He points out that downstream competitive advantage comes from outside of the company, from the customers and other external stakeholders. In order to compete and win downstream he calls for a shift in focus to downstream efforts such as how you define your “competitive set, influence customers’ purchase criteria, innovate to solve customer problems, and build advantage by accumulating customer data and harnessing network effect.” Professor Dawar asks readers to “rethink” traditional strategy pillars and move thinking downstream to where competitive advantage is outside of the firm and accumulative, to where focus is on customer needs and “…your position relative to their purchase criteria.” This becomes a space where you work to define how the market perceives your offering and markets are driven by shifts in this regard, instead of by product improvements.
Professor Dawar builds his case with a number of examples, including one about Cialis and Viagra. When Eli Lilly was bringing Cialis to market they were facing a critical decision about whether to center marketing strategy on Cialis’s lack of side effects or to establish longer duration as a new criterion. The team at Eli Lilly went with duration, 36 hours for intimacy, which focused on romance over sex. This proved to be critical as duration overtook efficacy to be the key criterion for purchase in the ED market. This decision to redefine the customer’s purchase criteria is of course easier said than done; however, if it is done well the impact can be game changing.
What he does not mention (because his article was published in HBR in December) is that Eli Lilly continues to push the “downstream” opportunity with Cialis by making CONVENIENCE the key overarching focus of Cialis, i.e. “Take it 24/7 now, so you are ready whenever your partner is.” Then, capturing a ton of visual images for the chance opportunities when the partner may be ready.
Most recently, however, Eli Lilly announced on May 28 that they plan to sell Cialis to Sanofi, who will then market this as an over-the-counter drug. Sanofi has a clear strategy to pursue a number of RX-to-OTC conversions (examples: Actonel for osteoporosis, Plavix for stroke and heart attack prevention to compete directly with Bayer 80mg aspirin). They will start with US, EU, Canada and Australia, to be ready for the OTC brand conversion as soon after the product expires as possible. We think this latest development by Sanofi is an even stronger example of downstream marketing than the examples he gives of Eli Lilly.
Professor Dawar also notes that if you are a late market entrant you can determine who your competitors are, and whether or not to compete directly or through differentiation. In regards to being able to choose competitors and not just being stuck with competitors, Professor Dawar argues that this approach is determined or influenced by three decisions: “how you position your offering in the mind of the customer, how you place yourself vis-à-vis your competitive set within the distribution channel, and your pricing.”
In addition, when you are downstream you can choose to market your offering in a way that does not associate you with competition, which may be an advantage especially in areas with less differentiation. The key is then to establish dominance on the criterion for purchase, which then makes it hard for “me too” products to compete with you. Food for thought against generics (branded or otherwise) who need the Rx market leader to create the leadership position to drive THEIR value for them as the lower-cost me too, unless they have other value they can drive.
Another area for downstream marketing strategy to make an impact, is in innovation of market activities and tools. Professor Dawar points out how during the 2008-2009 financial crisis, Hyundai choose a risk reducing marketing approach versus the cash back offers and dealer incentives that others were offering. They did this by allowing the buyer to return their purchase if they lost their income or job within a year of that purchase. Huge sales soon followed and clearly demonstrated the impact of this downstream strategic marketing innovation.
Professor Dawar does a good job of pointing out that if you expect strategy to be determined upstream then you are clearly missing big opportunities that you can impact downstream. So, clear your mind and open up to the downstream possibilities that will drive value and competitive advantage.
While we like this article for its provocative thoughts about “downstream marketing” we caution the reader not to be impressed just because it has been published in Harvard Business Review. Rather than hard data backing his hypotheses, he has selected examples that prove his point. However, we probably could find just as many (and many better) examples of creating market opportunity via “upstream” marketing. We also want to caution against adopting his definition of “upstream” marketing when speaking about healthcare market creation. In the healthcare market specifically, upstream marketing does NOT refer to ‘vertical integration’, e.g. controlling production from beginning to end. It refers to epidemiology – what causes a person to become at risk of a disease or poor health that later, in a “downstream” stage, becomes acute and/or chronic disease that costs a lot to control and manage. More and more today, governments are beginning to take the adage, “An ounce of prevention is worth a pound of cure”. Hence the global growth of preventative health, and in industry, vaccines.
To us, “upstream marketing” in health care IS good strategy for many companies, as well, engaged in nutrition, or for those who know that the number of people with early stages of the disease who should and could be treated earlier represents a huge market opportunity. The classic example was Merck launching Fosamax – redefining the diagnosis of osteoporosis as being about bone density, not about bone density post-fracture. Another present-day example is “pre-diabetes”. The company that can get governments to be more aggressive about treating for pre-diabetes is a HUGE opportunity, also what really is needed for patients. Imagine if they said to patients (as they did when Herceptin was first approved for reimbursement), “To get access to cancer medications, first you have to let the disease progress to metastatic stages!” The analogy is the same for diabetes. However, to be a truly effective upstream marketing strategy, companies also will have to demonstrate the impact on improved outcomes working with providers and their patients to achieve nutritional and exercise improvements along with medical support.
So don’t be overly impressed by this article. Be cautious in using the term downstream marketing the way Prof. Dawar uses it as it could be extremely misleading within the healthcare industry, resulting in your overlooking or not also considering the opportunity of the true meaning of upstream healthcare marketing strategy.
Review by Barri Blauvelt and Aaron Carpenter, Innovara, Inc.
