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Network Marketing
Network Marketing
Managed care has introduced a business rationality to the delivery of health care, and has compelled health care providers to adopt the same business principles found in any other industry. Healthcare providers must observe and adopt these principles of successful organizational growth, including execution of a marketing and communications plan which generates demand for network products and services. The network's basic sales principle is remarkably simple - deliver value and achieve customer satisfaction. Value, however, means different things to different people. To the managed care payer, value is a combination of clinical excellence, operating efficiency, geographic access, and price competitiveness not necessarily in that order. To the patient, the true customer, value is measured in terms of quality of care, personal attention, convenience, "out of pocket" expense, and other personal impressions. The challenge is, of course, to translate the abstract concept of value into operational reality for a variety of constituencies.

Marketing Approaches

Network marketing strategy is the sum of a multidimensional approach aimed at appealing to the ultimate health care consumer - the patient. It may include the familiar types of multi media elements that typify a marketing campaign, including print, electronic, and mass distribution advertising. In addition, the network may choose a multiple distribution channel approach by distributing mass mailing, creating a public access web site, and conducting a series of group presentations to a targeted population. Complimenting this broadcast marketing approach are dedicated network personnel whose main function is to establish relationships with potential customers, who may include payers, employers, or individual health care consumers. In addition to the recognizable forms of marketing - advertising, literature, group presentations, marketing reps, the network also markets itself on a daily basis by employing information technologies to custom-treat patients (in telephone call centers and information lines), in medical management programs tailored to individual patients, and by the personal attention each patient receives, at any point of intersection between the patient and network based care. The establishment of these one on one marketing techniques is a natural outgrowth of the network's commitment to providing superior quality care and "putting the patient first". By imbedding a patient focus across the fabric of network activities, from information services, to medical management, to facilities management, the network is drafting it's entire staff to act as part time marketers. Meeting ( or exceeding) patient expectations for service quality is an invaluable tool in building market share, reducing disenrollment, and strengthening patient relationships. By delivering on claims made in marketing venues (such as multi media), the network confirms its' value proposition and creates brand awareness. This synergy also generates that best of all marketing devices - word of mouth advertising. Network managers should never lose sight of this critical linkage between formal marketing efforts and daily operations of the network.

Defining the Market for Network Products and Services

The target audience for network products and services should be apparent from the research conducted during the business planning process. It then becomes necessary to match network capabilities to market demand, and express this convergence in a powerful way. First, the network marketing staff must identify their primary product market: is it payers; employers; Medicare; Medicaid; Worker's Compensation; or some niche market (such as purchasing coalitions or the "sandwich" generation)?

Correspondingly, the network must identify the principle audience for its' services: are they affiliated and community physicians; large practices or solo practitioners; or other provider organizations?

This is not a one time exercise - the network must first gain a market foothold and then continually reevaluate ways to grow the network book of business through effective marketing. Once the target market has been identified, the network marketing staff must determine what factors drive the purchasing decision among its' potential customers. Are they driven by price, by quality, by access, or some combination of market drivers? How will the network address their customers priorities, in a way that exceeds the current level of service available to the customer? In short, how will the network establish brand preference?

Wholesale vs. Retail Marketing

The network must also make a fundamental decision about its' primary customer base. For commercial patient populations, the traditional customer base has been payers and self insured employers. This is a wholesale transaction between network and purchaser, in that the payer or employer is an intermediary. Marketing to this customer base concentrates on population based market drivers - price, quality, and access, and is targeted to meet the needs of the purchasing intermediary. Even government sponsored programs are becoming privatized - which places the purchasing decision squarely in the hands of the payers once again. The clear attraction to targeting these customers is volume - they control access to large numbers of patients. The risk in concentrating on this market is that a relatively few customers can suppress true competition among health care providers on the basis of individual strengths such as superior clinical quality, by establishing a common denominator for their buying decision - most often price. It is a bold payer that will ignore price sensitivity in the market to offer a more costly product on the strength of perceived clinical excellence alone. Unfortunately, this dynamic tends to distort the transaction between willing seller and willing purchaser, in that providers are being "squeezed" to do more, with less, and within the current provider-payer contracting construct providers have limited leverage to defend their interests. The payer market is consolidating, self insureds are developing purchaser coalitions, and government programs such as Medicare and Medicaid are in the early stages of privatization, all of which leaves the network with fewer customers and the looming threat of declining market clout. For example, if there were six managed care payers in a local market three years ago, and there are four today, it is obvious that the competitive environment is shifting market power directly to the remaining payers, who will undoubtedly use that power to protect themselves - often at the expense of their provider networks. In this scenario payers may choose to ratchet down reimbursements (further!), introduce expanded reporting and clinical performance criteria, or demand additional non -clinical services (such as patient education) in support of payer marketing activities. Nevertheless, the payer, self insured, and government program markets are the most accessible and account for the greatest number of lives with the fewest number of access points. The network must carefully weigh the cost/benefit implications of each market segment, and continually monitor events in the payer and self insured industries, as well as government programs, to glean indicators of emerging industry trends that might have a local impact.

The network may also want to consider marketing at the retail level - that is marketing directly to the health care consumer. This has been accomplished successfully in the past with Medicare and Medicaid populations, but is still relatively obscure as a network based tactic in gaining commercial market share.

The retail marketing approach is a far more personalized one - it has to be because its' basic premise is that market share is built by conducting one-to-one transactions. The retail approach allows the network to step "outside the box" of intermediary defined health care delivery, and capitalize on those characteristics of the network that create distinct brand awareness. For instance, health care consumers will purchase a product based on price, but this alone does not constitute the basis of the decision. Consumers expect value and service, and too often they have felt disenfranchised by a managed care delivery system that is impersonal and bottom line driven. The network can address this groundswell of dissatisfaction by focusing on the customer-listening to their concerns and complaints, identifying their "hot" buttons in defining value, and customizing care to appeal to a broad base of constituents, from the working mother to the elderly pensioner. Health care consumers value convenience, control and customer service, qualities notably absent in many managed care plans. The network can reintroduce these qualities into the health care delivery paradigm, by inserting a customer consciousness into every aspect of network activities.

Starting with preventive care, the network can offer patient education services, in a group education setting, through literature and tapes, and through access to a web site. It can confer to patients greater control of their care, through self care programs, home based care programs, life style change programs, etc. These tactics imbue the patient with a sense of control - that they can actively effect their present and future health, and are not at the mercy of a health care system whose attention to their health care needs has been at best, sporadic.

The network can improve customer service in the care delivery setting, by expediting appointments, reducing wait times, treating patients with respect and courtesy (this applies to all network staff), demonstrating genuine interest in the patient by listening and responding to their concerns, and creating an environment that is comforting rather than sterile.

The network can provide innovative, customer focused services that reinforce the image of network quality. Telephone triage and medication reminders, treating patients in the home for diabetes and rehabilitation, and community oriented services such as free blood pressure screenings are all examples of non traditional, customer focused services.

The retail approach is particularly well suited to exploration and development of related products that enhance customer satisfaction. A key strategy of retail sales is to anticipate and act on perceived customer needs. For instance, a first time mother will need all manner of education and accessories, from choosing an obstetrician to buying diapers, which the network can source or pro-vide as a value added service. Notice this critical difference between the wholesale and retail marketing approaches: wholesale marketing is largely focused on meeting the demand for products which are defined by the wholesaler, whereas under the retail approach the seller exercises vastly greater control over what products will be developed and to whom they will be marketed. (1)

Market Growth Strategies

In terms of growing market share, there are a number of traditional approaches that serve as the point of departure for Network market planning. First, the network may concentrate on diverting existing market share - that is, capture business from within a finite pool of existing purchasers, and within an existing pool of product offerings, for which there are substitutes in the market. Often from the purchaser's perspective, the primary decision driver in switching from one essentially equivalent product to another is price. The newer entrant, then, is forced to "undercut" the competition, and runs the risk of launching a downward spiraling price war. A related strategy is to increase the frequency of purchase, or to stimulate demand from non-users. A second tactic is to introduce a new product or service to the market, for which there are no substitutes. The opportunity here is clear to capture untapped market share, but the challenge lies in overcoming barriers to market entry, such as established purchasing patterns, unfamiliarity and unappreciation of new products, price sensitivity, etc. A third approach is to expand demand from within an existing market, and to expand the boundaries of geographic reach. In crafting a network marketing plan, the marketing team should evaluate the results of market research (conducted previously as part of the business planning process) to determine which element or combination of these elements should be the centerpiece of the marketing campaign.

In addition to applying traditional marketing approaches, the network marketing team should examine innovative ways of creating demand and increasing market share. The single question that must be addressed is "what does the purchaser want, and how can we deliver it better?" The ultimate health care purchaser is the consumer, even though the buying decision is most often filtered through employers, payers, and government programs. Historically, the focus of commercial health care marketing has been on developing relationships with intermediaries rather than patients, and this gap represents an opportunity to create purchaser demand and customer preference. By focusing on the patient and the care delivery experience, the network can create grass roots, word of mouth, bottom-up brand awareness and preference. How? by learning from the experience of other industries. Patients are apprehensive about visiting a doctor's office or hospital department - make it less threatening - even warm and inviting. It sounds trite, but decor, staff demeanor, and other "atmospherics" of the health care setting can leave as strong an impression in the patients' mind as the actual quality of the care delivered. Simple attention to customer services, like arranging for transportation to appointments, or medication telephone reminders, translate into a patient image of quality and personal service. As other tactics of network marketing yield diminishing results (after all, how long can you profitably undercut the competition, or roll out a steady stream of new products?), it will be brand identification and perceptions of quality customer service that will drive and preserve market share.

The Network Marketing and Communications Plan

Based on market research previously conducted as part of the business planning process, the network marketing team will already have gained a general understanding of local market drivers and potential customers. This baseline information must be further enhanced, by the development of a marketing database, which will be a critical exercise in prioritizing customers and setting marketing targets. This "inventory" of potential customers should include the following:

Payer Inventory
  • Enrolled lives
  • Location of covered populations
  • Plan options and features - current contracts if possible
  • Current pricing of products
  • Current and prospective risk sharing arrangements by provider segment (primary care, specialty, acute care, etc.)
  • Market reputation locally, and elsewhere

    Self Insured Employer Inventory
  • Size of employee base
  • Loci of corporate decision making (locally, regionally, nationally?)
  • Current Third Party Administrator (TPA) relationships
  • Current Benefits Packages (and any anticipated changes)
  • Comparative costs of health care benefits
  • Managed care policies and philosophy
  • Receptivity to direct contracting
  • Quality and cost criteria

    This information should be readily available from first person interviews, anecdotal experience of contractual partners (including members of the network), and public information distributed by the target firms.(2) In addition to the commercial customer base, the network must examine opportunities to capture Medicare and/or Medicaid populations. Again, an analysis of those market segments should reveal their relative market size and geographic distribution, current contracting arrangements and potential profitability, points of access (HCFA? HMO?), and other factors that could effect the buying decision for these populations. Finally, the network should examine niche markets such as workers compensation and purchasing coalitions to yield additional target populations. The results of this analysis will identify those purchasers that will be targeted for early relationship development and preliminary negotiations.

    The marketing plan should set forth specific, quantifiable objectives that can be related to opportunities and customers identified in the analysis of the market database. It should "position" the network through creation of brand awareness to capture both existing and new market shares. The marketing plan will include several elements, such as:

  • an annual public relations plan;
  • a marketing plan by region;
  • a marketing plan by client/prospect;
  • corporate communications tools (brochures, newsletters, presentations)
  • multi media advertising;
  • personal (one-to-one) marketing;
  • web site

    The marketing plan should customize marketing approaches to individual patient populations. Since the network may target multiple payer groups, such as commercial payers and HCFA, it may be necessary to execute a two-tiered marketing strategy, based on the wholesale-retail strategies. Commercial payers, for instance, will be targeted for a wholesale marketing campaign, which will include account development and maintenance, customer-specific market research, development of a clinical and demographic profile of the network, development of reporting and quality assurance measurement tools, and development of contract management capabilities. Other populations such as Medicare may be targeted for a retail approach, which typically includes seminars, direct mail, telemarketing, and one-to-one contacts. These approaches are fundamentally unalike, and require close management to execute simultaneously.

    The network marketing and communications plan is an expression of network capabilities, products, and services. It's success is totally reliant on the network's ability to deliver on its' claims of service excellence, customer service, medical management. information management, risk management, and other characteristics established during the network development process. Due to the mutually dependent nature of these distinct aspects of network operations, it is vital that representatives of each discipline: marketing, medical directorship; information officer; administrative officer; and financial officer collaborate and synchronize their efforts to create capabilities that hold economic value to potential customers. For example, a network competing for risk based contracts must be able to market itself on the basis of clinical quality (medical and information management), cost efficiency (information and financial management), and service excellence (administration and human resources). To the extent that these independent functions can be harnessed to create collective value, the network achieves legitimacy and validates its' marketing propositions.

    1. Corrigan and Goldman, "Thinking Retail in Healthcare: New Approaches for Business Growth", The Healthcare Strategist, COR Healthcare Resources, San Francisco, CA, Vol.1 No.1, 11/97, pp.4-9.
    2. Kolb, Deborah, "Enrollment and Startup Phases", Developing a Successful Physician-Hospital Organization, American Hospital Publishing, American Hospital Association, 1995, p.132.

    Richard Krohn is a member and contributor of HealthBond. View his expert page on HealthBond.

    Richard Krohn is President of HealthSense. Krohn is a widely-published managed care expert as well as a dynamic speaker providing in-depth, practical and timely information on topics such as managed care contracting, strategic positioning for provider organizations, building new provider alliances, reengineering practice operations, developing market driven products, and creating equitable physician compensation plans.

    December 7, 2000

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