Product line management: Panadol is a very vital product for the company which has an incredibly good reputation inside the market. It generates large sums of revenue and therefore this product line should be expanded further in order to increase revenues and profits for the company. Although Mr. Asad talked about the introduction of new variances but he was not sure of when exactly they will be launched and what exactly would be the company’s marketing plan these new variances. Our recommendation would be that the company should not waste more time in introducing these new variances.
The environmental conditions of a huge city like Karachi have been getting poor day by day. Attention paid by the local government towards improving the health care facilities have drastically gone down hence there are now thousands of local residents falling down in different illnesses such as flu fever and body pain every day. The market for the new variances is huge and it should be seen as an opportunity and a market gap by the company. New variances like Panadol for flu and Panadol for women should be introduced in order to provide specific and specialized treatments for flu and for women.
These variances would further communicate the company’s core value of
“patient first” to the consumers and would make them believe that the
company understands its responsibility of catering to every new need of the consumer.
This extension of the product line would provide a number of benefits to the company such as :
1 Leverage costs would be drastically reduced via economies of scale.
Economies of scale is basically a stage in which as the company increases its output its average cost per unit tends to fall and move towards an optimum point.
2 Competitors would be defeated by enabling one-stop shopping. By introducing a cure for every disease, GSK would ensure that Panadol
becomes a brand for the whole family and customers do not feel the need of taking a risk of consuming new unknown brands to cure their illnesses.
3 More choices would be offered in the market that is more closely tailored to specific customer requirements. Different customers have different types of illnesses hence new variances would be able to cater the need of every customer individually and specifically.
4 Access incremental profit opportunities would be availed and higher profit margins would be achieved. Since Panadol is already a market leader in its market, people would not have much problems in trusting its new variances hence there would be increased sales, revenues and profits for company.
On the other hand the company will face a few drawbacks as well. Each and every item added to a line has associated costs. Some of these costs are visible, some are hidden in traditional financial accounting, including:
1 Administration: the cost of setting items up for processing, reviewing their status, and placing purchase orders
2 Cannibalization: diverting sales from other models rather than generating true incremental volume
3 Inventory: disproportionate safety stock is required to maintain service levels when volume is spread across multiple models
4 Repair parts: separate inventories of model-specific parts may need to be provided throughout the market life of the product
Hence the company will have to manage these costs effectively in order to fully avail the advantages of product line expansion.
Branding: as Mr. Asad pointed out in his interview Panadol’s brand image is all about safety and minimal side effects. Although it is a healthy brand image to have but it has to communicated to the audience and to the market on a larger scale and majority of the users of Panadol still do not know what does the brand of Panadol really stands for. GSK hasn’t introduced any advertising campaign in the last 5 years. They communicated to their customers through their products only. Hence the company needs to make more use of digital and print media in order to communicate their brand image clearly to the consumers.
Panadol is arguably the safest drug to use inside the market. According to Mr.
Asad all the other drugs in the market such as Ponstan and disprin carry a lot of side effects. They cause severe headaches with additional dosages and seriously damage the patient’s health. Whereas on the other hand Panadol almost has zero side effects hence this image of intense safety should be communicated to the consumers through different advertisement campaigns.
The advertisements do not need to be fancy or persuasive, they can be simple and informative, informing the general public about the safety feature of the brand of Panadol. A clear brand image will yield a number of benefits for the company:
1. Easier client recognition: it will reduce client recruitment and advertising costs so you can grow your business faster.
2. Expressing competitive advantage: it will provide an advantage over competitors and protect the value of the business
3. Expressing position and space in the market: the company would get known in the market as standing for and owning a position that its competitors cannot claim
4. Increased response rates: Tapping client benefits in branding increases the reaction rate from the company’s activities
5. Lowers costs of communication to clients: Brand consistency can dramatically lower the cost of communicating to the clients
6. Recruitment of new employees: Great staff want to be associated with and work for a great legal brand
Hence our recommendation for branding is that the company needs to be more vocal about its distinctive brand image inside the market.
Pricing: As stated by Mr Asad the prices charged by GSK for their product of Panadol are minimal. These prices are fixed by the Government of
Pakistan through its health ministry and pharmaceutical companies cannot do much about them. Based on the value and the price charged, panadol’s
pricing would come under the heading of price penetration. Price penetration is charging low prices and offering high quality in return.
According to Mr Asad although the government regulations would never be removed from the pharmaceutical firms but if we make an assumption that they are removed than GSK can charge around Rs20 for each set of 12 pills and this would increase the company’s profits by 20 percent.
Increase in prices would defiantly lead to higher revenues because the
demand for Panadol in Pakistani market is inelastic i.e. changes in prices do not drastically affect the demand of the product. An increase in price would
still keep Panadol as a very cheap product, one which constitutes a very small proportion of a consumer’s income, plus although there are other competitors in the market like ponston and disprin but still Panadol is the market leader and just because of a minor increase in the price a consumer would not stop buying Panadol put his/her health at a risk.
GSK enjoys a number of benefits by having a price inelastic demand:
1. There are several opportunities of increasing the prices of their products inside the market. And as stated before this increase in prices would almost certainly increase the revenues.
2. Increase in prices would not drastically bring down the sales units.
Since demand is price inelastic a slight increase in the prices would not stop the consumer from the buying the product.
3. Profits are mostly constant i.e. they might be increasing at different rates but most of the times they are increasing; very rarely there’s a decrease and change in the pattern of profits.
4. Constant profits make financial planning a lot easier. Lack of uncertainty helps a lot in making future plans and determining the success of those plans in the future
Hence increasing the prices of Panadol can generate large sums of revenues for GSK but the Governmental price controls do not provide permission to the firm to do so thus there is not much the company can do in the pricing department. However the company can invest in research and developing new methods of reducing costs in order to increase its profits.
Distribution: distribution is basically a process of making a product
available to the consumers wherever and whenever they want it. There are four main channels of distribution and the one which GSK uses involves the transfer of good from the manufacturer to wholesaler to retailer to final consumer. Panadol is a consumer good which caters to the needs of a large number of people. Anyone can get sick anytime and can use the drug hence the market for the product is massive. In order to facilitate this massive market the product has to be distributed in masses to each and every reachable location of the country.
There are a number of intermediaries involved in the distribution of Panadol, 50 to be exact. Whole sellers play a very vital role in the distribution of the product. They are responsible for buying the product in bulk from GSK hence the risk of a large sum of the product is lifted off from the shoulders of the company and is transferred to the whole seller’s books.
Distribution of Panadol in the urban areas is quite satisfactory but it is the remote rural areas in which the company needs to focus and improve its distribution. The company needs to locate its specific distributors in these rural areas in order to look after Panadol’s distributions.
Major problem in these rural areas is the cheap production of copies of Panadol. Different copies of the drug are produced and sold to the general public in these areas. Due to these copies the company not only loses its market and potential revenue but also faces a risk of getting consumers post purchase dissonance and a deterioting brand image of the product.
Employing sales personnel and regional heads in these remote areas would provide a number of advantages to the company:
1. Increase of sales
2. Increase of revenue
3. Protection of brand image
4. Highlighting the company’s “customer first” value
5. Possibility of increasing its share of the total pharmaceutical market of the country
Being a market leader of the pharmaceutical market, it is the responsibility of the company to access these remote areas and sell their products as this will not provide extra revenue but will also provide an upper hand over the
competitors in the market. It will also benefit the local residents as well as they are being forced to use the copies of the real product which are not at all as effective as the original drug itself. Hence improving distributions in these areas is crucial to the company’s future progress.