Essentials of Health Care Marketing 2nd Ed.

Eric Berkowitz

Chapter 3

The Environment of Marketing Strategy

Chapter 3 Learning Objectives

1. Understand the impact of the five environmental forces on organizational strategy

2. Explain how social and economic forces affect marketing strategy

3. Describe the impact of technology on health care organizations’ survival and competitive environment

4. Know the major regulatory requirements that must be followed when formulating health care marketing strategy.

Introduction

• Environmental scanning is conducted to assess trends in each of the five major environmental forces (economic, technological. Social, competitive, and regulatory) for their potential impact on the organization’s target market. Then, the health care organization can appropriately adjust its marketing mix strategy.

Learning Objective 1

• 5 Major Environmental Forces– Economical– Technological– Social– Competitive– Regulatory

Learning Objective 1

• Why are these forces important? – method to continually scan environment– conducted to asses trends over a period of

years– to know what needs to be done to adjust

appropriately to the marketing mix strategy

Learning Objective 2

• Economic Forces – Inflation

• decline in the buying power when price levels rise further than income

– Consumer income• gross income-total amt. $ earned by one person or family in

1 yr.• disposable income- $ left over after taxes to spend on basic

needs• discretionary income-$ left over after taxes and basic needs

for recreation or entertainment

Learning Objective 2

• Social Factors – Demographics

• population– aging population is growing

• baby boomers– need a way to support their aging relatives

Learning Objective 2

• Social Factors – geographic shifts

• people are moving west while people in the east are remaining about the same

– racial and ethnic distinctions• most noticeable in increase in metropolitan areas

Learning Objective 2

• Social Factors – Culture

• roles of men and women– more women are working outside the home and being

head of household

– Changing providers• more females are prominent in healthcare

positions such as physicians, and physician assistants

• A practice wants to attract female employees

Learning Objective 2

• Social Factors – Changing attitudes

• “I work to live”• Wellness• Complementary or alternative medicine• More proactive consumers

Learning Objective 3

• Competitive Factors – Technology drives the industry.

• New advances affect institutions and providers• Determines how care is delivered• Diagnostic and surgical procedures are shifting to

outpatient centers• Tele-medical• Increased efficiency = Decreased cost

Learning Objective 4

•Regulatory Factors –Competition

–Pricing

–Distribution

–Promotion

–Self-Regulation

Learning Objective 4

• Competition – Antitrust Legislation against monopolies

– Clarifications of the FTC “Safety Zones”

– Product Legislation – Trademark protection

Learning Objective 4

• Pricing – Has several regulations that relate to

reimbursement. – Discounts are allowable– Price fixing not specifically illegal according to

the Sherman Act, but considered illegal overall.

Learning Objective 4

• Distribution – Exclusive Dealing – Illegal to require a buyer

to handle only the products of one manufacturer and not a competitor

– Requirement Contracts– Tying Arrangements

Learning Objective 4

• Promotion – FTC forbids deceptive or misleading

advertising and unfair business practices.– FTC can order a company to conduct

corrective advertising

Learning Objective 4

• Self Regulation – Gifts must be nominal– Educational items and patient care items

should be used in the marketing process to avoid enticements.

Summary

• Marketing Strategy must be developed in response to and in concert with the broader macroenvironment. Economic, technological, social, competitive, and regulatory forces can all determine the effectiveness of any organization’s marketing program.

• In recent years, the rise in the cost of medical care has dramatically outstripped the rise in cost of consumer goods. This increase has caused employers and other health care buyers to take more aggressive actions to control their health care expenses.

Summary continued

• Health care is a technologically driven industry. New technological advances dramatically affect the institutions and providers who deliver health care and determine how that care is delivered. The Internet and wireless will dramatically affect how patients interact with their health care providers.

• The changing demographics of the US population represent significant opportunities for health care providers. The fast-growing segment of older consumers are major utilizers of health care services and products. Baby boomers are often attracted to alternative medical approaches.

Summary continued

• Changing marketplace demographics related to gender, ethnicity, and race require health care providers to be more responsive to the needs and concerns of diverse consumers.

• The competitive market can be defined as either a pure competition, a monopolistic competition, and oligopoly, or a monopoly. The differences represent the number of sellers in the marketplace.

Summary continued

• The prior movement to managed care is now returning to a fee-for-service market. Inpatient admissions are rising and outpatient surgeries continue to grow.

• A wide variety of federal and state regulations exist that affect each aspect of the marketing mix. Mergers and acquisitions have been of great concern for regulators.

• The issue of provider referrals is also highly regulated.

• HIPAA regulations also impact the marketing activities and communications that can be conducted without a patient’s consent.