Session #1 5 : Agenda for of MM2– MARKETING STRATEGY

1. Session #15:Agenda for of MM2– MARKETING STRATEGY • Brief Review • The Zantac Case: Market Leadership

2. Review ofClass Session 13: Major Points of the ODI Case • Successfully introducing really new products is very difficult and most likely to fail (for variety of reasons) • ‘Simple implementation problems’ can kill an otherwise good product • Important to anticipate & confront consumer objections to product adoption • Various types of risks

3. Attributes of Innovations that Improve/Detract from their Chances of Adoption by Consumers • The Relative advantage of the innovation over the products/procedures it is designed to supersede. • Its perceived complexity. • Its compatibility in use with present behavior patterns and complementary products. • The ease with which its features (especially its benefits) can be observed and communicated. • The degree of risk (physical, financial & social) attached to adoption of the innovation in preference to existing products or procedures. • The extent to which the innovation can be tried on a limited basis before being adopted on a large scale, permanent basis.

4. Extent of Zantac’s Success (time of case) • Zantac is #1 pharmaceutical product worldwide • 1.8% share  whole of #10 firm (Sandoz; 2.1% share) • Glaxo rose from minor pharmaceutical firm to #3 worldwide on strength of Zantac • In 1981 Glaxo’s US sales were small; By 1989 • held 53% of US market • US accounted for 41% of Glaxo’s sales • Between 81-89 Glaxo was the most profitable large company in the world in any sector • ROI increased from 16.5% (1981) to 30% (1989).

5. Tagament vs. Zantac Customer Needs (by order of Ideal Performance Tagamet Zantac importance) no difference indicated in Pain Relief |-----------2------------| Immediately after several days (p. 5) case Healing Speed* |--------T---Z----------| Immediately after 6 weeks after 4 weeks Healing Efficacy |----------------2-------| 100% 80% of patients 80% of patients breast swelling in males Side Effects** |----------------------2-| None reversible liver damage none known mental confusion Anti-Coagulants Interactions** |----------------------2-| None none known Valium Once a day or 4/day Convenience |------T-----Z----------| 2/day less 2/day approved Recurrence (after same as Tagamet (see |-----2------------------| None 66% within a year healing) Ex. 10) Recurrence (during continuous |-------------------------| None unknown in 1981 unknown in 1981 treatment) *actual healing is difficult to judge for patients and doctors without a test after treatment (p. 3) **Perception: Tagamet is very safe

6. Zantac is a me-too product Pioneers enjoy a lasting advantage Tagamet’s side effects not an issue Tagamet’s safety record will be more important than Zantac’s zero side effects Tagamet’s economies of scale make low-price policy unattractive Weak Glaxo presence in US True Only if they stay awake True, but are they known Who says? Net profit margin of 28% on Tagamet leaves room True Zantac Sales Potential Conventional logicObservation

7. Obstacles vs. Glaxo Actions

8. Zantac: What Next?

9. Zantac: Key Points • A minor product advantage can be leveraged into a competitive advantage by creating the right customer perceptions. • Good & consistent positioning • Zantac: fast, simple, specific • Align all Ps to create this positioning • Price: understand customers’ interpretation (quality) understand economic incentives • Sales effort/communication: high share-of-voice • Focused & clear advertising messages • Having ineffective competitors helps..

10. Attacking Market Leader • To overcome disadvantage (poor fit): size & resources • Strategic partnerships (Glaxo-Menarini, Glaxo-Roche, …) • Focus (Glaxo concentrated on Zantac, while SK diluted its resources) • Overcome disadvantage: Dominant incumbent • Attack under-defended markets (European markets first before attacking SK in U.S. market) • Attack competitor’s “blind spots” (safety and convenience) • Anticipate competitive reactions • Understand history and competitor’s past behavior (Glaxo understands SK’s mistakes; Glaxo is a very aggressive competitor) • Analyze competitor’s motivation to react (Zantac is Glaxo’s life) • Prepare contingency plans (Need to think several steps ahead)

11. Defending Leadership • Despite patent protection, product advantages are not sustainable for long; for optimal leverage of such advantages, continuous innovation & speed are essential. Markets are speeding up: • During product development: time-to-market • During roll-out: time to global coverage • During market penetration: time to market share peak • To sustain a differentiated position, market leaders ought to • Understand the gaps between customer needs and existing product offerings, and close them faster than competitors • Develop new market segments • Maintain high levels of marketing investments • Understand competitors’ weaknesses and utilize them appropriately

12. Threats to Sustainability (S.I.S.) • Slack • complacency, inefficiency • Imitation • copy-cats • Zantac to Tagamet • Substitutes • satisfy same customer needs in a different way • Tagamet to stomach surgery