Marketing health services

MARKETING

HEALTH

SERVICES

ThomasNew.book 11/15/04 2:00 PM Page i

AUPHA

HAP Editorial Board

Frederick J. Wenzel

University of St. Thomas

G. Ross Baker, Ph.D.

University of Toronto

Sharon B. Buchbinder, R.N., Ph.D.

Towson University

Caryl Carpenter, Ph.D.

Widener University

Leonard Friedman, Ph.D.

Oregon State University

William C. McCaughrin, Ph.D.

Trinity University

Thomas McIlwain, Ph.D.

Medical University of South Carolina

Janet E. Porter, Ph.D.

University of North Carolina at Chapel Hill

Lydia Reed

AUPHA

Louis Rubino, Ph.D., FACHE

California State University–Northridge

Dennis G. Shea, Ph.D.

Pennsylvania State University

Dean G. Smith, Ph.D.

University of Michigan

Mary E. Stefl, Ph.D.

Trinity University

Linda E. Swayne, Ph.D.

University of North Carolina–Charlotte

Douglas S. Wakefield, Ph.D.

University of Iowa

ThomasNew.book 11/15/04 2:00 PM Page ii

Richard K. Thomas

Health Administration Press, Chicago

AUPHA Press, Arlington, VA

AUPHA

HAP

MARKETING

HEALTH

SERVICES

ThomasNew.book 11/15/04 2:00 PM Page iii

Your board, staff, or clients may also benefit from this book’s insight. For

more information on quantity discounts, contact the Health Administration

Press Marketing Manager at (312) 424-9470.

This publication is intended to provide accurate and authoritative infor￾mation in regard to the subject matter covered. It is sold, or otherwise pro￾vided, with the understanding that the publisher is not engaged in rendering

professional services. If professional advice or other expert assistance is

required, the services of a competent professional should be sought.

The statements and opinions contained in this book are strictly those of

the author and do not represent the official positions of the American

College of Healthcare Executives, of the Foundation of the American

College of Healthcare Executives, or of the Association of University

Programs in Health Administration.

Copyright © 2005 by the Foundation of the American College of Healthcare

Executives. Printed in the United States of America. All rights reserved.

This book or parts thereof may not be reproduced in any form without

written permission of the publisher.

09 08 07 06 05 5 4 3 2 1

Library of Congress Cataloging-in-Publication Data

Thomas, Richard K., 1944–

Marketing health services / Richard K. Thomas.

p. cm.

Includes bibliographical references and index.

ISBN 1-56793-234-7 (alk. paper)

1. Medical care—Marketing. I. Title.

RA410.56.T48 2004

362.1'068'8—dc22

2004059852

The paper used in this publication meets the minimum requirements of

American National Standard for Information Sciences—Permanence of

Paper for Printed Library Materials, ANSI Z39.48-1984. ∞

Acquisitions editor: Audrey Kaufman; Project manager: Jane C. Williams;

Cover designer: Trisha Lartz

Health Administration Press Association of University Programs

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ThomasNew.book 11/15/04 2:00 PM Page iv

CONTENTS IN BRIEF

Introduction............................................................................................xi

Part I Healthcare Marketing: History and Concepts

1 The History of Marketing in Healthcare......................................3

2 The Challenge of Healthcare Marketing ....................................23

3 The Evolving Societal and Healthcare Context..........................51

4 Basic Marketing Concepts..........................................................77

5 Marketing and the Healthcare Organization..............................99

Part II Understanding Healthcare Markets

6 The Nature of Healthcare Markets ..........................................133

7 Healthcare Consumers and Consumer Behavior......................167

8 Healthcare Products and Services ............................................197

9 Factors in Health Services Utilization......................................223

Part III Healthcare Marketing Techniques

10 Marketing Strategies.................................................................247

11 Promotions, Advertising, and Sales..........................................275

12 Emerging Marketing Techniques .............................................301

v

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Part IV Managing and Supporting the Marketing Effort

13 Managing and Evaluating the Marketing Process ....................333

14 Marketing Research in Healthcare ...........................................351

15 Marketing Planning..................................................................377

16 Sources of Marketing Data.......................................................399

Part V The Future of Healthcare Marketing

17 Healthcare Marketing in the Twenty-First Century.................427

Glossary ...............................................................................................441

Index....................................................................................................457

About the Author ................................................................................469

vi Contents

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DETAILED CONTENTS

Introduction............................................................................................xi

Part I Healthcare Marketing: History and Concepts

1 The History of Marketing in Healthcare......................................3

The History of Marketing ..............................................................3

Marketing in Healthcare...............................................................6

Evidence of the Acceptance of Marketing .....................................17

Case Study 1.1 An Early Attempt at Healthcare Marketing..............21

2 The Challenge of Healthcare Marketing ....................................23

Why Healthcare Is Different........................................................23

Why No Healthcare Marketing? ..................................................34

Why Healthcare Marketing Is Different ......................................38

Developments Encouraging Healthcare Marketing ......................42

Reasons to Do Healthcare Marketing...........................................45

Case Study 2.1 Marketing Up the Wrong Tree.................................49

3 The Evolving Societal and Healthcare Context..........................51

The Emergence of Healthcare as an Institution............................51

The Cultural Revolution and Healthcare....................................58

Changing Societal Context..........................................................59

Healthcare Developments.............................................................65

Case Study 3.1 Capturing an Emerging Market..............................73

4 Basic Marketing Concepts..........................................................77

Marketing Concepts.....................................................................77

Components of Marketing............................................................79

Healthcare Products and Customers ............................................85

The Four Ps of Marketing ............................................................90

Other Marketing Processes ...........................................................94

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5 Marketing and the Healthcare Organization..............................99

Factors Affecting the Adoption of Marketing ...............................99

Healthcare Organizations and Marketing.................................102

Stages of Healthcare Marketing .................................................119

Case Study 5.1 Low-Intensity Marketing......................................129

Part II Understanding Healthcare Markets

6 The Nature of Healthcare Markets ..........................................133

Marketing’s Context .................................................................133

Defining Markets ......................................................................134

Delineating Geographic Market Areas.......................................142

Profiling Healthcare Markets ....................................................146

From Mass Market to Micromarket............................................151

The Effective Market .................................................................153

Evaluating Market Areas..........................................................155

The Changing Nature of Markets..............................................157

Case Study 6.1 Determining the Effective Market ........................161

Case Study 6.2 Is There Really a Market for It?............................165

7 Healthcare Consumers and Consumer Behavior......................167

The Healthcare Consumer .........................................................167

Why Healthcare Consumers Are Different.................................168

Why Healthcare Consumers Are Similar....................................169

The Variety of Healthcare Customers .........................................170

Characteristics of Healthcare Customers....................................175

Consumer Attitudes ..................................................................181

Segmenting the Market for Healthcare Products ........................185

Consumer Behavior ...................................................................188

Consumer Decision Making.......................................................190

8 Healthcare Products and Services ............................................197

Defining the Product ................................................................197

Ways to Conceptualize Products.................................................201

Common Healthcare Products ...................................................208

9 Factors in Health Services Utilization......................................223

Defining Demand.....................................................................223

Factors Influencing Demand.....................................................231

The Elasticity of Health Services Demand ..................................236

Measuring Health Services Utilization......................................237

Predicting the Demand for Health Services ...............................239

Case Study 9.1 Using Lifestyle Analysis to Predict the

Use of Behavioral Health Services........................243

viii Detailed Contents

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Detailed Contents

Part III Healthcare Marketing Techniques

10 Marketing Strategies.................................................................247

Strategy Defined .......................................................................247

The Strategic Planning Context ................................................249

The Strategic Planning Process ..................................................249

Developing the Strategic Plan....................................................257

Strategic Options.......................................................................258

Strategy Development and the Four Ps.......................................262

Branding as a Strategy..............................................................267

Case Study 10.1 Strategy Development ........................................271

Case Study 10.2 Establishing a Brand...........................................273

11 Promotions, Advertising, and Sales..........................................275

Promotional Mix .......................................................................275

Promotional Categories .............................................................275

Media Options...........................................................................288

Integrated Marketing................................................................292

Case Study 11.1 Integrated Marketing .........................................297

12 Emerging Marketing Techniques .............................................301

Emerging Marketing Techniques ...............................................301

Limitations to Contemporary Marketing Techniques .................315

Case Study 12.1 A Concierge Plan...............................................319

Case Study 12.2 Promoting Heart Health Using Customer

Relationship Management .................................323

Case Study 12.3 Effective Web Integration:

A Hospital Case Study .......................................327

Part IV Managing and Supporting the Marketing Effort

13 Managing and Evaluating the Marketing Process ....................333

From Marketing Plan to Marketing Campaign.........................333

The Players in the Marketing Process..........................................341

Components of a Marketing Department...................................344

The Marketing Budget ..............................................................346

Marketing Management............................................................348

14 Marketing Research in Healthcare ...........................................351

The Scope of Marketing Research ...............................................351

Marketing Research and Healthcare Decision Making ..............356

Steps in the Marketing-Research Process.....................................357

Primary Data-Collection Methods .............................................363

ix

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15 Marketing Planning..................................................................377

The Nature of Marketing Planning...........................................377

The Marketing-Planning Process ...............................................379

Implementing the Marketing Plan ............................................387

The Evaluation Plan .................................................................389

Case Study 15.1 Sample Goals, Objectives, and Activities ............393

Case Study 15.2 Marketing Planning for a New Program ............395

16 Sources of Marketing Data.......................................................399

The Data Challenge ..................................................................399

Data Dimensions ......................................................................402

Data-Generation Methods .........................................................405

Sources of Data for Healthcare Marketing.................................415

Health Data and the Internet...................................................419

Part V The Future of Healthcare Marketing

17 Healthcare Marketing in the Twenty-First Century.................427

Where Healthcare Marketing Is Today.......................................427

Where Healthcare Marketing Is Going ......................................429

Trends Affecting the Future of Healthcare Marketing ...............430

Healthcare Marketing: Seizing the Opportunity ........................435

Glossary ...............................................................................................441

Index....................................................................................................457

About the Author ................................................................................469

x Detailed Contents

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INTRODUCTION

ost observers consider 1977 the “official” launch data of market￾ing as a component of healthcare. The first conference on health￾care marketing was sponsored by the American Hospital Association,

and the first book on the topic was published in 1977. While formal mar￾keting activities became common early on among retail-oriented healthcare

organizations like health insurance, pharmaceuticals, and medical supplies,

health services providers had long resisted the incorporation of formal mar￾keting activities into their operations. Of course, hospitals and other health￾care organizations had been doing “marketing” under the guise of public

relations, physician relationship development, community services, and other

activities, but few health professionals equated these with marketing. To

many, marketing meant advertising, and, until the 1970s, advertising on the

part of health services providers was considered inappropriate.

The formal recognition in the 1980s of marketing as an appropriate

activity for health services providers represented an important milestone

for healthcare. The acceptance of marketing by health professionals opened

the door for a variety of new activities on the part of healthcare organiza￾tions. This development led to the establishment of marketing budgets and

the creation of numerous new positions within the organizations, culmi￾nating with the establishment of the position of vice president for market￾ing in many organizations. This development opened healthcare up to an

influx of concepts and methods from other industries and helped to intro￾duce modern business practices into the healthcare arena.

While most would agree that, after years of grudging acceptance, mar￾keting has become reasonably well established as a legitimate healthcare func￾tion, the process has not been without its fits and starts. Healthcare has

demonstrated surges of interest in marketing, followed by periods of retrench￾ment when marketing, and marketers, were considered unnecessary and/or

inappropriate. Periods of prosperity for marketing have alternated with peri￾ods of neglect over the past 25 years. There have been periods of exuberant,

almost reckless, marketing frenzy and periods of retrenchment. There has

xi

M

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been ongoing tension between those who eagerly accepted marketing as a

function of the healthcare organization and those who doggedly resisted its

intrusion into their realm. With each revival of marketing in healthcare, new

wrinkles have been added that made the “new” marketing, if not better, at

least different from previous approaches.

Once the dam broke and marketing made its initial incursion into

healthcare, a stampede ensued as healthcare organizations, led by major

hospitals, established aggressive marketing campaigns. Urged forward by

marketers recruited from other industries, hospitals and other healthcare

organizations embarked on a whirlwind of marketing activity. The effec￾tiveness of these initial marketing campaigns did not match their propo￾nents’ enthusiasm, and it was soon realized that marketing healthcare was

not the same as marketing hamburgers. The approaches required for the

healthcare arena were not easily adapted from other industries, and much

of what was effective elsewhere was not necessarily effective in the health￾care industry. The evolution of marketing in healthcare is discussed in a

later section within the context of developments in the healthcare field.

Today, healthcare is still struggling to find the appropriate role for

marketing, and marketers continue to strive to find their niche within health￾care. The industry still suffers from a lack of standardization when it comes

to marketing, and this has not been helped by the fact that few graduate

programs offer coursework in healthcare marketing. Today, healthcare mar￾keting appears poised to play a greater role in the new healthcare envi￾ronment. But, as the chapters illustrate, this is likely to be a different kind

of marketing than that envisioned in the mid-1970s when the first mar￾keting efforts were introduced into healthcare.

Before the 1980s, marketing campaigns targeting healthcare con￾sumers were relatively rare. In fact, the marketing activity that existed was

primarily on the part of industry segments that were not involved in patient

care (e.g., pharmaceuticals and insurance) and whose targets were not

patients but other players in the healthcare arena (e.g., physicians and

employers). Healthcare organizations did not need to market their services.

The industry was product driven and most “producers” of services oper￾ated in semimonopolistic environments. There was an almost unlimited

flow of customers (patients), and revenues were essentially guaranteed by

third-party payers.

This situation began to change in the early 1980s. Along with a num￾ber of other significant changes in healthcare, competition was introduced

for the first time. Healthcare organizations began to realize that to survive

in this new world, they would have to adopt business practices long estab￾lished in other industries. This involved, among other things, a shift from

a product orientation to a service orientation. For the first time, then, the

xii Introduction

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Introduction

market became a factor for the industry. These developments resulted in

the introduction of marketing as a legitimate function in healthcare.

By the mid-1980s, marketing departments had been established in

most of the large healthcare organizations. Once introduced to each other,

marketing and healthcare passed through a tentative getting-to-know-you

period. By the mid-1980s, however, it was a romance in full bloom with

the two being seen everywhere together. Healthcare organizations were

spending feverishly on their newfound consort, and marketers rushed to

take advantage of the sudden burst of interest. Those without formal depart￾ments started developing marketing functions through other mechanisms.

However, the introduction of marketing into healthcare resembled a shaky

romance.

Hospitals were among the first to embrace marketing as a part of

their operations. Other healthcare organizations followed their lead. As

new forces emerged in the industry, often led by entrepreneurs rather than

clinicians, the use of marketing techniques proliferated. Innovative health￾care programs, such as urgent care centers and freestanding diagnostic cen￾ters, began using marketing as a means of attracting patients from the

established sources of care.

Unfortunately, in the early years healthcare executives did not see

marketing for what it really was, and many expensive mistakes were made

by the organizations pioneering healthcare marketing. Healthcare organi￾zations failed to do their market research homework, rushed headlong into

expensive media advertising, became obsessed with image rather than sub￾stance, and failed to evaluate their hastily contrived marketing initiatives.

Perhaps the gravest error of all was to equate advertising with marketing.

As a result of these mistakes, by the late 1980s healthcare organiza￾tions were slashing their marketing budgets, disbanding marketing staff,

and generally scaling back this relationship. Healthcare did not want to

break it off altogether, but it did not want to continue spending on ini￾tiatives with uncertain benefits.

Both parties—healthcare and marketing—could probably be blamed

for the shaky initial relationship. The marketers that healthcare imported

from other industries failed in their effort to convert existing marketing

techniques to healthcare uses. The first rule of marketing, of course, is to

know your market, and marketers did not. They were offering quick fixes

and short-run answers in an industry that required long-term initiatives.

By the early 1990s, healthcare executives realized that marketing did

not consist of spending truckloads of money on mass-media advertising.

Progressive healthcare organizations began to assess their marketing objec￾tives in a more reasonable light. They began to try to understand the mar￾ket, their customers, and their customers’ motivations.

xiii

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