Marketing 2.2


Health Insurance for Our Furry— or Feathery— Friends

Health insurance for pets? Most large insurance companies haven't paid much attention to it. But that leaves plenty of room for more-focused nichers, for whom pet health insurance has become a lucrative business. The largest of the small competitors is Veterinary Pet Insurance (VPI). VPI's mission is to "make the miracles of veterinary medicine affordable to all pet owners."

Pet insurance is a still-small but fast-growing segment of the insurance business. Insiders think the industry offers huge potential. Currently, 43 percent of all U.K. households own at least one pet. There are approximately 7 million cats and dogs in the U.K., and some 1.7 million small animals, including hamsters, gerbils, guinea pigs, rabbits, and rats. Many people have included their pets in holiday celebrations and still others characterize their pet as a child. The pet food market alone in the U.K. generates approximately $3 billion annually In revenues.

But unlike in Britain and Sweden, where almost half of all pets owners carry pet health insurance, relatively few pet owners in the United States now carry such coverage. However, a recent study of pet owners found that nearly 75 percent are willing to go into debt to pay for veterinary care for their furry— or feathery—companions. And for many pet medical procedures, they'd have to! If not diagnosed quickly, even a mundane ear infection in a dog can result in $1,000 worth of medical treatment. Ten days of dialysis treatment can reach $12,000 and cancer treatment as much as $40,000. All of this adds up to a lot of potential growth for pet health insurers.

VPI plans cover a multitude of pet medical problems and conditions. The insurance helps pay for office calls, prescriptions, treatments, lab fees, x-rays, surgery, and hospitalization. Like its handful of competitors, VPI issues health insurance policies for dogs and cats. Unlike its competitors, VPI covers a menagerie of exotic pets as well. Among other critters, the

Nichers: Market nicher VPI is growing faster than a new-born puppy. Its mission is to "be the trusted choice of America's pet lovers."

Avian and Exotic Pet Plan covers birds, rabbits, ferrets, rats, guinea pigs, snakes and other reptiles, iguanas, turtles, hedgehogs, and potbellied pigs. "There's such a vast array of pets," says a VPI executive, "and people love them. We have to respect that."

How's VPI doing in the United States? It's growing like a newborn puppy. VPI is by far the largest of the handful of companies that offer pet insurance, providing more than 60 percent of all U.S. pet insurance policies. Since its inception, VPI has issued more than one million policies, and it now serves more than 460,000 policyholders. Sales have grown rapidly, exceeding $148 million in policy premiums last year. That might not amount to much for the likes of giant insurers such as MetLife, Prudential, or Aviva, which rack up tens of billions of dollars in yearly revenues. But it's profitable business for nichers like VPI. And there's room to grow. Only about 3 percent of pet owners currently buy pet insurance.

"Pet health insurance is no longer deemed so outlandish in a world where acupuncture for cats, hospice of dogs, and Prozac for ferrets are part of a veterinarian's routine," says one analyst. Such insurance is a real godsend for VPI's policyholders. Just ask Joe and Paula Sena, whose cocker spaniel, Elvis, is receiving radiation treatments for cancer. "He is not like our kids—he is our kid," says Ms. Sena. "He is a kid in a dog's body." VPI is making Elvis's treatment possible by picking up a lion's share of the costs. As more people adopt the Sena's view towards their pets, it's hard to think the pet industry isn't just beginning to stretch its paws.

Sources: See Diane Brady and Christopher Palmeri, "The Pet Economy," BusinessWeek, August 6, 2007, pp. 45-54; Yilu Zhao, "Break a Leg, Fluffy, If You Have Insurance," New York Times, June 30, 2002, p. 9.11; Damon Darlin, "Vet Bills and the Priceless Pet: What's a Practical Owner to Do?" New York Times, May 13, 2006, p. C1; "New National Pet Owners Survey Details Two Decades of Evolving American Pet Ownership," American Pet Products Manufacturers Association, June 18, 2007,; "Multiple Pet Owners with VPI Pet Insurance Represent 17% of All Policyholders," PR Newswire, July 30, 2007, p. 1; "All in the Family," Marketing Management, January/February 2008, p. 7; and information accessed at, September 2008.

Marketing mix

The set of controllable tactical marketing tools—product, price, place, and promotion—that the firm blends to produce the response it wants in the target market.

Developing an Integrated Marketing Mix

After deciding on its overall marketing strategy, the company is ready to begin planning the details of the marketing mix, one of the major concepts in modern marketing. The marketing mix is the set of controllable, tactical marketing tools that the firm blends to produce the response it wants in the target market. The marketing mix consists of everything the firm can do to influence the demand for its product. The many possibilities can be collected into four groups of variables known as "the four Ps": product, price, place, and promotion. Figure 2.5 shows the marketing tools under each P.

Product means the goods-and-services combination the company offers to the target market. Thus, a Ford Escape SUV consists of nuts and bolts, spark plugs, pistons, headlights, and thousands of other parts. Ford offers several Escape models and dozens of optional features. The car comes fully serviced and with a comprehensive warranty that is as much a part of the product as the tailpipe.

Price is the amount of money customers must pay to obtain the product. Ford calculates suggested retail prices that its dealers might charge for each Escape. But Ford dealers rarely charge the full sticker price. Instead, they negotiate the price with each customer, offering discounts, trade-in allowances, and credit terms. These actions adjust prices for the current competitive situation and bring them into line with the buyer's perception of the car's value.

Place includes company activities that make the product available to target consumers. Ford partners with a large body of independently owned dealerships that sell the company's many different models. Ford selects its dealers carefully and supports them strongly. The dealers keep an inventory of Ford automobiles, demonstrate them to potential buyers, negotiate prices, close sales, and service the cars after the sale.

Promotion means activities that communicate the merits of the product and persuade target customers to buy it. Ford Motor Company spends more than $2.5 billion each year on U.S. advertising to tell consumers about the company and its many products.16 Dealership salespeople assist potential buyers and persuade them that Ford is the best car for them. Ford and its dealers offer special promotions—sales, cash rebates, low-financing rates—as added purchase incentives.

An effective marketing program blends all of the marketing mix elements into an integrated marketing program designed to achieve the company's marketing objectives by

The Four Ps of the Marketing Mix

Place Channels Coverage Assortments Locations Inventory Transportation Logistics

Promotion Advertising Personal selling Sales promotion Public relations

The marketing mix-or the tour I Ps-consists of tactical marketing tools, blended into an integrated marketing program that actually delivers the intended value proposition to target customers, v------------------_)

Product Variety Quality Design Features Brand name Packaging Services

Price List price Discounts Allowances Payment period Credit terms delivering value to consumers. The marketing mix constitutes the company's tactical tool kit for establishing strong positioning in target markets.

Some critics think that the four Ps may omit or underemphasize certain important activities. For example, they ask, "Where are services?" Just because they don't start with a P doesn't justify omitting them. The answer is that services, such as banking, airline, and retailing services, are products too. We might call them service products. "Where is packaging?" the critics might ask. Marketers would answer that they include packaging as just one of many product decisions. All said, as Figure 2.5 suggests, many marketing activities that might appear to be left out of the marketing mix are subsumed under one of the four Ps. The issue is not whether there should be four, six, or ten Ps so much as what framework is most helpful in designing integrated marketing programs.

There is another concern, however, that is valid. It holds that the four Ps concept takes the seller's view of the market, not the buyer's view. From the buyer's viewpoint, in this age of customer value and relationships, the four Ps might be better described as the four Cs:17

4Ps 4Cs

Product Customer solution

Price Customer cost

Place Convenience

Promotion Communication

Thus, whereas marketers see themselves as selling products, customers see themselves as buying value or solutions to their problems. And customers are interested in more than just the price; they are interested in the total costs of obtaining, using, and disposing of a product. Customers want the product and service to be as conveniently available as possible. Finally, they want two-way communication. Marketers would do well to think through the four Cs first and then build the four Ps on that platform.

Author I So far we've focused on Comment | the marketing in marketing management. Now, let's turn to the management.

SWOT analysis

An overall evaluation of the company's strengths (S), weaknesses (W), opportunities (0), and threats (T).

In addition to being good at the marketing in marketing management, companies also need to pay attention to the management. Managing the marketing process requires the four marketing management functions shown in Figure 2.6—analysis, planning, implementation, and control. The company first develops companywide strategic plans and then translates them into marketing and other plans for each division, product, and brand. Through implementation, the company turns the plans into actions. Control consists of measuring and evaluating the results of marketing activities and taking corrective action where needed. Finally, marketing analysis provides information and evaluations needed for all of the other marketing activities.

Marketing Analysis

Managing the marketing function begins with a complete analysis of the company's situation. The marketer should conduct a SWOT analysis, by which it evaluates the company's overall strengths (S), weaknesses (W), opportunities (O), and threats (T) (see HI Figure 2.7). Strengths include internal capabilities, resources, and positive situational factors that may help the company to serve its customers and achieve its objectives. Weaknesses include internal limitations and negative situational factors that may interfere with the company's performance. Opportunities are favorable factors or trends in the external environment that the company may be able to exploit to its advantage. And threats are unfavorable external factors or trends that may present challenges to performance.

The company should analyze its markets and marketing environment to find attractive opportunities and identify environmental threats. It should analyze company strengths and weaknesses as well as current and possible marketing actions to determine which opportunities it can best pursue. The goal is to match the company's strengths to attractive

Managing Marketing: Analysis, Planning, Implementation, and Control

The first part of the chapter deait with this—developing companywide and marketing strategies and plans.


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