Case Analysis: Pfizer Inc., Animal Health
Ranee Sirirushneekorn
MKTG901-49
0/02/04
Case Analysis: Pfizer Inc., Animal Health (A)
Problem Definition
Pfizer was aware that the industry changes in the decrease in consumption of beef, increased amount of imports from NAFTA, and vertical integration of the powerful packing companies would affect their primary customers or ranchers. Pfizer may face trouble if their customers tried to cut the input costs in order to survive in the cow/calf industry downturn. Pfizer was concerned about their original market segmentation: whether it would still work for the company to continue to market its products on the basis of herd size. Also, the company needs to maintain the market position with the changes in the industry.
Analysis
Pfizer has segmented its market according to herd size. Companies tended to give the most attention to the ranchers with a herd of more than 500 head of cattle. In other words, Pfizer has been devoting most of its marketing efforts to the business segment where there was a potential that the company would earn more revenues from this business segment. Thus, the sales representation spent more time with this group of ranchers who tended to buy a high volume of the company's product because they had more than 500 head. According to this segmentation basis, both the company and sales representatives would give little attention to the traditionalists and also ignore the hobbyists who actually controlled a huge potential market (86% of the National Cattle Inventory). Actually, this original segmentation somewhat makes sense if the demand of beef consumption and other factors were unchanged. However, the consumer behavior is always changing. Today's health conscious consumers prefer to choose poultry and pork to beef because of preparation issues and health concerns. That's why the original segmentation might not work well. Pfizer should segment their markets in greater detail. There are various variables which might be suitable for change:
. Further classifications based on the age of the cow-- Pfizer should reclassify each segment (hobbyists, traditionalists, and businesses) into a class based on the age of the cattle. Of course, some vaccines or supplements might not be suitable for some ages of cows/calves. Some ranchers, especially those that didn't have the information about the cattle, might not maximize their satisfaction towards Pfizer's products. Therefore, the company should make the segmentation more focused and more understandable (see exhibit1). Pfizer can hope to increase sales with the new potential segmentation. Plus, the sales representatives surely do their job well because they would offer more of the right product to the right customer. This way will help lead to maximized customer satisfaction.
2. Pfizer should segment its market on the basis of the percent of income from the cattle (see exhibit 2). This method is based on the percent of income that ranchers gain from the cattle. As a result of segmentation, the company will see the potential new markets. Surely the one that totally relies on income from the cattle 100% should easily market our products. I believe that this 100% group will be more concerned about what's going on in the industry. From the exhibit, the marketers will see that some ranchers rely on the income from the ...
This is a preview of the whole essay
2. Pfizer should segment its market on the basis of the percent of income from the cattle (see exhibit 2). This method is based on the percent of income that ranchers gain from the cattle. As a result of segmentation, the company will see the potential new markets. Surely the one that totally relies on income from the cattle 100% should easily market our products. I believe that this 100% group will be more concerned about what's going on in the industry. From the exhibit, the marketers will see that some ranchers rely on the income from the cattle, and others just as a side job (less than 60%) because it is not the main source of income for them. The company should prioritize the potential markets by these percentages and then penetrate these markets accordingly. The Company might send sales agents, guest speakers, and experts to these target ranchers to point out the importance of nutrition and vaccines which affect the quality of cow or beef.
3. Geographically concentrated buyers-- Pfizer has to divide its segments geographically. Absolutely, each area has different weather, temperature, water quality, and environments. The company should assign a sales representative into each main area. This will lead to product development for the specific needs in each area. For example, there are more parasites in some areas that have humid temperatures than in the dry climates. The company will gain customer satisfaction and product innovation in return.
4. Usage rate- Non users, lighter users, moderate users, heavy users
5. Attitudes towards vendors - Favorable....Unfavorable
6. Organization Innovativeness - Innovator .....Follower
The Ranchers market is the business market which buys the medication, vaccines, etc. from Pfizer for further production. Certainly, ranchers want to retain their sales and possibly find the new potential markets to increase their sales. Pfizer needs to make sure that ranchers get the quality animal health products which will help them earn more money in return. Pfizer needs to build a good relationship with their customers. This is very important in order to improve the communication through the buyer/seller channel. Information flow and share reciprocity is a necessity for the industry changes. In order to respond immediately to the customer's behavior changes, the cooperation between both parties is a must. The new approach should be to produce what can be marketed rather than marketing what can be produced.
Recently there is a trend of vertical integration in the packers, feedlots, and also cow/calf producers. From this trend, the company needs to be aware and concerned that there is a shift of demand from the ranchers to the feedlots and stockers themselves. Pfizer has to increase marketing to these potential customers to recover the sales volume from the ranchers.
In addition, the secondary data or historical sales records help the marketers compare the current sales and also the new segmentations to find new potential customers and also emphasizes the existing customers in order to survive despite the industry changes.
Consider the buying process, Pfizer needs to rouse the ranchers so that they recognize the importance of animal health and have clear descriptions of those products, etc. Veterinarians also play an important role as influencers in buying process decisions. The company needs to retain a good relationship with the local vets and distributors as well. The company should make them feel comfortable with recommending Pfizer products to the local ranchers. Vets also help promote or advertise Pfizer products: the work doesn't end just when the customers buy the products. The most important part of the buying process is after-sales service. Pfizer has to make sure that the company sends the right people to evaluate the performance of the cow/calf, give updates on the new product releases, and distribute information about upcoming events, etc.
However, in order to adopt these new ways to segment the market, there are some implications that the company must concerned about. High investment in survey is the number one disadvantage. There is no guarantee that this segmentation will help the company increase its sales volume. Pfizer needs to be concerned also about its competitors.
Recommendation
Pfizer needs to assist ranchers in affecting changes with their industry and give more attention to small operations. The company needs to focus more on the customer's needs and wants and strive to be customer focused. In the old approach, Pfizer marketed to all customers on the basis of herd size and was production focused. Oppositely, I do recommend Pfizer to segment its market into key and primary customers on the basis of both age of cattle and percent of income from the cattle. Pfizer needs to continue to foster a good relationship with the existing customers. Customer satisfaction, which leads to customer loyalty, is very important.
The right segmentation provides the benefits such as the marketers or sales representatives becoming more attuned to the unique needs of the customers (ranchers, stockers, feedlots, veterinarians, and distributors). The company can then focus more on product development and can develop profitable pricing strategies, select the appropriate channels of distributions, and increase customer satisfaction. With good segmentation, marketing resources will be managed effectively.
Using Electronic Data Interchange (EDI) to uniquely identify and track the animals-- By using a coordinated system (tracking system) between Pfizer and ranchers, efficiency will increase by reducing duplication, or cutting costs in other words. For example, ranchers can classify which cow/calves have injections or vaccinations, but how do they know which one has or has not been vaccinated? Hence, there was no more doubt, which leads to re-vaccination or duplications, which increases costs in turn. However, adopting this system will require a huge investment. So, the company should consider information systems as one alternative for implementation.
Maintain the relationship with the local vets and distributors-- This also helps them manage the inventory and most importantly informs them about new upcoming products. The vets have influence and can help to clarify and promote the products directly. Pfizer needs to treat them as number one customers. The company should develop training manuals for the sales force to use, referencing how to use the same sales tools differently depending on the individual.
Pfizer should also look at the "disease free animals fundamental to human health" issue. They need to make sure that the products are safe for both animals and the consumers who eat it.
For the promotion tool, Pfizer should regularly advertise its products in the local newspaper. Pfizer should also become part of local events by being a sponsor for events, making "Pfizer" the most recognized brand. Reputation is also very important. Once the company increases its reputation, the customers tend to stick with their products. Also, they will help promote Pfizer brand by word of mouth, which is very effective. Surely quality supplements and vaccines will help cows/calves of those ranchers be more reputable because of the high quality of beef. This chain of quality will reach the consumers. That's why the communication between the chain, or information sharing, is necessary in today's business world. Each segment can function more effectively if they know and understand the needs, wants, and challenges of the other segments.
For example, there is a demand for a leaner cut of beef with a lot of marbling. Information should be taken directly to producers and geneticists to find out what kind of animal would need to be bred in order to end up with this specific product. Assuming it could be done, the producer could partner with the vets and nutritionists to find out the supplements and vaccines that help to produce the required product. They all would work together to raise the animals. This effective system allows a continuous flow of information from one segment to the next with everyone working together with the same goals to maximize customer satisfaction and gain profitable returns.
Exhibit
Exhibit1: segmented by the age of the cow/calf
Segment
No. cattle
No. operation
Age of calves/cows
No of each operation
Percent of National Cattle Inventory
Hobbyist
<100
808,000
0-6 months - calves
6 months -weaning
5 months-Conception
2 years - cows
>2 years
xx
xx
xx
xx
xx
50%
Traditionalist
00-499
69,000
0-6 months - calves
6 months -weaning
5 months-Conception
2 years - cows
>2 years
xx
xxx
xx
xx
xx
36%
Business
500+
5,900
0-6 months - calves
6 months -weaning
5 months-Conception
2 years - cows
>2 years
xxx
xxx
xxx
xxx
xx
4%
Exhibit2: segmented by percent of income from cattle
Segment
No. cattle
No. operation
Percent of Income
from cattle
No of each operation
Percent of National Cattle Inventory
Hobbyist
<100
808,000
<60%
61-70%
71-80%
81-90%
91-99%
00%
Xx
xx
xx
xx
xx
xx
50%
Traditionalist
00-499
69,000
<60%
61-70%
71-80%
81-90%
91-99%
00%
Xx
xxx
xx
xx
xx
xx
36%
Business
500+
5,900
<60%
61-70%
71-80%
81-90%
91-99%
00%
xxx
xxx
xxx
xxx
xx
xx
4%
