Marketing: Marketing and Health Care

Health care includes hospital health care, physician services, dental services, drug and medical supplies, physical therapy, nursing home care, substance abuse services, and psychological health care.  It includes both profit and no-profit businesses.  In 1991 a total of $756 billion was spent in the United States on health care.  This is a huge and constantly growing market.  There is a huge financial burden on placed on health centers, due to 37 million uninsured people in the United States.    This makes marketing to and by health care institutions challenging and necessary.

To provide health care services, health care institutions must purchase a rather sizeable amount of goods and services.  Marketers supply health care institutions with buildings, medical equipment and supplies, machinery, office equipment and supplies, utilities, and insurance.  Advertising and sales people that are specialists in their field mostly fill these needs.  For example, the pharmaceutical industry relies heavily on the marketing efforts to sell medical drugs to health care institutions.  Marketers in this over $75 billion industry may spend more than $200 million on marketing just to introduce a new product to this market. Pharmaceutical sales people make calls to doctors, trying to introduce them to new products. They provide physicians with promotional samples to give to their patients.  In addition, pharmaceutical marketers use heavy media advertising such as television and radio advertising, and promotional videos and publications.  These forms of advertising familiarize consumers as well as physicians about medical drugs. 

On the other hand, there is marketing by health care institutions.  Providing health care is a highly competitive endeavor.  The number of hospitals has decreased due to consolidation and the need for more cost efficient facilities.  Trauma centers in hospitals and nursing homes are over crowded and short staffed.  Health care organizations must compete for patients, doctors, nurses, and financial resources.  The number of nursing home facilities has increased during the past 3 decades.

 However, more facilitates are needed to take care of the growing number of senior citizens.  To meet the challenges of the health care institutions must effectively market their services to prospective patients and funding sources.  Private and public health care institutions depend on patient’s fees, government funds, and contributions to carry out their missions.  Health care organizations use several types of media to market their services.  Consumer interest in good health has provided new opportunities for marketers.  Health products have dominated new product developments in the grocery store.  The necessity of health care will always create marketing opportunities for health care institutions.

Market System: 6 major Characteristics of the Market System

The Market System is an economy in which only the private decisions of the consumers, resource suppliers, and firms determine how resources are allocated.  I am going to talk about the six major characteristics of the market system.

1) Private Property- private individuals and firms not the government own most of the property resources (land & Capital) when combined with the freedom to negotiate binding legal contracts, it enables individuals and businesses to obtain, use and dispose of property resources as they see fit.

a.  Property rights encourage investment, innovation, exchange, maintenance of property, and economic growth.

b.  Property rights also extend to intellectual property through patents, copyrights, and trademarks.

2) Freedom of Enterprise and choice- This idea is closely related to private property (freedom of enterprise) is the freedom to obtain resources to produce their select goods and services and are allowed to sell in whatever market they choose. Freedom of choice enables owners to employ or dispose of their property and money as they see fit.  It allows workers to enter and line of work for which they are qualified, and it ensures that consumers are free to buy the goods and services that best satisfy their wants and needs.  These choice are free only within broad legal limitations.

3) Self-Interest- is the motivating force of all the various economic units as they express their free choice.  In other words each economic unit does what’s best for itself.  This gives consistency or balance to the economic system.  Entrepreneurs try to maximize profit or minimize loss.  Property owners try to get the highest price for the sale or rent of their resource.  Workers try to maximize their utility and consumers try to obtain the products they want at the lowest price possible and apportion their expenditures to maximize their utility.

4) Competition- is the cornerstone of freedom of choice.  It is the freedom of choice exercised in pursuit of monetary sources. This requires; independently acting sellers and buyers operating in a particular product or resource market. And the freedom of sellers and buyers to enter or leave markets on the basis of their economic self interests.

5) Markets & Pricing- are key characteristics of the market system.  They give the system its stability to coordinate millions of daily economic decisions.  It is know as the Coordinating Mechanism of the market system.

6) Limited Government- is an active but limited government.  The government has the ability to increase the overall effectiveness of the economic system in several ways.        

 

These six characteristics are key when it comes to evaluating a market system.  Carefully analyzing these areas can lead to a healthy and successful company and product life.

Marketing: Law Of Diminishing Returns and Economics

The Law of Diminishing returns also called the Law of Diminishing Marginal Product and the Law of Variable Proportions, is the principle that states as successive increments of a variable resource(labor) are added to a fixed resource (capital and land) the marginal product of the variable resource will eventually decrease.  This law assumes that technology is a fixed entity, and each successive worker has the same innate ability, motor functions, education, training, and work experience.

Units Of     Variable Resource	Total       Product	Marginal Product	Average Prodcut
0	0
1	10	10	10
2	25	15	12.5
3	45	20	15
4	60	15	15
5	70	10	14
6	75	5	12.5
7	75	0	10.71
8	70	-5	8.75

1. Units of variable resource: Labor
2. Total Product(TP): is the total quantity, or total output of a particular good produced.
3. Marginal Product (MP): is the extra output or added product associated with adding a unit of variable resource, to the production process.  It can also be represented as a mathematical notation; MP= change in total product/ change in labor input
4. Average Product (AP): also called labor productivity, is output per unit of labor input.  This to can be expressed with a formula; AP= total product/units of labor

This table shows that in the short run, a company can increase output by adding units of labor, but in the long run each successive unit of output will cause negative marginal returns.  Finding the right balance is the key to marginal success.  This is an economic based topic but it is in response to a query posted earlier this week.  I know that this question was for a school project.  I hoped that this helped getting you on your way to the answer.  

Stages in the Consumer Decision Making Process

The five stages of the consumer decision making process include; Problem recognition, information search, information evaluation, purchase decision, and evaluation after purchase.  This is just a general model of the decision making process and it emphasizes that the buying decision making process starts before the actual purchase and continues even after the purchase.  It also encourages the marketer to focus on the complete buying process and not just on the purchase decision.

Problem Recognition: consumers recognize a problem as a need or want.  Of course, the most frequent problem occurs when consumers realize they are out of the product. For example, when the gas tank gets near empty, or you run out of lunch meat for your sandwiches, or when your car is due for maintenance.  Problem recognition also occurs when a consumer receives new information about a good, service, or business.  New fashions, for example, can make people recognize that their current clothing is not in style or up to date.  Different circumstances can change and force a consumer to recognize a major buying problem.  A stay at home mom who returns to the work force may need a new wardrobe.  A first year college student may need a personal computer.  A recently retired couple may now have the time and money to take a European vacation.

Information search: consumers search for information that is helpful in making a purchasing decision.  They may get this information in one or in many ways.  Marketers are interested in the major information sources that consumers use and the influence each has on the final purchase decision. Consumer information sources typically fall into four groups: 

• personal sources;
• commercial sources;
• public sources; and
• experience sources.

The consumer receives the most information from commercial sources.  these include advertisements, salespeople, catalogs, newspapers, and manufacturer-supplied direct mail. However, the most effective influence often comes from such personal sources as family members and friends.  Effective marketers try to identify the information sources and their relative influence on customers.  This means asking customers how they heard about the product, what sources of information they turned to, and what influences each source of information had on their purchase decision.  This consumer information helps marketers plan advertisements, select information to give to customers, and choose other marketing techniques to meet consumer needs.

Information Evaluation: follows the information search.  During this stage consumers usually compare products with respect to their various features and benefits.  They may compare product brands, styles, sizes, colors, prices, and related services.  They may also compare products at various stores.  They consumer may also evaluate the importance of certain information.  For many consumers, perceived reliability is extremely important.  For others, price, ease of operation, related services, or prestige may be paramount.  Other information may be more important to consumers when evaluating services.  While vacation, traveling, for example some consumers may want to only stay at the Hilton, while others are more prone to lodging at the less expensive locations.  Consumers generally evaluate goods and services by the features or benefits that are important to them.  retailers and other marketers often try to influence the type of criteria that consumers use in their product evaluations.  they frequently use ads that compare the features of their products with those of their competitors.

Purchase Decisions:  At this stage in the decision making process, consumers have recognized a need, done some research on the product, and evaluated available alternatives.  they are now ready to make a purchase decision, the actual buying of a specified product.  Many factors influence the purchase decision.  These include the cost of the product compared to how much money the consumer can afford to spend, the opinions of family or friends, and the sales and services policies of the marketer.  Some customers may wish to try a product before making a major purchase. 

Evaluation After Purchase: After customers make buying decisions, they often continue to evaluate them.  Post-purchase evaluation occurs when a customer seeks reasons to support a purchase decision.  retailers use the term buyers remorse to describe a customer's  second thoughts after a purchase.  Marketers use the term cognitive dissonance to refer to post-decision doubt that a customer has about an original purchase.  This doubt stems from an awareness that in reaching a particular buying decision the individual may have rejected certain attractive alternatives. Doubt is created when the motive for buying the alternative overshadows the actual purchase.  Marketers take positive steps to reduce cognitive dissonance and to help buyers feel good about their purchases.  Successful marketers know that a satisfied customer is an excellent advertisement for the company and its products.  They try to fulfill their customers needs and wants.  Customer oriented practices usually result in customer recommendations, called word of mouth advertising, and customer loyalty and repeat business.

Market Segmentation: Age, Gender, Education and Occupation, & Ethnic Background

Market segmentation is the process of dividing the market into segments or groups according to the customers needs and characteristics. Market segmentation helps marketers identify understand the various groups of possible customers. This allows marketers to tailor their offerings to meet the exact needs of one or all of the segmented markets. For example, the automobile industry has grown to its present size and diversity because auto manufacturers recognize and try to meet the needs of the many different segments within the total auto market.

Market segmentation is just as important to retailers and wholesalers as it is to manufacturers. For example, a department store and a discount store may offer the same television set. However, their ways of pricing, promotion, and distributing the television set may be very different because they are tailoring their marketing efforts to two distinct segments of the consumer market. The department store is targeting people in middle income bracket while the discount store is targeting those in the low income bracket. A market may be segmented according to several variables. These variables may be classified according to four categories: Demographic, geographic, psychographic, and behavioristic variable. Demographics involves statistics about population patterns such as age, gender, education and occupation, and ethnic background. Marketers study demographics to determine common needs and spending patterns.

People within a certain age group have many buying needs in common. For example, babies need diapers and formula, special care and clothing. People over the age of 65 tend to need medicine and other health care products. As you can see this specific market demand allows marketers to segment a market. Some manufacturers concentrate their entire production on a single age group. Marketers generally divide the consumer market into five age groups. These groups are children, teenagers, young adults, the middle aged, and the over 65s.

The Children's Market is made up of youngsters to the age of 10 year s old. This market includes about 15 percent of the total population. This market segment ends at age 10, because many 10 to 12 year olds model their behavior and attitudes to those of teenagers. Even before children enter school, they begin to form their own tastes and preferences. Their independences are reflected in the amount their parents spend on them and in the amount they spend themselves.

The Teenage Market is composed of young people ages 10 to 19. It accounts for some 18 percent of the population. Typical teenagers have special tastes, attitudes and outlooks. They are interested in the new, (new fashions, new music, new cars, new foods, new hairstyles, and new ideas. They want to play new video games, buy new tapes and compact discs, see a movie and go out clubbing. The teenagers disposable income is growing and brand loyalties are lasting. About 45 percent of all teenagers work and/or receive a weekly allowance. About sixty percent of teens have a hand in making out the family grocery list, and about 40 percent select the brands that are bought. Many of the sophisticated marketing techniques are aimed at young women and teenage girls. More than 6.5 million teenage girls have charge accounts and about 16 percent have credit cards.

The Young adult market consists of young adults ages 20 to 34. It contains about 24 percent of the population and is important because of both size and purchasing power. People in this age group get their first major career positions, get married, establish homes, and start families. They are the vital market segment for marketers of automobiles, auto accessories, clothing, housing, home furnishing, and children's products. Marketers know that this group has major needs and wants, has the money to satisfy them, and is willing to spend. For example, a furniture manufacturer may place ads for a dining room set in magazines read by young adults. An automobile dealer may put a commercial right before a television program popular with this age group. An airline may mail brochures to a list of young adults to promote vacations for couples.

The middle aged market is made up of ages 35 to 64. It includes the baby boomer generation. This group has the most buying power and buys the largest number of consumer goods and services. Many middle aged people, particularly the older ones, are at the peak of their earing power. Thus, this market segment receives much attention from the makers of high priced, top quality goods and services. These include cars,insurance, vacation homes, escorted tours, and expensive recreational goods such as airplanes, boats and swimming pools.

The over 65 market makes up about 14 percent of our population and is growing. People in this age group are, of course, consumers of the basic necessities. Most have discretionary income or expendable income, which is, the money left over after paying for the basic cost of living. Many people over the age of 65 have leisure time they want to fill. Some of them also have physical problems that require special goods and services. The marketers in retirement areas market the products to older residents in several ways.

Gender
Segmentation by gender is an obvious way of identifying possible markets. Women and men sometimes look for different benefits in products. In the past some goods, such as power tools and sporting goods, were bought mainly by men. Others such as groceries and health care products, were purchased mainly by women. These patterns are not staying constant over time. Women today have an increasing amount of personal buying power due to increased income levels. More women are buying such things as power drills and more men are shopping for groceries and grooming aids. Marketers are aware of and are addressing these changes in buying patters.

Education and Occupation
Today, more people are going to school at all levels that even before. They are also attending school for longer periods. In fact, education has become a lifelong process. School and businesses offer courses not only to improve job skills but also for self-improvement. The increased interest in education may lead many people to higher paying job positions. This means they will have more discretionary income to spend on goods and services. People in certain occupation form ideal segments for related goods and services. the marketers of career related goods and services target possible customers according to their occupations.

Ethnic Background
Markets for goods and services can be segmented according to ethnic groups. An ethnic group is all the people who have such characteristics in common such as racial background, language, social customs, or physical traits. Everyone is a member of at least one ethnic group. In fact, because of our diverse population in the United States, many people can trace their origins to several ethnic groups. There are numerous ethnic groups in our country. When members of these groups first arrived in the United States, they settled near friends and relatives and formed ethnic neighborhoods. These various ethnic groups established grocery stores, bakeries, and restaurants in their neighborhoods. These and other marketing outlets all them to help preserve their cultural conditions. Each ethnic group makes up a market segment allowing the marketer to meet the specific needs and wants of the customer.

Marketing and The Consumer Market

To fulfill their customers needs and still make a profit, marketers must thoroughly understand the characteristics of their various markets. As you already know from my previous articles. A market is all the potential customers for a product. There are two primary types of markets: the consumer market and the industrial market.

The consumer market is all of the potential customers for goods and services sold for personal use. This includes people like you and your family: people who buy such things as clothes, watches, food, auto insurance, notebook paper, dry cleaning services and televisions for their own use and enjoyment. These are known as consumer products (goods and services intended to satisfy the needs and wants of the individual consumer). The consumer market in the United States is amazing. There are more than 250 million people in the United States, and the population is constantly growing and changing. For example, every year:
• Every year people get jobs for the first time and begin to earn their own money;
• New consumer goods and services are introduced into the market;
• Thousands of individuals and families move to different parts of the country;
• The average earnings of the average person can increase or decrease with fluctuations in the economy; and
• Thousands of people retire and completely change the patterns of their lives.

Statistics about population patterns such as age; gender, ethnic background, income education and occupation are called demographics. Demographic changes affect which products are developed and how products are marketed. For example, an increase in population could result in a greater demand for the production of certain goods and services. On the other hand, it could mean that existing products have to be marketed differently to reach a larger or a more diverse audience. Increasing in average income could mean an increase in spending.

The three areas of change in the consumer market that most affect marketers are:
• The size and characteristics of the population;
• The amount of money customers have available to spend; and
• The way customers spend their money.

Thus you can see why marketers seek data on population, income, and spending patterns. This information helps them develop and seek the goods and services that society needs and wants.

The Marketing Functions

Modern marketers try to make consumers realize how marketing meets their demands for goods and services.  The term added value describes the advantages that marketing provides for the consumer. The value added emphasizes what the consumer receives in return for the costs involved in brining the product to the market.  In the process of adding value to products, many marketing functions occur.  The marketing functions explain the working to the overall marketing system.  They help connect the producer and the consumer.  How these functions are carried out and who performs them may vary from one economy to the next, but they are still carried out in every marketing system.  The eight functions of marketing are classified in three main groups:

• Exchange;
• Physical distribution; and
• Facilitating functions.

The two exchange functions are buying and selling.  Exchanges involve the transfer of products from the buyer and seller.  Before marketers can buy goods for resale, they must determine the customers’ needs through careful research.  Marketers must find the suppliers who can best provide the goods that will satisfy these needs.  They must also arrange the best shipping dates for the merchandise.  The selling functions include targeting customers, meeting competition, and setting prices.  They also involve persuading consumers to buy goods.

Physical Distribution functions involve the actual movement of goods from one producer to another, from producer to marketer, and from marketer to consumer.  Tow important physical distribution functions are transporting and storing.  Many products travel log distances, often by rail or truck, from the producer to the actual market so that consumers have access to the products.  Marketers must not only find the best way to ship a product but the must also know time schedules and costs involved.  On their way to the market, goods may often be stored in warehouses.  This is necessary when they are produced ahead of time they will be needed or when large shipments must be broken down into smaller shipments before being marketed.  Transportation thus gets goods to the right place, while storage gets them to the market at the right time. 

Facilitating Functions support and make easier the basic buying and selling, transporting and storing functions.  These functions include: 

• Standardizing and grading (offering goods of uniform size and quality)
• Financing (providing the necessary funds to produce, store, transport, and sell goods and services).
• Risk bearing (planning the uncertainties of marketing activities through risk management and insurance).
• Gathering marketing information (continually collecting and analyzing the information needed to plan, organize, conduct, and evaluate marketing activities). 

I will talk about each one of these functions later in greater detail.