Health Services MarketingHSA 305Designing And Managing.docx

Health Services Marketing
HSA 305
Designing and Managing Integrated Marketing Communications
Kotler, P., Shalowitz, J., & Stevens, R. J. (2008). Strategic
marketing for health care organizations. San
Francisco: Jossey-Bass
*
Welcome to Health Services Marketing. In this lesson, we will
discuss Designing and Managing Integrated Marketing
Communications.
Please go to the next slide.
ObjectivesUpon completion of this lesson, you will be able
to:Describe the health care system and the role of marketing
*
Upon completion of this lesson, you will be able to:
Describe the health care system and the role of marketing.
Marketing Communications RoleRepresent the voice of the
brandThe primary mechanisms implemented to establish a

dialogue and build relationships with consumersDemonstrate
consumers how and why a product is implemented, by what kind
of person, and where and whenEducate consumers regarding
who makes the product and what the organization and brand
representCan provide consumers an incentive or reward for trial
or usageEnable organizations to link their brands to other
people, places, events, brands, experiences, feelings, and things
In this lesson, we will focus on how marketing communications
work, what marketing communications can do for an
organization, and how holistic marketers combine and integrate
marketing communications. Specifically, we will examine the
different forms of mass or personal communications such as
advertising, sales promotion, events and experiences and public
relations and publicity.
Marketing communications are the instruments organizations
use to relate the benefits, positioning, and characters of their
brands to consumers. In essence it:
Represent the voice of the brand;
Are the primary mechanisms implemented to establish a
dialogue and build relationships with consumers;
Demonstrate consumer how and why a product is implemented,
by what kind of person, and where and when;
Educate consumer regarding who makes the product and what
the organization and brand represent;
Can provide consumers an incentive or reward for trial or
usage;
And
Enable organizations to link their brands to other people,
places, events, brands, experiences, feelings, and thing.
All of these are ways in which marketing communications can
contribute to brand equity. By establishing the brand in
memory and crafting a brand image is how these can contribute
to brand equity.

*
Marketing Communications and Brand EquityCommunication
mixMarketing activities
*
Marketing communication mix has six major modes of
communications:
Advertising. This is any paid form of non-personal presentation
and promotion of ideas, goods, or services by an identified
sponsor.
Sales promotion. This is a variety of short-tem incentives to
encourage trial or purchase of a product or service.
Events and experiences are organization-sponsored activities
and programs designed to create daily or special brand-related
interactions.
Public relations and publicity. These are a variety of programs
designed to promote or protect an organization’s image or its
individual products.
Personal selling. This is face to face interaction with one or
more prospective purchasers for the purpose of making
presentations, answering questions, and procuring orders.
And
Direct marketing. This is the use of mail, telephone, fax, email,
or Internet to communicate directly with or solicit response or
dialogue from specific customers and prospects.
Marketing communications transcends these platforms. The
product’s packaging shape and color, the way the individuals
delivering the service, the physical surroundings and décor, the
organization’s stationery communicate something to the buyers.
These types of brand contract provides an impression which can

strengthen or weaken a customer’s perception of the
organization.
Marketing communications activities contribute to brand equity.
By creating awareness of the brand, linking the right
associations to the brand image in consumer’ memory, eliciting
positive brand judgments or feelings, and facilitating a stronger
consumer brand connection are activities that contribute to
brand equity. In general, all marketing communications
activities must be integrated to provide a consistent message
and achieve the strategic positioning. Brand awareness is a
function of the number of brand related exposures and
experiences that have been accumulated by the consumer;
therefore, anything that causes the consumer to notice and pay
attention to the brand can enhance brand awareness. The
beginning of marketing communications is an audit of all
possible interactions that consumers in the target market may
have with the brand and the organization. Marketers need to
examine the experiences and impressions that will have the
most influence at each stage of the buying process. Hence, this
will assist them in allocating communication funds more
efficiently and design and implement adequate communications
programs. After the marketers have acquired the insights of the
consumer, marketing communications can be assessed according
to their ability to build brand equity and drive brand sales. It is
very important for marketers to evaluate all different possible
communication options that are available according to
effectiveness criteria to determine how well it works as well as
efficiency considerations to determine how well it works given
the cost.

Communications Process ModelsMacro Model of the
Communications ProcessNine elements Micro Model of
Consumer Responses
Macro and micro models are two models that provide helpful
structures that assist marketers in understanding the basic
elements of effective communication. Macro model of the
Communications Process has nine elements:
Sender
Receiver
Message
Media
Message encoding
Decoding
Response
Feedback
Noise.
The sender and the receiver are the major parties of
communication. Message and the media are used to send the
message. Message encoding, decoding, response, and feedback
are four elements that represent major communications
functions. The last element is noise or random and competing
messages that may interfere with the intended communication.
The macro model focuses on the key factors in effective
communication:
Senders must be familiar with what the audiences they want to
reach as well as which responses they want to obtain;
Senders must encode their messages to that the target audience
can decode them.
Senders must transmit the message through media that reach the
target audience.
Senders must develop feedback channels to monitor the
responses.
The more the send’s field of experience overlaps the receiver’s,
the more effective the message is likely to be.

Selective attention, distortion, and retention process may be
happening during communication. Selective attention is when
people filter messages to avoid sensory overload. Selective
distortion is when receivers of the messages will hear and
process what fits into their belief systems. Selective retention is
when people will retain in long-term memory only a small part
of the message that reaches them.
Micro Model of Consumer Responses focuses on consumers’
specific responses to communications. AIDA, Hierarchy of
Effects, Innovation Adoption, and Communication models are
all classic response hierarchy models that assume that the buyer
passes through cognitive, affective, and behavioral states in
evaluating marketing communications messages. There are three
potential sequences:
Learn-feel-do. This is sufficient when the audience has high
involvement with a product category perceived to have high
differentiation. This is evident in purchasing cosmetic surgery
or an assisted living property.
Do-feel-learn. This is the second sequence when the audience
has high involvement but perceives little or no differentiation
with the product category. This is evident in purchasing
hospital emergency services or cholesterol lowering medication.
Learn-do-feel. This is the third sequence when the audience has
low involvement and perceives little differentiation within the
product category. This is evident in purchasing travel vaccine
or health insurance.
*
Eight Steps in Effective CommunicationsIdentify the target
audienceDetermine the objectivesDesign the

communicationsSelect the communications channelsEstablish
the budgetChoose the media mixMeasure resultsManage the
integrated marketing communications process
There are eight steps in effective communications. The first
one is identify the target audience. There must be a clear target
audience that includes potential buyers of the organization’s
products and services, current users, deciders or influencers,
individuals, groups, certain publics, or general public. The
target population is so essential and influential that the
communicator makes decision regarding what to say, how to say
it, when to say it, where to say it as well as to whom to say it.
The second step is determining communications objectives. In
this step, four possible communications objectives can be
identified;
Category need
Brand awareness
Brand attitude
And
Brand purchase intention.
Design the communications is the third step in which designing
communications to meet the desired response requires solving
the following three problems:
What to say or also know as the message strategy
How to say it or the creative strategy;
And
Who should say it or the message source.
The fourth step is selecting the communication channels. It is
important to note that choosing efficient channels to carry the
message becomes more difficult as channels of communication
become more divided and chaotic. There are two different
channels to choose from: personal communication channels and
nonpersonal communication channels. Personal communication

channels have two ore more people communicating directly with
each other. It can be face to face, person to audience, over the
telephone, or through email. Another vehicle is using instant
messaging and independent sites to collect consumer reviews.
The effectiveness of personal communications channels come
from individualized presentation and feedback. Nonpersonal
communication channels are communications meant for more
than one person. These channels include media, sales
promotions, events and experiences, and public relations.
The next step is establishing the budget which is one of the
most difficult marketing decisions to make regarding how much
to spend on promotion. There are four common methods for
deciding on a budget:
Affordable method. This method ignores the role of promotion
as an investment and the immediate impact of promotion on
sales volume. This method is based on setting the promotion
budget at what they organization thinks the company can afford.
The caveat to this method is that it leads to an uncertain annual
budget which makes long range planning difficult.
Percentage of sales method. This method is when a company
set promotion expenditures at a specified percentage of sales or
of the sales price. Advocates believe that this method links
promotion expenditures to the movement of corporate sales over
the business cycle which focuses on the interrelationship of
promotion and selling price and unit profit and encourages
stability when competing firms spend approximately the same
percentage of their sales on promotion.
Competitive parity method
Objective and task method
*
AdvertisingDevelopment and management of advertising
programSetting the advertising objectivesDeciding on the

advertising budgetDeveloping the advertising
campaignDeciding on MediaEvaluating advertising
effectiveness
Advertising is a form of paid nonpersonal presentation and
promotion of ideas, goods or services by a sponsor. An ad can
be the most cost effective way to get the message out. Many
business and organizations use communication companies or
advertising agencies to create advertising campaigns as well as
select and buy media. Advertising is instrumental in
establishing long term image for products and services as well
as facilitating quick sales. It has the ability to reach
geographically dispersed buyers.
Qualities of advertising:
Pervasiveness
Amplified expressiveness
Impersonality
Developing and managing an advertising program
Five major decisions of communications:
Mission
Money
Message
Media
Measurement
Setting the advertising objectives
Informative advertising
Persuasive advertising
Reminder advertising
Reinforcement advertising
Deciding on the advertising budget
Product life cycle stage
Market share and consumer base

Competition and clutter
Advertising frequency
Product substitutability
Developing an advertising campaign
Three steps to developing a message strategy:
One. Message generation and evaluation
Two. Creative development and execution.
And
Three. Social responsibility review.
Deciding on media.
Steps:
Deciding on desired reach, frequency, and impact
Choosing among major media types
Selecting specific media vehicles
Deciding on media timing
Evaluating effectiveness.
*
Sales PromotionSales Promotion ToolsMajor
decisionsPretesting, implementing, controlling, and evaluating
the program
Sales promotion is a key ingredient n marketing campaigns
which consists of a variety of incentive tools that are designed
to get others to buy specific products or services. It provides
an incentive to the consumer to purchase where advertising
gives a reason to purchase. The tools for sales promotion for
consumer promotion , trade promotion, and business and sales
force promotion.
Free samples, free management advisory service, incentive type

promotion are some tools that have specific objectives. Free
samples seeks to get consumers to try out a product or as
service whereas a free management advisory service seeks to
obtain long term relationships with a retailer.
In making major sales promotion decisions, an organization
must establish the following:
Objectives. The objectives come from broader promotion
objectives which comes from more basic marketing objectives
developed for the product or service. For consumers, the
objectives are designed with the purpose of getting the
consumers to purchase larger size units, building trials among
nonusers, and attracting switchers away from competitors’
brands. On the wholesaler side, the purpose of the objectives is
to persuade retailers to carry new items and higher levels of
inventory, incentivizing off season buying, encouraging
stocking of related items, offsetting competitive promotions,
building brand loyalty, and gain entry into new retail outlets.
For the sales force, the purpose of the objective is to encourage
support of new products or services and to get them to do more
prospecting and encouraging more off season sales.
Select tools. These tools can be consumer promotion or trade
promotion tools.
Develop the program. In developing a program, marketers have
to determine the size of the incentive, establish conditions for
participation, decide on the duration of promotion, choose a
distribution mechanism, establish timing of promotion, and
determine the total sales promotion budget.
Pretest, implement, control, and evaluate the program. Pretests
can help to determine if the tools used are appropriate. There
are three methods of evaluations: sales data, consumer surveys,
and experiments.
*

Public Relations and PublicityMarketing public relationsMajor
decisions in marketing public relations
Public relations is a traditional promotional tool in health care.
Appeal based on three distinctive qualities:
High credibility
Ability to catch buyers off guard
Dramatization
Public relations (PR)
Functions of PR:
Press relations. Provides positive news and information
regarding the organization
Product publicity. Publicizes sponsoring efforts regarding
specific products.
Corporate communication. Provides understanding of the
organization through internal and external communications.
Lobbying. Working with legislators and government officials to
promote or defeat legislation and regulation.
Counseling. Advising management regarding public issues and
organization positions and image during good and bad times.
Market Public Relations supports corporate or product
promotion and image making. They engage in the following
tasks.
Assisting in the launch of new products
Assisting in repositioning a mature product
Building interest in a product category
Influencing specific target groups
Defending products that have encountered public problems
Building the corporate image in a way that reflect s favorably
on its products.
Major Marketing Public Relations Decisions in determining
when and how to use market public relations. They are as

follows:
Establishing the marketing objectives
Choosing messages and vehicles
Implementing and evaluating the plan
*
Events and ExperiencesEvents objectivesMajor decisions with
events
There are reasons why marketers indicate they sponsor events.
They are as follows:
Identifying with a particular target market or life style
Increasing awareness of company or product name
Creating or reinforcing consumer perceptions of key brand
image associations
Enhancing corporate image dimensions
Creating experiences and evoking feelings
Express commitment to the community or on social issues
Entertain key clients or reward key employees
and
Permit merchandising or promotional opportunities.
In developing successful sponsored events, the following is
involved:
Choosing the appropriate events,
Designing the optimal sponsorship program for the event
and
Measuring the effects of events
*

Factors in Setting Marketing Communications MixType of
product marketConsumer readiness to purchaseStage in product
life cycleOrganization’s market positionCost effectiveness of
the promotional toolsAdvertising and publicity
In order for an organization to develop its communication mix,
the following must be considered:
Type of product market
Consumer readiness to make a purchase
Stage in the product life cycle.
Organization’s market position
Cost effectiveness of the promotional tools.
And
Advertising and publicity
*
Managing integrated marketing communications
processCoordinating mediaImplementation of integrated
marketing
communicationCoverageContributionCommonalityComplementa
ryVersatilityCost
Integrated marketing communication is the management of all
organizational communications that builds positive relationships
with potential customers and stakeholders including employees,
legislators, the media, the financial community, and other
segments of the public.
A combination of personal and nonpersonal communication

channels help to achieve a maximum impact. Multiple media
within a well defined time frame contributes to more targets
being reached and impacted.
Coverage. This is the proportion of the audience reached by
each communication option used as well as how much overlap
there is among communication options.
Contribution. This is regarding the inherent capacity of
marketing communication effort to design the desired response
from consumers in the absence of exposure to any other contract
option.
Commonality. This is the extent to which common relations are
reinforced across communication options.
Complementary. This is the extent to which different
relationships and linkages are emphasized across
communication options.
Versatility. This is the extent to which a marketing
communications option is rich and works for various groups of
consumers.
Cost. This is the evaluations of marketing communications on
all of the above criteria. They must be weighed against their
cost to arrive at the most effective and efficient program.
*
Summary Successful communication elementsDeveloping
effective marketing communications stepsDetermining the best
communication mix
*
We have now reached the end of this lesson. Let’s take a look
at what we’ve covered.

First we looked at the importance of health organizations having
communications skills. Successful communications include the
following elements:
Sender;
Encoding;
Message;
Media;
Decoding;
Receiver;
Response;
Noise; and
Feedback.
Then we looked at developing effective marketing
communications. There are eight steps:
Identify the target audience;
Determine communication objectives;
Design the communications;
Select the communication channels;
Estimate the total marketing communications budget;
Decide on the media mix;
Measure the results; and
Manage integrated communications.
All of these steps have different activities and tools.
Finally, each health care organization has to determine the best
mix to make the communications tools of the following:
Advertising;
Sales promotion;
Public relations and publicity;
Events and experiences;
Personal selling; and
Direct marketing.
This concludes this lecture.
*
discuss Designing and Managing Integrated Marketing

Communications.
*
Describe the health care system and the role of marketing.
In this lesson, we will focus on how marketing communications
work, what marketing communications can do for an
organization, and how holistic marketers combine and integrate
marketing communications. Specifically, we will examine the
different forms of mass or personal communications such as
advertising, sales promotion, events and experiences and public
relations and publicity.
Marketing communications are the instruments organizations
use to relate the benefits, positioning, and characters of their
brands to consumers. In essence it:
Represent the voice of the brand;
Are the primary mechanisms implemented to establish a
dialogue and build relationships with consumers;
Demonstrate consumer how and why a product is implemented,
by what kind of person, and where and when;
Educate consumer regarding who makes the product and what
the organization and brand represent;
Can provide consumers an incentive or reward for trial or
usage;
And
Enable organizations to link their brands to other people,
places, events, brands, experiences, feelings, and thing.
All of these are ways in which marketing communications can
contribute to brand equity. By establishing the brand in
memory and crafting a brand image is how these can contribute
to brand equity.

*
*
Marketing communication mix has six major modes of
communications:
Advertising. This is any paid form of non-personal presentation
and promotion of ideas, goods, or services by an identified
sponsor.
Sales promotion. This is a variety of short-tem incentives to
encourage trial or purchase of a product or service.
Events and experiences are organization-sponsored activities
and programs designed to create daily or special brand-related
interactions.
Public relations and publicity. These are a variety of programs
designed to promote or protect an organization’s image or its
individual products.
Personal selling. This is face to face interaction with one or
more prospective purchasers for the purpose of making
presentations, answering questions, and procuring orders.
And
Direct marketing. This is the use of mail, telephone, fax, email,
or Internet to communicate directly with or solicit response or
dialogue from specific customers and prospects.
Marketing communications transcends these platforms. The
product’s packaging shape and color, the way the individuals
delivering the service, the physical surroundings and décor, the
organization’s stationery communicate something to the buyers.
These types of brand contract provides an impression which can
strengthen or weaken a customer’s perception of the
organization.
Marketing communications activities contribute to brand equity.
By creating awareness of the brand, linking the right

associations to the brand image in consumer’ memory, eliciting
positive brand judgments or feelings, and facilitating a stronger
consumer brand connection are activities that contribute to
brand equity. In general, all marketing communications
activities must be integrated to provide a consistent message
and achieve the strategic positioning. Brand awareness is a
function of the number of brand related exposures and
experiences that have been accumulated by the consumer;
therefore, anything that causes the consumer to notice and pay
attention to the brand can enhance brand awareness. The
beginning of marketing communications is an audit of all
possible interactions that consumers in the target market may
have with the brand and the organization. Marketers need to
examine the experiences and impressions that will have the
most influence at each stage of the buying process. Hence, this
will assist them in allocating communication funds more
efficiently and design and implement adequate communications
programs. After the marketers have acquired the insights of the
consumer, marketing communications can be assessed according
to their ability to build brand equity and drive brand sales. It is
very important for marketers to evaluate all different possible
communication options that are available according to
effectiveness criteria to determine how well it works as well as
efficiency considerations to determine how well it works given
the cost.
Macro and micro models are two models that provide helpful
structures that assist marketers in understanding the basic
elements of effective communication. Macro model of the
Communications Process has nine elements:
Sender
Receiver
Message
Media

Message encoding
Decoding
Response
Feedback
Noise.
The sender and the receiver are the major parties of
communication. Message and the media are used to send the
message. Message encoding, decoding, response, and feedback
are four elements that represent major communications
functions. The last element is noise or random and competing
messages that may interfere with the intended communication.
The macro model focuses on the key factors in effective
communication:
Senders must be familiar with what the audiences they want to
reach as well as which responses they want to obtain;
Senders must encode their messages to that the target audience
can decode them.
Senders must transmit the message through media that reach the
target audience.
Senders must develop feedback channels to monitor the
responses.
The more the send’s field of experience overlaps the receiver’s,
the more effective the message is likely to be.
Selective attention, distortion, and retention process may be
happening during communication. Selective attention is when
people filter messages to avoid sensory overload. Selective
distortion is when receivers of the messages will hear and
process what fits into their belief systems. Selective retention is
when people will retain in long-term memory only a small part
of the message that reaches them.
Micro Model of Consumer Responses focuses on consumers’
specific responses to communications. AIDA, Hierarchy of
Effects, Innovation Adoption, and Communication models are

all classic response hierarchy models that assume that the buyer
passes through cognitive, affective, and behavioral states in
evaluating marketing communications messages. There are three
potential sequences:
Learn-feel-do. This is sufficient when the audience has high
involvement with a product category perceived to have high
differentiation. This is evident in purchasing cosmetic surgery
or an assisted living property.
Do-feel-learn. This is the second sequence when the audience
has high involvement but perceives little or no differentiation
with the product category. This is evident in purchasing
hospital emergency services or cholesterol lowering medication.
Learn-do-feel. This is the third sequence when the audience has
low involvement and perceives little differentiation within the
product category. This is evident in purchasing travel vaccine
or health insurance.
*
There are eight steps in effective communications. The first
one is identify the target audience. There must be a clear target
audience that includes potential buyers of the organization’s
products and services, current users, deciders or influencers,
individuals, groups, certain publics, or general public. The
target population is so essential and influential that the
communicator makes decision regarding what to say, how to say
it, when to say it, where to say it as well as to whom to say it.
The second step is determining communications objectives. In
this step, four possible communications objectives can be
identified;
Category need
Brand awareness
Brand attitude
And
Brand purchase intention.

Design the communications is the third step in which designing
communications to meet the desired response requires solving
the following three problems:
What to say or also know as the message strategy
How to say it or the creative strategy;
And
Who should say it or the message source.
The fourth step is selecting the communication channels. It is
important to note that choosing efficient channels to carry the
message becomes more difficult as channels of communication
become more divided and chaotic. There are two different
channels to choose from: personal communication channels and
nonpersonal communication channels. Personal communication
channels have two ore more people communicating directly with
each other. It can be face to face, person to audience, over the
telephone, or through email. Another vehicle is using instant
messaging and independent sites to collect consumer reviews.
The effectiveness of personal communications channels come
from individualized presentation and feedback. Nonpersonal
communication channels are communications meant for more
than one person. These channels include media, sales
promotions, events and experiences, and public relations.
The next step is establishing the budget which is one of the
most difficult marketing decisions to make regarding how much
to spend on promotion. There are four common methods for
deciding on a budget:
Affordable method. This method ignores the role of promotion
as an investment and the immediate impact of promotion on
sales volume. This method is based on setting the promotion
budget at what they organization thinks the company can afford.
The caveat to this method is that it leads to an uncertain annual
budget which makes long range planning difficult.
Percentage of sales method. This method is when a company

set promotion expenditures at a specified percentage of sales or
of the sales price. Advocates believe that this method links
promotion expenditures to the movement of corporate sales over
the business cycle which focuses on the interrelationship of
promotion and selling price and unit profit and encourages
stability when competing firms spend approximately the same
percentage of their sales on promotion.
Competitive parity method
Objective and task method
*
Advertising is a form of paid nonpersonal presentation and
promotion of ideas, goods or services by a sponsor. An ad can
be the most cost effective way to get the message out. Many
business and organizations use communication companies or
advertising agencies to create advertising campaigns as well as
select and buy media. Advertising is instrumental in
establishing long term image for products and services as well
as facilitating quick sales. It has the ability to reach
geographically dispersed buyers.
Qualities of advertising:
Pervasiveness
Amplified expressiveness
Impersonality
Developing and managing an advertising program
Five major decisions of communications:
Mission
Money
Message
Media
Measurement
Setting the advertising objectives
Informative advertising
Persuasive advertising

Reminder advertising
Reinforcement advertising
Deciding on the advertising budget
Product life cycle stage
Market share and consumer base
Competition and clutter
Advertising frequency
Product substitutability
Developing an advertising campaign
Three steps to developing a message strategy:
One. Message generation and evaluation
Two. Creative development and execution.
And
Three. Social responsibility review.
Deciding on media.
Steps:
Deciding on desired reach, frequency, and impact
Choosing among major media types
Selecting specific media vehicles
Deciding on media timing
Evaluating effectiveness.
*
Sales promotion is a key ingredient n marketing campaigns
which consists of a variety of incentive tools that are designed
to get others to buy specific products or services. It provides
an incentive to the consumer to purchase where advertising
gives a reason to purchase. The tools for sales promotion for
consumer promotion , trade promotion, and business and sales
force promotion.
Free samples, free management advisory service, incentive type
promotion are some tools that have specific objectives. Free

samples seeks to get consumers to try out a product or as
service whereas a free management advisory service seeks to
obtain long term relationships with a retailer.
In making major sales promotion decisions, an organization
must establish the following:
Objectives. The objectives come from broader promotion
objectives which comes from more basic marketing objectives
developed for the product or service. For consumers, the
objectives are designed with the purpose of getting the
consumers to purchase larger size units, building trials among
nonusers, and attracting switchers away from competitors’
brands. On the wholesaler side, the purpose of the objectives is
to persuade retailers to carry new items and higher levels of
inventory, incentivizing off season buying, encouraging
stocking of related items, offsetting competitive promotions,
building brand loyalty, and gain entry into new retail outlets.
For the sales force, the purpose of the objective is to encourage
support of new products or services and to get them to do more
prospecting and encouraging more off season sales.
Select tools. These tools can be consumer promotion or trade
promotion tools.
Develop the program. In developing a program, marketers have
to determine the size of the incentive, establish conditions for
participation, decide on the duration of promotion, choose a
distribution mechanism, establish timing of promotion, and
determine the total sales promotion budget.
Pretest, implement, control, and evaluate the program. Pretests
can help to determine if the tools used are appropriate. There
are three methods of evaluations: sales data, consumer surveys,
and experiments.
*
Public relations is a traditional promotional tool in health care.
Appeal based on three distinctive qualities:
High credibility

Ability to catch buyers off guard
Dramatization
Public relations (PR)
Functions of PR:
Press relations. Provides positive news and information
regarding the organization
Product publicity. Publicizes sponsoring efforts regarding
specific products.
Corporate communication. Provides understanding of the
organization through internal and external communications.
Lobbying. Working with legislators and government officials to
promote or defeat legislation and regulation.
Counseling. Advising management regarding public issues and
organization positions and image during good and bad times.
Market Public Relations supports corporate or product
promotion and image making. They engage in the following
tasks.
Assisting in the launch of new products
Assisting in repositioning a mature product
Building interest in a product category
Influencing specific target groups
Defending products that have encountered public problems
Building the corporate image in a way that reflect s favorably
on its products.
Major Marketing Public Relations Decisions in determining
when and how to use market public relations. They are as
follows:
Establishing the marketing objectives
Choosing messages and vehicles
Implementing and evaluating the plan
*
There are reasons why marketers indicate they sponsor events.
They are as follows:

Identifying with a particular target market or life style
Increasing awareness of company or product name
Creating or reinforcing consumer perceptions of key brand
image associations
Enhancing corporate image dimensions
Creating experiences and evoking feelings
Express commitment to the community or on social issues
Entertain key clients or reward key employees
and
Permit merchandising or promotional opportunities.
In developing successful sponsored events, the following is
involved:
Choosing the appropriate events,
Designing the optimal sponsorship program for the event
and
Measuring the effects of events
*
In order for an organization to develop its communication mix,
the following must be considered:
Type of product market
Consumer readiness to make a purchase
Stage in the product life cycle.
Organization’s market position
Cost effectiveness of the promotional tools.
And
Advertising and publicity
*
Integrated marketing communication is the management of all
organizational communications that builds positive relationships
with potential customers and stakeholders including employees,

legislators, the media, the financial community, and other
segments of the public.
A combination of personal and nonpersonal communication
channels help to achieve a maximum impact. Multiple media
within a well defined time frame contributes to more targets
being reached and impacted.
Coverage. This is the proportion of the audience reached by
each communication option used as well as how much overlap
there is among communication options.
Contribution. This is regarding the inherent capacity of
marketing communication effort to design the desired response
from consumers in the absence of exposure to any other contract
option.
Commonality. This is the extent to which common relations are
reinforced across communication options.
Complementary. This is the extent to which different
relationships and linkages are emphasized across
communication options.
Versatility. This is the extent to which a marketing
communications option is rich and works for various groups of
consumers.
Cost. This is the evaluations of marketing communications on
all of the above criteria. They must be weighed against their
cost to arrive at the most effective and efficient program.
*
*
First we looked at the importance of health organizations having
communications skills. Successful communications include the
following elements:

Sender;
Encoding;
Message;
Media;
Decoding;
Receiver;
Response;
Noise; and
Feedback.
Then we looked at developing effective marketing
communications. There are eight steps:
Identify the target audience;
Determine communication objectives;
Design the communications;
Select the communication channels;
Estimate the total marketing communications budget;
Decide on the media mix;
Measure the results; and
Manage integrated communications.
All of these steps have different activities and tools.
Finally, each health care organization has to determine the best
mix to make the communications tools of the following:
Advertising;
Sales promotion;
Public relations and publicity;
Events and experiences;
Personal selling; and
Direct marketing.
Answers for each questions should be roughly 100 words, or
one paragraph, in length. Please write in full sentence format
and use your own words. A list of sources is required. No
Wikipedia please.
______________________________
Please watch the 2009 debate about the electoral college on C-

Span's Washington Journal at http://www.c-
span.org/video/?283203-7/electoral-college (Links to an
external site.)Links to an external site. (Links to an external
site.). Using the textbook, this video, and other academically
credible sources, please answer the following questions.
· Define the electoral college. Describe the role of the electoral
college in the election of the president and vice president of the
United States.
· How are the electors chosen? How many are there and how
many electoral votes are needed to win?
· Take a position on whether the electoral college should be
abolished in favor of a direct popular vote. Defend your
position using two specific arguments.
Requirements
· Written communication: Please write in paragraph format
· Font and font size: Times New Roman, 12 point.
· APA formatting: Resources and citations are formatted
according to APA (6th edition) style and formatting.
Chapter 13
The Federal Bureaucracy
A system of organization and control that is based on three
principles; handles the day-to-day business of the government
Employees about 4 million people in the United States
Bureaucracy in Political Science

Hierarchical authority (chain of command whereby officials and
units at the top of the bureaucracy have authority over those in
the middle, who in turn control those at the bottom)
Job Specialization
Formalized rules
Bureaucracy
An inevitable consequence of complexity and scaleBureaucrats
naturally take an “agency point of view” seeking to promote
their agency’s programs and powerDespite oversight and checks
and balances, the bureaucracy has significant power.
Bureaucracy
To implement policy Laws may lack clear, concrete details
Rulemaking authority to create regulations about how
government programs should operate. This authority enhances
the power of the federal bureaucracy, giving it considerable
jurisdiction over the implementation of government policies.
Purpose
President Andrew Jackson (1828) opened government jobs to
the common people. He inaugurated the spoils system, under
which party loyalty—not experience or talent—became the
criterion for a federal job .This was the beginning of patronage,
and it continued through the late 19th century
History of Bureaucracy
Congress passed the Pendleton Act in 1883, which created a
system for hiring federal workers based on qualifications rather
than political allegiance; employees were also protected from
losing their jobs when the administration changed.

In 1939, the Hatch Act passed to prohibit federal workers from
running for office or actively campaigning for other candidates.
1930s: the size of the federal bureaucracy grew exponentially
due to President Franklin Roosevelt's New Deal agencies.
Although many were short-lived, others continue to play a role
Example: the Social Security Administration (SSA), the
Securities and Exchange Commission (SEC), the Tennessee
Valley Authority (TVA), the Federal Trade Commission (FTC),
and the Federal Deposit Insurance Corporation (FDIC).
1960s: President Lyndon expanded the welfare state with such
programs as Medicare, Head Start, the Job Corps, and the Office
of Economic Opportunity (OEO). 1970s: The Environmental
Protection Agency (EPA) was created by the Nixon
administration, the new Occupational Safety and Health
Administration (OSHA) in the Labor Department transformed
the workplace for most Americans, and new cabinet departments
were established . 2002: Department of Homeland Security
established.
Bureaucracy

Cabinet Departments:
15 currently exist; major administrative units of the executive;
heads, or secretaries, appointed, approved and part of
presidential cabinet; each department has responsibility for a
general policy area
Forms of Bureaucracy
State,
Treasury,
Defense,
Justice,
Interior,
Agriculture,
Commerce,
Labor,
Health & Human Services,
Homeland Security,
Housing & Urban Development,
Transportation,
Energy,
Education, and
Veterans Affairs.
Cabinet Departments
Independent Agencies:
similar to cabinets in structure but have narrower
responsibilities
Example: Central Intelligence Agency

Regulatory Agencies:
Quasi-legislativeQuasi-judicialHold hearingsMake rulesResolve
disputesIndependentPresident cannot unilaterally remove
leadersExample: Environmental Protection Agency
Government Corporations:
Similar to private companies because they charge clients for
services and are governed by a board of directors Different b/c
receive federal funding to help defray operating expenses
Example: Amtrak
Commissions:Provide advice to PresidentExist because the need
for rulemaking is highly complex & technical
Examples: FTC, FCC, SEC, FEC, FRB
Primary Responsibility is policy implementation (Rule
Application, Rule Interpretation, and Rule Initiation)
Administrators tend to look out for their agency’s point of
view.Often, new regulation has a comment period time outlined
in the U.S. Federal Register
Bureaucracy

Expertise
Special interests, or clientele groups
Friends in High Places
Sources of Power
Overly complex rules and procedures (red
tape)WasteRedundancy and duplication of effortsConflict
Potential Issues
The ability of the government (especially the President,
Congress & Courts) to hold the bureaucracy responsible for its
performance and actionsSee n.a. (2018) Air Force paid $1280
on coffee cup. CNN
https://www.cnn.com/videos/us/2018/10/30/air-force-coffee-
cups-chuck-grassley-earlystart-sot-vpx.cnn/video/playlists/top-
news-videos
Accountability
Vis a vis the President
Authorized to appoint about 4000 higher-level bureaucrats
Can reorganize agencies/depts as he sees fit
President’s Office of Mgmt and Budget monitors & evaluates
performance, looks at efficiency, growth, etc
Accountability
Vis a Vis Congress
Congress uses its oversight powers to ensure that legislation is
implemented as intended;
Uses committee hearings to question agency staff and hold them

accountable to their actions and decisions.
Can also influence the behavior of a bureaucratic agency by
cutting or increasing its budget; this is also known as "power of
the purse."
Accountability
Vis a vis OMB: Budgets & Rule Making
Has substantial control over agency budgets
Review agency regulations before they go into effect (tends to
be reactive)
Accountability
Vis a vis the Courts
Legally, derives its authority from acts of Congress
An injured party can bring suit on grounds failed to carry out
law properly
Courts tend to support administrators if at least somewhat
consistent with law
Accountability
Vis a vis the Bureaucracy itself
Senior Executive Service —Top-level career civil servants who
qualify through a competitive process to receive higher salaries
than their peers but who can be assigned or transferred by order
of the President
Administrative Law judges—an official who presides at a trial-
like administrative hearing to settle a dispute between an
agency and someone adversely affected by a decision of the
agency
Accountability

3. Whistleblowers (individuals can report instances of
mismanagement without repercussions)
See https://oversight.house.gov/hearing/protecting-the-public-
from-waste-fraud-and-abuse-the-whistleblower-protection-
enhancement-act-of-2009
Accountability
+4000 appointed by White HouseLoyaltyNumber of
appointments has increased Tenure of those appointed has
decreasedPatronagePolitical Favoritism
Appointees
Office of Personnel ManagementBipartisan Merit Systems
Protection Board18 level General Schedule (GS) salary
structureService ratingsHatch Act of 1939 limits political
activities of civil service
Career Civil Service
PBS (2015) Bureaucracy basics. Crash Course. Retrieved from
https://www.youtube.com/watch?v=I8EQAnKntLs
Recommended videos
In this American Politics course,
· Identify at least two ideas you have gleaned from this course
that you consider useful.
· Provide a brief rationale for each of these ideas as to why you
think they are the most valuable to you. Include references to
the thinking habits, learning experiences, and content
knowledge you have gained from the course.
· Share two news or government sources that you find valuable
and why you find them to be so.
----------------------------------------------------------------------

Read Chapter 10: The News Media and Communicating Political
Images
The news media (or the press, as they are also called) are a key
intermediary between Americans and their leaders, but they are
a different kind of intermediary than parties or interest groups.
The media's basic goal is to inform the public about politics and
government. Yet, because news organizations also seek to
attract an audience in their pursuit of a profit, their news
coverage provide a slanted version of politics. As you read
through this chapter, consider the following points:
1) The American press was initially tied to the nation's political
party system (partisan press) but gradually developed an
independent position (the objective press).
2) In more recent years, traditional news has faced increased
competition for people's attention from cable and the internet.
This has led to audience fragmentation and an increase in
opinionated and entertainment based coverage/journalism.
3) The news media has several functions--signaling (the press
brings relevant events and problems to light), common-carrier
(the press serves as a channel through which leaders and
citizens can communicate), watchdog (the press scrutinizes
official behavior for evidence of deceitful, careless or corrupt
actions), and partisan (the press promotes particular interests
and values).
4) The news audience has been shrinking and fragmenting,
partly as a result of new technology and party because young
adults are less likely than older ones to pay attention to news.
________________________________________
Requirements
· Written communication: Please write in paragraph format. Do
not quote materials. Rather, use your own words so that I may
assess comprehension.
· Font and font size: Times New Roman, 12 point.

· Submit as a .doc, .docx, .rtf or pdf document
· APA formatting: Resources and citations are formatted
according to APA (6th edition) style and formatting.
The Supreme Court consists of the Chief Justice of the United
States and such number of associate justices as may be fixed by
Congress. The number of associate justices is currently fixed at
eight. Power to nominate the Justices is vested in the president
of the United States, and appointments are made with the advice
and consent of the Senate. The Constitution further provides
that "the Judges, both of the supreme and inferior Courts, shall
hold their Offices during good Behavior, and shall, at stated
Times, receive for their Services, a Compensation, which shall
not be diminished during their Continuance in Office" (U.S.
Const., art. III, § 1).
For this assignment, visit the official Web site of the Supreme
Court of the United States (www.supremecourt.gov). Do not use
Wikipedia.
Choose one recent court decision from the past five years, and
complete the following:
· Summarize the case and the final decision in 1–3 paragraphs.
· Discuss whether you think the current Supreme Court is
conservative, liberal, or balanced now. Use current Supreme
Court decisions to argue your position. Positions must be
supported with outside articles, current decisions, past
decisions, and/or the text.
Read Chapter 14: The Judicial System
Where the Executive and Legislative branches are elected by the
people, members of the Judicial Branch are appointed by the
President and confirmed by the Senate. Article III of the
Constitution, which establishes the Judicial Branch, leaves
Congress significant discretion to determine the shape and
structure of the federal judiciary. Even the number of Supreme

Court Justices is left to Congress — at times there have been as
few as six, while the current number (nine, with one Chief
Justice and eight Associate Justices) has only been in place
since 1869. The Constitution also grants Congress the power to
establish courts inferior to the Supreme Court, and to that end
Congress has established the United States district courts, which
try most federal cases, and 13 United States courts of appeals,
which review appealed district court cases.
Federal judges can only be removed through impeachment by
the House of Representatives and conviction in the Senate.
Judges and justices serve no fixed term — they serve until their
death, retirement, or conviction by the Senate. By design, this
insulates them from the temporary passions of the public, and
allows them to apply the law with only justice in mind, and not
electoral or political concerns. Generally, Congress determines
the jurisdiction of the federal courts. In some cases, however —
such as in the example of a dispute between two or more U.S.
states — the Constitution grants the Supreme Court original
jurisdiction, an authority that cannot be stripped by Congress.
The courts only try actual cases and controversies — a party
must show that it has been harmed in order to bring suit in
court. This means that the courts do not issue advisory opinions
on the constitutionality of laws or the legality of actions if the
ruling would have no practical effect. Cases brought before the
judiciary typically proceed from district court to appellate court
and may even end at the Supreme Court, although the Supreme
Court hears comparatively few cases each year.
Federal courts enjoy the sole power to interpret the law,
determine the constitutionality of the law, and apply it to
individual cases. The courts, like Congress, can compel the
production of evidence and testimony through the use of a
subpoena. The inferior courts are constrained by the decisions
of the Supreme Court — once the Supreme Court interprets a
law, inferior courts must apply the Supreme Court's
interpretation to the facts of a particular case.
The Supreme Court of the United States

The Supreme Court of the United States is the highest court in
the land and the only part of the federal judiciary specifically
required by the Constitution. The Constitution does not stipulate
the number of Supreme Court Justices; the number is set instead
by Congress. There have been as few as six, but since 1869
there have been nine Justices, including one Chief Justice. All
Justices are nominated by the President, confirmed by the
Senate, and hold their offices under life tenure. Since Justices
do not have to run or campaign for re-election, they are thought
to be insulated from political pressure when deciding cases.
Justices may remain in office until they resign, pass away, or
are impeached and convicted by Congress. The Court's caseload
is almost entirely appellate in nature, and the Court's decisions
cannot be appealed to any authority, as it is the final judicial
arbiter in the United States on matters of federal law. However,
the Court may consider appeals from the highest state courts or
from federal appellate courts. The Court also has original
jurisdiction in cases involving ambassadors and other
diplomats, and in cases between states.
Although the Supreme Court may hear an appeal on any
question of law provided it has jurisdiction, it usually does not
hold trials. Instead, the Court's task is to interpret the meaning
of a law, to decide whether a law is relevant to a particular set
of facts, or to rule on how a law should be applied. Lower
courts are obligated to follow the precedent set by the Supreme
Court when rendering decisions.
In almost all instances, the Supreme Court does not hear appeals
as a matter of right; instead, parties must petition the Court for
a writ of certiorari. It is the Court's custom and practice to
"grant cert" if four of the nine Justices decide that they should
hear the case. Of the approximately 7,500 requests for certiorari
filed each year, the Court usually grants cert to fewer than 150.
These are typically cases that the Court considers sufficiently
important to require their review; a common example is the
occasion when two or more of the federal courts of appeals have
ruled differently on the same question of federal law.

Source: (2011). The judicial branch. (2011). [Print Photo].
Retrieved from http://www.whitehouse.gov/our-
government/judicial-branch (Links to an external site.)
________________________________________
For this discussion, choose a current topic or story in the news
that ties to the US judiciary and/or court system (at any level)
1. Provide a summary and an analysis of the topic in your own
words (no cutting and pasting please)
2. Tie the topic to this unit's readings. Why is it relevant?
3. Please share if you think your sources are more liberal,
conservative or balanced.
Include in your post information from at least one source, being
sure to correctly cite the source in the post. No Wikipedia.
Please avoid cutting and pasting information from the Internet.
Answer 5 Weekly Reading Questions Below:
and use your own words.
1. Define what is meant by "agency point of view." Why do
bureaucrats tend to have an agency point of view?
2. Compare and contrast the patronage system and the merit
system as methods of hiring government employees.
3. What is bureaucratic accountability?
4. What are independent agencies? Please provide 2 examples.
What is a regulatory agency? Please provide 2 examples.
5. What are the major sources of bureaucrats' power? What
mechanisms for controlling the power are available to the
President and Congress?
Read Chapter 13 Patterson Book: The Federal Bureaucracy

Bureaucracy
"Bureau" is the French word for "office." Bureaucracy means
rule by offices.
Figure 13.2
Textbook____________________________________
Bureaucracies are hierarchically organized, formal
organizations based on a functional division of labor. Almost
all very large organizations, both public and private, are
bureaucratic. One's position within the organization is based on
your title and rank. Both together define your role within the
organization. There is a linkage between your job title and
your pay scale. At the top of public bureaucracies are the
political leaders, which, in democracies, are usually elected.
Below the top leadership, may be a group of politically
appointed officials. But most bureaucrats are selected on the
basis of merit and are tenured in their jobs after a
probationary period.
Bureaucracies are large, formal organizations. They exist as
both governmental and non-governmental (private)
organizations. Private bureaucracies include both religious
bodies like the Roman Catholic Church and business
organizations like General Motors or IBM. All modern business
corporations are bureaucratically organized.
All modern states have a large bureaucratic components. We
usually refer to the governmental bureaucracies as the
administration, which is usually under the direct supervision of
the chief executive, the President in Presidential systems or the
Prime Minister in Parliamentary systems. In the United States,
the bureaucracy refers to the Executive Branch of Government.
The U.S. President is the chief bureaucrat who rules both the
civilian and the military agencies and departments of the
executive branch of government.
Bureaucracies operate internally through written rules and
procedures. Positions within the bureaucracy are defined by
law and attached to particular offices. Individuals play the

defined roles prescribed by their office. There is a hierarchy of
offices, which are usually functionally organized on the basis of
some principle of specialization. Office holders are ranked and
their pay scale depends on their ranking. They receive a regular
salary and are generally prohibited from receiving favors
(bribes) from their clients. Positions are generally filled on the
basis of merit and specialized training. In public bureaucracies,
a civil service system has been established.
Democratically elected leaders usually serve at the top of the
bureaucratic hierarchy. These elected leaders are usually
assisted by a top group of politically appointed managers.
While the civil service bureaucrats are supposed to be
politically neutral expert managers, the political managers
pursue politically motivated goals. There is often tension
between the political top management and the career
professionals: between the democratic and the bureaucratic
principles of management.
Source: (2011) Bureaucracy. Retrieved
from http://faculty.ucc.edu/egh-damerow/bureaucracy.htm
---------------------------------------------------------------------
For this discussion, choose a current topic or story in the news
that ties to an office in the US Federal bureaucracy.
1. Provide a summary and an analysis of the topic in your own
words (no cutting and pasting please)
2. Tie the topic to this unit's readings. Why is it relevant?
3. Please share if you think your sources are more liberal,
conservative or balanced.
Include in your post information from at least one source, being
sure to correctly cite the source in the post. No Wikipedia.
Please avoid cutting and pasting information from the Internet.
Answer 5 Questions Below:

and use your own words.
1. Define what is meant by "agency point of view." Why do
bureaucrats tend to have an agency point of view?
2. Compare and contrast the patronage system and the merit
system as methods of hiring government employees.
3. What is bureaucratic accountability?
4. What are independent agencies? Please provide 2 examples.
What is a regulatory agency? Please provide 2 examples.
5. What are the major sources of bureaucrats' power? What
mechanisms for controlling the power are available to the
President and Congress?
Health Services Marketing
HSA 305
Pricing Strategies And Decisions In Health Care
Kotler, P., Shalowitz, J., & Stevens, R. J. (2008). Strategic
marketing for health care organizations. San
Francisco: Jossey-Bass
*
discuss pricing strategies and decisions in health care
ObjectivesUpon completion of this lesson, you will be able
to:Describe the various tools of the marketing mix available to
health care providers.

*
Describe the various tools of the marketing mix available to
Concept of PricingTransparencyPublic concernsPricing methods
dependencyThree types of payersConsumersGovernmentPrivate
Transparency is a term that is applied to a given situation in
which prices are accessible to consumers prior to services being
rendered. When there are price inconsistencies and absence of
transparency, local, state, and federal government intervention
may occur. Private insurance companies are involved in
transparency as seen when Aetna made available online the
prices it negotiated with Cincinnati area physicians regarding a
significant amount of medical procedures and tests.
There is public concern regarding health care costs. In this
lesson, we will discuss approaches that organizations can
implement to set their prices. In our discussion, it is very
important to keep in mind that pricing methods depend on a
combination of who the pay is, what the product is, and the
location where it is used. Our focus will be on the three types
of payers:
Consumers
Government; and
Private entities.
as well as the pricing decisions that are essential to each of
them.

*
Consumer PayersConsumer psychology and pricing Price
takersPerceptionsReference pricesPrice quality inferencesPrice
cues
Consumers are one type of payer that for the most part have
insurance that pays for most of their health care costs.
However, we will discuss when insurance is not the consumer’s
option to pay health care costs. The seller of health care
products and services use traditional market analysis tools in
this case. Traditionally consumers are price takers. Price takers
are consumers that accept prices at face value or as given. In
regards to health care products and services, consumers have
traditionally been price takers.
Consumers use a frame of reference such as their knowledge on
prior purchase, formal communication like advertisements, sales
calls and brochures, informational communications like word of
mouth from friends, colleagues, or family members, and point
of purchase or online resources. It is important to have an
understanding of how consumers obtain their price perceptions,
reference prices, price quality inferences, and price cues.
Reference prices are prices that are the result of comparing a
product’s indicated price to pricing information from memory or
an external frame of reference. Price quality inferences are
inferences that many consumers use price as an indicator of
quality when there is no other information available. Price
quality inferences are applied for products where consumers pay

with their disposable income such in cases of cosmetic surgery.
Consumers’ perception regarding health care product and
services can also be affected by price cues. This is evident in
products with prices that end in an odd number. Research
indicates that consumers have a tendency to process prices in a
left to right manner instead of by rounding. In this manner,
price encoding is essential if there is a mental price break at the
higher, rounded price.
*
Consumer Payers-Setting the PriceSelecting pricing
objectiveDetermining demandEstimating costsAnalyzing
competitors’ costs, prices and offers
It is a normal practice for the seller to set a price upon
development, introduction, or enters bids regarding a new
product. Different industries have different pricing points or
price tiers, and levels that can be found in a distribution
channel. There is a seven step procedure used to assist an
organization in considering the factors in setting its pricing
policy:
Step One. Selecting the pricing objective. Five major
objectives through its pricing can be pursued in order to decide
where an organization wants to position its market offering:
survival, maximum current profit, maximum market share,
maximum market skimming, or product-quality leadership.
Survival is a short term objective that is appropriate when
organizations are afflicted with overcapacity, intense
competition, or changing consumer wants. As long as prices to
cover variable costs and some fixed cost are covered, the

organization remains in business. Since this is an short run
objective, the organization must learn how to add value or face
extinction in the long run. In order to obtain the maximum
current profit, organizations estimate the demand and costs
associated with alternative prices, choosing the one that
provides maximum current profit, cash flow, or rate of return on
investment. One trade off regarding current performance is that
an organization may sacrifice long run performance by under
spending on brand building or ignoring competitors’ long run
responses. If the maximum market share objective is chosen by
organizations, then they believe that a higher sales volume will
lead to lower units costs and high long run profit. Market
penetration is a tactic where the organization will set a very low
price in order to obtain a high share. This tactic is appropriate
when the market is highly price sensitive and a low price
stimulates market growth. A collection of experience can cause
production and distribution costs to fall and the lower price will
discourage competition. This is not illegal predatory pricing.
Illegal predatory pricing is when very large organizations price
below their production cost to drive small, more poorly
financed organizations out of business.
Organizations introducing new technology may set high prices
to maximize market skimming to gain as much revenue as
possible in the short run. Price skimming is when prices start
high and are slowly lowered over time when competitive
offerings and generic substitutes become available. This is seen
in the pharmaceutical industry frequently. It is important to note
that if prices are set too high, the product may fail to gain
customers or may be excluded from formularies. Price
skimming is ideal when:
One. There is a sufficient number of buyers have a high current
demand;
Two. The unit costs of producing a small volume are not so high
that they cancel the advantage of charging what the traffic will

bear.
Three. The high initial price does not attract more competitors
to the market, and
Four. The high price communicates the image of a superior
product.
The aim is for organizations to become the product quality
leaders in the market where they produce gold standard quality
and charge premium prices.
Step Two. Determining demand. Price and demand are inversely
related meaning that the higher the price, mthe lower the
demand. In order to estimate demand, one must understand what
affects price sensitivity. Consumers are most price sensitive
when products are very costly or purchased frequently. The
opposite is true also. Consumers are less price sensitive when
price is only a small portion of the total charge to have, operate,
and service the product over its lifetime. A seller is able to
charge a higher price than its competition and still obtain the
business if it can convince the customer that it offers the lowest
total cost of ownership or TCO. In estimating demand, an
organization can use one of three methods:
One. Analyze past data and their relationships to each other
such as prices, units, sold, referrals, admissions, visits, and
procedures;
Two. Conduct field experiments to observe the effect of varying
prices on the same products in different, but similar, markets; or
Three. Use prospective surveys to explore how likely consumers
indicate they are to purchase at various proposed prices.
Price elasticity of demand is the sensitivity of the volume
change to alternation in price. The demand is inelastic if the
demand change is minimal with a small change in price. Third
party insurance coverage and other health care products and
services fit into this category. If the demand changes with price,
then it is elastic. The larger the volume growth as a result from

a price reduction, the larger the positive price elasticity.
Demand is likely to be less elastic under the following
conditions:
One. There re few or no substitutes or competitors;
Two. Buyers do not notice the higher price;
Three. Buyers are slow to change their purchasing habits.
And four. Buyers believe the higher prices are justified.
The range of prices for which demand is inelastic is the price
indifference band, and organizations apparently want to operate
at the highest point in this range.
Step Three. Estimating costs. In estimating cost for a given
product, the organization needs to charge a price that covers its
cost of production, distribution, and selling the product as well
as include a fair return for its effort and risk. There are types of
cost and levels of productions. Fixed cost are cost that do not
changed with production or sales revenue regardless of output
and subject to capacity constraints. Variable costs differ
directly with the level of production. Total costs consist of the
sum of the fixed and variable costs for any given level of
volume. Average cost is equal to total costs divided by volume.
Step Four. Analyzing competitors’ costs, prices and offers. An
organization also looks at the competitors’ cost, prices, and
possible price reactions into account through an analysis.
During this process, the organization should consider the
distinct features its product offers and whether they are valued
by the customers who are willing to pay more. Shadow pricing
is the practice of adjusting prices to keep them just under those
of the competition.
*

Consumer Payers-Setting the Price, continuedDeciding whether
to use price as a competitive strategySelecting a pricing
methodSelecting final price
Step Five. Deciding whether to use price as a competitive
strategy. Competitive strategy can be a marketing strategy
since there are sales of many goods and services that are
sensitive to price reductions.
Step Six. Selecting a pricing method. An organization can
implement the three C’s to price products: customers’ demand
schedule, the cost function, and competitors’ prices. The cost
set a floor to the price. The competitors’ prices and the price of
substitutes provide an orienting point, and customers’ value
assessment of unique features established the price ceiling.
There are three price setting methods: markup pricing, target
return pricing, value pricing, and going rate pricing. Markup
pricing is the most elementary pricing method. It is to add a
standard markup to the product’s cost, either a fixed amount or
a percentage. Markup pricing are popular for the following
reasons: (1) the seller can estimate production costs easier than
demand; (2) when all organizations in the industry implement
this pricing method, prices tend to be similar if their cost are
similar; therefore price competition is minimized; and (3) many
people believe that cost plus pricing is fairer to both buyers and
sellers. Sellers do not take advantage of the buyer when the
latter’s demand increases and sellers earn a fair return on
investment. Target return pricing is when the organization
determines the price that would yield its target rate of return on
investment (ROI). This method is used by public utilities.
When using this method, the manufacturer must consider
different prices and estimate their probable impacts on sales
volume and profits. Value pricing is when the organization
base their price on the customer’s perceived value of their

product. In going rate pricing, the organization bases its price
on the competitors’ prices.
And
Step Seven. Selecting the final price. The organization must
consider additional factors including the impact of other
marketing activities, overall organizational pricing policies,
gain and risk sharing pricing, public perceptions, and the impact
of price on other parties. The final price must take into
consideration the brand’s quality, positioning, and promotion
associated to the competition (the influence of other marketing
activities). In the pharmaceutical industry, direct to consumer
(DTC) advertising can strongly impact patient demand for a
particular medication. Organization pricing policies dictate the
price ranges or methods of relative pricing for their portfolio of
products and services. Pricing policy also allow salespeople a
range in which they can negotiate with their customers. Buyers
may not accept a seller’s proposal due to a high perceived level
of risk. At times, the seller may offer to absorb part or all of
the risk if the product does not deliver the full promised value/
This is called gain and risk sharing pricing. In setting the price,
the organization must also look at the impact of price on other
parties such as the reactions of other stakeholder to the
proposed price. In addition, it is important for marketers to be
cognizant of the laws regulating pricing. There are federal and
state statues that protect consumers against deceptive pricing
practices.
*
Consumer Payer-Adapting PriceGeographic pricingPrice
discounts and allowanceEarly paymentVolume purchasesOff
season buying

Organizations usually develop a price structure that reflects
variations regarding geographical demand and cost, market
segment requirements, purchase timing, order levels, delivery
frequency, guarantees, service contracts, and other factors. We
will now discuss price adaptation strategies: geographical
pricing, price discounts, and allowances, promotional pricing,
and differentiated pricing.
Geographical pricing. The organization decides how much to
charge customers in different locations. Over the counter
medications prices may vary by neighborhoods.
Price discounts and allowance. Many organizations will adjust
their list price and provide discounts and allowance for early
payment, volume purchases, and off season buying. Discounting
is a great tool if the organization can gain value in return such
in the case when the customer agrees to:
Sign a three year contract;
Is willing to order electronically; or
Purchases in large quantities.
*
Consumer Payer-Adapting Price, continuedPromotional
pricingLost leader pricingSpecial event pricingSeasonal
discountsCash rebatesLow interest financingLonger payment
termsWarranties and service contractsPsychological discounting
Promotional pricing. Organizations can implement many pricing
techniques to stimulate early purchase. These are:

One. Lost leader pricing. An example of lost leader pricing is
obstetrical services. Hospitals are not able to charge enough to
cover their expenses due to women being the primary decision
makers for family’s health choices; therefore, investment in
these services can assist in stimulating future hospital use when
the need occurs.
Two. Special event pricing. Sellers will offer special prices to
attract customers for special occasions such as opening a new
store, launching a new product line, or celebrating some other
special event.
Three. Seasonal discounts. Since health care revenue cycles can
be cyclical, to smooth the demand, some organizations offer
special pricing during predictable downturns. For example,
cosmetic dermatology services are often promoted in the spring
and summer months.
Four. Cash rebates. Health care organizations offer cash rebates
to encourage purchase of a manufacturer’s products within a
specific time period. An example of this would be coupons for
diabetic patients toward the purchase of a glucose monitoring
machine.
Five. Low interest financing. Organizations may offer low
interest financing instead of cutting its price. This technique is
attractive for health care information technology firms due to
the price of annual service contracts being based on a
percentage of the system’s sales price.
Six. Longer payment terms. This is a strategy used by medical
device and pharmaceutical companies that stretches loans over
longer periods and lowers the monthly payments.
Seven. Warranties and service contracts. Organizations can
promote sales by adding a free, low cost or extended warranty
or service contract.
And
Eight. Psychological discounting. This is a strategy that
involves setting an artificially high price and then offering the
product significant savings.

*
Consumer Payer-Adapting Price, continuedDifferentiated
pricingFirst degree discriminationSecond degree
discriminationThird degree discriminationCustomer segment
pricing Product form pricing Image pricing Channel
pricingLocation pricing Time pricing
Differentiated pricing. Organizations often adjust their basic
price to accommodate variances in customers, products and
locations. Price discrimination happens when an organization
sells a product at two or more prices that do not reflect a
proportional difference in costs.
There are three degrees of price discrimination:
First degree discrimination is when the seller charges a separate
price to each customer depending on the intensity of his
demand.
Second degree discrimination is when the seller charges less to
buyers who buy a larger volume.
And third degree discrimination is when the seller charges
different amounts to different classes of buyers such as the
following:
Customer segment pricing is when different customer groups are
charged different prices for the same product. A classic example
is that a health plan charges a low premium for students and a
higher premium for senior citizens.
Product form pricing is when different versions of the product
are priced differently, but not proportionately to their respective
cost. A pharmaceutical company may charge 35 dollars for a
thirty day supply of a drug in a 10 mg dosage, whereas the 15
milligram dose will cost 90 dollars.

Image pricing is when some organizations price the same
product at two different levels based on different images held
by different buyers.
Channel pricing is when pricing for the same item can be
different depending on the distribution channel. An example of
this is a ninety day supply of medication is usually cheaper if
purchased from a mail order pharmacy than from the local drug
store.
Location pricing is when the same product is priced differently
at different locations even though the cost of offering at each
location is the same. An example is a tertiary care hospital that
offers cosmetic surgery services in its urban facilities in
Washington, DC may charge a higher price for the same
procedures offered by its satellite facility in Alexandria,
Virginia.
Time pricing is when prices are varied by time of year or day of
week. An example of this is if pharmacy traffic is slower
midweek, it may offer discount prices on Wednesdays.
*
Consumer Payer-Initiating and Responding to Price
ChangesInitiating price increasesDelayed quotation
pricingEscalator clausesUnbundlingReduction of
discountsReduction of size
Organization may have to change their prices due to various
situations. We will now discuss price increases strategies.
Many organizations initiate price increases to maintain profits

when they encounter cost inflation. However, organizations try
to increase prices as few times as possible to avoid customer
antagonism. When they anticipate rising cost, they often raise
their prices by more than they expect in the short run. This is
called anticipatory pricing. Over demand is another factor that
causes price increases. In cases where the organization cannot
supply all of its customers, it may use one of the following
techniques:
Delayed quotation pricing. The organization does not set a final
price until the product is finished or delivered. This
implemented most in industries with long production lead times
and in economies that are experiencing fast inflation.
Escalator clauses. The organization requires the customer to pay
today’s price and all or part of any inflation increase that take
place prior to delivery. This clause bases price increases on
some specified price index. These contracts are evident in
major project such as construction and standard in property rent
agreements.
Unbundling. The organization maintains its price but removes
or prices separately one or more components that were part of a
former offer such as free delivery or installation.
Reduction of discounts. The organization instructs its sales
force not to offer its normal cash and quantity discounts.
And reduction of size. The amount delivered to the customer is
reduced while the price remains the same.
.
*

Consumer Payer-Initiating and Responding to Price Changes,
continuedReactions to price changesMaintain price and profit
marginMaintain price and add valueReduce priceIncrease price
and add brandsLaunch a low price line
Reactions to price changes. Market leaders can respond to
frequent aggressive price cutting by newer or smaller
organizations trying to establish market share by any of the
following:
Maintain price and profit margin. The market leader can
maintain its price and profit margin, it believes
One. It will lose too much profit if it reduced its price;
Two. It will not lose much market share to the competitor; and
Three. It could regain market share when necessary.
Maintain price and add value. The organization may find it
cheaper to maintain price and spend money to improve
perceived quality instead of cut price and operate at a lower
margin.
Reduce price. Prices can be lowered to match the competitor’s
price. This strategy can be attractive if the organization needs
to maintain a certain production volume to hold down its costs
and if it foresees difficulty in regaining market share once it is
lost.
Increase price and add brands. Prices can be raised and new
brands introduced to bracket the attacking brand.
Launch a low price line. Lower priced items can be added to the
line or a separate, lower priced brand can be created.
Any of these can be applied, but the organization must also

factor the product’s state in the life cycle, its importance in the
organization’s portfolio, the competitor’s intentions and
resources, the market’s price and quality sensitivity, the
behavior of costs with volume, and the company’s alternative
opportunities.
*
Government PayersCoding systemsCurrent Procedural
Terminology 4th Edition (CPT-4) Healthcare Common
Procedural Coding System (HCPCS)International Classification
of Disease (ICD)Resource Based Relative Value Scale
(RBRVS)Diagnosis Related Group (DRG)
*
When the government is the payer of health care products and
services, the seller must accept the amounts and payment
methods the government sets. US Congress sets the method of
payment and how rates will be increased or decreased over time
and Centers for Medicare and Medcaid Services or CMS
administer the pricing schemes for Medicare, Medicaid, and
Veterans Administrative Programs. Prices are based on what
was one, what was provided, and why or by procedure, product,
and diagnosis. A series of standardized codes have been
developed by different organizations to compare episodes of
care, set prices, and expedite payment. The three common
coding systems are as follows:
Current Procedural Terminology 4th Edition or CPT-4 is
copyrighted by the American Medical Association. It is a
system that list procedures, usually with a five digit code.
Healthcare Common Procedural Coding System or HCPCS is a

government code that CMS issues and updates annually. This
system include health care products such as injectable
pharmaceutical, durable equipment and disposable medical
supplies as well as procedures and professional services such as
dentistry and temporary medical service codes. These codes are
in the form of a letter followed by four digits.
International Classification of Disease or ICD is the World
Health Organization’s disease listing system which countries
may modify accordingly. The recent version is ICD-10 which
was can into use after 1994. However, ICD-9CM is still in use.
Most IDC-9CM codes are three digits, followed by up to two
more digits after a decimal point.
Resource Based Relative Value Scale is a fee schedule that uses
the CPT-4 coding system.
Diagnosis related group or DRG is a scheme that hospitals are
paid that relies on ICD-9CM codes. The federal government
sets many other fees according to a variety of prospective
payment system. DRG is a flat fee regardless of the number or
costs of services or products provided.
There are other considerations for pharmaceutical companies
who price their products outside the US. Other countries
consider drug prices when they decide whether to approve a
drug for sale. The method these countries implement to
determine the price often depends on a comparison to prices of
the same product or therapeutic category in other selected
nations or reference (index) pricing.
Private PayersPremiumDeductibleCoinsuranceCo payment

Actuaries provides estimates of the frequency of utilization for
a variety of health care services for the target population in a
health care organizations. The estimate is equivalent in the
product sector to the cost of goods sold. When the plan is on
the market, the actual cost data for this utilization or medical
expanse ratio can be obtained which accounts for 80 to 85
percent of the premiums that an organization charges. An
additional 10 to 15 percent of premiums for sales, general and
administrative or SG&A expenses are estimated. To provide an
understanding on how much the consumer is responsible for
paying for health care, the following must be defined:
Premium. This is the amount the consumer pays to purchase an
insurance product. A certificate of insurance specifies what it
covers and how much of the expense the plan will pay. The rest
is the responsibility of the consumer.
Deductible. This is the amount the consumer pays prior to the
insurance starts to cover charges.
Coinsurance. This is a percent of charges the patient pays.
The remainder is the responsibility of the insurance company.
Copayment. This is the amount the consumer patient pays for
every encounter, whether it is for receiving a service or buying
a product such as medication.
When health insurance is responsible for any benefits, all of
these terms apply to determine the total consumer cost for a
product or service. The actuarial cost previously discussed and
the patient’s out of pocket cost such as deductibles,
copayments, and coinsurance when pricing their products. Due
to the majority of health care purchases being relatively low
cost, even small increases in patients’ upfront payments can
result in large premium reductions.

*
Check Your Understanding
Summary Payers typesSeven theories for setting pricesOther
factors to consider in modifying pricesInitiate price increase or
reductionGovernment payerPrivate insurers payers
*
First, we discussed the task of setting prices that differ depend
on who the payer is:
Patient;
Government;
Private parties; or
A combination of any of the above.
Next, we looked at seven theories of setting appropriate prices
for patients. These are
One. Selecting the pricing objective.
Two. Determining demand.
Three. Estimating costs.
Four. Analyzing competitors’ costs, prices, and offers.
Five. Deciding whether to use price as a competitive strategy.
Six. Selecting a pricing method such as markup, target return

pricing, value pricing, and going rate pricing.
And seven. Selecting the final pricing.
In addition, we looked at modifying the theory by the any of the
following other factors:
Health care organization’s brand strength;
Its pricing policies;
Government regulations; and
The impact of price on other stakeholders.
We also discussed prices going through more adjustment to take
into account geographical factors, price discounts and
allowances, promotional pricing, and differentiated pricing.
Next, we discuss when an organization needs to initiate a price
increase or reduction and when to react to competitors’ price
initiatives.
We then discussed how the government exercises its right to set
prices for payment under the Medicare, Medicaid, and Veterans’
administration programs. It has also set up a system for price
determination that depends on the nature of the product or
service and where it is provided.
Finally, we discussed private insurers. They set the medical
conditions that they will cover and indicate what they will pay.
They often use governmental guidelines.
*
discuss pricing strategies and decisions in health care

*
Describe the various tools of the marketing mix available to
Transparency is a term that is applied to a given situation in
which prices are accessible to consumers prior to services being
rendered. When there are price inconsistencies and absence of
transparency, local, state, and federal government intervention
may occur. Private insurance companies are involved in
transparency as seen when Aetna made available online the
prices it negotiated with Cincinnati area physicians regarding a
significant amount of medical procedures and tests.
There is public concern regarding health care costs. In this
lesson, we will discuss approaches that organizations can
implement to set their prices. In our discussion, it is very
important to keep in mind that pricing methods depend on a
combination of who the pay is, what the product is, and the
location where it is used. Our focus will be on the three types
of payers:
Consumers
Government; and
Private entities.
as well as the pricing decisions that are essential to each of
them.
*
Consumers are one type of payer that for the most part have
insurance that pays for most of their health care costs.
However, we will discuss when insurance is not the consumer’s

option to pay health care costs. The seller of health care
products and services use traditional market analysis tools in
this case. Traditionally consumers are price takers. Price takers
are consumers that accept prices at face value or as given. In
regards to health care products and services, consumers have
traditionally been price takers.
Consumers use a frame of reference such as their knowledge on
prior purchase, formal communication like advertisements, sales
calls and brochures, informational communications like word of
mouth from friends, colleagues, or family members, and point
of purchase or online resources. It is important to have an
understanding of how consumers obtain their price perceptions,
reference prices, price quality inferences, and price cues.
Reference prices are prices that are the result of comparing a
product’s indicated price to pricing information from memory or
an external frame of reference. Price quality inferences are
inferences that many consumers use price as an indicator of
quality when there is no other information available. Price
quality inferences are applied for products where consumers pay
with their disposable income such in cases of cosmetic surgery.
Consumers’ perception regarding health care product and
services can also be affected by price cues. This is evident in
products with prices that end in an odd number. Research
indicates that consumers have a tendency to process prices in a
left to right manner instead of by rounding. In this manner,
price encoding is essential if there is a mental price break at the
higher, rounded price.
*
It is a normal practice for the seller to set a price upon
development, introduction, or enters bids regarding a new
product. Different industries have different pricing points or
price tiers, and levels that can be found in a distribution

channel. There is a seven step procedure used to assist an
organization in considering the factors in setting its pricing
policy:
Step One. Selecting the pricing objective. Five major
objectives through its pricing can be pursued in order to decide
where an organization wants to position its market offering:
survival, maximum current profit, maximum market share,
maximum market skimming, or product-quality leadership.
Survival is a short term objective that is appropriate when
organizations are afflicted with overcapacity, intense
competition, or changing consumer wants. As long as prices to
cover variable costs and some fixed cost are covered, the
organization remains in business. Since this is an short run
objective, the organization must learn how to add value or face
extinction in the long run. In order to obtain the maximum
current profit, organizations estimate the demand and costs
associated with alternative prices, choosing the one that
provides maximum current profit, cash flow, or rate of return on
investment. One trade off regarding current performance is that
an organization may sacrifice long run performance by under
spending on brand building or ignoring competitors’ long run
responses. If the maximum market share objective is chosen by
organizations, then they believe that a higher sales volume will
lead to lower units costs and high long run profit. Market
penetration is a tactic where the organization will set a very low
price in order to obtain a high share. This tactic is appropriate
when the market is highly price sensitive and a low price
stimulates market growth. A collection of experience can cause
production and distribution costs to fall and the lower price will
discourage competition. This is not illegal predatory pricing.
Illegal predatory pricing is when very large organizations price
below their production cost to drive small, more poorly
financed organizations out of business.

Organizations introducing new technology may set high prices
to maximize market skimming to gain as much revenue as
possible in the short run. Price skimming is when prices start
high and are slowly lowered over time when competitive
offerings and generic substitutes become available. This is seen
in the pharmaceutical industry frequently. It is important to note
that if prices are set too high, the product may fail to gain
customers or may be excluded from formularies. Price
skimming is ideal when:
One. There is a sufficient number of buyers have a high current
demand;
Two. The unit costs of producing a small volume are not so high
that they cancel the advantage of charging what the traffic will
bear.
Three. The high initial price does not attract more competitors
to the market, and
Four. The high price communicates the image of a superior
product.
The aim is for organizations to become the product quality
leaders in the market where they produce gold standard quality
and charge premium prices.
Step Two. Determining demand. Price and demand are inversely
related meaning that the higher the price, mthe lower the
demand. In order to estimate demand, one must understand what
affects price sensitivity. Consumers are most price sensitive
when products are very costly or purchased frequently. The
opposite is true also. Consumers are less price sensitive when
price is only a small portion of the total charge to have, operate,
and service the product over its lifetime. A seller is able to
charge a higher price than its competition and still obtain the
business if it can convince the customer that it offers the lowest
total cost of ownership or TCO. In estimating demand, an
organization can use one of three methods:

Health Services MarketingHSA 305Designing And Managing.docx

Health Services MarketingHSA 305Designing And Managing.docx

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