Evaluation of Pfizer’s Market Segmentation Approach

Executive Summary

Pfizer is among the largest companies in the world and among the leaders in the pharmaceutical industry. From April 2002 until March 2003, the company was able to rank first in total sales generation. Specifically, the company was able to acquire billions of US dollars, which in turn led to significant market share and company growth. In addition, Pfizer was able to out rank its major competitors such as Merck and Co., John & Johnson and GlaxoSmithKline. Reports have noted that the success of the company was mainly attributed to its effective marketing efforts, which in fact, have been considered as one of the best in the business industry. In addition, the safety records of Pfizer is also one of the best; thus, acquiring investors and establishing trust was easy for the company.

Aside from human health, Pfizer is also manufacturing products under its animal health product line. One of the market segments of the company are the large cow-calf business owners. Using the herd-size market segmentation approach, Pfizer primarily caters to large business owners and operators. While this market segmentation has been effective for the company, other approaches could possibly maximize the product distribution of the company. Thus, in this business analysis paper, the herd-size market segmentation approach will be described and analyzed. Furthermore, based on previous learning and business inputs, other viable market segmentation approaches that Pfizer may apply will also be identified.

Pfizer’s Animal Health Segment

Like its pharmaceutical product line, Pfizer’s Animal Health segment is recognized as one of the world’s largest. The company discovers, creates and sells products on animal health that will prevent and treat livestock and companion animal diseases. Based on reports and statistical records, the Animal Health segment of Pfizer was able to obtain increased revenues by twenty-two percent, adding two billion US dollars. This success has been attributed to the company’s inline product brands like Draxxin and Excede, a medication for treating cattle and swine respiratory diseases. Clavamox, Revolution and Rimadyl are all medications for companion animals that have contributed greatly to Pfizer’s animal health segment. These product segments were able to contribute a significant 3.7 percent to its total revenue in 2004, 3.6 percent in 2003 and 3.5 percent in 2002. From these records, it is clear that Pfizer is able to acquire consistent growth in its animal health products.

Pfizer Animal Health segment markets a number of products, including anti-inflammatories, parasiticides, antibiotics, vaccines and other related products. Among these products, medication for animal parasites constitutes the largest market, particularly for companion animals as this product line is primarily composed of medicines for parasites like worms and fleas. The brand Revolution is the largest selling parasiticide of the company for companion animals. Rimadyl on the other hand is a medication used as a pain and inflammation reliever for dogs with osteoarthritis, or those who have undergone soft tissue orthopedic operation. This product may also be used as a medication for animal arthritis, and come in tablets, capsules and injectable forms. Another popular product is Clavamox which is used as a skin antibiotic and soft tissue infections for both dogs and cats.

Vaccines for livestock animals are also produced by Pfizer. One of which is RespiSureOne that is for pneumonia prevention among swine. Cattle vaccine is also manufactured by Pfizer and comes by the brand name Bovi-Shield Gold, and used to prevent respiratory and reproductive disorders. Dectomax is also distributed among cow-cattle operators for controlling and removing both internal and external parasites in beef cattle. Respiratory and other internal infection among cattle and swine may also be treated through an antibiotic called Naxcel/Excenel RTU.

From this wide array of product lines, it becomes clear that high market coverage is among the many factors that contributed to Pfizer’s success. On the products manufactured for cows and cattle, Pfizer used a market segmentation strategy known as the herd-size market segmentation approach. The efficacy of using this segmentation approach will be analyzed based on the details provided by the case study.

The Herd-Size Market Segmentation Approach

Segmentation analysis is actually based on the theoretical belief that every consumer has different attitudes, perceptions and purchasing behaviors. However, these differences are not wholly idiosyncratic. Hence, consumers with similar needs and preferences must be grouped together apart from other groups with other preferences. This further stresses the importance of market segmentation to business. Market segmentation refers to the practice of dividing the total market into several groups, where the preferences of each consumer on products, services and distribution methods are all taken into account. This strategy appears to be an effective tool primarily in addressing mature markets. This is mainly because markets of this type are typically huge in size and highly diversified. According to Michman (1991), market segmentation pertains to marketing efforts provided to a group of potential buyers based on various characteristics. These characteristics may include demographic, geographic, lifestyle and behavioral data. Hence, market segments are typically based on age, income, occupation, gender and behavioral aspects.

Through market segmentation, the company is able to include efficiency and specialization into its marketing operations. By designing certain marketing programs, companies can align their products with the specific needs of their market segments, resulting to better marketing results (Moschis, 1994).

Pfizer Animal Health also makes use of the market segmentation strategy. This approach is being utilized by the company in their animal health products for cows and cattle. Pfizer Animal Health has segmented its market based on herd-size. With this market segmentation approach, the company focuses its attention on business owners and producers with a herd size of more than five hundred heads of cattle. Pfizer has used this approach to concentrate its marketing efforts. The segment is actually made up of 2.8% of all animal in the market.

In market segmentation, the nature of the market is not the only significant factor. Size is particularly important for an effective market segmentation strategy. In actuality, business operators of cows and cattle typically own a herd size with less than a hundred cattle head. Considering this fact, it seems impractical to just concentrate its marketing efforts to a small market population. The creation, distribution and advertising of a product can be labor-extensive and can demand a lot from the company resources. Thus, the company has to identify a huge market segment that can help reimburse all support given to the product. It is then not advisable to concentrate all marketing efforts to a market segment with a small percentage size. Concentrating to other segments that are larger in population may help Pfizer increase its revenue.

The herd-size market segmentation approach applied by the company provides minimal attention to traditionalists which make up 19.8% of all animals in the market. Moreover, this segmentation approach totally ignores the hobbyists which comprise 77 percent of all animals within the market. From this case, the basis of the company for concentrating on the smallest market segment is difficult to determine. Normally, market segmentation is based on the size of the market, including the consumers’ needs and preferences. Though small operators may not be have the highest ability or potential to support the product distributed by Pfizer Animal Health, this segment by far outnumbers the market segment based on her size.

Perhaps, the intention of the company to ensure the continuous support of their product is one of the reasons why Pfizer preferred to concentrate their marketing efforts on large operators. Aside from the fact that these owners have a huge herd that will need the product, these businesses are highly stabilized, with enough resources to support mass product orders. Small operators are not only less stable, but some of them are not growing cows and cattle for business. Thus, demand for the product may be less. Rather than including smaller operators as a market segment, Pfizer preferred to concentrate on the segment that will provide guaranteed support for the company.

While this approach may be practical, other segments that are also in need of the products made by the company may be overlooked. Hence, consumer groups that could have contributed to the company may not be given due attention. For this reason, extensive research and consumer study must be conducted. Other possible market segments must be identified by Pfizer. Changes should also be done to conventional market segmentation approaches.

The preferences, needs and tastes of consumers tend to change over time. Hence, identifying a new market, or a market niche, is essential (Sloman and Sutcliffe, 2001). Aside from developing a new product for this new market, Pfizer may also apply newer approaches that will include the new market segment, particularly the small business operators including the traditionalists and hobbyists. Research perhaps may be the most valuable tool that the company can use to gather significant data for these new market segmentation approaches

Other Market Segmentation Approaches

Selecting a single method to create a market segment is not possible. This is because a number of variables on segmentation would have to be evaluated alone and in combination to other variables. In order to create an effective market segmentation approach, a step by step process must be conducted. This process include the identification of the market segmentation bases, the development of market segment profiles, the identification of the segment size and profitability, selection of target markets, product positioning for every target market and the development of an appropriate marketing mix to reach every target market.

In order to enhance the current market segmentation applied by Pfizer, the process described above should be performed. In addition, below are some of the approaches that can be applied by the company:

• Behavioristic Segmentation

In this approach, consumers are segmented into groups based on their attitudes, uses, knowledge or responses to a certain product. In this segmentation approach, the focus is on buying situations, which tend to vary depending on circumstances and buyers’ time. With behavioristic segmentation, Pfizer may be able to identify other market segments that respond positively to its animal health product. Current trends suggest that customer preferences tend to change rapidly, and that most businesses are becoming more and more customer-oriented. Hence, applying the behavioristic segmentation approach is very much applicable to this industrial change. In implementing this approach, Pfizer may conduct a consumer study focusing on their product and brand preferences as well as current needs. Buying trends may also be included in this market segmentation approach. Rather than focusing on herd-size alone, Pfizer need to be more focused on the needs of the customers found in other market segments.

• Usage Segmentation

Usage segmentation is aptly named as this approach focuses on how market segments use a particular product. When a company makes use of this segmentation approach, a new and distinct product is usually developed. In addition to product development, special prices, promotional activities and distribution methods are established. In most instances, these special activities are beneficial as they enable the establishment of customer loyalty. In utilizing the usage segmentation for identifying market segments, companies and marketers are able to target various segments even when the customers are the same. The case of Pfizer may be used as an example for this tendency. For instance, a market segment may be price sensitive in one situation, such as purchasing cattle/cow vaccine for everyday use, and price insensitive to other situations, like purchasing vaccines in times when epidemics and pests are likely. Hence, inexpensive vaccines may be offered to consumer for everyday use and more expensive vaccines for other cases and emergencies.

• Psychographic Segmentation

This approach is primarily composed of motivation, lifestyle and personality variables. A single psychographic variable may be used on it own in identifying a market segment, or it may be combined with other psychographic variables. Consumer personalities like compulsiveness, aggressiveness, introversion and extroversion are some examples which can be used to divide a market. Motive on the other hand, is the drive that provides the consumers with the direction to move towards goal achievement. While it is hard to accurately measure the extent of a motive, marketers have used this segmentation approach to markets. Among the most common motives that may affect the types of products purchased and where these products are purchased. Lifestyle is also part of this segmentation approach. Lifestyle and market segmentation are considered to be related concepts and are potent tools for maximizing profitability and satisfying consumer preferences. When lifestyles are analyzed, opinions, interests and activities of the consumers are usually considered. Thus, activities like work, hobbies and leisure, or opinions such as on social, political and educational issues are take n into account in this segmentation approach. This approach can help Pfizer identify which of the consumers are considered hobbyists or traditionalists.

Implementation

Based on the descriptions made for the possible segmentation approaches that Pfizer can apply, it is imperative that the company conduct the said procedures in market segmentation. In addition, the company should conduct a demographic research focusing on the location of the consumers. This is to help the company identify which states have a higher population of small cow/cattle operators which need much attention. A consumer study should also be conducted by the company so as to help its marketers decide which of the many possible approaches should be applied. In terms of marketing strategy, a development of a marketing mix should be useful in the implementation of the selected market segmentation approach. Thus, the 4 Ps (product, price, place and promotion) should be identified to help market the animal health products.

Conclusion

Pfizer Animal health has focused its marketing efforts on herd-size market segmentation approach. While this approach is practical as the company can concentrate on large cow/cattle business owners, other market segments, particularly the small operators, are not given much attention. As product development and distribution can be demanding in terms of labor and other resources, gaining support from a more diversified market segment is then essential. Hence, applying other market segmentation approaches by Pfizer may be helpful in improving its sales and business status.

At present, businesses are becoming more and more customer-oriented. Thus, most marketing efforts are focused more on what the customer needs and prefers. Pfizer can then apply the suggested market segmentation approaches in response to changing customer trends. In general, Pfizer’s market segmentation based on herd-size may be improved further by applying other appropriate strategies. Most importantly, Pfizer should focus itself more on generating customer satisfaction and loyalty rather than on profit generation assurance alone.

References:

Michman, R. (1991). Lifestyle Market Segmentation. New York: Praeger Publishers.

Moschis, G. (1994). Marketing Strategies for the Mature Market. Westport, CT: Quorum Books.

Sloman, J. and Sutcliffe, M. (2001). Economics for Business. Harlow, England: Financial Time Prentice Hall.