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5/22/2008
IRI and NACDS Study Identifies Growing Retailer Concerns Over Healthcare Market Volatility
Gaps in Manufacturer Support Leave Healthcare Retailers Vulnerable in Rx-to-OTC Switches, Withdrawals, Recalls, and Other Unplanned Events; Improved P
Chicago – May 13, 2005 — According to findings from a recent IRI/National Association of Chain Drug Stores (NACDS) survey of healthcare executives among the country’s leading retailers, current manufacturing planning processes and support levels for Rx-to-OTC (over-the-counter) switches and drug recalls and withdrawals are sub-par, leaving retailers vulnerable to lost sales and unhappy customers.
The survey results were unveiled in the wake of a myriad of recent unplanned and unprecedented events within the healthcare arena. Such events include the multi-billion dollar global withdrawal of Vioxx®, the FDA’s review and subsequent denial of OTC status for the cholesterol lowering drug Mevacor® and pending state legislation requiring behind-the-counter status for pseudoephedrine.
IRI, the leading global provider of enterprise market information solutions for the Consumer Packaged Goods (CPG), retail and healthcare industries, conducted the Retail Executive Survey in partnership with NACDS to assess the industry’s present ability to protect and grow revenue and profits and identify opportunities to improve planning processes whenever these events arise.
The survey, which included feedback from many leading retail chains across all major CPG retail channels, is a key component of a broader study that analyzed sales trends across a multitude of categories and consumer segments that have already been or are projected to be affected by recent and potential industry events.
The Retail Executive Survey revealed a growing need in the healthcare industry for a new planning approach. Specifically, respondents identified four key gaps that are resulting in lost sales and leaving consumers without the products and information they need. The areas are Multi-Dimensional Forecasting; Sustained Trade Promotion Support; Timely, Direct Communication; and Demand-driven Inventory Management.
Multi-Dimensional Forecasting
An inability to accurately predict consumer behavior after switches, recalls and withdrawals was voiced as a major concern for retail executives, who noted that this deficiency was largely due to a failure to account for other external forces (e.g. changes in third-party reimbursements) that would impact behavior. Manufacturers must be generating sales forecasts that are driven by actual consumption and incorporate promotion/pricing plans that are aligned with supply chain realities, particularly during times of high volatility.
IRI's Consumer-Driven Sales Forecasting™ solution is already offering these capabilities, enabling manufacturers to better understand and use demand to drive performance. The solution uniquely integrates Point-of-Sale (POS) data from multiple sources with marketing, finance and supply chain information to improve forecast accuracy and help manufacturers more effectively react to rapidly evolving market conditions.
Sustained Trade Promotion Support
Regarding promotional efforts, retail executives commended manufacturers for their aggressive post-event marketing plans and merchandising support during the initial product launches of recent Rx-to-OTC switches. However, they also expressed disappointment in the lack of ongoing trade promotion support for most switches.
Timely, Direct Communication
The most significant gap, according to retail executives, exists because of manufacturers’ insufficient communication to both consumers and retailers. Retailers explained that relying on the pharmacist to inform consumers on the issues regarding OTC medications raises a conflict-of-interest red flag and is unrealistic given pharmacist’s other responsibilities and time constraints. Retailers expressed the need for manufacturers to reach out directly to consumers after recalls and withdrawals through advertisements that announce the recall or withdrawal, provide information to help allay fears, and inform consumers of their options. Furthermore, retailers indicated that the time lag and lack of direction in manufacturer’s announcements of recalls or withdrawals to the retailers must be improved.
Demand-Based Inventory Management
In recent major Rx-to-OTC switches, the report also revealed that retailers lost a significant number of sales due to insufficient supply. Manufacturer’s inability to provide an adequate supply of the new OTC solutions resulted in significant frustration for both consumers and retailers, particularly mid-sized, regional chains.
“The healthcare industry’s landscape has evolved significantly over the past two years and today’s players must be fully prepared to react quickly to a rising number of unprecedented events, each requiring strategic management plans and a real-time consumer demand signal. Ensuring that consumers’ needs are met, and that sales across these consumer segments continue to grow, is paramount,” said Bob Doyle, IRI’s senior vice president of Healthcare Solutions. “This study provides a unique perspective by presenting the retailer’s vantage point. The Retail Executive Survey outlines ways that manufacturers and retailers can align their response plans and protect their revenues.”
About Healthcare Solutions from IRI
IRI’s Healthcare Solutions Group provides pharmaceutical, healthcare, and consumer goods companies as well as retailers with consumer intelligence, targeting, and analytic services for the healthcare marketplace. The Healthcare Solutions Group offers a complete suite of retail tracking, consumer panel and analytic-driven products and services under the RxPulse™ brand to help its clients monitor, comprehend, and compete within the rapidly evolving healthcare space.
About IRI’s Consumer-driven Enterprise Management Software Solutions
IRI’s Consumer-driven Enterprise Management Software Solutions for the Consumer Packaged Goods (CPG) industry provide companies the ability to put the insights they have about their consumers to immediate application in driving key business decisions. These solutions provide a unique framework for all phases of planning, performance analysis, and rapid decision making required to optimize brand management, trade promotion, and sales and operations management.
For more information about the study or IRI’s Healthcare Solutions Group, contact Bob Doyle at robert.doyle@infores.com.
About NACDS
The National Association of Chain Drug Stores (NACDS) represents the nation’s leading retail chain pharmacies and suppliers, helping them better meet the changing needs of their patients and customers. NACDS members operate more than 35,000 pharmacies, employ 108,000 pharmacists, fill more than 2.3 billion prescriptions yearly, and have annual sales of over $700 billion. Other members include almost 1000 suppliers of products and services to the chain drug industry. NACDS international membership has grown to include 90 members from 30 countries. For more information about NACDS, visit www.nacds.org.
About Information Resources, Inc.
Information Resources, Inc. (IRI) is the leading global provider of enterprise market information solutions for the CPG, Retail, and Healthcare industries. IRI is the first company to leverage the power of real-time market information, advanced analytic insights, and enterprise performance management technology to improve the profitability and operational effectiveness of the world’s leading CPG, Retail, and Healthcare companies. The Company uniquely provides a total view of the market, enabling maximum business performance throughout the enterprise. IRI's solutions make the consumer-driven, real-time enterprise possible. More information is available at www.infores.com.
Editor’s Note: Vioxx and Mevacor are registered trademarks of Merck & Co., Inc.
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