A COMPETITIVE JOURNEY THROUGH THE PHARMACY CHANNEL

TERRI MORTRUD | DAWN SLEDGE | SVETLANA ARISTARKHOVA | CASSIE HOZ | JULIJA SEMIONOVA | DARIA SAVCHENKO

July 2014

www.3m.com

STEPS TO RX SUCCESS METHODOLOGY

SECONDARY

RESEARCH

Develop a firm

foundation and

understanding of the

company and the

market

OBSERVE SURVEY ANALYZE

Thorough observation

of product line and

consumer purchase

behavior at 15

pharmacies

IN-DEPTH

INTERVIEWS

In-depth interviews

with five pharmacists

and industry expert to

understand dynamics

of the channel

Built a survey based

on secondary research

and key findings from

observational to

address gap areas

Sort through data to

draw conclusions and

insights to improve

business proposition

of 3M pharmacy

channel

KEY FINDINGS PHARMACIES

CONCLUSION

Through the analysis of our secondary research, we were able to narrow our scope and focus specifically on the

pharmaceutical channel, as its importance in the Spanish healthcare system will begin to increase.

SECONDARY RESEARCH

AGING OF EUROPE

• Predicted life expectancy of 77.7 for males and 83.8 for females by 2020

in Spain

• Aging populations will lead to increases in the number of people suffering

from chronic, expensive-to-treat diseases and disabilities

• Changing consumption patterns

HEAVY RELIANCE ON PHARMACIES IN THE FUTURE

• NHS will begin to reduce it’s resources, this means 10% reduction in

hospital charts and less beds

• Consumers will begin to rely on alternatives such as pharmacies and

other channels

KEY FINDINGS PHARMACIES

CONCLUSION

This means that there is still opportunity for 3M to expand, especially with their product lines: Futuro, NexCare and ColdHot.

OBSERVATIONAL

• Pharmacist can easily influence customers who do not know a specific

brand name

• Increasing aging population in addition to increasing life expectancy

means there’s a need for more products for pain and chronic diseases

• Supply is based on preferences of the fixed audience of pharmacy

consumers

• Pharmacists can forecast what the customer wants and order these

products for them

IN-DEPTH INTERVIEWS

• Out of the 10 pharmacies observed, 7 did not have 3M products

• Some providers showed a preference for private label brands

• Brands offered by observed pharmacies: Hansaplast, Compeed, Urgo,

Leukosan, Lainco, Salvat, Meda, Smith & Nephew, Hatmann, Dr

Scholl, VIADOL

• Waiting times during peak hours

AUDIENCE AND SEGMENTATION SURVEYING

Segment by areas with highest

percentage of people over the

age of 65

2 weeks to complete

surveying

Chamberi 32.75%

Salamanca 32.05%

Moratalaz 31.65%

Retiro 31.38%

La Latina 32.05%

1

2

3

4

5 Target audience of

pharmacists, not the

end consumer

RESPONDENT PROFILE PHARMACISTS

37% male vs. 63% female 60% of respondents with 5-15

years of industry experience

41.8% of respondents aged 31 - 40

COMPARISON OF OVERLAPPING PRODUCTS SECONDARY DATA

PRODUCT 3M HARTMANN MÖLNLYCKE SMITH & NEPHEW

Skin Care

Orthopedics

Medical Diagnosis

Adhesive Bandages

Personal Safety/Thermotherapy

Personal Care

OUR KEY COMPETITOR ANALYSIS

VS

FAMILIARITY SMITH & NEPHEW MÖLNLYCKE HARTMANN 3M

LOW 89% 88% 3% 6%

MEDIUM 8% 12% 24% 52%

HIGH 3% 0% 73% 42%

Pharmacists surveyed said 3M and Hartmann are the top two choices in brands that they order, with 3M at 86% frequency and

Hartmann right behind with 82%.

CONCLUSION

OUR KEY COMPETITOR ANALYSIS

ASSOCIATIONS SMITH & NEPHEW MÖLNLYCKE HARTMANN 3M

QUALITY 8% 4% 84% 90%

PRICE-QUALITY

RATIO

0% 2% 78% 83%

TRUST 6% 0% 87% 79%

INNOVATION 0% 0% 60% 76%

DURABILITY 6% 0% 61% 67%

3M is winning in almost every category except for trust. This could be because of their business mission. 3M prides themselves on

their innovation, while Hartmann focuses more on the client relationship with the brand.

CONCLUSION

OUR KEY COMPETITOR ANALYSIS

3M and Hartmann are neck and neck: 2 for 2. There is one problem: 3M considers wound care one of their winning product

categories. However, according to pharmacists, Hartmann is addressing this better.

CONCLUSION

PRODUCT SMITH & NEPHEW MÖLNLYCKE HARTMANN 3M

WOUND CARE 8% 5% 70% 59%

CREAMS 15% 0% 35% 60%

BANDAGES 4% 4% 74% 67%

PAIN RELIEF 29% 5% 29% 43%

SWOT ANALYSIS HARTMANN

S

T O

W

STRENGTHS

Focus on customer with total solution

Business strategy is adapted to demographic changes

OPPORTUNITIES

Expansion to emerging markets

Accommodating the needs of consumers in Iberia

THREATS

Might have difficulty gaining share of markets

outside of Europe since production is located in

Europe

WEAKNESSES

34% sales in Germany – need to adjust

production for other European regions

89% of sales in Europe – little expansion outside of EU

Most research conducted on European consumers

Europe is their primary market, so they are

knowledgeable of core issues and demand

Solutions for infection for quick healing results

Relationships with physicians/nurses to reduce

strain of daily treatment

Due to European economic instability, may lose

business due to dependence on this market

KEY PURCHASING DRIVERS PHARMACISTS

RATIO OF PRICE TO QUALITY

SUPPLIER AGREEMENTS

79%

78%

CUSTOMER DEMAND

88%

TOP

THREE

KEY PURCHASING DRIVERS CONSUMERS

85% Price

37% Trust

58% Quality

73% Pharmacist recommendation

61% Doctor recommendation

55% Ask directly for product

9% Browse displayed products

75% Ask for advice

39% Ask for a specific brand

22% No influence

72% Purchase what’s prescribed

19% Purchase least expensive

PURCHASE

INFLUENCERS

PURCHASE

PROCESS

DECISION

INFLUENCERS

BARRIERS TO PURCHASING PHARMACISTS

QUALITY 72%

PRICE-QUALITY

RATIO

58%

TRUST 43%

DURABILITY 15%

INNOVATION 6%

SUSTAINABILITY 1%

3M is most highly associated with Quality and Price-Quality Ratio. These are the two main points that they communicate in their

messages, so this is successful. They are least associated with innovation in the eyes of pharmacists.

CONCLUSION

CLIENT DEMAND

REASONS FOR

SWITCHING

BRANDS

POOR SALES

PRICE-QUALITY RATIO

OVERALL QUALITY

POWER OF THE PHARMACIST RECOMMENDATIONS

NEVER SOMETIMES FREQUENTLY ALWAYS

HARTMANN 7% 18% 66% 9%

3M 5% 45% 42% 8%

VS

Pharmacists are more likely to recommend Hartmann products. This may be related to their core business mission of establishing

strong relationships with key decision makers, building a bond of trust between Hartmann and the pharmacists.

CONCLUSION

POWER OF PHARMACISTS CONSUMERS

0% 94% OF CONSUMERS FREQUENTLY BUY

RECOMMENDED PRODUCTS

There is a very slim likelihood of consumers not purchasing recommended products. 94% of pharmacists frequently recommend

brands and products to consumers but only half the time are referring 3M.

CONCLUSION

OF CONSUMERS NEVER BUY

RECOMMENDED PRODUCTS

LIMITATIONS OF STUDY 4 KEY NOTIONS

Sample size (n=70)

Did not survey end consumer

Key decision makers are hard to contact

Time limitation

IDEAS ARE THE BEGINNING points of all fortunes

BUSINESS CONCEPT RECOMMENDATIONS

UPDATES IN STRATEGY

Establishing mutual communication with pharmacists

Driving sales in wound care

Reaching the end-consumer through targeted communication strategy

RECOMMENDATIONS RELATIONSHIPS

RELATIONSHIPS

Despite the fact the 3M is considered to be high quality and well priced,

pharmacists have a strong sense of trust in the Hartmann Brand.

Hartmann is winning with pharmacists in the sense that they’re more willing

to recommend Hartmann products.

3M must invest more resources in relationship building with key decision

makers.

• Utilize 3M innovation center for yearly pharmacy conference highlighting

new innovations and product specialties

• Use this as a space to educate industry on key products related to

emerging trends in healthcare, such as the aging population

• Constant communication with pharmacists to understand their needs and

those of their clients

ACTION PLAN

BACKGROUND

RECOMMENDATIONS ASSOCIATIONS

WOUND CARE

BACKGROUND

3M is highly associated with wound care, but Hartmann’s products are

recommended at a much higher rate.

Hartmann is also considered to be addressing wound care issues better

than 3M.

ACTION PLAN

3M needs to drive customers to the pharmacist requesting their products.

• Complementary product bundles such as brand-aids with creams in order

to drive cross-sales

RECOMMENDATIONS COMMUNICATION

COMMUNICATION

BACKGROUND

3M is considered by pharmacists to communicate best with end-users when

compared to other brands (85%)

ACTION PLAN

Leverage this strength to become top of mind and drive consumers to the

pharmacy with the intention of purchasing 3M products.

• Develop a communication plan expressing the unique benefits 3M

provides to elderly consumers, i.e. creams developed for their specific

needs, etc.

THE APPENDIX

COMPETITIVE ANALYSIS

• Multinational medical technology company that is one of the

leading producers of advanced wound management

products

• Main areas of focus: orthopedic reconstruction (join

replacement systems), advanced wound management,

sports medicine, trauma

• Strategic priorities:

• Gain market share in established markets through

innovation and efficiency

• Build strong direct customer in emerging and international

markets and use to develop tailored products

• Invest more in R&D in support of innovation that will

maximize value

• Streamline operation and manufacturing in order to

maximize efficiency

• Growth through the acquisition of technologies,

manufacturing and distribution

COMPETITIVE ANALYSIS

• Global professional healthcare brand known for unique, high

quality product and innovative technologies that allow

patients to live better lives and help healthcare professionals

efficiently treat more patients to better care

• Main areas of focus: wound care, surgical products and

service provider to healthcare sector

• Strategic priorities:

• Innovation is a core part of Molnlycke’s DNA by helping them

offer new products that better suit their patients needs

• Drive expansion through innovation which allows company

to reinvest in the business