DEFINITIONS

Whereas a market was once defined as the physical place where buyers and sellers assembled and exchanged goods and wares according to a bartering system, it is defined today as “the set of actual and potential buyers of a product or services” (Kotler & Armstrong, 2011). Actual and potential customers are categorized as external markets, and employees comprise internal markets. Exchange has always been the defining concept underlying marketing. Exchange indicates action whereby a desired product or service is received from someone by offering something in return (Kotler & Armstrong, 2011). Today, exchange relationships take place in person, by phone, by mail, or in a virtual environment such as the Internet.

Marketing is a process that relates to transactions when products (i.e., goods or services) are exchanged in a market. The process begins with understanding what the customer needs and wants, includes the design of programs and services that fulfill these needs and wants, and ends with capturing value from the customers (Kotler & Armstrong, 2011). Marketing ensures a focus on an organization’s annual, long-range, and strategic plans. Objectives in the various plans include customer-driven strategies and programs that create customer value and relationships within internal and external target markets (Kotler & Armstrong, 2011).

Market research applies a scientific approach to ascertain insights into and information about customers and potential target markets. Steps in the approach begin with defining the problem and research objectives, proceeding to data collection and analysis, and ending with interpretation of findings relevant to a specific marketing situation or decision making (Kotler & Armstrong, 2011).

A product “is a bundle of attributes (features, functions, benefits, and uses) capable of exchange or use; usually a mix of tangible and intangible forms. Thus a product may be an idea, a physical entity (a good), a service, or any combination of the three. It exists for the purpose of exchange in the satisfaction of individual and organizational objectives” (American Marketing Association, 2011). Because health care is, for the most part, a service industry, the use of the term product depicts health care service(s) and is often used interchangeably with service by health care marketers.

Service is “a form of product that consists of activities, benefits, or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything” (Kotler & Armstrong, 2011, p. 224). Services are differentiated from products that are goods by four characteristics: (1) intangibility, (2) inseparability, (3) variability, and (4) perishability. A service denotes action, occurs at the time of provider-customer interactions, and varies according to circumstances related to both the provider and customer. Services cannot be saved or stored for later use (American Marketing Association, 2011; Kotler & Armstrong, 2011).

Needs can be biological, psychological, and social. For example, a hospital patient may require special attention to safety concerns, pain management, compassionate care, infection prevention and control measures, and prevention of complications. Nurses, who compose an internal market, seek competitive salaries, continuing education to remain competent, access to evidence to guide practice, and sufficient human resources to meet staffing requirements. These are needs. Wants are wishes, desires, or preferences of individuals (American Marketing Association, 2011). A hospital patient’s wants may include a quiet and spacious room, high-quality food, and cable television. Nurses may desire uniform allowances, self-scheduling, input in decision making, and flexible work hours. Employers consider the needs and wants of employees, beginning from the time of orientation and continuing throughout their tenure with the organization (Peltier et al., 2008).

BACKGROUND

Marketing is focused on “creating customer value and building profitable customer relationships” (Kotler & Armstrong, 2011, p. xvi). The business goal of a for-profit company is to maximize value so that shareholders will eventually benefit from their financial investment. The business goal of a non-profit or social sector organization, which includes many health care organizations, is to fulfill its mission of meeting consumer needs. Thus marketing is fundamental to creating value for customers that in turn leads to financial viability. Because of its for-profit roots, the term marketing often carries a negative connotation when applied to health care. Many question the appropriateness of marketing initiatives that seem focused on net income at the expense of patient care. Because nursing care composes much of the health care product, further questions about the appropriateness of health care marketing have surfaced among nurses.

Profitable may be the word that at first consideration seems foreign to the fabric of nursing and not related to what we do. Nurses are educated and socialized to give care, not to sell care. Although nurses experience the impact of marketing in their daily lives as consumers, they are unlikely to be exposed to it as an essential ingredient of their professional practice. However, when basic marketing concepts and aspects of the marketing process are explored and understood, their importance to not only the health care organization at-large, but also nurses and nurse leaders, becomes clear.

Whether or not they realize it, nurses, as essential providers of the health care product, are engaged in marketing when delivering care. This is in part because interpersonal relationships are a part of the therapeutic “product” of care. A health care organization dedicated to achieving excellence realizes this and works hard to inform all care providers and support staff about meeting customer needs. In excellence-driven organizations, marketing is more than a department; it is at the core of the organizational business framework. The American Organization of Nurse Executives (AONE) has identified “marketing” as a key business skill for nurse leaders in executive practice and for those with a career goal of leadership (American Organization of Nurse Executives, 2011). Nurse leaders and aspiring nurse leaders, who operate within a business framework, benefit from understanding marketing concepts that underlie programs and initiatives in health care organizations.

MARKETING STRATEGY

Strategic planning, a process discussed in previous chapters of this text, sets the overall direction for an organization. Defining the business, determining the mission, and developing long-term objectives form the basis of an organization’s strategic plan. Marketing strategies and programs must be aligned and guided by the organization-wide strategic plan (Kotler & Armstrong, 2011). This cannot be done effectively without investing adequate time and resources in evaluating the organization’s competitive environment.

A market research approach is used for environmental scanning and is a critical step in both the strategic and marketing planning processes. During the environmental scanning, marketing departments explore and evaluate the internal and external environments to gain an understanding of demographic and societal trends, competition, and potential customers. Also, internal business performance indicators such as financial results, customer and staff satisfaction, and quality indicators are evaluated. To be most effective, compilation, review, and analysis of environmental data should involve every functional area in an organization, including the nursing department. The results of the market research must be shared across business units, and all key stakeholders must participate in the subsequent planning process.

Marketing strategy is based on how target markets are defined. Markets are both broad and narrow. Mass marketing, which is broad, offers a product to an entire external market. Niche marketing is a more narrow view and focuses on capturing a small but important part of the market. Consider the difference between a full-service community hospital and a children’s hospital. The former serves a broad market, the latter targets very specific customers—children and their families. Four critical concepts—segmentation, targeting, product differentiation, and positioning—are essential to understanding and becoming fluent in the language of marketing. The following are brief explanations of these concepts. The definitions of these terms, along with an example of each, are in Table 27-1.

Segmentation and targeting are the means of decision making about which customers will be served. Segmentation involves identifying pieces of the total market that contain potential customers with distinguishable characteristics such as age, gender, geographic location, or ethnicity. The essence of segmentation is to break down the mass market into submarkets of individuals with similar needs (Harvard Business School Press, 2006). Targeting takes into account the whole market that can then be considered in terms of attractive smaller market segments. Differentiation and positioning clarify how customers will be served. A product offering’s differentiation calls for the creation of superior customer value and is typically what strengthens its position in the market against competitors. Positioning the product such that customers perceive it to be distinctive and desirable is the foundation of the marketing program (Kotler & Armstrong, 2011).

By analyzing information about the competitive market, a hospital can determine key strategies to meet the unmet needs in its service area. A small rural community hospital in a market 200 miles from any other hospital will adopt strategies for defining and serving its market that are very different from the strategies of a large suburban hospital in a market with four other hospitals within a 25-mile radius. The rural hospital would likely position itself as a full-service facility capable of meeting the most frequently occurring needs of their target audience or the local community. For example, its profile of services is likely to include women’s services, emergency care, diagnostic care, and general surgery. On the other hand, the large suburban hospital in a highly competitive market might seek to differentiate itself from competitors by creating a specialty center for heart disease or cancer. However, product or service lines are not the only way to differentiate. Differentiation can be based on quality measures and other distinctions that are prevalent today. These include the following:

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