MSD

M.S.D.

Market Analysis & Consumer Behavior

Dr. Yam Limbu

4/28/2011

Analysts: Seyi Adu Paul Didzbanis Ana Gatti Jasmine Hamlette Perkens Vital

M.S.D.

Table of Contents
Executive Summary ...........................................................................................................................................................................................................page 4 1-Introduction..pages 5-6 1.1 Motivation for choosing the industry 1.2 Research Objectives & Questions 1.3 Methodology 1.4 Plan of Group Work 2-Company Overview 2.1 MSD Overview 2.1 MSD Home Care Market

3-Market Analysis .................................................................................................................................................................................................. pages 8-15 3.1 Financial(Important Mergers) 3.2 Key Employees 3.3 S.W.O.T. 3.3.1. Strengths 3.3.2. Weaknesses 3.3.3. Opportunities 3.3.4. Threats 3.4 Home Medical Equipment Market 3.5 Michael Porters Five Force Model 3.5.1. Substitutes 3.5.2. Buyers Power 3.5.3. Barriers to Entry/Threat of New Entry 3.5.4. Rivalry 3.6 Technology 4-Marketing Strategies.pages 15-20 4.1 Segmentation Strategies 4.2 Positioning Strategies 4.3 Promotion Strategies

M.S.D.

4.4 Distribution Strategies 5-DataAnalysis..pages 20-38 5.1 Recommendations 5.1.2. Data Results 5.2 Interview 5.3 Internal Influences 5.3.1. Perception 5.3.2. Memory 5.3.3. Importance 5.3.4. Motivation 5.3.5. Personality 5.3.6. Attitudes 5.4 External Influences 5.4.1. Affect on Consumer Behavior 5.4.2. Culture 5.4.3. Demographics 5.5 Home Healthcare Equipment 5.6 Home Healthcare Services 5.7 Social Status 6-Conclusion.page 39 7-Bibliography.page 40

M.S.D.

Executive Summary
After much research and analyzing both secondary and primary data it was evident the reasons why Medical Specialties Distributors LLC, lacked market in the home health care segment of their company. Our secondary data enforces that this industry is growing at a fast rate due to the fact that the first baby boomers are turning 65 this year, and a projected 72 million - about one fifth of the U.S. population - will be that age or older by 2030. It also brought to our attention that the health care reform will threaten the home care market by cutting down on reimbursements leading to putting a lot of small home care facilities out of business leaving the industry with a lack of qualified staff. It will take a stable company with means of innovation and technology to keep up with this high demand even when government regulations could jeopardize its growth. Our primary data went a step further to demonstrate that MSD has the means and the knowledge to keep up with the high demand in this industry. Through already good standing relationships and ties, combined with an eager and well-trained staff, MSD will continue to grow in the home health care industry.

M.S.D.

1-Introduction

1.1 Motivation for choosing the industry We had decided that medical care is essential field in the future that is expected to grow exponentially due to the constant growth of the population. As hospitals are getting overwhelmed with new cases of treatment we wanted explore other possibilities in the healthcare industry. Thats how we came across MSD, we found out that they dealt with hospital equipment as well as homecare equipment. So as a group we chose to pursue the industry and see how MSD can become a huge part of homecare field, and maybe become a leader in medical homecare supplies. This is a growing industry and possibilities are for companies such as MSD.

1.2 Research Objectives and Questions Our primary objective is to further expand and gain service to the home healthcare market. We think that this can help them grow their company as a whole by adding more market share, as well as new opportunities to explore. Furthermore we are looking into creating new agreements with leading healthcares homecare providers. This can also impact the company by increasing sales as well as attracting new clients. Finally we are going to look into certain issues that may impact us down the road like overcrowded hospitals, and increase in patients staying at home due to high costs of hospital stay, and how MSD can help.

M.S.D.

1.3 Methodology We have used a lot of primary data that we had discovered through an in depth interview with a district sales manager. He had been with the company for 5 years now and had provided us with a lot of key information. Another primary source we had used was a survey that we had made up for pharmacies that dealt with MSD products. We had submitted these questionnaires to five different pharmacies to get our results. These results gave us a lot of Intel of MSD products and services, as well as the consumers perception on the subject. Furthermore we had used secondary sources such as medical journals, government websites as well as Business wire to provide us with some other background information of the company endless for a company such as MSD to grab a big market share if they act quickly.

1.4 Plan of Group Work We have five members in our group who were in charge of certain things to help complete this project. We had each a responsibility of the project that we had to complete. We divided it into sections that each group member chose to do, for example two group members were in charge of collecting data, while others did background research. Then after the results were in we had a group meeting to analyze our findings. Furthermore we had a group member who had a friend in the industry, and was able to get an in depth interview. Finally we put these pieces together to come up with the complete paper as well as presentation.

M.S.D.

2-Company Review 2.1 MSD Overview Medical Specialties Distributors are leading the market in distribution of homecare as well as hospital equipments. Including infusion related products such as syringes, gloves, needles, needle free systems, needle trays, as well as electrometric devices. Also Specialize in Biomedical equipment rentals, sales, technical support, and for convenience also buy the equipment back. MSD is headquartered in Stoughton, Massachusetts and have six medical product distribution centers, seven medical equipment and repair centers, and thirty biomedical rental and service centers located in the United States. MSD is involved in business-to-business sales and, acquires most of its revenue through selling to hospitals and pharmacies. They have also introduced patient home direct program that arranges for patients to receive these goods delivered straight to their home. Providing a safe way of delivery through tracking as well as proof of delivery, to accommodate patience all the way to their own home.

2. MSD and the Home Care Market As homecare market increases it presents a huge opportunity for MSD to exploit, and make profit. Equipment used in homecare such as canes, scooters, crutches, home safety equipment, lifts, and wheelchairs are essential to our older generation. As we also see baby boomers retiring, and in need of assistance it opens more opportunities to sell this equipment strait to the buyer rather then through a pharmacy. Making it a faster and more efficient way of supplying the market for medical equipment vendors such as MSD. This homecare equipment market is expected to increase annually by 6% and is expected to reach $8 billion dollars by the year 2012.
7

M.S.D.

As MSD is already considered to be one of the biggest merchants of home and hospital care products it makes no sense for them to exploit further into this targeted market.

3- Market Analysis
3.1 Financial- (Important Mergers) On March 3, 2010, Medical Specialties Distributors, LLC (MSD) and Definitive Homecare Solutions, Ltd. (DHS), the developers of CPR+ home infusion and specialty pharmacy software, today announced a 5-year alliance .Under the agreement, Definitive Homecare will collaborate with MSD to develop automation solutions, fully integrated within CPR+, across the entire supply chain for home infusion providers. These features will be fully available in CPR+. MSD is the largest supplier of infusion related supplies and equipment to the home infusion market, and CPR+ is the most utilized patient and business management software among home infusion providers. The alliance seeks to capitalize on the strengths of both organizations to develop inventory and asset management that presents a flawless solution to these providers. On July 30, 2010, MBF Healthcare Partners, L.P. (MBF), a middle market healthcare focused private equity firm, announced it has sold Medical Specialties Distributors, LLC (MSD), to private equity firm Water Street Healthcare Partners. Water Street invested in MSD in 2010 and management retained a significant ownership position in the company. With demand for providing intravenous (IV) therapy to people in their homes continuing to increase, Water Street is focused on extending MSDs leadership position in this growing sector of healthcare. Together with the management team, they are expanding MSDs services to home healthcare providers and oncology clinics through a combination of organic growth and strategic acquisitions.
8

M.S.D.

2.2 Key Employees

Jim Beck

Brian Heath

Peter Hue

Mike Ward

Richard Worthen

Chris Good

Description Joined MSD in January of 2007 as President and Chief Operating Officer. He has over 30 years of healthcare service and distribution general management experience. Director Joined MSD in October 2001 as the CFO. In addition to his responsibilities as CFO, he handles contract review and legal matters for the Company. Vice President-CFO Joined MSD in March, 2006 as Vice President of Vice President, Distribution Operations. Peter brings with him over 23 Distribution Operations and Biomedical Services years of operations and logistics experience. Joined MSD in October, 2007 as Senior Vice President of New Product and Technology Development. Mr. Ward Senior Vice President of brings with him over 25 years of experience in biomedical New Product and Technology Development sales, distribution, and software development. Joined MSD in May of 2000 as VP of Sales and Executive Vice President, Marketing. He has over 24 years of healthcare sales and marketing experience. Sales and Marketing Joined MSD in April 2009 as President of Outpatient Infusion Systems, a subsidiary of MSD. He has over 25 President of Outpatient years of healthcare sale and management experience. Infusion Systems

Title

3.3 SWOT 3.3.1. Strengths Medical Specialties Distributors LLC,. is the only national distribution and logistics provider in the United States focused primarily on alternate site infusion and specialty pharmacy providers. MSD provides a Total Enterprise Solution with services ranging from national product distribution, equipment management and tracking, online ordering, biomedical services, formulary management, and a fully accredited ambulatory pump program for patients on continuous infusion. 3.3.2. Weakness There is a lack of sales in the home-care segment of the company. One major key factor contributing to this is approximately 37 million Americans without health insurance. About a
9

M.S.D.

third of the uninsured are poor, another third are low income, and the rest are non-poor. Americans with incomes below the Federal poverty level would be eligible for Medicaid, regardless of family structure, age, or disability status. Individuals and families with incomes between 100 percent and 150 percent of the Federal poverty level would qualify for first-dollar coverage of a limited package of primary, preventive, and associated ambulatory care through state Medicaid programs. Another downfall is the current gap in Medicare coverage is making it harder for older and sicker patients to swap hospital stays for home care. 3.3.3. Opportunities

As the market matures and more therapies are proven to be safe and effective in the home setting, opportunities will continue to increase for provider. Home infusion therapy is currently an $11 billion market with projected growth to approach $16 billion by 2012, says Jonathan Sadock, managing partner and CEO of Paragon Ventures. There are many factors contributing to this growth, including cost savings to the health care system, a changing reimbursement environment, an increase in new intravenous drugs and biologic products and impending health care reform.

3.3.4. Threats

Under the new healthcare reform law, home health care agencies and hospice, will not see any direct expansions but will face Medicare cuts of nearly $40 billion over 10 years. Centers for Medicare and Medicaid Services believe the rule will decrease Medicare reimbursements to
10

M.S.D.

home health agencies by approximately $960 million for fiscal year 2011. These cuts can affect many home care agencies even put them out of business and therefore contributing to the lack of qualified staff. Even though the passage of this Act is truly a democratic success and a milestone in our nations history, such a change does not come cheap. The Act actually imposes tax increase on certain classes & industries such as the medical device manufacturing industry. Effective 2013, a 2.3% excise tax will be imposed on sales of medical devices. The medical device excise tax will apply to devices ranging from surgical instruments to bedpans. The provision is expected to raise $20 billion over the course of 10 years. This can greatly affect the budget manufacturers will have for R&D of medical devices, one thing being certain proper R&D of medical devices is absolutely critical to the safety of patients and consumers.

3.4 Home Medical Equipment Market

The global market for home medical equipment (HME) was worth about $16.8 billion in 2009. BCC Research expects the HME market to grow to $17.7 billion in 2010 and $23.8 billion by 2015, a CAGR of 6.1% over the next 5 years. The market for therapeutic HME as a group is the fastest growing segment; their share of the total global HME market is expected to increase from about 23% to 28% by 2015. Therapeutic HME was valued at $3.9 billion in 2009 and $4.3 billion in 2010 and will be worth an estimated $6.7 billion by 2015, a compound annual growth rate (CAGR) of 9.3%. Monitors, sensors, and telemetry devices account for the largest share of the HME market, mainly because of the very large market for home blood glucose testers. This segment was worth $7.7 billion in 2009 and $8 billion in 2010. By 2015, this sector will be worth an estimated $11.3 billion, a compound annual
11

M.S.D.

growth rate (CAGR) of 7%. The global home healthcare market is forecast to be driven by a growing focus on self-monitoring to curb spiraling healthcare expenditures due to reimbursement reforms and the increasing aging population in developed nations. In developing countries, the major drivers for home healthcare equipment are the increasing incidence of chronic diseases such as asthma, Chronic Obstructive Pulmonary Disease (COPD) and diabetes, along with growing affordability and awareness.

3.5 Michael Porters Five Forces Model

Porter argued that Threat of Substitutes, Buyer Power, Supplier Power, and Barriers to Entry/Threat of Entry all contribute to create Rivalry and affect a firms ability to successfully compete in the marketplace. Analyzing each of these forces provides insight into Medical Specialties Distributors LLC. future profitability in the home care market. 3.5.1. Substitutes

12

M.S.D.

Housing that is often called "assisted living" (AL) or "housing with services" has become increasingly popular, with approximately 800,000 elderly residing in over 30,000 such facilities in the U.S. These buildings typically offer a meal program, housekeeping, activities, and some level of nursing services on site. The elderly, their families, and many physicians have come to believe that these programs are comprehensive, similar to a nursing home. Therefore, they may consider the in-house nursing program to be a substitute for skilled home care services that are reimbursed by Medicare and other medical insurers. 3.5.2. Buyer Power Seniors have lost almost one-quarter of their buying power since 2000, according to the Annual Survey of Senior Costs, released recently by The Senior Citizens League (TSCL), a senior advocacy group. In most years, seniors receive a small increase in their Social Security checks, intended to help them keep up with the costs of inflation. But since 2000, the Social Security Cost of Living Adjustment (COLA) has increased average benefits just 31 percent while typical senior expenses have jumped almost 63 percent, more than twice as fast, according to the TSCL. Whats more, seniors are receiving no COLA this year for the first time since the automatic COLAs introduction in 1975, and are forecast to receive no COLA again next year. A senior with the average Social Security benefit in 2000 received $816 per month, a figure that rose to $1072.30 by 2010. However, that senior would require a Social Security benefit of $1,328.40 per month in 2010 just to maintain his or her 2000 lifestyle. A majority of the 37 million Americans ages 65 and over who receive a Social Security check depend on it for at least 50 percent of their total income, and one in three beneficiaries rely on it for 90 percent or more of their total income, the TSCL reports.

13

M.S.D.

3.5.3. Barriers to Entry/Threat of New Entrants

One large barrier in this industry is the capital-intensive nature of the industry. Because it is so costly to research and produce the machines, it is difficult for businesses to compete in this field. Another barrier MSD benefits from is the government-created barrier that specifies the FDA must approve all medical devices in order for them to be marketed and sold within the U.S. The process is both expensive and time consuming and represents another barrier to entry by competing firms. 3.5.4. Rivalry In Medical Specialties Distributors case, rivalry tends to be high because of the significant R&D costs to develop new solutions and then market and distribute them successfully. Profit margins tend to be high in this industry, so the competition is fierce. Exit barriers are very high in this industry because the decision to stop producing a machine that required such specific R&D investments causes significant capital loss to the company. 3.6 Technology Companies across the world are working to develop innovative solutions for the aging populations of Europe, the United States and Canada. Many of these products and services for baby boomers are designed to enable older adults to live independently during their golden years. Berg Insight, Swedish analyst firm, estimates that this emerging market is worth $10 billion in 2010. New devices that utilize wireless technology are also being created for this industry. They predicted that health-related apps will be released for smartphones in increasing numbers, making mobile health programs (mHealth) more accessible. In addition, mHealth devices will be key to lowering health costs as boomers age and require more care. Europe spends 7 percent of
14

M.S.D.

total GDP on healthcare costs and the United States spends 15 percent. Over 8,500 apps have already been developed for healthcare needs, ranging from medication management to emergency responses, according to The Wall Street Journal. (Video) http://www.youtube.com/watch?v=rVg2xDBjxG4 4- Marketing Strategies A marketing strategy allows a company to develop a plan of which will allow them to achieve their brand goals and objectives. For Medical Specialties Distributors their marketing strategy involves the decision and direction that includes but is not limited to the following; segmentation/target market identification, positioning strategies, product strategies, pricing strategies, promotion and distribution strategies. The use of their marketing strategy in all parts connects to their core objectives and helps decide 4.1 Segmentation Strategies One of the first strategies involved in developing a target market or further your marketing strategy is to understand the segmentation of the market. A useful segmentation strategy aligns with the core values of the company, expresses opportunities, concentrates on consumer behavior, and it can allow for anticipation of market needs and behavioral changes (Abbot, 5) For Medical Specialties Distributors geographic segmentation of the market has been one of their most influential ways to identify their most profitable locations. Geographic segmentation consists of regions, size of metropolitan area, population density, classification of neighborhood or city, and even weather patterns that are prevalent to certain areas. There is a lot of marketing information that can be gathered from the geographical statistics of certain regions; information that can lead to making smart marketing decisions.
15

M.S.D.

After performing extensive research on the company and exploring their nationwide business strategy we realized that one of their most profitable regions is the New York Metropolitan area. There are several reasons for this geographical preference to this area. The first reason is the high population that offers various demographics that are attractive to a company like MSD. Second this geographic area is attractive because according to the 2009 census about 15% of the population is fifty years of age and older; which is a primary target market for medical companies (Census). The percentage has been expected to grow beyond in the coming years; so the potential for even greater growth is possible. Also the cities classification has a dual function. The New York metropolitan area has dual functions; it is both urban and rural which provides area for both their business transactions and their distribution centers. This promotes an ease of flow in the sale and delivery of product from customer to buyer. 4.2 Positioning Strategies Another portion of Medical Specialties Distributors marketing strategy is their position strategy. The point of a well developed positioning strategy is to differentiate a brand or company from all other similar brands or companies within the mind of their customers or target audience. They must create distinguishing features, offer unique services, and create a profitable image; and maintaining that position to maintain stability within their market. Also a business can create a positioning strategy under to basic platforms; either the consumer or the competitors. When the campaign is based on the consumer the messages presented are for the benefit of the customer versus the view of the competitor in which they brand their products and services to overshadow that of their competitors (Drypen). In the case of Medical Specialties Distributors they tend to focus their positioning strategy on the customer; so they tend to go above and beyond with the services and products they build for their target audience (Mhealth).For MSD their positioning
16

M.S.D.

strategy has been strongly built and reinforced; they have several services and products that make them a truly unique brand. The basis for their positioning strategy is the seamless blending of products, services, and technology that extends beyond the initial purchase of medical supplies. When it comes to their products their research and development team has worked very hard to determine the needs of their target market. So their

products are extremely unique and tailored to the current demands from the consumer market. Beyond their products their services are unparallel to most medical specialties companies within their competitive arena. One of the most important portions of medical supplies business is sharing information about recalls or issues with products and technology. Their website allows their customers to stay up to date on the latest information involved with possible recall of their products. They also offer services like Equipment Management Solutions which provides real-time inventory tracking of their equipment and provides compliance and accountability testing (Mhealth). This can allow companies to lower the cost of inventory and compliance management; this can lead to increase profitability for their consumers (i.e. repeat purchases and brand loyalty due to benefits). Another service is their Total Enterprise Solutions Software which provides a flawless connection between products, technology and services in the home care and home care solutions
17

M.S.D.

market (Mhealth). This allows consumers who want to bring health and medical equipment to their home the ability to have an management system that can allow them to re-order supplies, review/manage their inventory, and even dispose of biomedical products. And finally they allow purchases to be placed through their highly developed website; which provides convenience for the customer. 4.3 Promotion Strategies The main purpose of a promotion strategy is to create a new for a product to marketing promotional and advertising tactics. There are two main strategies for promoting a product; push and pull are the to make tactics. Push is to make use of a companys sale force and trade promotion activities to create and enhance the demand for a product. The pull selling strategy that involves a large amount of financial contribution to the advertising of the company or product (Promotion, 1). In reference to MSD they have adapted the strategy of push versus pull; most of their sell and profit is not from large amounts of advertisements rather smart usage of

their sales force to promote their large amount of customer driven benefits and services. This
18

M.S.D.

involves many tools mentioned in the previous section which includes responding to consumer needs; identify the target audience and finding the tools to promote successfully to them. For MSD their main promotion strategy is through their website. This company does not rely on heavy commercialism, television advertisements or even periodical advertisements; their primary promotion is through their highly developed website. A smart tool they have developed to make their website and its purpose more obvious is to include a Feature Items showcase on their homepage. Their research and development team works to determine the most popular issues in health today and promote an item/equipment that is a solution to that issue. Another tool they have developed is to present a slideshow on their homepage of all of their most profitable products and services; mostly focusing on the services. MSD offers various services that provide their customer with additional benefits and they express this idea within the first thirty seconds of you visiting their webpage. Their secondary means of promotion is through their overwhelming presence in trade shows and medical expos. Typically, MSD will be involved in shows and expos at least once or twice a year so their presence is expected. However, with their amazing products they tend to create a high level of anticipation in the medical community and many potential cliental can be found in these situations. 4.4 Distribution Strategies Finally, the last portion of their marketing strategy is their success is the distribution arena. MSD has expanded their company worldwide which allows them to have a far reach in the medical supplies market. However, this does not come easily. Medical Specialties Distributors has developed professional partnerships with companies that have created agreements to share their
19

M.S.D.

distribution centers when they combine efforts. Currently Medical Specialties Distributors has relationships with such companies as MOOG, Smiths Medical Supplies, Covidien and event Philips Respironics. This has allowed the company to over the years expand their market share and dispense their products and services nationwide. MSD continues to grow and is currently working with a few different companies to expand their company overseas. 5- Data Analysis

Importance Scale Survey Group B Pharmacy Survey For each question below, circle the number to the right that best fits your opinion on the importance of the issue. Use the scale above to match your opinion. Question MSD offers fast response time when medical supplies are recalled. MSD products & services are widely advertised. Purchase more than a handful MSD products during a month time span. Consumers provide positive feedback in regards to MSD products. MSD provides your staff with training in using any of their products A decent amount of MSD products go to patients in the home care market. MSD products are fairly priced. MSD products are consumer friendly {in terms of usage} Patient Home Direct is a fast and efficient way of delivering supplies to the consumer. MSD products stand out in comparison to similar products you carry. MSD provides its consumers with state-of-the-art technology. MSD provides quality technical support for the consumers. You rely on MSD products more than any other vendor. MSD products/services respond to the specific needs of your home care customers. You are very satisfied with your service and relationship with MSD. MSD needs to make changes to improve their brand performance with home care customers. Scale of Products & Services Strongly Disagree 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Disagree 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Neutral 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 Agree 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 Strongly Agree 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5

The above survey was conducted to the top five pharmacies that MSD does business with: 1) Infusion Options 2) Discover Rx 3) Partners IV 4) Chem Rx 5) Omnicare 5.1 Recommendations 1) MSD offers fast response time when medical supplies are recalled.
20

M.S.D.

In medical industry products can go out of date quickly and may need to be recalled on the basis of a newer product or new findings about the product. So it is very important for companies to retrieve these old products, and replace them with new stock. MSD is relatively efficient in this category reaching a 3.8 out of 5. Never the less improvements can be made for better service. The company should shorten its response time by putting more emphasis on this problem, and reacting quicker by sending personnel to retrieve these items right away. 2) MSD products and services are widely advertised Advertisement is a very big aspect in reaching new clients and expanding the business. The results of the analysis states that advertisement campaign is very weak, scoring only a 2.8 out of 5. There is a lot of room for improvement in this category for MSD; even though it may be hard to advertise goods such as medical equipment the company still should pursue it. Medias such as radio, television, as well as newspapers can inform people about their existence and possibly bring in new clientele. 3) You purchase more then one MSD product during a month time span Most pharmacies agreed that they acquire at least one good every month from MSD. They had recorded a 3.6 out of 5 meaning that they have purchased and used MSD products recently. This is a good indication for the company, but the problem we had encountered was we did not ask how many goods have been purchased during the month. Instead we just asked if they had purchased any during the month. 4) Consumers provide positive feedback in regards to MSD products

21

M.S.D.

Consumer satisfaction is very important aspect of sales and should be regarded as so. MSD is very good at satisfying consumers with their purchases of high quality goods and service. It ranks very high scoring 4.4 out of 5, leaving little room for improvement. In this case its best for the company to keep its standard at where it is and dont waist more resources on this aspect of their business. Rather invest the money in other aspects that are currently lacking. 5) MSD provides your staff with training in using any of their products. Products sold by MSD are not the most high tech products that require much training. In these are included gloves, crutches, wheelchairs, scooters, syringes, disposable trays, and some others. That may be the reason why MSD had only received a 2 out of 5 in this category. Thats because most pharmacists already had training in medical school on how these tools should be used. So there may be no need for MSD personnel to come and visit each pharmacy to show the uses for the instruments. MSD does offer online and phone support 24/7 if need may occur. 6) A decent amount of MSD products go to patients in the home care market. Homecare market is huge in the U.S. and is steadily growing each year by 6%. So its very important for MSD to get into the market early and obtain a big share before the competition. As of now they are not doing a great job of it scoring only 2.6 out of 5. This means that MSD has failed to appeal to this marketing segment and as a result may be suffering in sales figures. To combat this MSD should further their reach into the homecare market through advertisements of the services they provide, and show off their great customer service. Helping them to capture the attention of new clients in the homecare business or users of the equipment that MSD provides. 7) MSD products are fairly priced

22

M.S.D.

Price of the good is very important for a company to keep close, or lower then the one of its competitors in order to be successful. From the survey results its clear that MSD offers average prices to its buyers scoring 2.8 out of 5. Meaning that a little less then half of the consumers are satisfied with the price of the goods. Lowering the price in this case can be seen as a possibility, but also one must think about the repercussions of doing it. Cutting the profit margin of a good can make the consumer happier but can also loose a lot of money for the company. So we suggest that the price can be lowered slightly to accommodate the consumer as well as the company. 8) MSD Products are consumer friendly (in terms of usage). Consumers had found MSD products very easy to use with the average score of 4 out of possible 5 points. This is a great aspect of the company to highlight in advertisements for new consumers. Showing that MSD products are easy to use by anybody not just healthcare professionals. Bringing in those consumers that may have thought that homecare equipment may be too hard for them to use before. 9) Patient Home Direct is a fast and efficient way of delivering supplies to the consumer. One of the services that MSD provides for its consumers is Patient Home Direct, which safely delivers products straight to the home of the buyer. Eliminating costs of transportation of the device to the home of the consumer. Most pharmacists had agreed that it was a efficient way of delivering supplies to the consumer scoring 3.8 out of 5. In this case its logical for the company to keep on providing the service because it benefits most customers. 10) MSD products stand out in comparison to similar products you carry.

23

M.S.D.

Most pharmacists are neutral when asked if MSD products stand out opposed to their competition. Its hard to capture attention when selling something that does not fallow most norms. As medical equipment is in most cases needed, and not necessarily desired. Never the less MSD has to try standing out above its competitors, by introducing the newest technology possible, the emphasis of the great service that backs every product, as well as more advertisements on what makes their product the best choice. 11) MSD provides its consumers with state-of-the-art technology. Technology today never stops growing; so keeping up is very hard in most cases. Never the less MSD can proudly say that they offer the best as well as technologically advanced equipment available. As it scores a very high 4.4 out of possible 5 in this category. In this case its important for MSD to keep the bar high and keep doing a great job at servicing its consumers with the most advanced technology in medicine possible. 12) MSD provides quality technical support for the consumers. As found out previously MSD offers the most technologically advanced equipment on the market. So therefore providing a good technical support for the customer is just as important. Which once again MSD does an excellent job in scoring 4.2 out of 5. There is not much to suggest to MSD to improve in this category besides to keep up the good work. 13) You rely on MSD products more then any other vendor. Locking down the complete control of the market is highly improbable for any company. So its not a surprise that MSD is not relied upon by most pharmacies as well as hospitals as there number 1 vendor scoring a low 2 out of 5. This obviously has to be changed so we suggest that the company advertise its

24

M.S.D.

services more to capture a bigger slice of the market share. Through advertisement the company has a better chance to get their name out there as well as the services they provide capturing new consumers. 14) MSD and its products responds to the specific needs of your home care customers. Responding to the need of a consumer is very essential to any company that tries to compete in the market today. Satisfying a need of a consumer better then competition is a huge objective of MSD. So the company handles this very seriously, scoring a 4 out of 5 on this aspect of their business. They do a great job to accommodating consumers with specific needs and there is no need to waist resources on this aspect of the company just yet. Never the less in the future MSD can extend their line of products to specialize even further to each consumer, such as tailored equipment for individuals. 15) You are very satisfied with your service and relationship with MSD

As mentioned before MSD offers great service, newest technology, as well as great customer service. So there are not many reasons one could be unsatisfied with the service of MSD. Being the reason for the high score of 4.6 out of 5. The company does a great job in this aspect of their business so there is little to no room for improvement in this area. 16) MSD needs to make changes to improve their brand performance with home care customers. Most pharmacists disagree that the company needs improvement in this area. Showed by a low score of 2.8 out of possible 5, meaning that they like MSD as a good brand and satisfies most customers. 5.1.2. Data Results
25

M.S.D.

Descriptive Statistics N ResTime Advert Purc Feedback Training HCMrk Price userFrd fasAndEff Superior Tech tecSup Vendor specNed Statisf Imprv Valid N (listwise) 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Minimum 3 2 3 4 2 2 2 3 3 2 4 3 1 3 4 2 Maximum 4 4 4 5 2 3 4 5 5 4 5 5 3 5 5 4 Mean 3.8 2.8 3.6 4.4 2 2.6 2.8 4 3.8 3 4.4 4.2 2 4 4.6 2.8 Std. Deviation 0.447 0.837 0.548 0.548 0 0.548 0.837 0.707 0.837 0.707 0.548 0.837 0.707 1 0.548 0.837

5.2 Interview In-depth-Interview 1. I understand that your biggest sales are to hospitals and non-retail pharmacies but that

you do also sell to private homes. Why would you say that MSD is lacking sales in this market? 2. What are some previous and present marketing strategies used to gain market share in

this segment? Have you seen any growth in this particular market since these strategies where implemented? 3. I understand you are a nation-wide company. I there a specific region that sell than others

and why?

26

M.S.D.

4.

As a sales rep for this company, what would you say is the number one barrier in growing

in the home-care market? 5. Are there any major modifications that your services/products would need to go through

in order to better accommodate this particular market? 6. Would you say that MSD has a competitive edge in this market in comparison to other

medical supply companies? 7. I understand that besides selling equipment you also do rentals. Do you offer any sort of

training in using your equipment, whether to hospital, pharmacy or private-home user. 8. Is there any personal input you would like to share on how to better retain business and

help MSD grow as a company in the future? (Video) http://www.youtube.com/watch?v=98RIh07aEyQ

5.2.1. Interview Analysis This interview was given to a very reputable sale representative named Billy Bavbek. He has been with Medical Specialties Distributors, LLC for the past 5 years and holds the current title of District Sales Manager for the Northeast Region. He also currently won on, March 11, the award for Territory Manager of the year in the Home Infusion Therapy Division for MSD. He in a nutshell agreed that its a growing market but that its very hard for MSD to gain market share due to the large competition on the NYC metropolitan area. Also due to the contracts that these medical supply companies hold with manufactures its hard to obtain new contracts with maybe less expensive manufacturers. Overall, Mr. Bavbek believes that relationships will continue to grow with already existing clients and therefore grow as a company

27

M.S.D.

5.3 Internal Influences

In buying home care products there are several internal influences that affect the decision that the buyer makes. Among them are perceptions, memory, learning e.t.c. These internal influences drive our decision making process. 5.3.1. Perception Perception is a process that begins with consumer exposure and attention in marketing stimuli and end with consumer interpretation. When we see a commercial for a popular home care product like the motorized chair, notice how the people are in the commercial. It highlights and illustrates how the typical elderly citizen lifestyle would be without the chair. They are restricted in where they go. They cannot maneuver around their own homes. They give the consumer watching the video the impression that life without the chair with cause them to be captive and would directly influence their quality of life. Then they will show the same individuals in the scooter. All of a sudden the client is liberated. They are able to move about the same home in ease. In addition, they are able to do chores that before they would have to delegate to someone else. They can go shopping by themselves without needing a ride to and from the store. The individuals in the commercials have recaptured their freedom. Within 30 seconds, this commercial demonstrates how the person watching it will go through all these different feelings and emotions and will most likely prompt them to call to order or at least inquiry how to have this essential item in their lives. What the commercial used was the concept of Information processing which is a series of activities by which stimuli are perceived, transformed into information, and stored. The four stages of information processing are exposure, attention, interpretation, and memory. Exposure,
28

M.S.D.

attention, and interpretation together are the major factors in perception. Exposure occurs when a stimulus comes into range of a persons sensory receptor nerves such as vision for example. Exposure can be random and deliberate. A television commercial for homecare would be more effective if it was shown during a block of time where studies show the elderly will be watching most likely. This would be a deliberate exposure. In the case of the television commercial, the person views the commercial and from there, the job of the commercial is to captivate the consumers attention. Attention is when the stimulus is seen which means that the receptor nerves pass the sensations on to the brain for processing. Stimulus factors help to grab the consumers attention. Stimulus factors are physical characteristics of the stimulus itself. Stimulus factors such as ad size and color are under the marketers control and can attract attention individual or situational characteristics. The important part of perception is the interpretation step. Interpretation is the assignment of meaning to sensations. Interpretation is related to how we comprehend and make sense of incoming information based on characteristics of the stimulus, the individual, and the situation. In the case of the motorized scooter, the individual reasons out the meanings and emotions in the commercial. The homecare products marketers drive the consumer to focus on the psychological meaning on purchasing the products. Psychological meaning is the specific meaning assigned a word by a given individual or group of individuals based on their experiences, expectations, and the context in which the term is used. Maybe the person watching the commercial is an active citizen that would not have the need for a product like a motorized chair, but that is why the commercial tries to create real world experiences that would seem familiar. Possibly a friend that person might know is having the difficulties that are highlighted in the commercial. It
29

M.S.D.

prompts the person to wonder if they want to be like their friend John, stuck in the house all day because he cannot out and about the way he used to. Also the fact that the commercial gives the impression that having this product will encourage more social activity might entice the consumer to pick up the phone to order. This type of interpretation is affective because it is the emotion or feeling response triggered by the stimulus. These meanings derived from one commercial show how important interpretation is. 5.3.2. Memory Another internal influence that drives consumers to purchase homecare products is memory. To understand memory we must first address learning. Learning is any change in the content or organization of long term memory or behavior and is the result of information processing. Long term memory deals with storing and retrieving information to be used in decisions versus short term memory holds information temporarily while it is interpreted and transferred into long-term memory. It is the long term memory that is essential in getting the individual to purchase a product. With homecare products, the consumers purchase them because they have developed an attachment to the product. You cannot purchase a product that you cannot remember. The way marketers encourage the consumer to develop a long term memory for the homecare product is to make it very personal. They try to make the consumer feel that they have to have the product in their lives. The term marketers use for this type of memory formation is called semantic memory. Semantic memory is the basic knowledge and feelings an individual has about a concept. It represents the persons understanding of an object or event at its simplest level. Another type of memory homecare product marketers tend to focus on is episodic memory.

30

M.S.D.

Episodic memory is the memory of a sequence of events in which a person participated. These personal memories of event such as a first date, graduation, birth of a child, can be quite strong. Marketers frequently attempt to evoke episodic memories either because their brand was involved in them or to associate the positive feelings they generate with the brand. With the motorized chair, the commercial a consumer will see has a person struggling in their tradition wheelchair. They will be seen bouncing around, clumsily bumping into furniture, frustrated trying to negotiate the wheelchair through doorway openings. This will trigger strong emotions for the elderly person watching it. Their long term memory synapses will start to trigger. I remember when that happened to me the other day in the kitchen. Then when they

see how life will change for the better with the new and improved chair, the consumer has other emotions that develop. The way the product sticks in the consumers mind is that it triggers an emotion that allows them to associate it with a previous memory. For example now the consumer is thinking if I get that scooter, I will not bounce into the door of the kitchen anymore. How great will that be?. The scooter has developed a long-term memory for the consumer and because of an effective marketing strategy most likely the consumer will move close to purchasing the product. The key to this association developing is dependent on accessibility. Accessibility is the likelihood and ease with which information can be recalled from long term memory. The consumer pulls together the memory of the previous lifestyle and the new

memory of what life would be like with the product. This is termed conditioning. Conditioning is a set of procedures that marketers can use to increase the chance that an association between two stimuli is formed or learned. The word conditioning has a negative connotation to many people and brings forth images of robot-like humans. However, the general procedure simply
31

M.S.D.

involves presenting two stimuli in close proximity so that eventually the two are perceived (consciously or unconsciously) to be related or associated. The motorized chair is a condition stimulus that triggers a positive conditioned response. 5.3.3. Importance There are some key factors that motivate people to purchase homecare products. One of them is Importance. Importance refers to the value that consumers place on the information to be learned. Importance might be driven by inherent interest in the product or brand, or might be driven by the need to make a decision in the near future. The more important it is for the individual to learn a particular behavior or piece of information, the more effective and efficient he or she becomes in the learning process. This is largely due to the greater elaborative activities involved in fully processing and categorizing the material. For an aging population, homecare products are already a priority. Unlike generations before, the older populations are more active and would like products that will still maintain their health but also allow them to stay as independent as possible. Products like home IV stand, personal oxygen tanks, and motorized chairs help to do this. When these products are marketed they intention is to trigger behavior to cause the consumer to make the purchase. This process is called motivation. 5.3.4. Motivation Motivation is the reason for behavior. A motive is a construct representing a unobservable inner force that stimulates and compels a behavior response and provides specific direction to that response. A motive drives us to do the things we do. The terms needs and motivations are often interchangeable. This is because when a consumer feels a gap between a desired state and his or her actual current state, a need is recognized and experienced as a drive state referred to as
32

M.S.D.

motivation. The people that would purchase homecare products are motivated to make these purchases because they feel that there is a need for them. They need to have them in their homes out of convenience, safety, security, and overall health. These factors are highlighted in how these products are promoted. They are marketed to the consumer so that they feel that if they do not have these products in their homes it will have a negative impact on their quality of life. 5.3.5. Personality Personality also plays are role in why people will purchase homecare products. If you are an active adult and then all of a sudden you have to have knee surgery. You will not be allowed to be as mobile as before. As a result, a motorized chair will be alluring to you because it allows you to be closer to the lifestyle you are accustomed to. The personality of a consumer guides and directs the behavior chosen to accomplish goals in different situations. Consumers also prefer advertising message that portray their own or a desired personality. This will trigger emotional responses. Emotions are strong, relatively uncontrollable feelings that affect behavior. Emotions occur when environmental events or our mental processes trigger physiological changes such as increased heart rate. These changes are interpreted as specific emotions resulting from the situation. They affect consumers thoughts and behaviors. Marketers design and position products to both arouse and reduce emotions. The emotion that the consumer gets when they see the product is what drives them to make the purchase. 5.3.6. Attitudes The last internal factor that drives consumers to purchase homecare products is their attitude towards the product. Attitude is defined as the way people think, feel, and act toward some aspect of their environment. A result of all the factors discussed so far attitudes, influence as
33

M.S.D.

well as reflect the lifestyle of the individual. If the product gives the person a positive impression, then their attitude towards the homecare product will be received with good reception, thus causing them to purchase the product.

5.4-External Influences 5.4.1. Affect on Consumer Behavior

Consumer purchasing decisions are often affected by factors that are outside of their control but have direct or indirect impact on how they live and what they consume. External influences are one of those factors that affect how we as consumers go about buying and connecting with a particular product or service. External influences are mainly based on sociological and demographic backgrounds. As consumers we tend to rely on external influences that involve our self-concept and lifestyle. We all have a view of ourselves, and we try to live in a particular manner given our resources. Our view of ourselves and the way we try to live are determined by external factors such as our culture, age, friends, family, and subculture. Another aspect to look into when considering external factors is the needs and desires of the potential consumer.

When looking into the company we chose to research Medical Specialties Distributors Inc, we glanced at what external influences affects them the most. I felt as though that culture, demographics, and social status affects them most when it comes to gaining more market share in the home-care market. Also explore the Baby Boomer generation because they are the population that MSD will to market to for more shares in the home-care market.

5.4.2. Culture

34

M.S.D.

Culture is the complex whole that includes knowledge, beliefs, art, law, morals, customs, and any other capabilities and habits acquired by humans as members of society. In MSD case knowledge, beliefs, and customs play a part on how they can market themselves to potential customers in their home-care segment. A trend has developed in recent years that involve healthcare many patients have focused from hospital care to home-care. Patients prefer home healthcare over hospitals mainly for the lower cost and convenience benefits. There are many ways for MSD to capitalize in this market by informing and gain awareness to consumers of the goods and services offered to suit their needs. Many family-oriented families can familiarize themselves to this segment so they can take care of by their extended or limited family from home without worries of treatment at a facility and constant visits from doctors which ultimately be more costly then in home care. Also many cultures believe that being taken cared of from home is the best remedy because they are surrounding by loved ones, comfort and more upbeat environment. Instead of being surrounded by strangers and secluded in a one person suite this can cause depression, worsen the patients morale, and deteriorate their health.

5.4.3. Demographics Demography is the study of human population in terms of size, density, occupation, age, gender, race, and location. MSD target market should towards the age group of 45-54 which are the Baby Boomers. They contain most of the general population in the United States as shown in the graph below. Also demand for in home care service is expected to grow over the next decade as Baby Boomers continue to age and require assisted living services.

35

M.S.D.

This is especially important to remember when marketing a product or service to the general public or even to a sub-segment of the general population. The segment MSD is trying market is home-care services were goods and services are offered to a patients homes instead of hospitals or clinics. If they cannot relay awareness and advantages of their services to this target audience, all their efforts will be a lost cause, falling on deaf ears. As you can see from this chart below home health utilization has growth over the years. Some regions in the United States have more consumption of home-care than others. The national average rate in home health utilization is 19.7% and quartile four is well below that with .70%, also quartile three with 8.9% which are lacking home health utilization. MSD can gain more market share by providing goods and services in quartile three and four

36

M.S.D.

which lack a home-care market by marketing to them if there is a need there. The market for home-care services is estimated to reach two-hundred and seven billion dollars by the year 2014. Home visits and nursing services will constitute for seventy-two percent of the entire market. Also home therapeutic equipment is growing fast in this particular segment. They can accommodate to consumers needs by providing home-care equipment and services.

5.5 Home Healthcare Equipment Home therapeutic equipment- Oxygen delivery systems, nebulizers, ventilators, IV diagnostics, home dialysis, insulin delivery devices, and other equipment. Home self-diagnostics/monitoring equipment- Blood glucose monitors and test strips, blood pressure monitor, heart rate meters, sleep monitors, and other equipment. Mobility assist devices and others- Wheelchairs, walkers, crutches, canes, treatment chairs, medical beds, medical furniture, and accessories.

5.6 Home Healthcare Services

Home respiratory therapy services Home infusion therapy services Home visits and nursing care services (physical examination, physical therapy, nursing services)

Home telemedicine services

5.7 Social Status

As mentioned before MSD target should be the Baby Boomers because they represent one-third of the population and they are

37

M.S.D.

aging. Baby Boomers have charged social and cultural revolutions. Their influence on the market is greater than any other generation. Also they consume a lot of health-related product and services, for instance anti-aging products. They want to continue to have their self concept and maintain their lifestyles. They are tech savvy enough to use the products after some training. With this in mind physicians and hospitals are prescribing home care to the patients to reduce huge patient inflow. Therefore patients can lower medical expenses and increase their use in automation.

38

M.S.D.

6- Conclusion

We have thoroughly analyzed Medical Specialties Distributors LLC in conjunction with the material, tools and lessons from this course to develop strong data which can allow upper management make strategic business decisions. Also we evaluated their current strategies to lead to development of more effective choices in the future. Such decisions that would create a positive impact on both their brand image within the medical supplies market and their current position among their competition.

39

M.S.D.

Works Cited
Bannon, A. (2009, October 12). Home Health Care Industry Is Booming, According to New Report. Retrieved March 20, 2011, from FRANdata: http://www.frandata.com/products/samples/HHC.pdf Brindle, D. (2009, September 18). Demand for care homes rising, market survey finds. Retrieved from Guardian.co.uk: http://www.guardian.co.uk/society/2009/sep/18/care-home-places-business-market Healthcare Market Resources. (2011). Metrics Matter: Is Home Health Utilization Growing in Your State? Retrieved March 20, 2011, from Healthcare Market Resources: http://www.healthmr.com/resources/newsletter-archive/0808-mm-home-health-growing-in-your-state Healthcare Reform. (2011, March 4). Retrieved April 21, 2011, from NY Times: http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/health_insurance_and_ managed_care/health_care_reform/index.html Lyon, E. (2010, March 2). Examining Baby Boomers: Stats, Demographics, Segments, Predictions. Retrieved April 5, 2011, from SPARXOO: http://sparxoo.com/2010/03/02/examining-baby-boomersstats-demographics-segments-predictions/ Marketers & Marketers. (2010, Febrary). Home Healthcare Market (2009-2014). Retrieved from Market sand Markets: http://www.marketsandmarkets.com/Market-Reports/home-health-care-market133.html Medical Specialties Distributors,LLC. (n.d.). MSD. Retrieved April 21, 2011, from MSDon line: http://www.msdonline.com/ PRW. (n.d.). Encouraging growth in the home health care market. Retrieved April 21, 2011, from PRW.com: http://www.prw.com/subscriber/headlines2.html?cat=1&id=1275904086 Sawyer, D. (2010, March 24). House Democrats Face Violent Threats After Health Care Vote. Retrieved April 21, 2011, from ABC World News: http://abcnews.go.com/WN/house-democrats-face-violentthreats-health-care-vote/story?id=10193618 Seeking Alpha. (2010). Home Healthcare Industry: Looking Forward to Patient Growth . Seeking Alpha .

40