Appendices C - K). The original German transcripts, the content analysis in Excel sheets as well as the recorded interviews can be found on the attached CD.
2. The OTC Market
2.1 OTC drug definition and legal regulations
OTC drugs are medicines that may be sold to the customers in pharmacies, supermarkets and other shops without prescription, e. g. painkillers such as aspirin or cold remedies (GBA 2009). In Germany there is a difference between OTC drugs available in supermarkets/drug stores and those available in pharmacies: Most of the prescription-free OTC drugs available in supermarkets are health supplements, cold remedies or vitamins. As it will be seen later, it will be debated if vitamins and health supplements can be called OTC at all. OTC pharmaceuticals are prescription- free but pharmacy-only pharmaceuticals such as painkillers or stronger cold remedies. This thesis will concentrate on OTC drugs that are prescription-free but have to be sold in pharmacies.
The legal requirements for OTC drugs vary considerably between the EU countries. With regard to the topic of this thesis, a brief mention will be made about the legal requirements that pave the way for today's OTC market in Germany.
The definition ofOTC is regulated in § 48 ofthe German Medicines Law (Arzneimittelgesetz 2009). Thereafter drugs are available without prescription if their intended usage will not threaten the health of individuals. They are proven to be reasonably safe with little or no abuse potential and well-tolerated even without the direct supervision of a physician. As every new medicament starts as prescription-only until it is proven to be safe, the process to release a drug from its prescription- only status can take up to ten years (Rx-to-OTC switch, Wessels 2006: 61). With the prescription- free drugs patients should have the possibility to treat slight illnesses or discomforts themselves (self-medication) while being more self-reliant and responsible for their own health. If the taking of these drugs additionally does not need professional advice of a pharmacist, they are not pharmacy-only. If supervision and information is required, OTC are prescription-free but pharmacy- only. A re-switch, Rx-to-OTC, is also possible like the example of Paracetamol in Germany shows: Due to strong side effects, Paracetamol is re-switched to Rx since 1. July 2008 in case of doses from 10to 12 grams ofthe active substances (Creutz 2008).
With the modernisation of the statutory health insurance in Germany (GMG) and the commencement of this act in 2004, the German OTC market faced considerable changes. Since 1 January 2004, standard prices for OTC drugs (now an exception of the Regulation of prices of pharmaceuticals / Arzneimittelpreisverordnung, AMPV), price fixing and the reimbursement of the health insurances for OTC drugs are no longer applicable (Holl 2007). This placement of OTC drugs on the reimbursement list of the health insurance funds once “was a comfortable sales through physicians and pharmacists” (Ludlow-Schmidt 2004: 20) as this meant guaranteed sales for a fixed price and thus was central to the survival for 400 of the 900 German OTC companies (ibid.).With the changes of the GMG now, expenses for drugs without prescription (OTC) are not reimbursed by the statutory health insurance any more (§ 34 Social Security Code V / § 34
Sozialgesetzbuch V Absatz I). In essence, people pay for OTC products out of their own pockets. But § 34 V also allows exceptions, e. g. a cost transfer for OTC is possible for children up to 12 years and teenagers up to 18 years, if they show disorders of psychological development or, for adults, in case of severe illnesses. These basic legal considerations also comprise laws for the advertising of pharmaceuticals such as the HWG (Law on Advertising in the Health Care System) or the UWG (fair trade law) that are explained in chapter 5 in direct linkage to the OTC PR later. What are the reasons for the summed up basic changes? The German government basically wants to relieve the statutory health insurances (Graetzel 2009) with consumers paying for OTC drugs themselves and having a higher responsibility for their own health (self-medication). Furthermore consumer advocates, a major player in this process, wanted lower drug prices for consumers.
2.2 Economic impact and status quo of the German OTC market
These processes had two major consequences for the OTC market and the OTC marketing: First, instead of the physicians, pharmacies and the patients themselves are now the new addressees of the pharmaceutical industry (Accenture 2007: 2, Zeiner and Weiche 2007: 18); Stefan Holler quotes marketing expert Gerhard Fuchs translating OTC with 'only the customer' (Holler 2007). Second, the OTC market is developing to a 'normal', to a free consumer market (ibid., Breuer and Winter 2000: 31, Accenture 2007: 2, pressi 2009, Ludlow-Schmidt 2004: 20,) where the ever more critical consumer chooses (Käckenhoff 2008: 22, Zeiner and Weiche 2007: 18), but the pharmacist still provides a central function of counselling and advice.
This market has been constantly rising in recent years (Paninchukunnath 2007, Jäschke and Neumann 2006) and experts have predicted that the market for self-medication will increase up to 50% by 2010 (Jäschke and Neumann 2006: 9) thus being the leading future drug market. As the 2007 European OTC survey of market research enterprise A. C. Nielsen which analysed 31.000 European households from six countries (including UK and Germany) points out, 20 % of the German pharmaceutical market (7.5 billion Euro) already consist of OTC drugs (health.com 2008) which supports the trend ofself-medication. Nevertheless, pharmacies are still the main distribution channel for OTC drugs in Germany with a market share of 87% of the OTC market (ibid.), which declined to 83% in 2008 (Springer 2008). Additionally, the actual IMS health data show that the actual OTC market is returning (- 9.7 % in total) and stagnating (IMS Health 2008).
This stagnation creates additional pressure and marketing might mean survival for some OTC companies. Furthermore, pharmacy drug prices are generally high, but patients accept these prices due to the feeling of having better service and advice in pharmacies than in supermarkets or drug stores (health.com 2008, Consumer Analysis 2008). This might also be a point of contact for the application of PR.
But new developments have occured: The OTC market “escapes the pharmacies” as Jäschke and Neumann (2006: 9) predict, rises in importance (Zeiner and Weiche 2007: 18) with purchase more often taking place in supermarkets, drug stores etc. Also the Nielsen survey 2007 claims that trustworthy OTC brands might replace the patient's trust in advice and service of pharmacists. Furthermore, the new Nielsen survey already underpins this development as the patient's trust in the better effectiveness of pharmacy drugs is in decline (Nielsen 2009). This is supported by the fact that pharmacies in Germany usually do not provide the same space for products as supermarkets can. Pharmaceuticals are kept in stock behind the counter which allows less display of goods and less promotion activities at the point of sale (POS) (Jäschke and Neumann 2006: 9). Even though market researchers have observed a decline in OTC sales outside of pharmacies (Springer 2008) and pharmacies still make the majority of the 7.5 billion sales, supermarkets like Aldi, Lidi and Norma already have OTC sales of237 million Euro in Germany (ibid.).
Behind these developments there lies a more sceptical, health-conscious and critical consumer. The Patient Profiler 2008 underpins a remarkable increase of informed and critical people who are longing for detailed information concerning all topics that come into contact with their own health (Bergmann 2008: 29). That might also pave the way for the content-orientated and information- deep PR.
2.3 Comparison to Other EU Markets
A detailed look at the UK and other EU OTC markets might then forecast possible future developments for the German market, as experts have already observed that many prescription- only drugs in Germany are changed to the status of OTC products (OTC switch) (Käckenhoff2008: 22). In Denmark, Norway and UK for example, much more of prescription-free OTC drugs are not pharmacy-only any more (Hollstein 2009). For instance, the sale of painkillers in these countries does not require the presence and advice of a pharmacist; they can simply be sold in the supermarket off the shelf with no pharmacy training required and are therefore, e. g. in UK, on the so-called General Sales List (GSL). Differently, Italy and Portugal allow the sale in supermarkets but require the presence of an approbated pharmacist (ibid.). Surely, the UK market represents the actual extreme of a liberalised and deregulated pharmaceutical market. Three years ago, the instore-pharmacies of the retail giants Tesco, Sainsbury, Morrison and Asda (31% market share) have already overtaken the pharmacy chains such as Lloyds (29%) (ibid.).
Although the competitive pressure creates lower prices for the patients, which is the original idea of this deregulation, one might argue that the profiteers of these developments are the retailers rather than the consumers (ibid.), that “commercial gains are being put ahead of public health” (Anekwe 2008). Nevertheless, this general market liberalisation EU-wide as well as the slight beginning in Germany are central to the ideas and efforts of this thesis as these new legal and market developments extend the possibilities for companies of using corporate communication tools towards both, pharmacists and consumers. Additionally, the recent decision of the European Court of Justice of the 19. May 2009 that the prohibition of multiple pharmacy ownership in Germany is rightful has to be acknowledged. Thus, the German pharmacy system is stalled until further notice. An additional development that increases competitive pressure is the rising market entrance of generics. Generics contain qualitatively and quantitatively identical active substances as the original pharmaceuticals (German Generics Association 2009). These can be produced after the protection of application of the original drug has expired (normally for five to 15 years, see EU Act 1992) and might substitute branded prescription-only as well as OTC products. That is why in the general drug market, where objective product comparisons for patients are not easy to make, “brands are a possibility for the consumer to make decisions both, emotionally and rationally” (Ludlow-Schmidt 2004: 20). In essence, branded and thus more expensive OTC drugs have to be differentiated by a consistent brand strategy that communicates the added value of OTC originals towards patients in order to be able to maintain a sustainable differential advantage (SDA) towards generics (Käckenhoff2008: 21).
2.4 Increasing Competition in the German OTC-market
All of these developments lead to intensified competition on the OTC market with a change in “marketing paradigms” (Zeiner and Weiche 2007: 18) and a central problem: strong field work force achieves no competitive advantage any more (ibid.: 19). This market demands from the OTC providers consequent brand and communication developments to address both, pharmacists and patients, as without “many of the former listed OTC drugs now nearly have no chance on the market” (Ludlow-Schmidt 2004: 20). Plus, OTC marketing touches upon ethical and morally problematic issues as the focus is human health - OTC communication can not have the character of FMCG PR. Thus, high budgets are allocated to brand development (Zeiner and Weiche 2007: 19). All these points will be proven or disproven and discussed with regard to the results of the expert interviews later.
As the examples of multinationals like Bayer or Roche already show, who “started with a gradual brand building of their products years ago” (Ludlow-Schmidt 2004: 20), major players in the OTC market have already recognised and dealt with this issue. Bayer for instance developed both, a strong company brand and strong, independent drug brands such as Aspirin whereas companies like Ratiopharm, which is specified in the production of generics (Claim: Do you also have something of Ratiopharm? [translated by author]), concentrated on the development of a strong company brand that is generally unconsciously linked with their offered generics by the consumers. Ratiopharm actually is the leading OTC-provider (Ärzte Zeitung 2009) which underpins the substitutionality of pharmaceuticals with generics which develop a heavily promoted brand and maintain successful marketing communications themselves.
The summed up points show that starting from the relaxation of regulations which attempt to increase competition to the advantage of the consumer, a new, free OTC market developed in recent years in Germany. This market is constantly growing and with the new freedom in price and distribution, the growing importance of the consumer as well as the market entrance of generics, the competition is constantly increasing. Nevertheless, the pharmacy still maintains an important position in that web. Thus, communication strategies for OTC might consider both the pharmacists and their teams as well as the physician as multipliers and opinion leaders in the OTC market besides the end consumer.
All of this demands new strategies in marketing and communications from the OTC providers which might require PR tools in the broad context of an Integrated Marketing Communication in order to differentiate a company as a whole or a company's OTC drugs from those of the competition in order to capture or increase market share. The usage of PR for this purpose is key to this thesis.
3. The Method: Guideline-based qualitative Interviews
3.1 Consideration and discussion ofthe method
The challenge of this thesis is to explore the fairly new topic of OTC PR in more detail on an academic as well as a practitioner level. That is why guideline-based qualitative telephone interviews with academic as well as business experts from the field of healthcare, OTC PR and marketing were applied. A second challenge was not to lose the focus in the applied interviews as instead to provide a certain structure with the guidelines.
The experts were interviewed to gain knowledge about the status quo of both, the German OTC market and the linked PR activities. Narrative guideline-based interviews, as developed by Friedrich Schütze 1977, are a special form of the qualitative interview. Its form allows the experts to talk more freely (Lamnek 2005: 361), the open-ended questions “allow complete freedom to reply” (Keats 2000: 35), thus making it more likely to explore new information, knowledge and opinion. It was important that the experts were representative, appropriate and accessible. Thus, our experts were identified and chosen through purposed sampling, as experts in the OTC field have been pointedly addressed. This was undertaken as the focus of this thesis is the very concrete niche of OTC and so it was searched for people who could provide the necessary information (cf. Gläser and Laudel 2006: 113). Furthermore, the taken perspective is that of companies as well as PR and marketing specialists, so it has made sense to ask this target group about their experiences directly. In addition, it was important to prevent deep acquaintance between the interviewer and the interviewee in order not to threaten the professional and objective level ofthe interviews (cf. Lamnek2005: 386).
Generally, expert interviews “are using verbal stimuli to cause verbal reactions. This is happening in certain situations and includes mutual expectations whereas answers bear on experienced and memorized social occasions. These are opinions and assessments.” (Atteslander 1995: 132). The status of the experts derived “from their function and position within a company” (Scholl 2003: 6), they are OTC experts and are or have been responsible for OTC marketing and PR strategies in the German OTC market. This leads to another difficulty in this thesis: It had to be clarified if the chosen experts could be interviewed in English. Soon it was realised that a German questionnaire with the same questions as the English one made sense. Thus, most of the interviews were conducted in German, transcribed and translated in English (cf. appendices C - K, German transcripts on CD). This had the advantage that due to my native language, questions as well as answers were clearer.
In reflection on the method it becomes obvious that the applied interviews are only able to capture opinions, views and experiences of individuals that are subjective rather than objective. But one could argue that answers are always loaded and given from a position. Additionally, the difficulty remains “that people do not always say what they think, or mean what they say.” (Bruhn-Jensen 2002: 240). One can argue that the experts might eventually not be willing or allowed to answer all questions honestly due to company secrets. Furthermore, the fact that all interviews were conducted via telephone might have influenced the results as the interviewees are not confronted face-to-face which was mainly done because all interviewees were working and busy. Plus, most of them lived far away from Münster and with the time and money available, this would just not have been possible. But it was expected that the fairly new topic, the large set of people interviewed and the possibility to not mention the name of the experts and companies helped to counteract these two processes. It was decided that it was preferable to reach more experts from different regions and especially big cities where many large PR consultancies are based via telephone than to reach a few from a narrowed region vis-à-vis.
Due to time and the high number of interviewees, the first idea to apply questionnaires as additional quantitative method (as described e. g. in Birn, Hague and Vangelder 1990) was neglected.
3.2 Central Research Questions and the development of the guidelines
After the research of the German OTC market and the research of marketing, PR and IMC bibliography, central research questions and hypotheses were summed up. The research questions should provide further knowledge in three areas: the German OTC market, the relation of marketing, IMC and PR and OTC product PR. These areas lead to five central research questions:
1) What is special about OTC as products, which processes shape the actual OTC market in Germany and how does this affect OTC marketing and PR? (chapter 2 and 5)
2) What is the general role of PR within IMC and thus within marketing? (4)
3) What are general strengths and weaknesses of PR? (4)
4) Is PR a strong means within IMC to promote OTC? (5)
5) Which PR tools can be used for an OTC communication and why? (5)
The applied guidelines were developed on the basis of the research and the central hypotheses. Therefore, the interview guideline was separated into three blocks (please see Appendix A for the guideline in English).
The first block deals with marketing, IMC and PR and tries to find out about the interviewee's theoretical and/or practical experience. It was the purpose to analyse the relation of these three aspects and to find out about the general tools and the importance of PR from a practitioner's perspective. This part of the guideline should support and enhance the theoretical research and pave the way for an OTC PR discussion in block three later. The second block asks the interviewees about the German OTC market. Besides proving or disproving knowledge about this issue (e.g. to define OTC in question 2.1), this block tries to narrow down important developments in this market that may influence or might have already influenced the marketing and PR of OTC drugs. Additionally, this block underpins the research in the OTC part (chapter 2). The third and last block combines the first and second block: It analyses if and why PR could be an important tool within the IMC mix to promote OTC drugs.
Generally, it was tried to create the questions as clear as possible. Phrases such as “according to you” or “from your point of view” were added to stimulate the experts to be aware of the fact that it is searched for their experiences and opinions. That is why key questions (on the questionnaire) were applied with the remaining possibility of asking additional questions if an interviewee did not cover important aspects (cf. Scholl 2003: 68). Additionally, pointed and provocative questions such as 1.9, “Is there anything such as product PR?” helped to generate clear answers of the interviewees and to stimulate a dedicated discussion.
The fact was recognised that not all interviewees might be able to answer all questions. That is why the guideline was really seen as guideline that should support a more or less free and fluent conversation about the topic while providing a red line at the same time. Questions could be skipped by the interviewee and earlier or later questions that are linked to other questions could be answered in one go.
3.3 The Interviews: Preparation, Conduction and Transcription
A pretest of the guideline was conducted in early July to provide important information about the structure, the questions and the length of the interviews. After the pretest, the original German guideline was finally changed. All experts (please see the table of experts in Appendix В for detailed information) were contacted via Email with an exact explanation of the thesis, the guidelines and the interviews. The interviews were conducted in July and August with responses ranging in length from 18 to 49 minutes. All answers were recorded digitally as mp3 files on the PC (attached CD). Afterwards, the interviews have been transcribed (cf. Keats 2000: 40) and a content analysis (cf. Mayring 2003) of the interviews helped to organise and interpret the results (Excel sheets attached on CD). With the method of Mayring, the transcripts of the interviews were copied into Excel sheets. Every question got a code and the characteristic “statement / reasons” as well as the “reduction” helped to reduce and to crystalise out the ideas and opinions of the experts. Before it comes to the discussion and reflection of the interviews, the following part of this thesis will enlighten the theoretical background of marketing, Integrated Marketing Communications (IMC) and Public Relations (PR) as well as their mutual connection with regard to the topic.
4. From Marketing to IMC to PR
4.1 Competition and the market system
Before this thesis touches upon the relevant ideas of PR, a brief mention should be made about the broad field of marketing. This side glance should allow us to locate and evaluate PR's role and importance which should pave the way for a discussion of IMC and the relationship between PR and marketing later that is also necessary to grasp the discussion of expert opinions and the concept of an OTC PR.
Central to the understanding of market systems and marketing is the term “competition” as every economy has to deal with scarce resources:
"Any economy, whatever its cultural and political traditions may be, must decide what products to supply and how much of each to produce, how scarce resources will be apportioned in producing each, and how the end products will be divided up or distributed among the various members of society.” (Baker 2000: 18)
A product should be defined broadly as “a physical commodity or an idea, cause or other intangible that provides customer satisfaction” (Anderson and Vincze 2000: 219). There are three basic systems to deal with these problems of production, allocation and distribution (cf. Baker 2000: 18): To conform with tradition (e .g. caste system of occupational selection in India), central planning (former Soviet Union) or the market system. This thesis focuses on the OTC market system in Germany.
A market system is characterised by the process that “consumers and producers act in response to price signals generated by the interplay of supply and demand in more or less freely operating markets” (Baker 2000: 19). This results basically in an rational attempt of every consumer “to make the best of the market conditions he or she faces” (ibid.: 25) (by assuming the often discussed and questionable model of the homo economicus, e.g. Persky 1995: 221.) Today it is mostly acknowledged that the market systems “offers the best solution to the central economic problem of maximising satisfaction through the consumption of scarce resources” (Baker 2000: 19). Although the term “satisfaction” is highly problematic as it is special and personal to the individual deriving from “culture, values, attitudes and experience” (ibid.: 20) and furthermore it is not the products people desire but the satisfying experience with the products (Abbott 1955 in Baker 2000: 20), economists generally agree that “the process by which this [satisfaction] is achieved is marketing” (ibid.: 19).
From a company's perspective, another point has to be recognised: Every company, as well as every producer of OTC pharmaceuticals, is part of an industry that creates a market and competition. This is “a group of firms producing products that are close substitutes for each other” (Porter 1980 cited in Baker 2000: 28). It is the nature of competition of freely operating markets that “the forces of competition work to ensure that capital will flow from less efficient firms in an industry to more efficient firms and from less efficient industries to more efficient industries.” (ibid.).
Baker identifies five basic forces which govern this competition in an industry: the threat of substitution, the bargaining power of suppliers, the bargaining power of customers, the rivalry between current competitors and the threat of new entrants (cf. Baker 2000: 29). This permanent competition leads to an intensified need for companies to differentiate either themselves or their products or even both from competitors. This idea lies at the heart of marketing and is at the same time its major task. As it will be seen later, this is also highly the task of Integrated Marketing Communication and among PR.
4.2 Marketing: Needs and wants meet products and services
Marketing “as a distinct discipline was born out of economics around the beginning of the 20th century [...] when products and services not strictly required for human survival became generally available to large numbers of consumers” (Egan 2004: 9).
Generally and with regard to several academics and the Chartered Institute of marketing (CIM), marketing could be understood as “the management process responsible for identifying, anticipating and satisfying consumer requirements profitably.” (Egan 2004: 21, Theaker 2008: 11), thus it tries to understand consumers and create products that satisfy consumer needs.
The marketing discussion is shaped by two major marketing models. On the one hand, Philip Kotler's marketing management model (1967) tries to understand consumer needs better to effectively manipulate elements of the marketing mix, thus “to bend demand to the available supply” (Baker 2000: 21). It basically asks what can marketing do to buyers. Kotler claims that beyond mankind's basic needs, e. g. for food, “the existence of human needs and wants give rise to the concept of products” (Kotler 1976: 18). From his point of view, a product is something “that is viewed as capable of satisfying a want” (ibid.). A want “describes a state of felt deprivation in a person. The deprivation produces discomfort and a wish to act to relieve this discomfort. [...] The person will perceive certain things outside of himself that would satisfy his want. These things can be called products [...]” (ibid.).
On the other hand, the concept of relationship marketing (RM) “is built upon the creation and maintenance of mutually satisfying relationships. It enjoys a win-win perspective, mutual exchange, and sees the role of a producer as doing things for customers.” (Baker 2000: 21; cf. Grönroos 1994: 9). RM draws on traditional marketing principles: “The basic focus on customers is the same, it is just the way marketing is practiced that requires change” (Egan 2004: 21). This thesis will not discuss both models in great detail due to the limited scope of this thesis. It was believed that both models contain relevant ideas for the purpose of professional communication, elements that are central, melt into an Integrated Marketing Communication strategy and can shape good public relations. With this position explained, it is focused now on basic elements of the marketing mix that lead to IMC and PR.
The four basic elements of the marketing mix (developed by McCarthy 1978), referred to as the “4ps”, are product (product development, brand management, features, benefits, packaging, after sales), price (costs, profits, liquidity, competitiveness, value, incentives), place (channel management, retail location and retail image, logistics) and promotion (marketing communications mix, Integrated Marketing Communications) (cf. Egan 2007: 10). It is argued that these elements “have to be combined in a logically integrated program to conform to market forces bearing on the individual product” (Baker 2000: 317). Although it is often claimed that these 4ps have to be extended with another “p” for people as the organisation's greatest asset (cf. ibid.: 321, also cf. Theaker 2008: 307) or a “p” for politics, most of the current models work with the 4ps in order to explain marketing.
By remembering the outlined increasing market pressure, e. g. in case of OTC drugs with regard to upcoming generics, it is the task of this marketing mix and the marketing mix team to position and brand a product (an OTC drug) effectively to maintain and win market share. Positioning means “defining the location of a product (or service) relative to others in the same marketplace and then promoting it in such a way as to reinforce or change its 'position'” (Baker 2000: 288, cf. Blythe 2006: 160). A successful brand can be understood as “an identifiable product, service [...] augmental in such a way that the buyer or user receives relevant, unique added values which match their needs most closely” (DeChernatony and McDonald 1998 in Blythe 2006: 160). A brand might be a physical commodity or intangible (Anderson and Vincze 2000: 219), a “symbol of what the organisation stands for” (Olins 2008: 106) that “differentiates one firm's product or service from all others” (Anderson and Vincze 2000: 240). In essence, a branded product has a “sustainable differential advantage (SDA)” (Doyle 1999 cited in Baker2000: 295).
Although the other elements of the marketing mix require attention as well, academics point out that one of the most important competencies for marketers to differentiate and position their products nowadays is their communication capability and strategic thinking (Brannan 1998: introduction, Baker 2000: 11, cf. Schmidt 2004: 147). That is why promotion is of high relevance for successful marketing. The promotion “is responsible for the communication of the marketing offer to the target market” (Fill 1998: 6), thus it comprises the broad field of marketing communications and among various communication tools such as direct marketing, product placement, advertising, sponsoring, PR, events, conventions (cf. Schneider 2003: 238) illustrated as follows.
Abbildung in dieser Leseprobe nicht enthalten
4.3 Integrated Marketing Communications (IMC):
To bunch communication tools
Marketing communication can be described as providing “the means by which brands and organisations are presented to their target audiences with the goal of stimulating a dialogue to a succession of purchase” (Fill 1998: 2) or leading to “a better commercial or other relationships” (Egan 2007: 1) from a RM perspective. Communication scientifically and by observing the advent of the internet it is reasonable to understand marketing communications as a two-way communication process (Grunig 1992: 320) with an integrated feedback function of customers who could complain about a product publicly or towards the company. In short, marketing communication provides added value to a product or service through communicated enhanced product symbolism. Marketers try to understand customer needs and wants as well as “the identity of the consumer” (Yeshin 1998: 11), however, whether this is possible is another question altogether. Moreover, Yeshin suggests that every company has to recognise “the fact that everything a company does consists, in some form, as part of the communication which takes place between itself and its customers” (ibid.). So marketing communication can be both, “promotion” for a product or service and existence with a positive or negative image through communication. An image can be understood as the “quintessence of attitudes that consumers attribute to a product, service or idea” (Gabler 2004: 1434), also referred to as the corporate image in case of a company. A corporate image can emerge without the support of the company itself (cf. Demuth 1994: 27) as in society there is an intrinsic and intuitive compulsion to get idea (an image) of persons and companies. Although companies try to shape this corporate image with IMC tools, a corporate image always depends on subjective and thus emotional attitudes, feelings, experiences and opinions, too (cf. Essig 2003: 22, Bungarten 1993: 118).
Although some academics refer to (marketing) communication as promotion (e. g. Baker 2000: 414), this thesis prefers to use the term marketing communication which most ofthe researchers in this field agree upon.
The marketing communication mix comprises various tools: Fill lists advertising, sales promotion, public relation and personal selling (1998: 6, cf. Anderson and Vincze 2000: 314 - 320), one can add direct marketing (Egan 2007: 17), publications, the internet and many more as well.
But, in today's “overcommunicated society' (Ries and Trout 1986 cited in Baker 2000: 292, cf. Blythe 2006: 54 as well) marketing communication faces a problem: With up to 1500 advertising messages every day (Brannan 1998: 3), rising media costs and competition as well as product differences that narrow (ibid.: introduction, Blythe 2006: 54), the only solution of marketing is to be selective, to raise more attention and/or to be more trustworthy than others (with PR?), to narrow targets and/or to practice segmentation. In order to reach critical and overwhelmed customers, companies additionally integrate their marketing communication tools. The purpose of Integrated Marketing Communications (IMC) is 'to deliver a clearly defined message to an identified target audience in an effective manner” (Brannan 1998: 1), to deliver a core message to a target market, while at the same time building and reflecting a brand that offers a real benefit. The rationale behind it is that by using many different routes (e. g. advertising, PR and direct marketing simultaneously) “the meaning of the message is more likely to get through than if only one or two routes were used” (Blythe 2006: 3). Consistency, consistent visibility and integration help customers to remember a brand, e. g. Coca Cola is always working with the same symbols and colours, thus purposefully shaping its corporate identity (CI) and thus its reputable image.
To underpin the relevance of these theoretical considerations in business practice, the interviewees were asked to explain from their view characteristics of IMC as well as to evaluate its importance. Nearly all interviewees support the theoretical analysis that IMC bunches communication tools thus providing consistent communication across all channels (see appendixes C - K). Additionally, all experts attribute a high importance to IMC in business practice.
This integration is now applied across audiences, products and time (cf. Brannan 1998: 4-5), e. g. in communicating the same message in specified or varied ways to customers, local authorities and community (external audiences) as well as to the staff and partners (internal audiences). In case of time it is argued that every product goes through a product life cycle (PLC) (e. g. Egan 2007: 41, Anderson and Vincze 2000: 232 - 236, Fill 1999: 213). By passing stages of market introduction, growth, maturity, saturation and decline, marketers can strategically coordinate and apply either the whole mix or different tools, depending on each tool's specific strengths and weaknesses and the specific strategy to sustain a competitive advantage. With regard to the PR core of this thesis, the comparison of the different elements of the IMC mix with PR will take place after the introduction and analysis of PR.
4.4 Public Relations (PR):
To manage autonomy, to create favourable images
To speak with the words of noted PR researcher James E. Grunig, PR “is the management of communication between an organization and its publics” (1992: 4). It equates PR and communication management and is broader than terms such as media relations or publicity. It describes “the overall planning, execution, and evaluation of an organization's communication with both external and internal publics - groups that affect the ability of an organization to meet its goals.” (ibid.), groups also called stakeholders (ibid.: 84). Kitchen summarises further PR definitions (1997: 27 in Theaker2008: 5). Thereafter PR
- is a management function,
- covers a broad range of activities and purposes in practice,
- is regarded as two-way or interactive,
- is that publics facing companies are not singular (i. e. consumers) but plural,
- is that relationships are long term rather than short term.
All these factors are key to PR. With regard to Grunig it is the main task of PR to manage the company's striving for autonomy through mutual understanding between a company and its stakeholders (cf. Grunig 1992: 11). That is so important because every internal or external stakeholder limits and/or controls a company's market performance somehow, e. g. Amnesty International discovers the sweatshop production of the company and starts to run a campaign. To manage these relationships to the environment through communication and to maintain them on a qualitatively high level based on a two-way symmetrical model of communication (ibid.: 320) - a company can never be without any relationship - is the key task for PR that increases the effectiveness of an organization (ibid.: 84 - 85). From this perspective of PR on a corporate level, PR fits well within an RM perspective.
Additionally, IMC researchers determine that PR is able to contribute to the already mentioned branding and positioning by shaping the image of a company (and its products) (cf. Baker 2000: 295, Hart 1998: 232). Furthermore, PR increases the company's market reputation and thus a higher market share, happier customers, more satisfied employees, favourable government, better applicants for jobs etc. (ibid.: 228) that can finally lead to a higher return on investment (ROI) (Baker 2000: 295, Hart 1998: 232).
There are various PR tools such as news releases, press conferences, media briefings, interviews, media tours, facility visits, online press offices, fact sheets, case histories, question-and-answer sheets etc. (Theaker 2008: 208). Plus, PR plays a major role in investor relations, lobbying, sponsorship, crisis management, events etc. (Fill 1999: 403). But there is no PR standard solution: As the interviewed expert the anonymous interviewee B explains, the tools used depend highly on the individual case: PR “is extremely difficult to break down into classical formats, because every task is different.” (Appendix H, 1.5). The anonymous interviewee G has the same point of view, underpinning some standard formats that can be mostly applied: “There is a whole range of them. Obviously, the standard one is a press release, [...] whether it is promotional literature, [...] conferences or whatever” (C, 1.5). The anonymous interviewee F also adds the internet or event- communication as PR tools (I, 1.5). In essence, the PR staff will have to decide which tools are applied in the individual case of the product or service.
4.5 PR and marketing: Bosom buddies instead of squabbling sisters
These qualities and tools of PR lead to two questions that are key to the evaluation and comparison of PR and its tools to other communication tools: First, what is the relationship of PR to marketing? And second, what is the role of PR within IMC with a focus on products?
With regard to the status quo, Theaker critically points out that “to marketing practitioners and academics, public relations is one of the 4ps” (2008: 10). Grunig observes the same reduction and subordination under the marketing department and demands to understand and implement PR as an independent communication tool and management function with an independent manager, equated to the marketing manager (Grunig 1992: 20, cf. also Hart 1998: 235).
Although the idea is supported that an independent, parallely running corporate PR that, in close mutual agreement with the marketing department, communicates with various publics, creates a positive image and reputation, manages independence and thus supports the company's performance, it is believed that PR has a second function on the product level that is part of the IMC mix. This function, sometimes referred to as marketing public relations (MPR) (Theaker 2008: 11, Fill 1999: 7) or brand PR (Brannan 1998: 52), this thesis refers to as product PR that is less misleading, can contribute to a successful IMC because of certain strengths PR has to offer in comparison to other communication tools of the IMC mix, exemplified here as comparison to advertising and backed up with the expert interviews. This discussion happens partly by reducing product PR to press relations for a better understanding. As shown, PR comprises even more tools.
4.6 Discussion of PR's strenghts and weaknesses
First, while advertising is obvious “marketing communication” in newspapers, TV, radio etc. that is paid for (cf. Brannan 1998: 45), PR offers trustworthiness and credibility (Hart 1998: 155) because the media as third party is perceived as impartial (Anderson and Vincze 2000: 357). An article in an important newspaper that mentioned a product or company is more trustworthy with the journalist as “filter” (Brannan 1998: 54) than the big ad besides. But what is trustworthiness? In this thesis, trustworthiness will be understood as the “basic willingness to accept messages of a certain object as appropriate and to adopt those to a certain degree to one's own spectrum of attitudes and opinions” (Wirth 1999: 55). This is, as described, highly the case with third-party information. Second, PR is considered as “conveying information only” (Blythe 2006: 130) with a certain information depth: PR can also explain complex products or services such as OTC whereas advertising is limited to short messages. Nevertheless, advertising is seen to create awareness rapidly because the content is in total control of the company or agency (in contrast to PR that depends on the editor) thus delivering the message precisely as wanted (Brannan 1998: 107), whereas the content of a press release can be incomplete, changed or even wrong.
Third, PR is flexible with a quick response possibility (ibid.): The internet in particular allows companies to respond to an incident within minutes or with press releases in a few hours. Additionally, PR is dialogic, the company is able to talk to its stakeholders and vice versa, e. g. via corporate blogs. Fourth, PR has “lower (relative) costs to reach members of the target audience (cost-effective)” (Fill 1999: 395). Although the staff involved in professional PR occasions results in costs (cf. Blythe 2006: 130), the costs are lower than those for advertising as every ad depending on the specific mass media can be extremely expensive whereas a printed article itself does not cost anything and can be inexpensively and easily reprinted (Hart 1998: 155). Fifth, PR is able to reach specific audiences in niche markets with information-deep, very specific articles (Fill 1999: 395) orto motivate members of networks (ibid.: 403), e. g. in the supply chain by maintaining good relationships and creating a favourable corporate image.
With regard to the expert interviews, these theoretical considerations can be underpinned. The anonymous interviewee G indicates that “if they (the publications) become over undiluted, they tend to have more credibility if you are getting your message in the context of a bigger article” (C, 1.8). He adds that two developments lead to this: First, “there is no sufficient time, space or staff to actually develop a story around PR or press releases” which, in turn, leads to the process that editors take press releases gratefully. Second, “it is fairly simple for a lot of organisations to more or less guarantee that their press releases are used” (ibid.). So the “power” factor is also key to PR. Furthermore, the anonymous interviewee F supports that “trust” is key to PR and adds that PR “is also a substantial way to present information because it allows to go into more detail and to talk more extensively about certain products” (I, 1.8). This is also underpinned by the anonymous interviewee H who claims: “It is PR's absolute strength in case of OTC and generally in the healthcare business to be able to explain” (D, 1.8.). Similarly, the anonymous interviewee B sees PR's central strength in occupying “ranges oftopics with information sustainably and consequently” (H, 1.8). She adds that PR is able to personalise (e. g. the CEO saying something publicly) as “it allows to work with real human beings instead of working with advertising role models” (ibid.). The anonymous interviewee B also agrees that PR is able “to work with that editorial filter that reduces the negative touch and increases the neutrality or our communication that is basically always under suspicion of being acted for one's own interest. PR is able to this more effectively than classical advertising ever could” (ibid), thus gaining trustworthiness. Nevertheless, the journalists as filter that might add a neutral touch might also become a “bottleneck” (the anonymous interviewee H ) PR professionals have to pass that could change or destroy the central messages. The anonymous interviewee C suggests that a further strength of PR is that it is “able to focus on the social and cultural context” (E, 1.10)ofa company's performance.
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