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12 Implementation, Evaluation, and Control
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It is a bad plan that admits of no modification.
—Publilius Syrus
Maxim 469
Learning Objectives
After reading this chapter, you should be able to do the
following:
• List the four types of implementation skills that are
necessary to successfully translate a strategic goal into
implemented activities.
• Identify six forces that can affect or cause resistance to
change and innovation in a healthcare setting.
• Explain the roles played by people, systems, corporate
cultures, and organizational structures in success-
fully organizing for the implementation of an organization’s
strategy.
• Describe the relationship between planning and control in
the planning process.
• Discuss the use of the balanced scorecard approach to
performance evaluation, and identify the four key
control areas for performance evaluation.

Section 12.1Implementation
Introduction
This chapter focuses on the processes for creating and
evaluating the activities that are
necessary to implement both the strategic and marketing plans.
Through the implementa-
tion process, employees are assigned tasks and given the
authority and resources needed
to create the activities that bring the plans to life. Plans are
written documents that specify
what the organization wants to accomplish in the future; the
tasks carried out by the orga-
nization’s managers and staff turn those plans into reality. The
evaluation and control of the
plans involve determining whether objectives are being
accomplished and taking the actions
needed to align results with objectives. Evaluation involves
comparing actual results to objec-
tives and analyzing differences. Control refers to decisions or
actions taken by management
to bring results into alignment with objectives.
12.1 Implementation
A classic Harvard Business Review article carried the title
“Hustle as Strategy”—the point
being that more is gained from a good strategy with great
implementation than from a great
strategy with good implementation (Bhide, 1986). “Hustle,” or
implementation, can make or
break a company in many marketing situations. The firm that
achieves excellence in the skills
needed for implementing a marketing plan may be achieving a

competitive advantage that
perhaps has eluded it in the strategy development stage of the
planning process. However,
excellent implementation of a poorly conceived strategy is akin
to great advertising of a ter-
rible product—the disaster occurs much sooner than if the
excellence was not there! Thus,
successful organizations have found ways to be good at both the
development and implemen-
tation of marketing plans.
Implementation Skills
To this point of the textbook, the emphasis has been on
developing plans that focus on deliv-
ering patient value at a competitive advantage. The goal is the
desire to consider the impact
of actions on the long-term as well as the short-term welfare of
patients and society at large.
From an implementation perspective, the trick is to accomplish
this feat by translating our
strategy into a series of assigned activities in such a way that
everyone can see their job as a
set of value-added actions. These actions should be seen as
contributive to the organization,
by the people assigned those tasks, because they ultimately
result in greater value being deliv-
ered to the patient. Thomas Bonoma (1985) has suggested four
types of implementation
skills that must be used to successfully translate a strategic goal
into implemented activities:
• Allocating skills are used by managers to assign resources
(for example, money,
effort, personnel) to the programs, functions, and policies
needed to put the strat-
egy into action. For example, allocating funds for special-event

marketing programs
or setting a policy of when to voluntarily recall a defective
product are issues that
require managers to exhibit allocating skills.
• Monitoring skills are used by managers who must evaluate
the results of activities.
• Organizing skills are used by managers to develop the
structures and coordination
mechanisms needed to put plans to work. Understanding
informal dynamics as well
as formal organization structure is needed here.
• Interacting skills are used by managers to achieve goals
by influencing the behav-
ior of others. The motivation of people who are internal as well
as external to the
company—community, third-party payers, advertising agencies,
and so forth—is a
necessary prerequisite to fulfilling objectives.
Figure 12.1 continues the example begun in Figure 7.2 by
showing how a pharmaceutical com-
pany might have used these four skills to implement the strategy
and objectives formulated at
the corporate, strategic business unit, and product-market levels
of planning. Note that, in this
example, there is a consistency between every level and every
action taken with respect to the
various manifestations of strategy and tactics. Contemporary
marketing managers, perhaps

unlike their predecessors, would find it important to tell the
revenue force and external agents
why these assignments were being made and not just what and
how much to do.
Figure 12.1: Eli Lilly Pharmaceutical Company
Each of the four types of implementation skills should be used
to ensure a strategic goal is successfully
implemented.
f12.01_MHA 626.ai
Corporate Level
Objective: Maintain product leadership in each market we enter.
Strategy: Adapt a product leadership value discipline.
Strategy Business Unit Level
Objective: Maintain a market share of the nonnarcotic analgesic
market of 80% plus for the next five years.
Strategy: Introduce new products to take place of high-revenue-
producing products when they lose patent protection.
Product Market Level
Objective: Call on physicians to detail Darvocet as a more
advanced
analgesic than Darvon with more efficacy and fewer side
effects; call
on pharmacists to leave order blanks for Darvon at sales prices.
Strategy: Product line extension and aggressive pricing.
Allocating

Assigning to
sales force the
targeted
number and
types of MDs
and pharmacists
to receive a sales
call during a
specified period
of time.
Budgeting of
funds to cover
expenses such
as advertising,
selling, and
direct mail.
Monitoring
Annual plan controls
will monitor sales to
make sure total sales
objectives are achieved
as well as percent of
sales to old vs. new
product, sales calls to
MDs and pharmacists
to ensure that the
correct price for old
and new products are
printed, and that
“sale” announcements
are received by
pharmacists at speci-
fied time.

Profitability controls
by type of MDs, chain
vs. independent
pharmacies, etc.
Organizing
Ensuring
that existing
market
organization
structure
aids in the
execution of
the specified
strategy and
tactics.
Interacting
Motivating sales force to
devote the effort necessary
to make the number of
calls needed to fulfill
strategic plan.
Providing sales force with
information and material
needed to change MDs’
prescribing habits toward
new product and obtain
orders from pharmacies for
both old and new product.
Working with ad agency
in preparation of

promotional materials.
(For an interesting
example, see “Marion Labs
Succeeds with Different
Approach,” The Wall Street
Journal, August 31, 1987.)
Source: Loudon, D., Stevens, R., & Wrenn, B. (2005).
Marketing management: Text and Cases. The Hawthorne Press,
Inc., p. 183.
Internal Implementation Issues
Chronologically, strategy development precedes
implementation. Conceptually, both should
occur simultaneously. That is, strategy, when it is conceived,
should be thought through to the
point of implementation. Otherwise, strategic plans and goals
might be impractical, or at least
inefficient, requiring far more resources than might have been
the case if some thought had
been given to implementation issues when the strategy was
devised.
One of the most important considerations when implementing
plans is to foster ownership of
the process (Third Sector Strategy, 2013). Several resources can
be used by management to
foster ownership of a plan, including the following:
1. Detailed action plans—One effective way of getting key
people to own the strategy

is to develop a detailed plan for implementing the strategy.
Such a plan sets respon-
sibilities for specific actions for individuals, and includes a
measure and time frame
for the action. For example, a strategy to add a direct sales
program to a channel that
previously used only retailers would specify a number of
actions and responsibilities.
One action might be for the hospital to secure a list of 3,000
previous patients’ names
and addresses from the database within the next three days. By
specifying what
actions specific individuals will be accountable for,
management can ensure that
plan ownership has been achieved. Those activities required for
the plan’s successful
implementation will be assigned and thus will not go wanting
because no one took
responsibility for them. An example of an action plan was
provided in Table 11.2.
2. Champion and ownership team—Champions are individuals
who see their over-
all responsibility as the successful implementation of the
marketing strategy and
marketing plan. Better yet is a team of people, with different
expertise areas, who
can make sure that the assigned responsibilities are fulfilled
within their spheres
(Narayanan, 2010).
3. Compensation—Another means of ensuring ownership of a
plan is to tie people’s
compensation to the performance of those actions involved in
the plan’s implemen-
tation. These performance measures can be results oriented for

internal revenue
and profit measures as well as external market numbers, such as
referrals, market
share, brand awareness, percent of patients who would
recommend the clinic, and
so forth (Meehan, 2010).
4. Management involvement—Top managers must sustain a
commitment to the plan
and review its implementation progress periodically. Other
people involved in the
plan’s implementation will look to management for cues on the
interest and impor-
tance placed in its implementation.
Obviously, managers must do a good job of internal marketing
if plans are to be translated into
successful implementation activities. Internal marketing refers
to the managerial actions
necessary to make all staff within the organization understand
and accept their respective
roles in implementing the chosen strategy. All staff means that
everyone, from the receptionist
to the president, must understand that what they do has an
impact on the delivery of customer
satisfaction via the implementation of the planned strategy. This
requires everyone to under-
stand and be committed to the underlying tenets of the
marketing concept (see Chapter 7),
which may mean that marketers devote time to employee
training in, and employee sensitizing
to, a customer philosophy. Thus, internal marketing necessitates
segmenting groups of people
within the organization; analyzing their needs, motives,
objectives, and level of understanding

Section 12.2Resistance to Change
of marketing philosophy; devising specific training programs
for each segment; carrying out
the training and motivation; and then measuring the success of
these programs.
While external marketing focuses on informing, persuading, and
reminding external con-
stituents about the HCO and its vision, services, and
accomplishments, internal marketing
addresses the knowledge, attitudes, and perspectives of the staff
about the organization. Both
internal and external marketing may have similar messages, but
the goals of these programs
are different. The staff needs to be knowledgeable and have
positive attitudes toward the HCO
because they are the interface between the HCO and its external
stakeholders. What the staff
project to these external stakeholders is an important part of the
image that the stakeholders
have of the HCO, and the trust they put in it.
12.2 Resistance to Change
As noted throughout this textbook, healthcare is undergoing
radical changes. While the pres-
sure for change will continue, organizations often find that
changing the ways employees
and managers perform their duties is difficult. Employees often
view change with suspicion,
especially when they believe that any change implemented is
unlikely to have the intended
effect (Jones, Jimmieson, & Griffiths, 2005).

Resistance to change may also take place when an organization
believes it is doing “well-
enough.” For example, in 1995 the president of Cigna®’s
individual health insurance division
reported that while the unit was experiencing profitable
earnings growth, it was lagging
behind industry leaders. Moreover, the unit’s focus was out of
alignment with Cigna’s stra-
tegic direction. Clearly, change was called for. Yet there was
strong resistance to any change
because the unit was doing well-enough and had achieved its
profitability by doing things
that were “tried and true” (Quinn, 2004). This example shows
that change in organizations,
even when needed, can be difficult to implement.
In healthcare, several forces can affect or cause a resistance to
change and innovation. Regina
Herzlinger (2006) identifies six such forces: players, funding,
policy, technology, customers,
and accountability. Players, the first force, are powerful
stakeholders that can help or hurt an
HCO. Players often have different agendas, such as when
insurers and medical service provid-
ers dispute which patient treatments and services should receive
payment.
A second force that affects change and innovation in healthcare
is funding. The main prob-
lem with funding is the long payback time for some healthcare
innovations. For example, a
venture capitalist that backs a new drug therapy may have to
wait up to ten years to learn
whether the FDA will even approve it for use. Additionally, in
healthcare, the payback comes
not from the consumer but a complex system of third-party

payers, such as insurance compa-
nies and the government.
A third force that can hamper change or force change not
intended by the HCO is policy or
regulation. An extensive network of regulations exists in all
areas of healthcare. For exam-
ple, recent regulations placed a moratorium on certain new
specialty hospitals in the United
States. Another example is the Affordable Care Act, which
mandates insurance companies to
provide specific benefits, such as birth control.
Section 12.3Organizing for Implementation
Competition in the technology sector also can lead to resistance
to change. The adoption of a
new technology will make the old technology obsolete.
Advocates of the old technology may
challenge the efficacy of the new methods. For example, new
drugs for kidney disease have
reduced the need for dialysis treatments.
Fifth, as noted in the subsection on social media in Chapter 11,
customers are becom-
ing increasingly informed and are more involved in their own
healthcare. Empowered and
engaged customers demand certain levels of care and can
influence the allocation of research
funds. Information obtained from the Internet results in
customers adopting such alterna-
tive medical practices as acupuncture and herbal remedies.
Additionally, physicians are often
opposed to direct-to-consumer advertising of pharmaceuticals

because they feel pressure
to prescribe an advertised drug rather than a more effective
alternative (Silver, Stevens, &
Loudon, 2009).
Finally, the pressure to enact change at HCOs is due to the
accountability demanded by
engaged consumers and third-party payers, which are
increasingly under cost constraints.
HCOs must change to become more accountable, but cosmetic
change in order to please regu-
latory bodies or consumer groups without improving patient
outcomes will have a negative
effect on organizations.
In summary, implementing changes within an organization is
difficult even in the best of
circumstances. People naturally resist change. In addition to
this mind-set, which is com-
mon to all organizations, change and innovation challenges in
the healthcare industry are
often external to the HCO. Understanding and managing these
challenges is essential to an
HCO’s success.
12.3 Organizing for Implementation
In the past few decades, management theorists have increasingly
turned their attention to
the interactions of people, systems, corporate culture, and
organizational structure as the key
to understanding the successful implementation of an
organization’s strategy. Each of these
components will be discussed regarding their role as a
contributor to the successful imple-
mentation of an organization’s strategy.

People
Success within organizations does not come from everyone
doing their best, but rather from
everyone doing their best, at an assigned role, to achieve an
objective everyone understands
and works to achieve. Managers need to gain the cooperation of
involved parties to success-
fully achieve the implementation of marketing strategies. One
study revealed that the imple-
mentation process was improved if the manager seeking change
adhered to the following
advice (Stanleigh, 2013):
1. Simplify performance measures—Do not try to measure
everything.
2. Measure the right things—Measure performance output, not
just activity.
3. Eliminate silo thinking—Use teams and share what works
among departments to
get everyone involved.
This approach is more effective than implementation by edict,
persuasion, or more demo-
cratic and participative approaches. By using this approach, the
manager unfreezes old
beliefs, norms, attitudes, and behaviors and engages in the
supervision of the change process.
An experienced HCO manager can identify subordinates with a
superior ability to accomplish
assigned tasks. These people usually receive the assignments

most demanding and critical to
the implementation process. Taken to the extreme, however, this
approach of “giving the busy
person the job you need done well” may overburden even the
most competent subordinate,
or executive. Establishing systems that allow senior
management to review assigned tasks
and responsibilities for the implementation of a program can
ensure that bottlenecks are not
created by making too many demands on talented executives.
Systems
A number of systems are relevant to the implementation of
strategies. A system is a set of
interrelated activities relating to some function in an
organization. Among these are account-
ing and budgeting systems, information systems, and
measurement and reward systems. The
system most directly involved in the implementation of plans is
the project planning system,
which involves the scheduling of specific tasks for carrying out
a project, such as opening
a new wing in a hospital. Two of the better known project plan-
implementation tools are
the program evaluation review technique (PERT) and the
critical path method (CPM) (CPM-
Scheduling, 2013).
Using CPM in the implementation of a strategy requires the
completion of the following steps:
1. Specific activities and sequences must be identified in the
strategy.
2. Specific dates for completion and review points for progress
are identified.
3. Specific individuals are assigned responsibility for

completion of each task.
To achieve success with the use of CPM, managers must foster
ownership of the process by
means previously outlined in this chapter (that is, detailed
action plans, a champion and own-
ership team, compensation, and management involvement).
Mapping out the activities, sequencing, and determining the
time required to execute the
actions makes it possible to identify the “critical path”—the
sequence that will take the longest
time to complete. Although other paths will have some slack
time and delays, these will not
add to the overall time of the project. If everyone understands
the critical nature of perform-
ing his or her task, within the allotted time, the process can
become self-managing. Everyone
is dependent on one another for performing their tasks in
sequence in a timely fashion, and
peer pressure prevents procrastination.
A competitive advantage can be obtained in certain markets by
reducing the time it takes to
implement a strategy. Firms such as Toyota®, Hitachi, Honda,
Sharp, Benetton, The Limited,
FedEx®, and Domino’s® Pizza have gained a competitive
advantage in their markets by greatly
decreasing the time it takes to perform key implementation
activities.
Corporate Culture

Organizational or corporate culture is the pattern of role-related
beliefs, values, and expec-
tations that are shared by the members of an organization. It is a
social control system with
norms as behavioral guides. Rules and norms for behavior
within an organization are derived
from these beliefs, values, and expectations. Norms of behavior
can actually exert more con-
trol over employee behavior than a set of objectives or
sanctions, which people can some-
times ignore, because norms are based on a commitment to
shared values. For instance, if
an employee goes to heroic lengths to satisfy the needs of a
patient, such behavior is seen
as laudable by management and peers because it is consistent
with the shared values of the
organization’s employees. Norms can also work to discourage
sloppy work, which would vio-
late a set of shared values of excellence held by employees. Jim
Collins (1995), coauthor of
Built to Last, describes “cult-like” cultures as one of the traits
of visionary companies. Vision-
ary companies tend to be cult-like with respect to core
ideologies, not charismatic individuals.
According to Collins (1995), such companies translate their
ideologies into tangible mecha-
nisms that are aligned to send a consistent set of reinforcing
signals by indoctrinating their
employees, and imposing a tightness of fit to create a sense of
belonging to something special.
Collins (1995) suggests that visionary companies adhere to or
use the following practices to
sustain their core ideologies:
• Hiring
– Tight screening processes during hiring and for the first few

years
– Rigorous up-through-the-ranks policies—hiring young,
promoting from within,
and shaping an employee’s mind-set from a young age
• Training
– Developing internal “universities” and training centers
– Training programs that convey not only practical content but
also teach ideologi-
cal values, norms, history, and tradition
– On-the-job socialization with peers and immediate
supervisors
– Using unique language and terminology (such as Disney’s
“cast members,” and
Motorola’s “Motorolans”)
– Corporate songs, cheers, affirmations, or pledges that
reinforce psychological
commitment and a sense of belonging to a special, elite group
• Reward
– Incentive and advancement criteria explicitly linked to
corporate ideology “buy-
in” mechanisms (financial, time investment)
– Celebrations that reinforce successes, belonging, and
specialness
– Awards, contests, and public recognition that reward those
who display great
effort consistent with the ideology; severe tangible and visible
penalties or termi-
nation for breaching the ideology

• Operations
– Facility layouts that reinforce norms and ideals
The successful nurturing of a corporate culture, as embodied by
such visionary companies,
results in a governance of behavior that is sometimes described
as a clan system. A clan sys-
tem, using norms, exercises control over employees by
socializing individuals into an infor-
mal social system that stresses teamwork rather than strict
adherence to a set of bureaucratic
rules and regulations. If a corporation’s ideology, which has
internalized by the employee
through indoctrination (see the preceding core ideologies list),
stresses customer service as
a shared value, then the clan system operates to reinforce that
value. A clan system can aid in
improving the implementation of strategies in the following
ways (Swallow, n.d.):
1. Employees share the goals and beliefs of the organization,
resulting in less conflict.
2. Clan members support one another because they believe that
their self-interest is
best served through their cooperation as teammates.
3. Costs associated with formalized control methods are reduced
because of the
increase in commitment and the reduction of politics and

conflict associated with
implementation activities.
Structure
When preparing an organization for the implementation of
strategies, managers must build
an internal structure capable of carrying out the strategic plans.
Changes in an organization’s
strategy initiate new administrative problems which, in turn,
require changes in the new
strategy if it is to be successfully implemented. Alfred
Chandler’s study of 70 large corpora-
tions revealed this pattern: new strategy creation; emergence of
new administrative prob-
lems; a decline in profitability and performance; a shift to a
more appropriate organizational
structure; and then recovery to more profitable levels and
improved strategy execution (Far-
rell, 2007).
The axiom that structure follows strategy is well ingrained as a
corporate heuristic. However,
if an organization’s current structure is so out of line with a
particular strategy that it would
be thrown into total turmoil to implement the strategy, then the
strategy is neither practical
nor realistic for that firm. Therefore structure, to some degree,
does influence the choice of
strategy. However, structure should generally be of service to
strategy, acting as a means of
aiding people to pull together in carrying out their tasks toward
implementation.
Organizational structure can refer to either formal or informal
structure. The formal struc-
ture can be seen on an organization chart. The informal

organizational structure refers to
the social relations among the organizational members. Wise
managers take both the for-
mal and informal structures into account when planning strategy
implementation. A strategy
that requires the ability to make fast reactions to a changing
market might be inhibited by a
structure with multiple layers of management whose approval is
required before changes
can be made. For example, General Electric (GE®) found that it
needed to eliminate several
echelons of management and reorganize 15 businesses into three
areas in order to make fast
responses to environmental change.
Decisions must be made regarding which management levels
and specific personnel will be
responsible for carrying out the various tasks involved in the
implementation of strategy.
Sometimes top management will need to be involved. Other
times it is just a middle man-
agement issue. Finally, informal organizational structure can be
used to facilitate the imple-
mentation tasks. For example, in some HCOs, managers confer
regularly on implementation
issues. This type of informal network can be helpful in
encouraging the adoption of changes
in implementation tasks.
Types of Organizational Structures
Organization structure refers to how people and functions are
arranged within a company.

Five strategy-related approaches to organizational structure can
be used to structure func-
tions for implementation purposes: functional, geographic,
divisional, strategic business
units, and matrix.
Functional
Organizational growth usually includes the development of
several products and markets,
resulting in structural change reflecting greater specialization in
functional business areas.
These structures tend to be effective when key tasks revolve
around well-defined skills
and areas of specialization. Performance of such functional-area
activities can enhance
operational efficiency and build distinctive competence.
Companies that are a single-busi-
ness, dominant-product type of enterprise or vertically
integrated usually adopt this type
of structural design. In different types of organizations, such
functional structures might
appear as follows in business firms: R&D, production,
marketing, finance, and human
resources; in municipal governments: fire, public safety, health,
water and sewer, parks and
recreation, and education; in universities: academic affairs,
student services, alumni rela-
tions, athletics, buildings and grounds, and so on. In a hospital,
the functional structure
would usually include a board of directors, a hospital
administrator and chief of medical
staff, a chief financial officer, a chief information officer, a
chief nursing officer, and a chief
operating officer.
Whatever the configuration, the disadvantages of this structural

form center on obtaining
good strategic coordination across the functional units.
Thinking like a marketer, accountant,
or engineer may, in many ways, be a good thing because an
organization might need high
levels of expertise in such fields. However, such tunnel vision
can penalize a general manager
seeking to resolve cross-functional differences, joint
cooperation, and open communication
lines between functional areas. In addition, functional structures
are not usually conducive
to entrepreneurial creativity, rapid adjustments to market or
technology change, and radical
departures from conventional business boundaries.
Geographic
Organizations that need to tailor strategies for the particular
needs of different geographical
areas might adopt a geographic structure. The advantages of this
structural form include
the delegation of profit/loss responsibility to the lowest
strategic level, the improvement of
functional coordination within the target geographic market,
and the opportunity to take
advantage of the economics of local operations. Disadvantages
include increased difficulty in
maintaining consistency of practices within the company, the
necessity of maintaining a large
staff of managers, duplication of staff service, and problems
with control of local operations
from corporate headquarters.

Divisional
Firms that develop or acquire new products in different
industries and markets may evolve
into a divisional structure. Divisional lines might be made on
the basis of organizing on
the basis of services (ambulatory/nonambulatory); markets
(industrial, consumer); or chan-
nel of distribution (main, satellite). Divisional mangers are
given authority to formulate and
implement strategy for their divisions, but it may be difficult to
coordinate strategies, and turf
battles may erupt.
Strategic Business Units
CEOs with too many divisions to manage effectively may use a
structure that is organized
around strategic business units (SBUs). These forms are popular
in large, conglomerate
firms. SBUs are divisions grouped together based on such
common strategic elements as an
overlapping set of competitors, a closely related strategic
mission, a common need to compete
internationally, common key-success factors, or technologically
related growth opportunities.
Vice presidents might be appointed to oversee the grouped
divisions and report directly to
the CEO. For example, a large hospital with several locations
and satellite clinics may decide
to group the satellite clinics into a separate SBU and assign a
manager to oversee this group
of similar facilities. SBU structures are particularly useful in
reducing problems of integrating
corporate-level and business-level strategies and in “cross-
pollinating” the growth opportu-
nities in different, but related, industries. Disadvantages include
a proliferation of staff func-

tions, policy inconsistencies between divisions, and problems in
arriving at the proper bal-
ance between centralization and decentralization of authority.
Matrix
In matrix structures, subordinates have dual assignments—to the
business/product line/
project managers and to their functional managers. This
approach allows project managers
to cut across functional departmental lines and promotes
efficient implementation of strate-
gies. Such an approach creates a new kind of organizational
climate. In essence, this system
resolves conflict because strategic and operating priorities are
negotiated, and resources are
allocated based on what is best overall. When at least two of
several possible variables (prod-
ucts, customer types, technologies) have approximately the
same strategic priorities, then
a matrix organization can be an effective choice for
organizational structure. The primary
disadvantage of this form is its complexity. Employees become
confused over what to report
to whom and by the need to communicate simultaneously with
multiple groups of people.
As might be surmised from the listing of the advantages and
disadvantages to each of these
structures, there are no hard and fast rules for selecting a
structure appropriate for any par-
ticular organization at a specific point in time. While line and
line and staff structures are the
most commonly used structures in HCOs, the process of
analyzing organizational structure
is a beneficial step to take in considering how to best implement
marketing strategy and any

needed changes in structure.
Section 12.4Evaluation and Control of Plans
12.4 Evaluation and Control of Plans
Many companies fail to understand the importance of
establishing procedures to evaluate
and control the planning process, which is a failing that leads to
less than optimal perfor-
mance. This section reviews the need for control, what is to be
controlled, and some control
procedures. Control should be a natural follow-through in
developing a plan. No plan should
be considered complete until controls are identified and the
procedures for recording and
transmitting control information to managers are established.
The need for controls was clearly pointed out in a study of 75
companies of various sizes in
several industries. The findings were as follows (Kotler, 2003):
• Smaller companies had less adequate control procedures
than larger ones.
• Less than one-half of the companies knew the profitability
of individual products,
and one-third had no system set up to spot weak products.
• Almost half of the companies failed to analyze costs,
evaluate advertising or revenue-
force call reports, or compare their process to competitors.
• Many managers reported long delays—four to eight
weeks—in getting control

reports, and many of their reports were inaccurate (Bonoma,
1985).
Such problems can be avoided when a sound control system is
established.
Integration of Planning and Control
Planning and control should be integrated processes. In fact,
planning was defined as a pro-
cess that included establishing a system for feedback of results.
This feedback reflects the
company’s performance in reaching its objectives through
implementation of the strategic
marketing plan. The relationship between planning and control
is depicted in Figure 12.2.
The planning process results in a specific plan being developed
for a product or service. This
plan is implemented (marketing activities are performed in the
manner described in the
plan), and results are produced. These results are revenues,
costs, profits, and accompanying
consumer attitudes, preferences, and behaviors. Information on
these results is given to man-
agers, who compare the results with objectives to evaluate
performance. This performance
evaluation identifies the areas where decisions must be made.
The actual decision-making
controls the plan by altering it to accomplish stated objectives,
and a new cycle begins. The
information flows are the key to a good control system.
Deciding what information is pro-
vided to which managers in what time periods is the essence of
a control system.

Section 12.5Performance Evaluation and Control
Figure 12.2: Planning and control model
A manager compares the plan objectives with the results when
conducting a performance evaluation.
f12.02_MHA 626.ai
Information feedback
Specific
plans
Planning
process
Plan
implementation
Results:
revenues, costs,
profits, patient
attitudes, behavior,
etc.
Control
decisions
Plan
alteration
Decision
areas

Evaluation
objectives
vs. results
Source: Adapted from Stevens, R., Loudon, D., Wrenn, B., &
Mansfield, P. (2006). Marketing planning guide. The Hawthorne
Press, Inc., p. 257.
Timing of Information Flows
The strategic plan in the firm is composed of many annual
operating plans. An economist
once noted that “we plan in the long run but live in the short
run.” If each of a firm’s annual
operating plans is controlled properly, the long-run plans are
more likely to be controlled.
The planner cannot afford to wait for the time period of a plan
to pass before control informa-
tion is available. The information must be available within a
time frame that is long enough
to allow results to accrue but short enough to allow actions to
align results with objectives.
Although some types of businesses may find weekly or
bimonthly results necessary, most
companies can adequately control operations with monthly or
quarterly reports. Cumulative
monthly or quarterly reports become annual reports, which in
turn become the feedback
needed to control the plan.
12.5 Performance Evaluation and Control
Performance evaluation and control, as shown in Figure 12.2,
should be viewed as a con-
tinuous process. The evaluation process analyzes what has been
accomplished during the
planning period, and the control process is used for making

corrections to the plan to align
activities with objectives.
The Balanced Scorecard Approach
The balanced scorecard approach to evaluation is one that
combines the use of strategic and
financial objectives. Thus, the balanced scorecard gives
management a more balanced view of
how the organization is performing (Gamble, Thompson, Jr., &
Peteraf, 2013). The balanced
scorecard should address four main areas of strategy:
1. Customer perspective—That is, how do our customers see us?
2. An internal perspective that examines those areas the
organizations needs to excel
in.
3. Value creation—How can the organization improve its value
proposition?
4. Shareholders or other financial providers—How does the
organization look to those
who provide the money for the operation (Kaplan & Norton,
1992)?
While the balanced scorecard has been widely adopted by many
different industries, its use
by HCOs is relatively recent (Rodgers, 2011). This shift to the
balanced scorecard approach
is due to, in large part, mounting financial pressures facing
HCOs (Garling, Nevius, & LaCasse,
2009). The balanced scorecard has been used in such

institutions as St. Mary’s/Duluth Clinic
Health System (SMDC Health System) (Johnson, Kaplan, &
Nevius, 2009), the National Health
Service of the UK (Rodgers, 2011), and Saint Vincent Catholic
Medical Centers in New York
(Garling et al., 2009). While it is understood that strategic
planning and implementation are
both arts, the process needs to be systematic and as quantifiable
as possible (Kaplan, Nor-
ton, & Barrows, Jr., 2008). For example, the balanced scorecard
approach helped Saint Vin-
cent Catholic Medical Centers move from crisis management to
strategic management with
a strong dedication to its mission (Garling et al., 2009).
Additionally, the balanced scorecard
helped SMDC Health System achieve its goal of linking
strategic and financial objectives by
encouraging collaboration between administrators and
physicians (Johnson et al., 2009). An
example of the SMDC Health System balanced scorecard
approach is shown in Figure 12.3.
Performance should be evaluated in many areas to provide a
complete analysis of results and
the causes for those performance results. The four key control
areas for performance evalu-
ation are revenues, costs, profits, and consumers. Objectives
should have been established in
three of these areas for the operating and strategic plans. The
fourth, costs, is a measure of
marketing effort and is directly tied to profitability analysis.

Figure 12.3: A balanced scorecard for the SMDC Health System
This organization utilizes a balanced scorecard to address four
main areas of strategy: customer
perspective, internal perspective, value creation, and financial
providers.
f12.03_MHA 626.ai
Financial
To financially
sustain our
mission, on
what must
we focus?
Learning
How can we
develop our
ability to
improve as
a system?
Internal
processes
To satisfy our
clients, at which
internal
processes must
we excel?
Clients
How should
we appear
to our clients?

Mission: SMDC brings the soul and science of healing to the
people we serve
Vision: SMDC will be the best place to work and the best place
to receive care
We will pursue our mission and vision through a focus on
quality, safety and value
Service Excellence Quality Clinical Excellence Management
Excellence
Timely care
Patient-centered care
Equitable care
Provide easy, timely,
coordinated access
to services
Right patient,
right care,
right process
Optimize
physician and staff
productivity
Efficient
processes and
operations

Design and
implement coordinated
care models
Effective and safe
medical care
Capital investment in technology and facilities
to support clinical and financial objectives
Create an environment that has an expectation
of consistently delivering quality health care
Achieve a 3% operating margin in 2008 to sustain
our mission and achieve our vision
Efficient care
Create direct
access to specific programs
and services
Emphasize entity
and system
missions
Grow key
specialty services
and programs
Restructure the

regional clinical and
financial model
Redesign the
SMDC primary
care strategy
Capture new
revenue
Recruit and develop
people to outstanding levels
of performance
Engage physician
leaders and managers as partners
in success with SMDC
Source: © St. Mary’s Duluth Clinic. Reprinted with permission
of Essentia Health.
Revenue Control
Revenue control data are provided from an analysis of revenue
by individual segments
(products, territories, and so forth), market share data, and data
on revenue inputs (sales
force, advertising, and promotion).
Revenue by Segment

Revenue performance can be evaluated by segment by
developing a revenue performance
report, as shown in Table 12.1. When such a format is used, the
revenue objectives stated in
the annual operating plan are broken down on a quarterly basis
and become the standard
against which actual revenue results are compared. Dollar and
percentage variations are cal-
culated because, in some instances, a small percentage can
result in a large dollar variation.
Table 12.1: Revenue performance report—Quarter 1 (by
service)
Service
Revenue
objective
Actual
revenue
$
Variation
Percent
variation
Index
A $100,000 $ 90,000 *10,000 *10.0 .90
B 95,000 102,000 *7,000 *7.4 1.07

C 120,000 92,000 *28,000 *23.0 .77
D 200,000 203,000 *3,000 *1.5 1.02
*Asterisk indicates variation between objective and actual.
A performance index can be calculated by dividing actual
revenue by the revenue objective.
Index numbers of approximately 1.00 indicate that expected and
actual performance is about
equal. Index numbers that are larger than 1.00 indicate above-
expected performance, and
index numbers below 1.00 reveal below-expected performance.
Index numbers are especially
useful when a large number of services are involved because
they enable managers to identify
those services that need immediate attention.
The same procedures can be followed to analyze revenue
performance by patient category or
location. They could also be combined to check performance of
services in various locations
and revenue to various patient types.
Market Share Data
Another important type of revenue control data is provided
through market share analysis.
A firm’s performance should be compared to that of its
competitors, and a common method
for doing this is to calculate a firm’s share of a market. External
forces do not affect all firms in
the same way, and the impact of those forces can be analyzed
through market share analysis.
To calculate market share, the relevant market must be
identified. It is possible to calculate

market share on at least two bases:
1. Share of total market. This is the firm’s revenue divided by
the total revenue in the
markets in which the firm is exerting marketing effort.
2. Relative market share. This is one firm’s share of the market
held by the top two,
three, or four firms. It reflects the firm’s share of the market
captured by the major
competitors.
Unless some effort is made to understand why a firm’s market
share has changed or failed to
change, this analysis is more of a scorekeeping task. If the
components of market share are
analyzed—such as number of patients reached, loyalty, and
repeat visits—then meaningful
control decisions can be made.
Sales Input Data
A great deal of analysis of performance can be done on sales
inputs. For the sales force or mar-
keting representatives, these inputs can be divided into
qualitative and quantitative inputs.
Qualitative inputs:
1. Time management
2. Planning effort
3. Quality of revenue presentation
4. Product knowledge

5. Personal appearance and health
6. Personality and attitudes
Quantitative inputs:
1. Days worked
2. Calls per day
3. Proportion of time spent selling
4. Selling expenses
5. Non-selling activities
a. Calls to prospects
b. Display setups
c. Service calls
6. Miles traveled per call
Analysis of these factors will help a manager evaluate the
efficiency of the revenue effort. For
many of these input factors, an average can be computed to
serve as a standard for analyzing
individual performance. If the number of calls per day for one
representative is three and the
average is six, this case warrants attention. The low calls per
day could be caused by a large,
sparsely populated territory, or it could be that the
representative is spending too much time
on each client. Whatever the problem, management must be
alerted to its existence.
Advertising inputs are difficult to evaluate but must be dealt
with nonetheless. The following
factors can be evaluated to help determine the efficiency of this
input:
• Competitive level of advertising

• Readership statistics
• Cost per thousand readers or viewers
• Number of inquiries stimulated by an ad
• Number of conversions of inquiries to patients
• Changes in clinic traffic generated by an ad campaign
These measures help evaluate the results of advertising
decisions. Tracking these data over
several years can help identify successful appeals, ads, or
media.
Many promotional tools can be directly evaluated if objectives
are set before their use. For
example, if a dentist offers free whitening to new patients, then
the number of new patients
is one measure of this offer’s results. The number of people
who visit a display, the number of
patients who try a different service based on referrals, and so
forth are examples of how data
on these activities can be used to evaluate their effectiveness.
The key to evaluating performance is the setting of objectives,
which become the standards by
which actual performance can be evaluated.
Cost Control
Several tools are available for establishing cost control
procedures, including budgets,
expense ratios, and segment and functional costs analyses.
Budgets are a common tool used
by most organizations for anticipating expense levels on a

yearly basis. The budget is often
established by using historical percentages of various expenses
as a percent of revenue.
Thus, once the revenue forecast is established, expense items
can be budgeted as a per-
cent of total revenue. If zero-based budgeting is used, the
objectives to be accomplished
must be specified and the expenditures necessary to accomplish
those objectives estimated,
rather than relying on historical budget data. The estimates are
the budgeted expenses for
the time period.
Once the budget is established, expense variance analysis by
line item or expenditure category
is used to control costs. Although it is not possible to establish
standard costs for marketing
expenditures, the budget amounts are the standards for
performing variance analysis. A typi-
cal procedure is to prepare monthly or quarterly budget reports
that show the amount bud-
geted for the time period and the dollar and percentage variation
from the budgeted amount,
if any exists. Expenditure patterns that vary from the budgeted
amounts are then analyzed to
determine why the variations occurred.
Expense ratio analysis is another tool for controlling costs. An
important goal of every plan
is to maintain the desired relationship between expenditures and
revenues. Calculations of
expense ratios provide information on what this relationship is
at any time. Monthly, quar-
terly, and yearly ratio calculations should satisfy most
managers’ needs for this type of data.
Common expense ratios are as follows:

• Profit margins
• Selling expense ratio
• Cost per call
• Advertising expense ratio
Many other financial ratios, such as asset turnover, inventory
turnover, and accounts receiv-
able turnover, also provide measures that can be used to reduce
or maintain cost levels.
Segment and functional costs analyses can also be used as tools
to control costs. These types
of analyses, which permit evaluation of cost by individual
departments, locations, procedure
usage, and so forth, involve allocating costs to specific
operating units to obtain detailed cost
information. Analysis of these costs in relation to revenue
volume produced by segment is a
key type of analysis for identifying profitable and unprofitable
services and departments.
Profit Control
Profit control begins with profitability analysis by services,
facilities, and patient type. This
method involves a breakdown of revenues and costs by various
market segments to deter-
mine either a profit contribution or a contribution being made to
cover indirect costs and
earn a profit. Profitability analysis is the only way to identify
the strong and weak services,
locations (facilities), or patient type. Until specific services can

be identified as unsuccessful,
no action can be taken to correct the situation. A manager needs
specific information, about
a service, location (facility), or patient type, on both revenues
generated and the costs associ-
ated with a given level of revenue.
Profit control is achieved through the action taken once the
specific information is available.
Table 12.2 presents data on procedures for a medical clinic. It
was discovered that many of
the ENT (ear, nose, and throat) patients were heavily using
some services but not others at
the medical clinic. Some of the corrective actions that could be
taken at the medical clinic to
increase underused services are as follows:
1. Use cross-selling—someone in one department refers a
patient to another service
offered.
2. Match staffing to service usage.
3. Hire a nurse practitioner to do follow-ups on patients.
Table 12.2: Number of ENT patients by service
Number of ENT patients Service
31 Routine examination
50 Sinus/ear infections
80 Hearing issues
90 Surgery

75 Follow-up visits
65 New-patient workup
Patient Feedback
The final area of performance evaluation is consumer or patient
feedback, which involves
the analysis of patient awareness, knowledge, attitudes,
behaviors, and satisfaction with the
services received. Chapter 11 pointed out that communications
efforts are goal oriented. The
goals of communications efforts are to have consumers or
patients become aware of products,
services, or locations; possess certain knowledge; and exhibit
certain attitudes and behaviors.
These goals should be specified in the HCO’s operating and
strategic objective statements and
then become the standards to which current consumer data are
compared through patient
feedback.
Analysis of data on patients must be performed by the
organization’s staff or outsourced
to firms that perform those analytical services. Many research
firms specialize in providing
patient data, either as a one-time research project or on a
regular basis. Audits, awareness
studies, and attitudinal surveys are available from a variety of
firms. Many firms special-
ize in healthcare research and provide appropriate data on
consumers. For example, Olson

Research Group, Inc. (2013), with offices in Pennsylvania and
California, provides a wide vari-
ety of research services for HCOs, including online surveys and
industry insights.
Patient data are especially valuable if collected over a long
period of time because awareness
levels, attitudes, and purchase behavior can be analyzed to
reveal trends and areas for further
investigation. Also, changes in consumer attributes can be
related to marketing activities, such
as coupons or the introduction of a new advertising theme. One
area of patient feedback that
has received considerable attention recently has been patient
satisfaction measures. Much
has been written about how to define and measure patient
satisfaction, and the importance
of obtaining this type of feedback on a regular basis so that
corrective action can be taken
when areas of dissatisfaction appear. More recently, it has been
argued that patient satisfac-
tion measures are too narrowly focused and that “patient value
delivery” is a more important
gauge of how well an HCO is doing in its provision of services
and products to its patients.
Here, the organization is seeking to determine the level of
patient loyalty by determining the
patient’s sense of value delivered to him or her via the
organization’s value package: price,
product quality, innovation, service quality, and company image
relative to the competition.
All of these areas should be monitored to determine the degree
to which patients are loyal
to the organization versus which patients are at risk to be lost to
competitors (Porter, 2012).

Establishing Procedures
It should be pointed out that none of the performance evaluation
data described in the pre-
ceding subsections are going to be available unless they are
requested and funds are made
available to finance them. Thus, data collecting and reporting
procedures must be set up by
the marketing planner in consultation with the marketing
managers who are going to use the
control data in decision-making.
The reporting procedures will usually change over time as some
types of analysis or report-
ing times are found to be better than others. The most important
requirement is that the
data meet the needs of marketing managers in taking corrective
actions to control marketing
activities.
Summary & Resources
Summary & Resources
Chapter Summary
No planning process should be considered complete until the
details of implementation,
monitoring, and control procedures have been established.
Without such information, it is
impossible to manage marketing activities with any sense of
clarity about what is actually
happening in the marketplace.
A performance evaluation of revenues, costs, profits, and
patient data is vital for control deci-

sions. Information obtained from the evaluation of these areas
tells a manager what has actu-
ally happened and serves as the basis for any actions needed to
control the organizational
activities that are directed toward the fulfillment of
predetermined objectives.
Key Points
1. Through the implementation process, employees are assigned
tasks and given
authority, and resources are allocated as needed to create the
activities that bring
the marketing plans to life. The evaluation and control of the
marketing plans
involves determining whether objectives are being accomplished
and taking the
actions needed to align results with objectives. The evaluation
involves comparing
actual results to the marketing plan’s stated objectives.
2. While a firm may have an excellent marketing strategy on
paper, the strategy is not
effective until it has been successfully implemented. In order
for this to happen, the
marketing strategy needs to be translated into a series of
assigned activities in such
a way that everyone can see his or her job as a set of value-
added actions. Chrono-
logically, strategy development precedes implementation, but it
is best if a market-
ing strategy, when it is conceived, is simultaneously thought
through to the point of
implementation.
3. Several skills are essential to the implementation of strategy.

These include allocat-
ing skills, which are used by managers to allocate resources;
monitoring skills, which
are used by managers to evaluate results; organizing skills,
whereby managers
develop the structures and coordinate the mechanisms needed to
put plans to work;
and interacting skills, which influence the behavior of others
through motivation.
4. People naturally resist change. Thus, change in any
organization is difficult to
implement no matter how necessary. Healthcare has its own
particular forces that
hamper change. These include players (the organization’s
stakeholders); funding, or
the problem of long payback periods in healthcare; policy,
including governmental
regulations and legal concerns; technology, where one form of
treatment replaces
another; customers, who are more empowered and demanding;
and, accountability,
or the need for HCOs to prove themselves to the public and
third-party payers.
5. Managers need to gain the cooperation of involved parties to
successfully achieve
the implementation of marketing strategies. For example, it is
important to not try
to measure everything. Instead, measure performance and not
just activity, and
eliminate silo thinking. Managers can also use tools such as
PERT charts and the
critical path method (CPM) to evaluate strategy. Organizational
culture, or “the way
we do things around here,” can support control by helping

employees conform to
organizational expectations. Finally, organizational structure,
the way people and
Summary & Resources
functions are arranged within an organization, aids in evaluating
strategy as long as
the strategy has been designed with the organizational structure
in mind.
6. The balanced scorecard method of evaluation combines the
use of strategic and
financial objectives, giving management a more balanced view
of the results of stra-
tegic implementation. The scorecard addresses four main areas:
customer perspec-
tive, internal organizational perspective, value creation, and
shareholders or other
financial stakeholders.
7. Performance should be evaluated in many areas to provide a
complete analysis of
what the results are and what caused them. The four key control
areas are revenues,
costs, profits, and consumers. Objectives should have been
established in each of
these four areas during the strategic planning process. During
the planning process,
management also should have decided how data will be
collected and how it will be
reported. Feedback in the form of an evaluation may alert
management to poten-
tial problems, and the organization must exercise flexibility to

take fast, corrective
actions to resolve those potential problems.
Key Terms
balanced scorecard An approach to
evaluation that uses a framework involving
critical indicators or key business factors
to balance the long-term and short-term
objectives.
budget A common tool used by most orga-
nizations for anticipating expense levels on a
yearly basis. It is often established by using
historical percentages of various expenses
as a percent of revenue.
champion and ownership team Individu-
als or groups who see their overall respon-
sibility as the successful implementation of
the marketing strategy and marketing plan.
clan system A cultural system which,
through the use of norms, exercises control
over employees by socializing individuals
into an informal social system that stresses
teamwork rather than strict adherence to a
set of bureaucratic rules and regulations.
corporate culture The pattern of role-
related beliefs, values, and expectations
that are shared by the members of an
organization.
cost control Procedures, including budgets,
expense ratios, and segment and functional
costs analyses, to manage cost.

CPM An approach to the scheduling of spe-
cific tasks for carrying out a project, using
the project implementation tool known as
the critical path method.
detailed action plans Set responsibili-
ties for specific actions for individuals, and
include a measure and time frame of the
action.
divisional structure Organizing on the
basis of services (ambulatory/nonambula-
tory); markets (industrial, consumer); or
channel of distribution (main, satellite).
functional structure Organizing activities
and people around functions to be per-
formed, such as R&D, production, marketing,
finance, and human resources.
geographic structure Organizing for the
particular needs of different geographical
areas.
Summary & Resources
implementation skills Skills that must be
used for a strategic goal to be successfully
translated into implemented activities; that
is, allocating, monitoring, organizing, and
interacting skills.
implementation The process of assigning

tasks, giving authority, and allocating the
resources needed to commence and carry
out the activities that bring the marketing
plans to life.
internal marketing Refers to the mana-
gerial actions necessary to make all staff
within the organization understand and
accept their respective roles in implement-
ing the chosen strategy.
market share analysis A firm’s perfor-
mance as compared to competitors by calcu-
lating the firm’s share of a total market.
matrix structures Structures in which
subordinates have dual assignments—to the
business/product line/project managers
and to their functional managers.
organization structure Refers to how
people and functions are arranged within a
company.
patient feedback Involves the analysis of
patient awareness, knowledge, attitudes,
behaviors, and satisfaction with the services
received at an HCO.
performance index An index created by
dividing actual revenue by the revenue
objective.
PERT An approach to the scheduling of spe-
cific tasks for carrying out a project, using
the project implementation tool known as

the program evaluation review technique.
profit control Profitability analysis by
services, facilities, and patient type. This
method involves a breakdown of revenues
and costs by various market segments to
determine either a profit contribution or a
contribution being made to cover indirect
costs and earn a profit.
resistance to change Opposing or strug-
gling with modifications or transformations
of people and processes that alter the status
quo in the workplace.
revenue control data Data provided
from an analysis of revenue by individual
segments (products, territories, and so
forth), market share data, and data on rev-
enue inputs (sales force, advertising, and
promotion).
sales inputs Qualitative and quantitative
analyses of effort and results of marketing
representatives’ or sales force activities.
share of total market The firm’s revenue
divided by the total revenue in the markets
in which the firm is exerting marketing
effort.
strategic business units (SBUs) Divisions
of a large firm that are grouped together
based on such common strategic elements as
an overlapping set of competitors, a closely

related strategic mission, a common need
to compete internationally, common key-
success factors, or technologically related
growth opportunities.
systems A set of interrelated activates relat-
ing to some function in an organization.
zero-based budgeting Budgeting requir-
ing that objectives to be accomplished are
specified and the expenditures necessary
to accomplish those objectives estimated,
rather than relying on historical budget data.
Summary & Resources
Critical Thinking Questions
1. Why is the integration of planning and control so important
to the success of
an HCO?
2. Are the skills needed for implementation the same as those
needed for planning? If
not, explain why.
3. How does the use of the balanced scorecard approach to
performance evaluation aid
an HCO?
11 Marketing Programs and Tactics

Blend Images/Superstock
Strategy without tactics is the slowest route to victory.
Tactics without strategy is the noise before defeat.
—Sun Tzu
Learning Objectives
following:
• Discuss each of the five I’s that characterize services,
from the perspective of a service provider at an HCO.
• Delineate the two essential decisions related to fees that
need to be made by an HCO.
• Describe the role played by the physical environment as it
relates to patient satisfaction in a
healthcare setting.
• Identify four promotional tactics that can be used by all
types of HCOs.
• Explain how publicity can affect an organization,
including its public perception in a community, and
i dentify elements of a crisis management plan.
• Outline an action plan, and discuss the effective use and
management of social media as part of an HCO’s
marketing plan to implement strategies with tactics.
Section 11.1Product/Service Mix Elements

Introduction
This chapter focuses on the key elements of marketing
programs: tactics. Tactics are the actual
marketing activities an organization engages in as it develops
ways to create its brand, attract
and retain customers, and accomplish objectives. These
activities involve the development or
alteration of the marketing mix elements described in Chapter 7.
Blending the marketing mix
elements, along with effective public and community relations,
creates a consistent image for
an organization and helps customers differentiate the
organization’s brand from its competi-
tors. In this technology-driven age, social media marketing
tactics have become an integral
part of the marketing arsenal available to organizations.
A marketing program is composed of all the short-term or
tactical marketing plans used by
an organization. Each of these plans must be developed with all
the components described
in the outline of the marketing plan presented in Chapter 8.
While it is often feasible to use
one plan to cover several services, such as a birthing center and
neonatal care, other services
that are high-revenue producers or have special initiatives need
their own specific plans for
managing marketing-related activities. All marketing tactics
involve some aspect of the four
Ps of marketing described in Chapter 7.
11.1 Product/Service Mix Elements
While healthcare does involve products, for example, medical
equipment and pharmaceuti-
cals, much of what is delivered by HCOs and medical providers

can be classified as services.
A service may be defined as an intangible task or action that
satisfies a patient’s needs. The
following subsection discusses the characteristics of services in
the context of executing the
HCO’s strategic marketing plan.
Characteristics of Services
Services differ from pure products in several ways. One is that
services are intangible. Another
is that the service provided cannot be separated from the person
providing the service. Many
healthcare services are combinations of service and product. For
example, an annual flu
shot is a combination of the flu serum and the person who
actually administers the shot. For
pure services and service/product combinations, it is helpful to
distinguish the characteris-
tics of services. Figure 11.1 illustrates the tangible/product to
intangible/service continuum
for healthcare.
Services can be described according to the five I’s:
intangibility, inventory (perishabil-
ity), inseparability, inconsistency (variability), and involvement
(Kotler, Bowen, &
Makens, 2014).
Figure 11.1: The tangible continuum for healthcare products and
services
Healthcare products are more tangible than healthcare services.

f11.01_MHA 626.ai
Flu shot
Prescription
medication
Non-prescription medication
Medical equipment
Dental cleaning
Psychiatric services
Pure service
(intangible)
Pure product
(tangible)
Source: Adapted from Booner, L. E. & Kurtz, D. L. (2011).
Contemporary marketing, Cengage: Mason, OH.
Intangibility
Services are intangible. That is, services cannot be touched or
handled, smelled or tasted.
Services also cannot be resold or even owned by someone other
than the service provider. In
fact, only a service provider can deliver a service. For example,
having your teeth cleaned by
a dental hygienist is very close to a pure service. While there is
some product involved (the
dental polish), the bulk of the experience is service. The
hygienist cleans and polishes your

teeth, involving specialized work you could not have done
yourself. You can see the results
of the service, but you cannot hold the service in your hands, or
sell or give your service to
someone else.
The intangibility of services makes the marketing of services
difficult. Services, because of
intangibility, are credence goods. Credence goods are those
where the quality cannot be
determined at the time of consumption. For example, if a patient
receives a root canal, he
or she will not know whether the service was correctly
performed until possibly months or
years afterward. In contrast, if that same patient takes pain
medication immediately after the
root canal, the pain will be reduced by the medication, or it will
not.
Thus, marketers need to reduce the intangibility of services.
This can be accomplished in
several ways. One way is to explain to patients the process of
treatment. This allows the cus-
tomer to visualize the service, making it more tangible. Another
way to make services more
tangible is to design pleasant surroundings. A dental practice
can have a comfortable wait-
ing room and flat screen TVs in the treatment rooms. A hospital
can have art on the walls in
each room. Finally, service providers can guarantee their work.
The promise of a guarantee
instantly makes the service more tangible.

Inventory (Perishability)
As the example with the dental hygienist shows, services are
produced and consumed at the
same time. Thus, services cannot be stored in inventory for
future use and, if unused, the
service perishes.
Services are perishable in the following two regards:
• As noted, services are produced and consumed at the same
time. Thus, if the con-
sumer is not present to receive the service, the opportunity to
provide that service,
and the related revenue for the service provider, is lost forever.
If a patient is a
no-show for a scheduled appointment with a dental hygienist,
the opportunity to
provide a service during that time period perishes. Another
example is an empty bed
in a hospital. During every 24-hour period that the bed remains
empty, it absorbs
the fixed costs of the hospital with no revenue. Once that time
period has passed,
that revenue can never be recovered.
• Services perish because of irreversibility. That is, a
service vanishes once that par-
ticular service has been performed for a patient or customer. To
continue with the
example of the dental hygienist: Once the cleaning has been
completed (that is, the
patient has consumed the service), the service vanishes, and it
cannot be reclaimed.
While the dental hygienist may clean the patient’s teeth again in
six months, the

condition of the teeth and the situation in which the service will
be provided will
be different.
The perishability of services leads HCOs to manage service
capacity. Idle service providers
draw salaries and use other resources that cost the HCO money
that cannot be recovered.
Additionally, empty beds in hospitals or nursing homes absorb
fixed costs while contributing
no revenue. A detailed discussion of capacity management is
beyond the scope of this text-
book, but a basic explanation can be made with a few examples.
One way to manage service capacity is to schedule service
employees during the hours of
peak demand. For example, a dental practice may schedule more
hygienists early in the morn-
ing and late in the afternoon to match the times patients would
prefer to have their teeth
cleaned. It is more difficult for hospitals to fill empty beds, but
there are strategies. One is to
add services, such as obstetrics and neonatal care, to fill empty
beds. Another is to transfer
critical-care beds to long-term-care beds.
Inseparability
Services are inseparable from the service provider and the
person receiving the service. The
dental hygienist cannot clean a patient’s teeth without both the
patient and the hygienist
being present in the same place at the same time. Contrast this

with another healthcare sce-
nario: filling a prescription at a pharmacy. In this case, there is
a combination of product and
service. The product is the prescription and the service is the
pharmacist’s dispensing of the
prescription. For example, your physician transmits your
prescription to the pharmacy and,
sometime later, you go to the pharmacy to pick it up. A clerk
hands you the filled prescription,
and you pay for it. The pharmacist who filled the prescription
may have gone home. There
was no reason for you and the pharmacist to be in the drugstore
at the same time. This illus-
trates the difference between a product and service in terms of
inseparability.
Inconsistency (Variability)
A service cannot be separated from the service provider, and,
because that provider is human,
each service is unique. Thus, a particular service can never be
repeated exactly in the same
form. Different circumstances and resources are present each
time a service is provided. No
two teeth cleanings, tonsillectomies, or flu shots are the same.
Differences in the quality of
service given to a patient by the same provider might depend on
how the provider feels physi-
cally and emotionally. Additionally, each patient is different.
For example, one dental patient
may need more time than another patient for an anesthetic to
work before a tooth extraction
can be performed.
Involvement
Finally, consumers participate in the consumption process. This
is known as consumer copro-

duction. In healthcare, the customer may modify the service
within the bounds of the pro-
vider’s guidelines. For example, a dental patient may be able to
determine the type of crown
he or she receives, or a patient can request a generic instead of
a brand-name medication.
Quality Service Dimensions
Companies have been concerned with the delivery of a
satisfactory level of customer service
for decades, but it is safe to say that the level of concern has
increased during the past decade.
Competitive forces and the more demanding nature of customers
have combined to put cus-
tomer service at, or near, the top of most marketers’ lists of
important issues. Research has
revealed five quality service dimensions used by customers to
define the quality of service
they perceive they are receiving. These dimensions include
tangibility, reliability, respon-
siveness, assurance, and empathy, as shown in Table 11.1.
Further research has revealed that while respondents ranked all
five toward the “very impor-
tant” end of the scale in defining service quality, they did
respond, when asked, that reliability
was the most critical.
Table 11.1: Dimensions of service quality
Dimension Description

Tangibility Appearance of physical facilities, equipment,
personnel, and communications
materials
Reliability Ability to perform the promised service dependably
and accurately
Responsiveness Willingness to help customers and provide
prompt service
Assurance Knowledge and courtesy of staff and their ability to
inspire trust and confidence
Empathy Caring, individualized attention the organization
provides its customers
Source: Adapted from Zeithaml, V. A., & Bitner, M. J. (2003).
Services marketing: Integrating customer focus across the firm
(3rd ed.). Boston: McGraw-Hill/Irwin, p. 93.
These research results, regarding the critical importance placed
by customers on service reli-
ability, suggest that firms must accomplish the following tasks
with regard to their service
strategy:
1. Determine the specific service expectations of the target
market.
2. Design a service strategy grounded in meeting or exceeding
those expectations.
3. Deliver on those promised service levels consistently when
dealing with customers.
4. If Steps 1–3 are performed better than by competitors, a
competitive advantage
exists in the area of customer service and should be exploited as

such.
Improving Customer Perceptions of Service Quality
The most vexing challenge for management, given the
importance of reliability in defining
service quality, is to close any gap that exists between customer
service expectations and the
ultimate delivery of service to those customers. This is
sometimes referred to as gap analy-
sis. The following four service-related gaps should be of
particular concern to marketing
planners:
1. Gap between customers’ expectations and management’s
perceptions. Conducting the
proper research into what customers are actually thinking is
necessary—we cannot
just assume that, absent such research, we know with clarity
what the expectations
of customers are, in fact.
2. Gap between management perception and service-quality
specifications. Manage-
ment’s knowledge of customer expectations is but the first link
in a chain of steps
leading to customer satisfaction with service delivery. It is
important that specifica-
tions of policies and tasks of service delivery be developed,
based on that knowl-
edge, and communicated to employees. Further, the employees
must see that their
job performance will be rated in part or in whole on meeting
those service-quality
specifications.
3. Gap between service-quality specifications and service

delivery. Highly motivated,
trained, and well-informed employees are needed to actually
perform the tasks
Section 11.2Price/Fee Mix Elements
specified as necessary for delivery of quality service. Control
systems that are
capable of measuring any gap between desired and actual
service delivery should be
in place to indicate where excellence or shortfalls are occurring.
4. Gap between service delivery and external communication.
Excellent delivery of
service specifications can still disappoint customers, if
marketers have caused those
customers to have unrealistically high expectations of service.
For example, facility
photos that suggest the accommodations are more spacious or
luxurious than they
really are will likely raise customer expectations higher than
can be delivered upon,
resulting in disappointed customers (Kotler et al., 2014).
Product quality and customer service decisions should be the
cornerstone of product deci-
sions in the marketing plan for HCOs.
11.2 Price/Fee Mix Elements
Pricing decisions have gained importance in recent years
because of increased concern
over controlling healthcare costs. Fee structures and third-party
reimbursement is one vari-
able that can bring about immediate market response—either

positive or negative. Price
may not be the determining factor in a decision for a consumer,
but it is, usually, at least a
qualifying factor. Price is always a consideration for consumers
and, therefore, for marketing
planners. Some insurance companies have a reduced deductible
for those taking an online
health survey, which offers immediate feedback on the insured’s
health status and a $250
reduction in the deductibles for the next year’s healthcare
services (BlueCross BlueShield of
Oklahoma, 2013).
Two essential decisions related to fees that need to be made by
an HCO are (a) the basic level
of fees charged and (b) how specific fees are set. For example,
each hospital has its own policy
for setting prices on tens of thousands of different items on its
price list. Most hospitals use
the estimated amount that it costs to provide the service or item
as the major factor. The
hospitals have to factor in the sometimes hundreds of different
payment arrangements they
have with insurance companies. Some of these arrangements
make it necessary to set a base
price that is higher than the cost to provide the service in order
to get paid enough to cover
the costs. The DRGs, Diagnosis Related Group, must also be
factored in for inpatient care.
Recall that DRGs are universal groupings used by Medicare and
most insurance companies to
clarify the type of inpatient care a patient receives. Insurance
companies use the DRG code,
along with a diagnosis/CPT® (Current Procedural
Terminology), which consists of codes set
and revised by the American Medical Association (American

Medical Association, 2013), and
the length of the inpatient stay, to determine payment and
reimbursement for claims (Henry
Ford Health System, 2013).
The fees charged can be a way to attract new patients. For
example, the clinic My Dentist, in
Oklahoma, offers an exam and cleaning for $39 for new
patients. This is a tactic to attract new
patients and let them experience the services. The My Dentist
clinic’s strategy behind this
tactic is to create a regular patient for the clinic (My Dentist,
2013). In this situation, the clinic
is pricing this service below the market average as a tactic to
attract new patients and build
the clinic’s revenues.
Section 11.4Promotion Mix Elements
If an HCO’s fees are above the market average, then the HCO is
usually positioning the organi-
zation as a high-quality provider or a provider of services that
are not available through other
providers. This tactic targets higher income or better insured
patients to attract them to the
organization.
11.3 Place/Delivery Mix Elements
Place tactics involve the locations at which the healthcare
services will be provided. An HCO
may have only one location. An HCO may also operate satellite
locations with more limited
services, or it can have franchised locations in other
geographical areas. While the location of

operating units is a strategic decision, tactical place decisions
are a critical component in the
delivery of services and patient satisfaction with those services.
Healthscape is defined as the emotional, affective, cognitive,
and physiological patient/pro-
vider behaviors and outcomes related to the physical
environment in which the healthcare
services are delivered. The term healthscape thus describes the
role played in the marketing
mix by the physical environment in which the healthcare
services are delivered (Sheaffer,
2008). For example, a facility’s layout, noise level, temperature,
lighting, and décor should all
be designed to reinforce the organization’s overall positioning
strategy. Research has shown
that these environmental elements play a role in patient
satisfaction (Fugate, 1991).
Marketing plans that involve tactical changes to the
healthscape, such as new brochures, sig-
nage, audio/video, and so forth, must be carefully considered
before being incorporated into
the existing healthscape to ensure that the proposed changes are
complementary and consis-
tent with the organization’s brand and image. Even a simple
change, such as the standardiza-
tion of staff uniforms or a new uniform color, should be given
careful consideration in terms
of its impact on both patients and staff. Otherwise, the
interaction of these proposed changes
with the current healthscape may have a detrimental effect, such
as the effect on patients of
red uniforms worn by staff in an operating room.
11.4 Promotion Mix Elements

Promotional efforts are the most visible manifestation of a
marketing plan. Some observers
might think of the promotional strategy as the marketing
strategy. However, much planning
and strategizing must necessarily precede promotional
decisions. Until a solid positioning
strategy is articulated to reach a clearly defined target audience,
it is not appropriate to begin
consideration of promotional decisions.
Promotional tactical decisions center on what is to be
communicated, to whom, through
what methods and media, and at what appropriate costs.
Promotional tactics are activities
designed to inform, persuade, or remind consumers about the
HCO and the services it offers.
Insight into the types of decisions involved in promotional
tactics can be gained by viewing
promotional tactics as a communication process, as shown in
Figure 11.2. In the commu-
nication process, a source (HCO) sends a message by using a
certain method, or medium.
Section 11.4Promotion Mix Elements
This message reaches a receiver (existing or potential), who, by
his or her words and actions,
sends a message back to the source about what was received and
his or her willingness to
respond to that message. This process is always goal oriented.
The sender is communicating
to get a response from the receiver. The response may be
internal, such as learning certain

information or having certain attitudes, or the response may
show itself in more overt behav-
ior through immediate or precipitant acts. Regardless, a
response is desired.
Figure 11.2: Promotional tactics as a communication process
Successful communication between the source and the receiver
occurs when the message is understood
by the receiver as the source intended.
f11.02_MHA 626.ai
Source:
Healthcare
organization Message
transmitted
Method
or
medium
Feedback
Message
received
Receiver:
Patients,
public,
payers
Source: Adapted from Stevens, R., Loudon, D., Wrenn, B., &
Mansfield, P. (2006). Marketing planning guide. The Hawthorne

Press, Inc., p. 200.
The checkered areas in the Sender (Source) and Receiver boxes
represent common frames of
reference. A common frame of reference is a prerequisite to
effective communication. Unless
there is a common area of understanding between the sender and
receiver, no communica-
tion takes place. The simplest example is a language barrier. If
the smoking cessation message
is sent in English and the receiver understands only Spanish, no
communication takes place.
The symbols (words) used as the means of communication are
not common to the two parties
taking part in the process.
One point that must always be con-
sidered by the marketing planner
is that promotional tactics involve
sending the right message to the
right audience through the right
medium by using the right methods
at the right costs. Deciding what is
“right” constitutes the marketing
planner’s work in the communica-
tions part of the marketing plan.
Consider the two Italian signs
shown in the nearby photos. Each
sign clearly identifies the location
of a pharmacy, or farmacia in Ital-
ian. However, one sign brings the
concept of state-of-the-art service
offerings to the prospective patient,
iStock/Thinkstock

The word on these two signs indicates the location of
a pharmacy, but the two distinct styles may generate
different assumptions about the type or quality of the
facilities and their services.
Section 11.5Community/Public Relations
while the other sign may cause outsiders to avoid the facility
because its rustic nature might
suggest limited service offerings. The choice of the color green
for the large sign could even
be a tactical decision to create the image of an environmentally
friendly organization or to tie
it to other promotional materials used by the organization.
While promotional tactics may differ from one type of HCO to
another, the following tactics
can be used by all types of HCOs:
1. Physician-referral initiatives aimed at networking with other
healthcare providers
2. Patient experience-sharing aimed at letting patients share
their experiences
(testimonials)
3. Reputation building and management supported by integrated
branding and
communications
4. Integrated messaging that drives customers to the HCO’s
website (Rodak, 2012)
11.5 Community/Public Relations
Publicity, when properly managed, provides another opportunity

to promote a company’s
offering but in a way unlike those discussed thus far. Publicity
involves mass communications
transmitted through the media in editorial space rather than paid
space. When a company or
its products and services create news through the media, the
company is receiving publicity.
Publicity has been called “the velvet hammer of promotion”
because it can drive home a point
in an unobvious manner.
Recently, Baylor Health Care System, which is based in Dallas,
Texas, combined with Scott &
White Healthcare, which is based in Temple, Texas, to form a
new organization: Baylor Scott
& White Health. Both health systems were nationally known for
quality patient care, and their
respective management felt that the environment was right to
combine their strengths to
provide more resources. Because this business merger generated
a great deal of press in the
North Texas media, a great deal of the branding effort
benefiting the new organization has not
come at a financial cost to the organization(Baylor Scott &
White Health, 2013).
Publicity, however, can also be negative because production
errors, court cases, service fail-
ures, and so on also make news. For example, the FDA is
currently questioning the safety of
antibacterial soaps. According to the FDA, the soaps have not
proven to be any more effective
than soaps without antibacterial ingredients; further, the
antibacterial soaps contain triclo-
san and triclocarban, which may be harmful ingredients.
Manufacturers of antibacterial soap,

such as Dial®, will need to formulate responses to the FDA in
order to protect their reputa-
tions (Jacobsen, 2013).
One question that most organizations face is how to get good
publicity. One source offered the
following suggestions (Walker, 2013):
1. Research your media market to identify which media firms
cover healthcare topics.
2. Identify who is assigned to cover healthcare topics at those
media firms.
3. Study the media for the types of healthcare-related news
stories they publish.
4. Understand what is and is not news with regard to healthcare
topics.
Section 11.5Community/Public Relations
5. Create a professional press release.
6. Establish yourself as an expert.
7. Cultivate professional relationships.
8. Be deadline-sensitive.
Crisis Management
Despite the efforts of the public relations department to project
positive information about
the HCO, negative publicity can, and often does, happen. For
example, in 2004, the Duke
University Health System accidentally substituted hydraulic
fluid instead of detergent when
cleaning surgical instruments at two satellite hospitals (Dzau,
2005). One of the largest not-
for-profit hospitals, Kaiser Permanente, was investigated in

2006 by the California Depart-
ment of Health Services concerning its kidney transplant
program and patient health (The
Associated Press, 2006). As recently as 2013, the personal data
of 90,000 patients at the
University of Washington Medical Center were compromised.
Those persons who hacked
this medical center’s system obtained patient contact
information, medical record num-
bers, and Social Security numbers (KOMO Staff, 2013). These
examples point to the need
for a crisis management plan that can be implemented when
negative publicity strikes
(Freeo, 2013).
Many crisis management plans are available, but almost all
contain the following elements.
First, there needs to be a crisis communication team that
includes the CEO, chief marketing
or public relations officer, and other senior management. This
team is on call 24/7 if a crisis
develops. The team should also have a backup staff that can
immediately answer phone calls,
especially from the media. The key for the first response is to
protect the integrity and repu-
tation of the HCO. This is done in virtually every instance by
telling everything, telling it fast,
and telling the truth.
Second, the crisis management team needs to put itself in the
role of the audience affected by
the news. For example, in the Duke University Health System
case involving the use of hydrau-
lic fluid, instead of assuring patients that internal controls were
strengthened, the crisis man-
agement team hired an outside expert. This expert determined

that the high heat process
kept the surgical instruments clean even though they had not
been washed in detergent, thus
assuring patients that no health risks were posed from the use of
the surgical instruments
in question.
Another crisis management tactic is to have a designated
spokesperson. This person should
be comfortable with the media and project confidence to the
audience. An advantage of hav-
ing one spokesperson is that the message delivered will be
consistent. Additionally, all infor-
mation regarding the crisis can be funneled to one person rather
than fragmented throughout
the organization.
Fourth, have a designated media center. If the crisis is visual
(for example, a fire or tornado
has occurred), then allow the media access so it does not look as
though the HCO is hiding
information. It is always best to have staff assigned to escort
the media during a crisis so that
members of the media are not allowed to wander into areas
where misinformation may be
disseminated.
Section 11.6Implementing Strategies With Tactics
Finally, a crisis management plan needs to be in place, as much
as possible, before a crisis hap-
pens. This plan can include sample, prepared statements and
practice sessions for respond-
ing to tough questions. If the public relations department waits

until the crisis to plan, it will
be too late.
11.6 Implementing Strategies With Tactics
A useful technique for implementing strategies is called an
action plan. An action plan for
each key result area should be developed. The key result areas
are the overall goal of a specific
set of activities. The action plan places key result areas,
objectives, strategies, and action plans
into perspective with each other and helps an HCO develop the
interrelationships among
plans at each institutional level. The action plan helps strategies
come to life with appropriate
action, as shown in Table 11.2.
Table 11.2: Action plan for a new adult day care center
Key result area: Improve the financial condition of the center
through increased services and
improved enrollment (new and retention).
Objective: Increase revenue from $200,000 to $300,000 per
year.
Benefits statement: To improve the financial capability of the
center and reduce dependence on the
need for additional funding.
Strategies: A. Develop the case or story of the center, and
identify 10 media outlets that
might communicate the center’s story to their audiences.
B. Develop proposals for new services.
C. Develop an alumni survey and telephone campaign.

Action plan Person responsible Start date Date completed
Send letter to all local
physicians.
Call on directors of the 10
media outlets.
Write an appeal letter to
alumni.
Personally visit every home
health service provider for
leads.
Arrange speaking engage-
ments at each area service
club.
BUDGET: $5,000
Note that the plan includes who is to be responsible for each
task and the dates that the task is
to be started and completed. More details can be added to
manage more specific subtasks. For
example, if an appeal letter is to be written, then who will be
responsible for addressing and
mailing the letters? This format can also be used for updates
from the staff responsible for
a task to determine the progress made to date and whether
additional help is needed. Also,
note that a budget has been specified to cover the costs of the

activities.
Managing Marketing Tactics
Marketing tactics must be carefully managed to avoid the
impact of Murphy’s Law: “Anything
that can go wrong will go wrong” (Wikipedia, 2013, para. 1).
This means that someone (or a
group), who is capable and with decision-making authority
regarding details, must be given
responsibility for the oversight of planned marketing activities.
In certain circumstances, it is
advisable to outsource the management of these activities and
events to ensure that they are
managed by experienced professionals.
Consider just a few of the activities that are involved in
something that seems as uncompli-
cated as a luncheon and groundbreaking ceremony for the
construction of a new wing at
a hospital:
1. Time and date have to be established so that all the key
players can be present at the
event; each key player must be contacted to coordinate a date
for availability.
2. Press releases need to be prepared and timed to coordinate
with the event’s media
representatives and photographers, and media deadlines.
3. The luncheon menu must be established within a given
budget and any specific
menu items determined, such as vegetarian plates for some
guests.
4. The room setup must be determined in advance, along with

any audiovisual equip-
ment needs and head-table arrangements.
5. There must be a participant sign-in sheet, and a nametag
created for each partici-
pant, with each name spelled correctly.
6. Seating arrangements must be established so that guests know
at which table to
be seated.
This is just a partial list of the activities that must be done, and
done correctly, for the event
to be successful. For each of these specific tasks, there is the
potential for error. While some
mishaps may be minor and easily corrected, others, such as not
having the audiovisual equip-
ment available and tested before the start of the luncheon, are
either more difficult or impos-
sible to correct during the time of the event. Therefore,
management’s question is this: What
person or group will be responsible for the event, and what
system of checks and balances
will be used to make sure the event goes smoothly?
Social Media Programs—Connecting With Stakeholders
As discussed in Chapter 10, Social media marketing (SMM) is
the use of social networking
websites as a marketing tool (WhatIs.com, 2013). The basic
objective of SMM is to create con-
tent that users, or followers, will read and share with their
social network, thereby enabling

an organization to increase its brand awareness and customer
knowledge, and to establish
broader customer contact (MedTouch, 2013). Additionally,
SMM provides use as a tool for
customer relationship management (CRM), whereby interactive
parts create opportunities
for customers to get information, raise questions, complain, and
feel like someone is listening
to them. If used properly, it is much more than a website link
for questions and complaints
because (a) it is interactive and (b) other members of the
network also post information and
experiences. The increased popularity of Facebook, Twitter,
LinkedIn, Myspace, YouTube, and
so forth make SMM a powerful marketing tool that must be
managed.
One of the first decisions to be made about SMM is who will
manage the use and content of
social media for the organization. For example, without specific
managerial oversight, it is
possible for several departments in a large organization to have
multiple Facebook pages
with different or even conflicting logos and information. And, if
an employee in a department
without SMM oversight starts using social media for business
purposes and then leaves the
organization, those customer interactions stop. In some cases, it
is wise to hire an experienced
staffer to manage an organization’s social media content and
usage, or to bring in social media
consultants to help train those vested with that responsibility. It
is also extremely important
to have specific written policies on who may post and what can
be posted through social

media. A social media audit may be needed to determine which
media are currently being
used; who has the authority to post, using that media; and what
kinds of communications are
being posted. Such an audit will often identify inconsistencies,
and, in some cases, misinfor-
mation, being sent out under the organization’s name.
Another key component in effectively managing SMM is
determining the content strategy
that the organization will use. Does the organization have the
“right” content to share, and
what are the messages to be shared with its followers? Next,
continual analysis of the num-
ber, types, and content of posts or tweets is necessary to
determine the impact of social
media usage. This is where many organizations fail. It is not
sufficient for an organization
to say that it has a specific number of likes or followers. Rather,
an organization needs to
know who those respondents are, what they are saying about the
organization, and how
this information can be channeled into even more exposure for
the organization through
the use of social media.
Examples of the effective use of social media by HCOs are
shown in the following links:
• www.youtube.com/user/rochestergeneral
• www.facebook.com/UHRainbowBabies
• www.facebook.com/AlaskaPhysicianJobs
While getting the medical staff involved in using SMM to help
promote the services of an HCO
is always a major challenge, this should still be a goal of the

SMM director at the HCO. Some
medical staff may feel that consumers want to focus their
attention not on the HCO but on
their relationships, as patients, with the physicians who are
actually going to treat them at
the HCO. A solution to increasing consumer interest in the
HCO’s services could be as simple
as posting a video on YouTube to introduce several physicians
on the medical staff of the HCO,
and to let them discuss their educational and professional
backgrounds and their clinical and
philosophical approaches in treating patients.
Summary & Resources
Summary & Resources
Chapter Summary
While it is necessary to understand the strategic aspects of
marketing planning, it is also criti-
cal to know how to implement plans through the development of
tactical marketing plans.
These tactical plans involve the application of the marketing
mix: price, product, place (dis-
tribution), and promotion. Healthcare marketing involves both
products and services, and it
is therefore necessary to understand how these two entities are
marketed differently.
Today’s HCO needs to maintain good relations with the
community while marketing to differ-
ent targets or constituencies. Image and reputation are
important, so HCOs must be able to
counter negative publicity. Additionally, no marketing program

is now complete without the
effective use of SMM.
Key Points
1. The marketing program is composed of all the short-term
(tactical) marketing
plans used by an organization. While developed from the overall
marketing plan (as
discussed in Chapter 8), the tactical plans outline what is to be
done, who is respon-
sible for doing it, and the time frame for completion.
2. Products differ from services and therefore need special
marketing considerations.
Additionally, many offerings in the healthcare industry are
combinations of product
and service. Products and services are elements included in the
marketing mix, which
consists of the four Ps of marketing: product/service, price,
place (distribution), and
promotion. Product/service refers to the specific offering of the
HCO, while price is
often referred to in healthcare as fees. In terms of distribution,
healthcare is unique
because it often requires large expenditures for buildings and
equipment, limiting
the number of available locations. Promotion is critical to HCOs
because the nature of
the product/service is sometimes complex, with varying results.
3. HCOs are increasingly aware of the need to manage both
public relations and pub-
licity. It is important to understand the distinction between
public relations and
publicity. Public relations is an area controlled by the HCO that

involves participat-
ing in projects designed to help the community and ensuring
that positive stories
about the HCO reach the public. Publicity, on the other hand, is
not controlled by
the HCO, and publicity about the HCO may be positive or
negative, depending on the
news story about the HCO. Negative publicity can often cause
damage to an HCO’s
professional reputation and public image. Thus, part of an
HCO’s crisis management
program is to counteract negative publicity.
4. The marketing executive of an HCO is often responsible for
several marketing pro-
grams at once (for example, advertising, publicity, and social
media). An effective
marketing program integrates all aspects of the marketing mix
to send a consistent
and positive message about the HCO to target audiences.
5. The use of social media is essential in today’s business
environment for almost any
organization, certainly HCOs. An important element of
managing social media is
managing its content. While an HCO can manage its own social
media content, it is
difficult for the HCO to manage the content of all its employees
and even more dif-
ficult to manage the social media content provided by the
public. Therefore, an effec-
tive and well-communicated social media policy needs to be in
place at an HCO.

Summary & Resources
Key Terms
assurance A customer’s perception of the
knowledge and courtesy of a healthcare pro-
vider’s staff and their ability to inspire trust
and confidence.
capacity management The process of
matching service demand with supply in
order to maximize revenue.
communication process The process
through which communication takes place
between a sender and a receiver.
credence goods Services that a buyer finds
difficult to evaluate after purchase.
CPT® Current Procedural Terminology,
which is the most widely accepted medical
nomenclature for reporting medical proce-
dures and services under public and private
health insurance programs. CPT is a regis-
tered trademark of the American Medical
Association.
empathy Caring, individualized atten-
tion that the organization provides to its
customers.
gap analysis Analysis of the difference
between expectations and actual service
delivery.
healthscape The emotional, affective,

cognitive, and the physiological patient/pro-
vider behaviors and outcomes related to the
physical environment in which the services
are delivered.
inconsistency (variability) The idea that
service cannot be separated from the service
provider or the service recipient. Because
each is human and each service takes place
in a unique setting with differing circum-
stances, each service varies from the one
before it.
inseparability The idea that services are
inseparable from the service provider and
the person receiving the service.
intangibility Refers to the idea that ser-
vices cannot be touched or held and cannot
be transferred to someone other than the
recipient.
inventory (perishability) Refers to the
concept that services cannot be inventoried
or stored for future use. Once the time for a
service passes, the service perishes, either
by not having been performed or by having
been completed.
involvement Refers to the idea that cus-
tomers often aid in the production of
services. For example, a patient may be
required to “cleanse” before a colonoscopy
or fast before a blood test.
place tactics The location and ambiance of

service delivery.
pricing decisions Fee structures and third-
party reimbursements.
promotional tactical decisions Decisions
relating to what is to be communicated, to
whom, through what methods and media,
and at what appropriate costs.
publicity Refers to mass communications
transmitted through the media in editorial
space rather than paid space.
quality service dimensions Service char-
acteristics used by customers to define the
quality of service that they perceive they
are receiving.
reliability Refers to the ability to perform
the promised service, dependably and
accurately.
Summary & Resources
1. In what way(s) do tactical decisions and actions differ from
strategic decisions and
actions?
2. How do community and public relations activities impact the
service mix of an HCO?
3. What are some of the ways that an HCO can incorporate
social media into its market-

ing programs?
responsiveness Providers’ willingness to
help customers and provide prompt service.
service An intangible task or action that
satisfies a patient’s needs.
social media marketing (SMM) Market-
ing through social media, such as Facebook,
Twitter, LinkedIn, Myspace, and YouTube.
tangibility Refers to the appearance of
physical facilities, equipment, personnel,
and communications materials.
10 Customer Acquisition and Relationship Management
Dmitry Kalinovsky/iStock/Thinkstock
Patronage by loyal customers yields 65 percent of a typical
business’ volume.
—American Management Association
Learning Objectives
following:
• Identify how organizational growth is best achieved by an

HCO, and state the effect of the product life cycle
on an organization’s revenues.
• Discuss several approaches that an HCO can use to attract
new customers, or patients.
• Delineate the premises upon which customer relationship
management is based.
• Explain the advantages of database marketing, and
identify ways for an organization to use a marketing
database.
• Provide examples of how an HCO can effectively manage
real and virtual customer interactions.
Section 10.1Organizational Growth
Introduction
This chapter focuses on how to attract and keep patients through
understanding and meeting
their needs. The long-term success of an HCO depends on its
ability to attract new patients
and turn them into loyal customers who not only return for
needed services, but recommend
the HCO’s services to others. This is especially important
because of the nature of the life cycle
for products and services, from their introduction to their
decline. Attracting new customers
and keeping existing ones involves interacting internally and
externally with patients, analyz-
ing data on current patients, and managing real and virtual
interactions with patients. Manag-
ing relationships with patients helps to ensure that patients stay

informed and feel connected
to the HCO through its internal and external customer
relationship efforts.
10.1 Organizational Growth
Most organizations have growth as a basic goal. Growth means
an increase in revenue and
a greater impact on the communities served. Growth also creates
opportunities for staff to
advance and take on new responsibilities. While many activities
can help an HCO grow, the
most important is the development of an effective marketing
plan to provide a consistent
platform for the organization’s visibility and to brand the HCO
as an attractive option for
medical services. The development of an effective marketing
plan was stressed in Chapter 8
as a basic marketing need for an HCO: that is, to inform new
and existing customers of the
organization’s services and to persuade them to continue using
or to try using these services.
Product/Service Life Cycles
Like people, products and services have a life cycle. The term
product life cycle refers to the
stages that a product or service goes through from the time it is
introduced until it is taken
off the market or “dies.” The stages of the product life cycle,
illustrated in Figure 10.1, usually
include the following descriptions:
• Introduction—The stage of researching, developing, and
launching the product or
service.
• Growth—The stage when revenues are increasing at a fast

rate.
• Maturity—The stage when revenues peak, and the rate of
growth slows down.
• Decline—The final stage of the life cycle, when revenues
start to decline.
For example, a pharmaceutical manufacturer introduces a new
cholesterol drug, and it is pro-
moted by sales reps and possibly promoted directly to
consumers during the product’s intro-
duction stage. As more and more physicians prescribe the drug,
sales grow at a fast pace, and
the drug enters the growth stage. As time passes, sales begin to
slow as the drug reaches the
maturity stage. Then, newer drugs are introduced, and sales of
the older drug start to decline.
In an attempt to maintain sales of the older product, the
manufacturer may decide to sell the
older product as an OTC drug, but at a much lower price than
when it was a prescription drug.
Of course, not all products reach the final stage and may instead
continue to stay at the matu-
rity stage for a long period of time. Regardless, attracting and
keeping new customers is critical
Section 10.1Organizational Growth
because of the nature of how products evolve from their
conception to extinction. When the
revenues produced by the product or service begin to decline, so
do profits. To boost or main-
tain revenues requires keeping existing customers, but also
attracting new ones.

Figure 10.1: Product/service life cycle
Some products stay in the maturity phase for a long time. Other
products move quickly through the cycle.
f10.01_MHA 626.ai
Introduction Growth Maturity Decline
Time
R
e
v
e
n
u
e
Source: Adapted from Product Life Cycle Stages at
http://productlifecyclestages.com/
Individual Adoption Stages
A critical element in attracting new customers is to understand
the stages that individual
consumers move through when adopting a new product as it
moves through the product life
cycle. These stages, shown in Table 10.1, are referred to as the
individual adoption stages.
Of course, promotional messages must be aligned with these
stages to carry the consumer
through them. In the introductory stage, promotional messages
must inform potential cus-
tomers of the offering. In the growth stage, promotional
messages must encourage potential

customers to use that specific offering, or product, rather than
competing products. At the
maturity stage of the product, customers are reminded of the
product to build repeat usage
and referrals. Thus, messages stressing the firm’s competitive
advantage must be developed
to answer consumers’ questions at a given stage in the
individual adoption process and to
reflect the nature of the product at a given time during its life
cycle.
Section 10.2Attracting New Customers
Table 10.1: Individual adoption stages and information needs
Stage in Individual Adoption Process Questions Consumers
Want Answered
1. Awareness: Consumer first learns of the product, ser-
vice, or organization.
Who are you?
What are you all about?
What do you do?
2. Interest: Consumer is stimulated to get more informa-
tion about the product or service.
Why would anyone use your services?
What benefits would they get?
3. Evaluation: Consumer considers whether to try the
product or service.

Why should I buy your organization’s
services?
4. Trial: Consumer tries the product or service. Will it really
deliver those claimed benefits?
Can I risk trying the service?
5. Adoption: Consumer decides to use the product or
service, becoming “your” customer or patient.
Did I make the right decision?
6. Repeat: Consumer may reevaluate his or her decision to
continue using the product or service.
Should I continue to use the same service
provider or are there better alternatives?
Consumers will be at various stages in their individual adoption
process of a product and will
have varying levels of knowledge and experience. Therefore, a
variety of promotional mes-
sages, conveying different types of information about the
product, service, or organization, is
usually necessary to communicate effectively to them. While
most consumers are concerned
about the benefits received from a product, some are interested
in the detailed information
that produces those benefits. Such detailed information should
be available to consumers
who request it.
Information from the marketing plan’s consumer analysis is
vital in making communications
decisions on promotional message content. The needs and
motives of consumers become the

center of such content decisions. If time and money permit,
promotional messages should be
tested before use, and measures indicative of consumer
responses to those promotional mes-
sages should be evaluated in the decision-making process to
finalize the message content.
10.2 Attracting New Customers
New customers, or patients, can be attracted to an HCO in
several different ways, some at
a relatively low cost. One source has identified four low-cost
approaches (Guerrero, 2013),
which follow:
1. Create an online presence with a website because people
search for information, and
sometimes ratings, online.
2. Use social media to create a profile of your business and to
get feedback. Using
social media increases visibility and presence, and shows
potential patients you are
up-to-date.
3. Increase community involvement, which is an age-old
technique, but it works. Clubs,
churches, speaking engagements, and so forth all increase name
recognition and
awareness.
Section 10.2Attracting New Customers
4. Make it easy for patients to contact you. This can be done by
creating a link on your

website for customer contact or by using text, tweets, and email.
Some hospitals have started using animated videos to attract
new patients. These videos can
be linked from your website, or emails can be sent to provide
links to videos on YouTube.
This allows potential and existing patients to view the videos at
their leisure and provides an
interesting interface, which can serve to present useful
information (PRWeb, 2012).
Another approach for increasing patients/revenues is to offer
additional services. Dr. Clint
Long of Long Eye Clinic in Sherman, Texas is a board-certified
ophthalmologist who has added
new services to his practice to attract new patients and increase
revenues from existing
patients. The clinic offers BOTOX® Cosmetic, a proven
prescription medicine that is injected
into muscles to temporarily improve the look of moderate-to-
severe frown lines between the
eyebrows in patients from age 18 to 65. The clinic also offers
CO2 laser treatment for skin
rejuvenation. This treatment can help diminish brown spots and
wrinkles while firming and
toning facial skin.
L O N G V I S I O N C E N T E R : D R . C L I N T L O N G
Long Vision Center in Sherman, Texas cares about your vision.
In fact we believe that it is
very precious, and Dr. Long is here to make sure you have
superior quality eye care. Here
at Long Vision Center, we provide general eye care, medical
eye care, surgical eye care,
laser eye care, as well as Botox Cosmetic, Laser Skin Re-
surfacing, and Lasik to patients in

Sherman, Texas and the surrounding North Texas area.
Dr. Clint Long, a State of Texas Board Certified Licensed
Ophthalmologist, performs gen-
eral eye examinations for eyeglasses and contact lenses,
examinations for cataract and
cataract surgery, lens implants, corneal surgery and transplants,
diagnosis and treatment
of dry eyes, laser vision correction & surgery such as LASIK,
diagnosis, medical, laser and
surgical treatment of glaucoma and provide eye examinations
and laser treatment for dia-
betic retinopathy and treatment for age related macular
degeneration.
Source: http://www.longvisioncenter.com/ Retrieved November
13, 2013(continued)
While Dr. Long’s initial interest was in helping patients with
skin issues around the eyes, he
soon learned that patients also wanted the treatments for other
areas of their face. His invest-
ment in additional training and certification in those procedures
has paid off through an
expanded customer base and increased revenues (Long Vision
Center, 2013).
Patient referrals are a cost-effective way of getting new
patients. However, patient referrals,
like other aspects of a marketing plan, must be managed. This
means evaluating the pro-
cess of new-patient referrals; that is, who is referring new
patients, how is this information
being obtained and kept, and how are new patients treated by
staff and made to feel welcome
and valued.

Many doctors will actually set up an appointment for a patient
with another doctor and have
the referred doctor’s office confirm the appointment. A record
of each of these referrals
Section 10.3Customer Relationship Management
should be maintained and the referring doctor thanked for the
referral. A short note or call
can show appreciation and lead to more referrals.
The cross-selling of services within a clinic is a valuable tool
for referrals. Cross-selling means
referring patients to other doctors or services offered by the
clinic. It is important that each
doctor be aware of the services and qualifications of other
medical staff at the clinic and con-
tinually reminded of the need to cross-sell, because it works
both ways: I refer someone to
you, and you refer someone to me.
10.3 Customer Relationship Management
In addition to attracting new patients, HCOs must effectively
manage their existing custom-
ers to support long-term profitability. Customer relationship
management (CRM) further
analyzes a targeted segment by addressing each customer’s
potential for profitability. CRM is
based on the following four premises:
1. Customers are a key asset of the organization.
2. Customers vary in their preferences and behaviors and their
value to the

organization.
3. Understanding customer needs, preferences, and behavior can
improve a
customer’s value.
4. Relationships with customers must be managed.
While many companies have operated on the premise that the
best customers are loyal ones
and have focused on segmentation by frequency of purchase,
traditional loyalty programs
have neglected to analyze their profitability (Mason & Young,
2003). Instead of focusing on
loyalty alone, CRM goes one step further in finding ways to
measure the company’s “cost” to
maintain that customer relationship. Many companies now offer
software for CRM programs,
which, if implemented appropriately, can provide a competitive
edge for an organization
(Kotler, 2003). These software programs involve the use of
database marketing, which will be
discussed in the next section.
The All About Smiles dental practice in Durant, Oklahoma has
learned to use several
approaches to CRM. At All About Smiles, CRM begins with
new patients at the front desk,
where they are greeted by office staff and made to feel welcome
and appreciated. Everyone
else’s job is to ensure that customer appreciation continues
throughout the whole treatment
and payment process. The office layout is unusual for dental
practices. For example, the Egypt
room has murals of pyramids; the Jamaica room has scenes of
beaches and palm trees; and a

game room complete with PAC-MAN® entertains the younger
patients.
New patients are asked for their email addresses and mobile
phone numbers so they can
be sent reminders of their next appointment and also have an
opportunity to evaluate the
services through an online survey, which is sent to patients a
few days after their dental visit.
Email reminders are sent the day before the upcoming
appointment, and text messages are
sent the day of the appointment and two hours before the
appointment time. Patients can opt
out of both of these contact methods and request phone calls
instead, if they prefer that type
of reminder. The office manager reports that the texts sent on
the day of the appointment
have significantly reduced the number of no-shows.
Section 10.4Database Marketing
A L L A B O U T S M I L E S D E N T I S T R Y , D U R A
N T , O K L A H O M A
At All About Smiles Dentistry, we value our patient
relationships, making it our priority
to deliver gentle compassionate care that you deserve from a
dentist in Durant. We work
hard to make you feel at ease by providing exceptional patient
care in a relaxed, convenient
atmosphere. We strive to develop lifelong relationships with our
patients by combining the
latest dental technology with a professional and compassionate
staff. The result is a beau-
tiful, healthy smile that lasts a lifetime.

We also believe that patients should have sufficient information
to make educated deci-
sions about their oral health, treatment options and choice of
dentist in Durant. You’ll find
all of this important information on our website, including
directions to our Durant office,
service descriptions, patient forms, patient education resources
and more.
Not only are we a leading dentist in Durant, we are a full-
service practice providing for all
of your dental needs. Our services include:
• General Dentistry
• Teeth Whitening
• Crowns
• Preventive Care
• Periodontal Exams
• View a Complete List of our Dental Services
Should you ever need additional information about our practice,
we are always available to
answer your questions. Let us care for your entire family! We
look forward to meeting you.
Source: http://www.durantsmiles.com/ Retrieved November 13,
2013
10.4 Database Marketing
True database marketing creates customer intelligence that
contributes to the development
of profitable customer relationships. Database marketing is an
organizational process that
is customer research driven. The information base is dynamic
and evolving, preferably with

two-way dialog with the customer (Berry & Linoff, 2000). It is
a measure of the importance of
creating and maintaining a good database of market information
that Business Week devoted
the cover story of its September 5, 1994 issue to the subject of
database marketing, calling
it “one of the biggest changes in marketing since ‘new and
improved’” (Bloomberg Business-
week, 1994, para 5). Since that time, the concept of database
marketing, coupled with new
technologies, has grown to the point that a new generation of
marketing professionals has
been created. Basic information on age, gender, lifestyle,
occupation, and so forth can easily
be captured by HCOs through additions to the regular patient
forms filled out annually or by
new patients. This information must then be entered into a
software program by staff or an
outside marketing agency. The data can then be analyzed for
commonalities and trends.
Advantages of Database Marketing
The new generation of database marketing professionals offer
skills in four primary areas:
(a) secondary data acquisition, including analysis of the value
of lists; (b) database-build-
ing, including the understanding of computer hardware and
software; (c) target marketing,
including maximizing database record use; and (d) one-to-one
marketing, which involves
managing and refining the targeting process to customize
contacts for every customer (Kot-

ler, 2003). The popularity of database marketing is grounded in
the belief that marketing
planning begins by understanding the customer—his or her
buying and consumption pat-
terns, location, interest, and other aspects of buying behavior
discernible from databases—
and then formulating plans that attempt to weave the firm’s
product or service into the con-
sumer’s pattern of behavior. The basic idea behind the use of
databases is this: If that is what
the consumer is doing, how can we make consumers want to do
that more often and with our
product? This approach to satisfying customers adheres to the
belief that the best indicator
of future behavior is past behavior. Thus, if American Express®
sees its card frequently used
by a cardholder to purchase works of art, then it assumes an
advertisement for artworks in
that cardholder’s monthly bill will generate a better response
than it would with a cardholder
who uses the card for travel in the Caribbean (and receives
advertisements for travel specials
to that region). In fact, by monitoring card members’ shopping,
travel, and eating patterns,
plus the economic and weather patterns in which they live, the
database may trigger an ad
to be sent to someone who has traveled in the past to warmer
climates during a particularly
inclement winter month, in a calculated effort to strike while
the iron is hot.
If an HCO learns that more and more patients are accessing its
website before a visit, then
ensuring that the website is up-to-date, and that links to
departments and services are all
working, is an essential part of the use of data mining, which is

discussed in the next subsec-
tion. Patient forms can simply ask about visiting the website
and any additional information
patients would like to be able to access on the website. Patients
can also be asked whether
they want to receive email or text updates of changes to the
website.
Data Collection and Manipulation
The process of data collection and manipulation, which allows
such powerful tactical market-
ing actions to occur, consists of several steps:
1. Consumer action. The process begins with the consumer
taking some form of
action—they use a coupon, fill out a warranty card, make a
purchase, enter a sweep-
stakes, place a toll-free call to request information, fill out a
business reply card,
order from a catalog, and so forth. This behavior is combined
with other information
in public records to identify a broad profile of each consumer in
the database.
2. Digesting the data. Sophisticated statistical techniques are
used to merge data on
the consumer into a coherent, consolidated database. Other
software allows the
marketer to “drill down” into the data to reveal patterns of
behavior for classes of
customers.
3. Profiling the ideal customer. Neural networks that “learn”
from the data are used to
identify a model consumer, that is, the common characteristics
held by the high-

volume customer. This allows the marketer to find customers or
potential customers
who share those characteristics in common with the high-
volume customer.
4. Using the knowledge. This data can be used in many ways: to
determine who gets
which sales promotions, to develop attributes for new products
or services with a
targeted list of customers for new-product introduction
announcements, to tailor ad
messages and target them by customer groups, and so forth.
5. Sharing data with channel members. For consumer package-
goods marketers, it is
possible to merge the manufacturer’s database (described in
item 2 of this num-
bered list) with an individual store’s scanner data to help plan
local promotional
mailings, fine-tune shelf displays, and design store layouts
(Berry, 1994).
Modern technology has made it possible for marketers to do
extensive searches through a
large database, essentially mining the data. Data mining is the
process of sorting through the
data to find hidden patterns, potential trends, and correlations
between customers or within
a single customer’s data. Data mining is predominantly
accomplished through mathemati-
cal and statistical processes and is typically done using software
developed for this purpose

(Mason & Young, 2003). However, great care must be used in
healthcare-related data mining
because of the privacy concerns of patients and the need to
safeguard access to patients’
medical information.
While modern technology, including neural network software
and parallel processor hard-
ware, makes the use of such database marketing possible, it is
old-fashioned objectives that
drive the interest in databases. Marketers seek to know their
customers so well that they
can anticipate their needs and provide them with desired
products and services before the
customers themselves know what they want. This is relationship
marketing, which is now at
its most efficient evolutionary stage. Computer technology
allows the marketer to acquire
knowledge of the purchasing habits of millions of individual
customers and to weave relation-
ships with them by anticipating their needs and informing them
of need-satisfying products
specifically suited to their situation. By successfully weaving
these relationships, the mar-
keter makes it inconvenient or costly for the customer to switch
to a competitor.
Using the Data
To some degree, the marketing plans of companies actively
engaged in database marketing
are driven by the desire to maximize the use of their databases
and the technology that allows
the manipulation of those databases. In other words, the ability
to use the database in certain
ways means that those uses will become the implementation of
the marketing plan (that is,

the marketing plan conforms to fit the technology available).
This is not necessarily an inap-
propriate or backward approach to marketing, as long as
marketers do not lose sight of this
fact: The ultimate goal of any technology usage or marketing
plan objective is to identify how
an organization can gain a competitive advantage in satisfying
customer needs and wants.
Jackson and Wang (1994) have identified 15 ways to use a
marketing database. These uses of
a marketing database are described in depth in their book and
are listed as follows to illus-
trate the spectrum of possibilities for the use of databases in
data-based marketing planning:
1. Identify your best customers.
2. Develop new customers.
3. Deliver a message consistent with product usage.
4. Reinforce consumer purchase decisions.
Section 10.5Managing Real and Virtual Customer Interactions
5. Cross-sell and complementary sell products.
6. Apply three-tiered communications.
7. Improve delivery of sales promotion.
8. Refine the marketing process.
9. Increase the effectiveness of distribution channel marketing.
10. Maintain equity.
11. Establish a management resource.
12. Take advantage of stealth communications.
13. Conduct customer, product, and marketing research.
14. Personalize customer service.

15. Provide program synergy and integration.
10.5 Managing Real and Virtual Customer Interactions
Patients develop a service script in each healthcare setting. A
service script is the expected
sequence of events and outcomes for that particular setting.
When the actual experience
departs from the script, the patient may be uncomfortable
(Solomon, 2013). For example,
a dental patient may expect a visit to the dentist to include
reading out-of-date magazines
in the waiting room, experiencing pain while a cavity is filled,
and hearing the high-pitched
sound of the drill. This may not be perceived as a pleasant
experience, but it is, traditionally,
the patient’s expectation.
A problem now faced by many HCOs is that patients gather
information from social media
outlets before contacting a healthcare provider (Kane, Fichman,
Gallaugher, & Glaser, 2009).
The information gleaned from the Internet and social media
sites determines, at least in part,
the patient’s service script. A new dental patient can search the
Internet or interact with
friends on a site such as Facebook to find a dentist who has a
big-screen TV in the waiting
room, guarantees little or no pain, and uses a quieter laser drill.
This information dramati-
cally alters the patient’s expectations of the dental appointment.
Several popular healthcare
social media sites are listed in Table 10.2.
Table 10.2: Healthcare social media sites
Website Purpose

PatientsLikeMe.com
DailyStrength.org
Allows patients to share real-world health experiences to
help themselves and other patients.
angieslist.com
healthgrades.com
RateMDs.com
All of these allow patients to rate healthcare providers.
CaringBridge.org Helps people who have significant health
problems
connect with friends and family, making the experience
easier.
Sermo.com Exclusively for MDs and DOs to post observations
and
questions about puzzling cases.
The following subsections will discuss the use of social media
by patients, the management
of online community relations, gaps in expected and delivered
service, and service recovery.
Social Media in Healthcare
Sixty million people in the United States read or contribute to
blogs, wikis, and/or social
networks about healthcare (Kane et al., 2009). Often, social
media is the first place patients

search for information concerning specific illnesses or
recommended healthcare providers.
This use of social media provides opportunities as well as
possible pitfalls for HCOs and indi-
vidual healthcare providers.
The opportunities offered by social media include the ability for
the HCO to communicate its
mission, vision, and products or services as well as health
education. HCOs also can use social
media to advertise and post patient testimonials. Finally, social
media can be used to manage
customer experiences by helping to create realistic service
scripts.
The biggest challenge for any organization involved in social
media is the ability to control
the conversation (Forbes Insights, 2013). Threats to a firm’s
reputation may be internal or
external. Internally, a disgruntled employee may post
information damaging to an organiza-
tion, such as protected health information about a patient. Even
an act of kindness may be
damaging to an organization. For example, a nurse may post a
request on Facebook for her
friends and family to keep a particular hospitalized patient in
their thoughts and prayers.
Depending on the amount of information revealed by the post,
patient confidentiality may
have been breached.
Controlling the external conversation is more difficult. Online
communities spontaneously
appear, often with different contributors taking the lead.
Further, as patients, the participants
are free to discuss personal medical information without

violating privacy law (Kane et al.,
2009). This allows the participants to be very specific about
their experiences with an HCO
or a healthcare practitioner. Often, the HCO cannot respond to
such posts without violating
patient confidentiality. Nonetheless, it is imperative that HCOs
have personnel who constantly
monitor and respond to social media conversations—both
positive and negative. Elements of
a social media policy are outlined in Table 10.3.
Table 10.3: Social media policy
Develop a Formal Social Media Policy
• Activate network settings so only designated staff can
access social media.
• Define inappropriate use of social media and ramifications
for policy violations.
• Encourage employees to report the inappropriate use of
social media by others.
Monitor External and Internal Online Communication
• Use Google Alerts, Twitter Keyword Tool, and other tools
to monitor online communications.
• Deputize employees to augment the team’s efforts for
internal communication.
Engage Online Communities
• Create compelling social media.
• Use online community leaders, such as well-known
bloggers and journalists, to ensure that your message
is understood.
• Communicate internally—marketing to employees unifies
the organization’s message.

Act as First Responders
• React quickly to negative comments, but use a team
trained in public relations triage.
• Acknowledge legitimate criticism and mistakes.
• Respond forcefully to unfounded rumors.
• Do not engage every online community—pick and choose
those with which you want to be associated.
Managing Customer Service
In a recent survey, more than 300 chief marketing officers
(CMOs) from a broad array of indus-
tries, including healthcare, reported that customer experience
was their most important pri-
ority. Customer experience was viewed as more important than
new products or services,
branding, or need identification. Interestingly, pricing, as a
concern, came in last. To achieve
an outcome of excellent customer experience, CMOs believe
that marketing, strategy, finance,
information technology, and social medial need to all
collaborate. As the CMO of one pharma-
ceutical company stated, “We don’t have a silo-driven culture at
all. We are highly integrated
across sales, marketing, R&D, and finance” (Forbes Insights,
2013, p. 8).
As noted earlier in this section, social media now drives the
service script, or customer expec-
tations, of the healthcare experience. The difference between
the service expected and the
customer’s perceived service quality is known as the service
gap, and the management of

this difference is known as gap analysis (Loudon, Stevens, &
Wrenn, 2005). Management
needs to constantly monitor customer service expectations and
the customer’s perceived
service quality. Actual gaps in service need to be addressed by
the appropriate personnel.
For example, a stand-alone urgent care center may advertise a
no-waiting policy. However,
patients actually experience a 15- to 20-minute wait, and they
perceive that wait to be much
longer. In this case, the person in charge of the promotional
message can close the service gap
by advertising “short wait times.”
Frontline employees, such as admissions clerks, receptionists,
and triage nurses, are also
in a position to manage service gaps. Frontline employees, as
well as other personnel who
initially interact with the patient, are the first experience the
patient has with the HCO and, in
the patient’s mind, these employees represent the HCO. Thus,
part of the employee’s job is to
communicate a favorable impression of the organization to the
patient.
In addition, the frontline employee who initially engages the
patient also has valuable infor-
mation that can be used to manage patient expectations. For
example, an emergency room
admissions clerk can communicate the expected wait time to a
patient. Then, the triage nurse
can explain the steps that will be taken to care for the patient’s
illness or injury, and provide
some information about what the patient can expect the
emergency room doctor’s examina-
tion to include.

However, even in the best of organizations, service failures will
occur—those instances when
customer expectations clearly were not met. While some
patients who experience a service
failure will not complain and not return, others will complain.
How those complaints are
handled is crucial to patient retention for the HCO. Once a
service failure is identified, the
lowest-level employee possible needs to be empowered to
resolve the problem. For example,
frontline employees at The Ritz-Carlton® hotels, including desk
clerks and housekeepers,
have $2,000 dollars per year to use to satisfy customer
complaints (Kotler, Bowen, & Makens,
2014). Once the service failure has been addressed, management
needs to analyze the failure,
look for trends within the organization for that type of failure,
integrate information about
service failure into operational planning, and follow up with
customers or patients to support
continuing good relations (Kotler, 2003).
Interestingly, service failure can be an opportunity to strengthen
patient relationships. In one
study, customers who experienced a service failure but felt the
organization had successfully
resolved the situation were found to be more loyal than the
customers who had never expe-
rienced a service failure. This is known as the service recovery
paradox (McCollough, 2009).

Therefore, it is crucial that management constantly anticipates
and attempts to control cus-
tomer service expectations, analyzes service gaps, and has
effective policies in place for ser-
vice recovery.
Using a Marketing Agency
Given the increased use of technology and the need to find new
ways to attract and keep
patients, contracting with a marketing agency may be a solution
for an HCO as a means
to outsource many of its marketing activities. For large
organizations that have a marketing
administrator, the use of an external supplier to handle event
planning and other marketing
activities avoids the need to hire additional staff, and it may be
a more cost-effective solution
for the organization. For a smaller organization, outsourcing the
marketing operations of a
busy medical practice allows physicians and staff to concentrate
on serving patients and the
marketing specialist to design, update, and manage the
marketing side of the business.
Website design, patient surveys, social media, blogs, and so
forth can all be outsourced to
marketing agencies that specialize in healthcare marketing. Not
only do these agencies bring
their marketing expertise to the organization but also their
knowledge and experience with
other healthcare clients, enabling the HCO to find and use what
is new but also what is tried
and true in marketing services in its industry.
For example, DiD is a boutique healthcare communications
agency in Pennsylvania. This

agency’s Services content on its website explains that
“Healthcare marketing is about finding
the right mix of what’s new with what’s tried and true. We
excel at creating integrated cam-
paigns. Our insights and honed healthcare instincts keep us
ahead of the pack. We shorten the
distance between insight, idea, and execution. Simply put, we
don’t waste time chasing our
tails” (DiD, 2013, Services, para. 1). This agency offers a
complete line of services for health-
care marketing, including strategy (research, analytics, and
measurement); planning (brand
positioning, trends, and marketing); and creative (print, video,
digital, mobile apps, and social
media) services (DiD, 2013).
It is important for an organization to select the right marketing
agency for its marketing
needs. An organization needs to decide whether its primary
target market is patients or other
HCOs, and then find a marketing agency that focuses on
healthcare marketing. One source has
suggested evaluating the following criteria when selecting a
marketing agency:
1. The agency’s knowledge of legislation
2. The agency’s use of its expertise in their own business
3. The agency’s references, and how they will bill you (Fawcett,
2013)
The criteria should include an agency that the organization can
build a relationship with—an
agency that understands the organization and has the expertise
to perform tasks effectively
and efficiently. The agency should share, with the organization,
the metrics for assessing a cli-

ent’s results, which will determine how well the marketing
activities performed by the agency
for that client are working.
Summary & Resources
Website Design
In today’s digital world, it is extremely important to have an
effective website. An increasing
number of consumers are using the Internet to search for health
information and healthcare
providers. This is especially true of younger consumers. The
following list offers several sug-
gestions for creating an effective website design (Clow &
Stevens, 2009):
1. Decide on the objective of the website. The objective dictates
how the website will
be designed. Possible objectives include the following:
a. E-commerce; that is, selling services over the Internet
b. Information for clients or patients
c. Means for clients or patients to contact the organization
d. Public relations communication tool
e. Advertisement of services
2. Hire a professional web designer. It will be worth the
money.
3. Make the site user-friendly. Use the language of the target
audience, not technical
jargon.
4. Use photos, which speak louder than words.
5. Create an easy-to-follow menu.
6. Include FAQ as a topic to provide ready responses for the

end user.
7. Promote benefits, not attributes.
8. Have easy-to-find contact information.
9. Keep the site simple so that it will load quickly. If videos
and lots of photos are used,
then put those on page links so the front page will not be slow
in loading.
10. Consider creating links or advertisements on other websites
that are related to the
organization or that would be a good source for referrals, such
as municipal and
local chamber of commerce websites.
11. Use a URL that is easy to remember, but connected to the
name of the organization’s
service. Do not use a strange URL that no one can remember or
that has nothing to
do with the organization’s professional service(s).
12. Test the website and every link on the website before it is
promoted or launched.
The technical problems that marred the launch of the federal
government website
for the Affordable Care Act’s healthcare exchange marketplace
was an embarrass-
ment to the U.S. government, and initially limited the website’s
purpose to provide
consumer access to the selection of health insurance coverage
and enrollment in a
health plan in a federally facilitated marketplace.
Summary & Resources
Chapter Summary

In this chapter, we discussed how to attract new customers to an
HCO and a private health-
care practice. Also discussed were the product life cycle and the
stages consumers go through
in choosing a product or service. Social media can be used to
attract new customers as well
as to manage customer expectations and help with customer
retention. Key to determin-
ing consumer behavior is database marketing, which is the
process of data collection and
Summary & Resources
analysis concerning consumer actions. Finally, HCOs may
handle advertising and social media
in-house or hire an outside marketing agency; there are pros and
cons to both approaches.
Key Points
1. Attracting new customers or patients is important for both
HCOs and healthcare
practitioners in private practice. Growth means increases in
revenues and a greater
impact on the communities served by the organization. Growth
is best achieved with
an effective marketing plan that provides a consistent platform
for the organization
to be visible and an attractive option for medical services.
2. The term product life cycle refers to the stages a product or
service goes through
from the time it is introduced until it is removed from the
market or dies. The stages

of the product life cycle are introduction, growth, maturity, and
decline. In the intro-
duction and growth stages, revenues increase quickly as there is
little competition.
As competitors enter the market, products or services advance
to the maturity stage
of the life cycle, and revenues begin to flatten. In the decline
stage, new products or
services replace old ones and revenues decrease. The goal of
marketers is to keep a
product or service in the maturity stage for as long as possible.
3. Organizations must effectively manage existing customers to
support long-term
profitability. Customer relationship management (CRM)
analyzes a targeted seg-
ment by addressing each customer’s potential for profitability.
CRM is based on four
premises: (a) customers are a key asset of the organization; (b)
customers vary in
their preferences and behaviors and their value to the
organization; (c) understand-
ing customer needs, preferences, and behavior can improve their
value to the orga-
nization; and, (d) relationships with customers must be
managed.
4. Database marketing creates customer intelligence, which
contributes to the develop-
ment of profitable customer relationships. With database
marketing, marketing pro-
fessionals use data collected from consumer activity to better
understand consump-
tion patterns, locations, interests, and other aspects of buying
behavior. The basic
idea behind the use of databases is this: If that is what the

consumer is doing, how
can we make them want to do that more often and with our
product? The process of
data collection consists of four steps. First, customer action is
collected (credit card
purchases, website visits, etc.). Next, the data collected from
consumers is analyzed,
using sophisticated statistical techniques. Third, neural
networks “learn” from the
data and identify the model customer. Finally, the knowledge
gleaned is used for
targeting customers with promotions and information that are
tailored to their
interests and behaviors.
5. Consumers interact with an HCO both in person, as patients
or consumers of prod-
ucts, or online through websites and social media. Often, the
customer’s first inter-
action with the HCO is online, and it is at this point that the
HCO is in a position to
manage customer expectations and educate patients about
products and services
offered. The biggest challenge when dealing with patients
online lies in the HCO’s
ability to control the conversation. Information posted by
people other than the
HCO’s designated employees may be misleading, false, or
defamatory.
6. Eventually, patients will interact with the HCO or healthcare
practitioner in person.
As with online interactions, healthcare employees need to
manage patient expec-
tations and educate patients about processes in which they are
about to become

involved. In any organization, there will be service failures
where patients clearly
did not receive the promised care or did not receive the care in a
timely fashion. This
Summary & Resources
difference between service expectations and actual service
delivery is known as the
service gap. HCOs need to have procedures in place to satisfy
and retain patients for
the future consumption of their products and services.
7. As previously noted, the first interaction a potential patient
has with an HCO is often
through the HCO’s website. Thus, it is extremely important for
an HCO to have an
effective website that is easy to navigate and provides
information helpful to the
patient. This chapter lists twelve considerations for creating an
effective website.
The two most important considerations for an HCO are deciding
on the objective of
the website (drive customers to call the HCO, educate patients,
build image, and so
forth) and hiring a professional web designer.
Key Terms
customer relationship management
(CRM) Managing relationships with existing
customers to support long-term profitability.
frontline employees Personnel at an HCO
who initially interact with a patient, such as

admissions clerks, receptionists, and triage
nurses.
healthcare social media sites Social net-
work sites that are dedicated to the display
and exchange of healthcare information.
individual adoption stages The stages that
individual consumers move through when
they are adopting a new product.
marketing agency An external supplier
that functions as an outside contractor for
its clients’ marketing activities, such as web-
site design, promotional campaigns, public
relations, etc.
service gap The difference between the
service expected and the customer’s per-
ceived service quality.
service script The expected sequence of
events and outcomes in a particular setting.
social media policy Guidelines set up
to develop and monitor postings in social
media of both organizational and per-
sonal data that may be detrimental to the
organization.
website design The process of developing
and maintaining an organization’s website,
including the information displayed on the
website and the links that connect to addi-
tional information or websites.

1. Explain the product life cycle concept. How does the need to
attract new customers
influence promotional messages about a product during the
stages of its life cycle?
2. How would an organization go about establishing a CRM
process?
3. Why do most promotional media used by an HCO try to drive
the patient or potential
patient to that HCO’s website?

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