2.7 Brands and Products
2.7.1 Branding in the Drug Industry
The concept of branding has lasted for many years as a tool to differentiate a firm`s offering from competing products by creating an image that can easily be recognized and remembered (Smith, 2007). Over the years, firms that produced traditional customer goods have sustained themselves in the market by branding their products (Ladha, 2007). It has been suggested that, one of the possible ways for companies to survive and continuously grow in the marketplace
is to create and carefully manage the value of their products and services. Firms can create this value through their product brands (Dlaćic & Kezman, 2007).
However, traditionally, the sources of value creation in the drug industry as whole have been continuous research and development and aggressive sales efforts (Blackett & Harrison, 2001).
The drug industry has been typically dominated by science and its success has been largely dependent on the invention of superior products beneficial to mankind (Blackett & Robins, 2001a). Hence, the industry had focused on products rather than brands. They serve as a major source of competitive strength and huge investments were made to create them (Moss, 2001;
Sanyal, Datta, & Banerjee, 2013).
Since a firm`s products can easily be reproduced, products are therefore not unique and they earn a rate of returns on investment that is commensurate with those of competitors. Dickov and Igić (2013) suggested that brand equity was virtually non-existent in the pharmaceutical industry since the value of a product was indicated by its therapeutic value and the duration of the patent expiration.
Coupled with this, the development of the discipline of branding in the drug industry has been slow and has not gained the strategic attention relative to their counterparts in the traditional customer goods industry (Shuiling & Moss, 2003). The authors further argued that the critical success factors in the industry until recently, used to be aggressive research and development, strong patent protection and strong sales agents. Thus, the industry has been well-noted for being product, research and development driven but not market-oriented.
However, Moss and Shuiling (2004) emphasise that the industry is not growing as it used to in the past, partly, because the traditional success factors are less effective in today`s competitive marketing environment. Moreover, differences in product performance are getting closer and generic competition is intensifying and this constitutes a major threat to the industry.
Firms in the industry are now searching for new ways to consolidate themselves in the market.
Over the years, several mergers and acquisition were undertaken with the view to optimising productivity from research and development to gain economies of scale within the industry (Dickov & Igić, 2013).
Ladha (2007) is of the view that due to the harsh competitive nature of the industry, the idea of branding would be more significant and of strategic importance to the industry. However, there are several factors that constrain branding and marketing practices in the pharmaceutical industry compared to the traditional customer packaged goods industry. Blackett and Robins (2001a) emphasized that brands thrive in a marketplace where direct and open relationships exist, as well as where availability of a product and choice is unrestricted. Few of these factors, however, really exist within the ethical drug industry. In the ethical drug industry, the relationship between the buyer and the seller is heavily mediated, while regulatory bodies impose sanctions and restrict the availability of a product and direct communication about a product`s attributes to customers (Blackett & Robins, 2001a).
According to Moss and Schuiling (2004), the drug market is a highly regulated market globally and, unlike other customer products, the brand name is not transferable to a new product when the patent expires. In view of this, it has been concluded that it is not worth investing in pharmaceutical brands due to their short life cycle. Another major problem lies in the constant cycle of product innovations which gives rise to the rapid launching of new brands at the cost of older brands. In spite of this, the authors further emphasized that drug companies have not worked proactively to determine and communicate the brand identity of their products to customers in order to make their brands distinct from competitors. Moreover, it is argued that there is lack of brand focus in the ethical drug industry (Shuiling & Moss, 2003).
Nonetheless, the industry possesses some well-established and strong brands of which a large number enjoy little or no patent protection (Blackett & Robins, 2001b). Furthermore, the OTC market which operates in a similar fashion as the traditional customer goods industry has embraced brand logic and its practices as prevailing in the customer packaged goods industry (Dickov & Igić, 2013; Blackett & Harrison, 2001). Most functional and alternative medicines are also managed like traditional FMCGs as they are accessible, and the power of choice largely depends on the customer (Blackett & Robins, 2001a).
Dickov and Igić (2013) asserts that many successful OTC brands, such as Aspirin and Strepsils are recognized as international brands and are comparable to iconic brands like Coca Cola in the customer retail markets. Recognizing the critical role of branding in the OTC market, many ethical pharmaceutical companies are now producing and investing in non-prescription drugs
with a view to creating strong brands as they represent new a source of business value (Blackett
& Robins, 2001a).