Extended-form Case Study

Hearts and minds: how McKesson gained market share via insight into customer wants and needs

Published on January 31, 2023   12 min

A selection of talks on Strategy

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0:00
Hello, I'm Ruth Stevens, Professor of Marketing at NYU Stern. Welcome to this talk on hearts and minds, how McKesson gained market share via insight into customer wants and needs.
0:16
McKesson is the largest pharmaceutical distributor in North America. They faced a daunting challenge in their institutional market, that's hospitals and health systems. How to grow market share in a setting where first, wholesale pharmaceuticals were really treated like a commodity and, second, they really had little to no differentiation from competitors. Let's look at this case where ultimately McKesson succeeded in capturing an extra five percent of market share in a three-year period by starting with the most fundamental principle of marketing: listen to, understand and focus your marketing on the hearts and minds of your customers.
1:04
Here's the situation in 2010. US hospitals and health systems have traditionally struggled to contain costs while delivering more and better patient care. When it comes to hospital's expenses, the second largest cost for most organizations after labor are the medicines used and dispensed throughout the hospital system. This necessary cost category is often managed by administrators who believe the only option for optimization is through price negotiation on contracts. McKesson was frustrated by years of negotiations with hospitals that constantly shrunk their margins, but they came up with a fresh idea. Several years earlier, McKesson had hired a team of former hospital pharmacy directors who had developed tools to optimize a pharmacy's business processes. For example they had a tool for easier access to Medicare 340B funds available for indigent patient drug reimbursement. They also had developed a "drug spend trend" reporting tool that allows hospitals to better forecast their drug demand and adjust their purchasing. These solutions reduce excess inventory and waste and save costs, while at the same time speeding up the dispensing process and reducing the possibility of errors. In short, they help find significant hidden value in the hospital pharmacy.

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