Retailers from several types of sales outlets recently voiced their opinions of the leading over-the-counter drug marketers in a new industry study from Kline & Company. While many of the top OTC companies received high marks in areas like product quality, assortment, and packaging, they were also criticized in other areas by outlet managers and corporate retail executives.
"Retailers are fairly happy with most of the OTC leaders in general, but there's definitely room for improvement in a number of areas, and for some drug companies more than others," says Laura Mahecha, industry manager for Kline's Healthcare Practice.
Kline's study, 'retailer perceptions of OTC drug marketers' 2004, compiled survey results from more than 300 managers and executives in the drugstore, food store, and mass-merchandiser trade classes to rate the top ten OTC drug marketers in the US according to 23 different attributes or services.
The retailers' ratings place the OTC companies into three tiers. Johnson &Johnson/McNeil and Procter & Gamble comprise the first tier, and both companies exceeded the industry average in a number of categories, including product innovation, speed to market, and inventory levels.
Companies in the second tier either registered average ratings in most of the 23 categories or displayed variable performance that evened out their overall scores. The companies in the third tier were perceived by retailers to fall short of the other industry leaders in several categories.
Retailers' opinions of marketers' campaigns to switch products from prescription to OTC status were a key factor in the rankings, says Mahecha. Procter & Gamble received a big boost from its success in switching Prilosec OTC, and its promotional materials, speed to market, and product quality were widely commended by survey respondents.
In contrast, several retailers noted that Schering-Plough's launch of Claritin OTC was poorly executed. Although some respondents praised the company's promotion, pricing, and coupon efforts, many grumbled about delays in receiving inventory after the product was switched. Insufficient inventory to meet demand was another common complaint.
"The retailers are well aware of how important these switch drugs are - for both them and the marketers," says Mahecha. "They've seen the switches help increase foot traffic in the stores and encourage dialogue between customers and pharmacists, which often improves customer loyalty.
Ultimately, this translates into bottom-line results for the drug companies as well," she added.
"With the growth of private-label product sales, retailers will have even more influence on OTC profit margins, so it's important for drug marketers to be aware of how they are perceived by the people who put their products in the hands of consumers," says Mahecha.