The Challenge in Marketing for Drug and Agricultural Chemicals

The Challenge in Marketing for Drug and Agricultural Chemicals A. B. CLOW

Downloaded by 80.82.77.83 on May 9, 2018 | https://pubs.acs.org Publication Date: June 17, 1959 | doi: 10.1021/ba-1959-0024.ch001

American Cyanamid C o . , 30 Rockefeller Plaza, New York, Ν. Y.

Drug and agricultural chemical producers will have to fight two wars during the next 10 years. One is with domestic competitors; the other lies in the international field. Foreign competition must be met on its own grounds by establishing foreign operations. On the domestic scene, one of the foremost challenges lies in the barrier created by government statutes. Another challenge, obso lescence, is sure to haunt every drug and agricul tural chemical marketing man in coming years. Patent expirations pose yet another problem. Finding and training better salesmen will be a seri ous challenge as marketing assumes an increasingly complex and demanding role. Rising costs, more over, must be balanced with a realistic price policy. In agricultural chemicals three special problems— dealing with present farm surpluses, future needs of an expanding population, and changing farm ing methods—will be faced.

D u r i n g t h e next 10 y e a r s the d r u g a n d a g r i c u l t u r a l c h e m i c a l m a n u f a c t u r i n g i n d u s t r i e s m u s t fight t w o w a r s . O n e is a c o n t i n u a t i o n of t h e domestic b a t t l e w i t h a group of k e e n c o m p e t i t o r s w h o w i l l h a v e b u t one p u r p o s e : t o t a k e o u r entire business a w a y f r o m u s — y o u r s a n d m i n e — i f t h e y c a n . T h e second a n d f a r m o r e serious w a r is one t h a t s t a r t e d i n earnest some y e a r s ago i n t h e i n t e r n a t i o n a l field a n d has n o w extended to b o t h p o l i t i c a l a n d economic b a t t l e grounds. T h i s is the w a r w h i c h m a y affect n o t o n l y our businesses b u t our entire e c o n o m y as w e l l as our society. F o r several y e a r s a f t e r the l a s t great w a r , t h i s c o u n t r y w a s i n a p o s i t i o n of l e a d e r s h i p i n the p r o d u c t i o n a n d d i s t r i b u t i o n of d r u g a n d a g r i c u l t u r a l spe c i a l t i e s , as w e l l as m a n y p r o d u c t s t h a t m i g h t be classed as c o m m o d i t i e s i n these t w o fields. Pharmaceuticals I n recent y e a r s , h o w e v e r , for reasons such as t h e great increase i n the m a n u f a c t u r i n g pace a n d the t e c h n o l o g i c a l c a p a c i t y of s u c h p r e w a r producers as B r i t a i n , G e r m a n y , I t a l y , a n d J a p a n , w e h a v e been l o s i n g m a r k e t s n o t o n l y i n these c o u n t r i e s , b u t also i n lesser developed areas, as w e l l as w i t h i n our o w n 3 CHEMICAL MARKETING IN THE COMPETITIVE SIXTIES Advances in Chemistry; American Chemical Society: Washington, DC, 1959.


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ADVANCES IN CHEMISTRY SERIES

c o u n t r y . T h e seriousness of t h e foreign c o m p e t i t i v e s i t u a t i o n i n p h a r m a c e u t i cals c a n n o t be f u l l y s h o w n b y e x a m i n i n g t o t a l i m p o r t s a n d exports. T h e f o r m e r is r e l a t i v e l y s m a l l , h a v i n g a m o u n t e d to $15,000,000 i n 1958. H o w e v e r , t h e p e c u l i a r m a r k e t s t r u c t u r e of the c h e m i c a l i n d u s t r y is s u c h t h a t t h e offering of b u t a s m a l l q u a n t i t y of a g i v e n p r o d u c t q u i c k l y tends t o d r i v e prices d o w n w a r d . W i t h no p a s t source of s u p p l y l o y a l t i e s , a foreign s u p p l i e r m u s t r e l y o n a l o w e r p r i c e t o enter a m a r k e t . So as n o t t o lose business the domestic p r o ducer meets the p r i c e . T h i s is f o l l o w e d b y s t i l l lower offerings a n d so on d o w n w a r d . I c a n cite some d r a m a t i c examples t o i l l u s t r a t e t h i s t r e n d . I n 1949, p - a m i n o s a l i c y l i c a c i d s o l d f o r $15 a p o u n d . T o d a y t h e p r i c e is $3.40 a p o u n d . p - A m i n o s a l i c y l i c a c i d is used as a d r u g i n the t r e a t m e n t of tuberculous patients. I n 1954, t h i a m i n e h y d r o c h l o r i d e w a s s o l d for $100 per k i l o g r a m . I t is n o w a v a i l a b l e f r o m foreign producers a t $21 p e r k i l o g r a m . I do n o t k n o w w h a t other domestic p r o d u c e r s ' costs a r e , b u t I c a n s a y t h a t o u r c o m p a n y c a n n o longer m a n u f a c t u r e t h i s p r o d u c t a n d sell i t w i t h a n y p r o f i t a t $21 per k i l o g r a m . I n 1957, f o l i c a c i d w a s offered at $1.20 per g r a m . A t present i t is offered b y t w o A m e r i c a n producers a t 440 per g r a m i n c o m p e t i t i o n w i t h t h e J a p a n e s e p r o d u c t a v a i l a b l e a t a c o n s i d e r a b l y lower p r i c e . I n J a p a n , however, t h e p r i c e is f r o m 45 t o 500 p e r g r a m . M a n y other examples c o u l d be c i t e d . T h e effect of the p r i c i n g p o l i c i e s of J a p a n e s e a n d D a n i s h s u l f a d i a z i n e producers h a v e caused w o r l d prices t o d e c l i n e b y n e a r l y 7 5 % i n t h e l a s t few y e a r s . Some o f these prices are c o n s i d e r a b l y l o w e r t h a n domestic costs. T h e net effect of t h i s c o m p e t i t i o n w i l l be g r a d u a l l y t o d r y u p domestic sources of s u p p l y f o r p r o d u c t s so affected a n d m a k e us dependent u p o n foreign sources. P e r h a p s the difference i n o u r w a g e scales is the m a i n reason for these p r i c e i n r o a d s . H o w e v e r , w e s h o u l d l o o k a t ourselves. H a v e w e done a n o u t s t a n d i n g t o t a l m a r k e t i n g j o b ? I f n o t , does t h i s n o t present one of our greatest challenges i n t h e y e a r s t o come? W e h a v e reaped good p r o f i t s f r o m exports i n the p a s t . H a v e w e r e i n v e s t e d a sufficient p o r t i o n of those p r o f i t s a b r o a d , so t h a t w e c o u l d be i n a p o s i t i o n t o fight o u r foreign c o m p e t i t o r s o n t h e i r o w n grounds, a n d u s i n g t h e i r o w n rates a n d rules? I s e r i o u s l y d o u b t w h e t h e r a sufficient n u m b e r of c o m p a n i e s h a v e done so. I t h i n k t h e y m u s t do so i n t h e f u t u r e . Y o u m i g h t a s k w h y a n y o n e s h o u l d w i s h t o see greater c o m p e t i t i o n develop i n t h e i r i n d u s t r y . T h e r e are a t least t w o reasons: F i r s t , i f w e do n o t h a v e operations i n the m a i n p r o d u c i n g countries we w i l l g r a d u a l l y be forced o u t of t h e i r m a r k e t s ; second, a n d f a r m o r e i m p o r t a n t , w i l l be our d i s p l a c e m e n t i n t h e lesser developed countries. I n these areas, we h a v e a l r e a d y begun t o b a t t l e t h e new a n d s i n i s t e r g i a n t — R u s s i a . H e r e w e h a v e a n o b l i g a t i o n t h a t goes b e y o n d i m m e d i a t e p r o f i t . A g r i c u l t u r a l c h e m i c a l s m a k e for greater a v a i l a b i l i t y of food. D r u g s m a k e for better h e a l t h . I f w e c a n h e l p a l l e v i a t e t h e p a i n s of h u n g e r a n d disease i n the lesser developed countries of the w o r l d , do w e not m a k e h a p p i e r people? I f w e c a n b u i l d operations i n those c o u n t r i e s , d o w e n o t help t h e i r economic p l i g h t ? W i l l not h e a l t h y , o c c u p i e d people t e n d t o resist t h e p o l i t i c a l m i r a g e offered b y R u s s i a ? C a n a single c o m p a n y do t h i s j o b ? C e r t a i n l y not. B u t I believe t h a t v e r y m a n y companies e x p a n d i n g i n foreign c o u n tries m a y w e l l , w i t h i n the next decade, p r o v i d e t h e c a t a l y t i c influence t o preserve o u r w a y of l i f e , our s o c i e t y , a n d our t y p e o f e c o n o m y , i n m a n y sections of t h e w o r l d — n o t the least of w h i c h is r i g h t here a t home. T h i s is w h y I believe t h a t CHEMICAL MARKETING IN THE COMPETITIVE SIXTIES Advances in Chemistry; American Chemical Society: Washington, DC, 1959.


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DRUG AND AGRICULTURAL CHEMICALS

there s h o u l d be greater i n t e r n a t i o n a l c o m p e t i t i o n , based o n n a t i v e p r o d u c t i o n i n the c o u n t r y where the m a r k e t exists. T h e B o g g s B i l l , c u r r e n t l y p e n d i n g before t h e H o u s e of R e p r e s e n t a t i v e s , w o u l d p r o v i d e i n c e n t i v e f o r p r i v a t e A m e r i c a n c a p i t a l t o go a b r o a d , a n d t o promote t h e economic g r o w t h of t h e free n a t i o n s of t h e w o r l d . I t is a t a n g i b l e r e c o g n i t i o n of b o t h a great need a n d a r e a l i s t i c w a y t o serve i t . E s t a b l i s h i n g foreign operations w i t h s t a n d a r d p r o d u c t s i s , of course, e x t r e m e l y difficult. F o r t u n a t e l y , i n t h e d r u g a n d a g r i c u l t u r a l fields w e h a v e a n area where specialties c a n often p r o v i d e t h e open door a n d t h e p r e l i m i n a r y b r e a t h i n g s p e l l t o get s t a r t e d . T h i s i s n o t a m a r k e t i n g challenge, b u t i t d e f i n i t e l y is a challenge t o o u r associates i n research. T h e p r a y e r of e v e r y p e d d l e r i s , " P l e a s e give m e t h a t necessity w h i c h n o b o d y else c a n find o r c o p y . " T h i s p r a y e r is e s p e c i a l l y apropos f o r t h e j o b I h a v e o u t l i n e d . S o m u c h f o r foreign challenges. T h e r e a r e a l s o a n u m b e r o f obstacles f a c i n g us here a t home. O n e of t h e foremost lies, I t h i n k , i n t h e b a r r i e r s created b y g o v e r n m e n t statutes. N o n e of t h e m w i l l m a k e o u r domestic, or f o r t h a t m a t t e r , our i n t e r n a t i o n a l j o b a n y easier. S o m e of t h e m m a y m a k e p a r t of i t i m p o s s i b l e . I n t h e d r u g a n d a g r i c u l t u r a l fields w e n o w h a v e v e r y r e s t r i c t i v e procedures for f e d e r a l clearance of a new p r o d u c t . I believe t h a t a n y concern p l a c i n g a new p r o d u c t o n t h e m a r k e t h a s a definite m o r a l r e s p o n s i b i l i t y t o i n v e s t i g a t e t h o r o u g h l y t h e safety of t h a t p r o d u c t before i n t r o d u c i n g i t . I t is also s o u n d business sense t o do so. B u t t h e j o b of m e e t i n g some of o u r government's r e q u i r e m e n t s h a s become so expensive a n d t i m e - c o n s u m i n g t h a t research f o r n e w p r o d u c t s i n some fields w i l l no longer be e c o n o m i c a l l y j u s t i f i e d . I f t h i s s h o u l d be t h e r e s u l t , t h e p u b l i c w i l l d e f i n i t e l y b e t h e loser. Government Marketing Challenges I n A u g u s t 1953, after e x h a u s t i v e s t u d y , t h i s c o m p a n y a p p l i e d t o t h e p r o p e r a u t h o r i t i e s f o r use of t h e a n t i b i o t i c A u r e o m y c i n as a p r e s e r v a t i v e i n fresh p o u l t r y . T h e d a t a w e s u b m i t t e d filled s e v e r a l v e r y l a r g e v o l u m e s . A c c o m p a n y i n g the d a t a were affidavits f r o m m a n y of t h e l e a d i n g c l i n i c i a n s i n t h e c o u n t r y t h a t the residue of A u r e o m y c i n r e m a i n i n g o n p o u l t r y , u p t o 7 p . p . m . , w o u l d be i n significant from a h u m a n toxicity standpoint. A n i n d i v i d u a l w o u l d have to eat 314 p o u n d s of c h i c k e n t o h a v e a d r u g i n t a k e e q u i v a l e n t t o / \ of a n o r m a l d a i l y t h e r a p e u t i c dose. E v e n w i t h a l l t h e d a t a s u b m i t t e d , i t t o o k 2 y e a r s t o o b t a i n clearance o n i t s use o n c h i c k e n s , u p o n s u b m i t t i n g d a t a o n m a n y m o r e c l i n i c a l a n d l a b o r a t o r y t r i a l s . T h e t o t a l cost reached i n t o t h e six-figure c a t e g o r y . W i t h a l l of t h i s I agree. x

B u t t h e n w e a s k e d f o r clearance o n t h e p r o d u c t ' s use t o preserve fish, where t h e residue m i g h t be 4 t o 5 p . p . m . I n a l l cases, l i t t l e or n o residue w o u l d r e m a i n after p r o p e r c o o k i n g . T h i s clearance r e q u i r e d 3 / y e a r s m o r e , w i t h countless a d d i t i o n a l submissions of d a t a . T h e clearance w e n o w h a v e , h o w e v e r , s t i l l does n o t i n c l u d e processed o r filleted fish. T h e o n l y possible q u e s t i o n , as i n o u r p o u l t r y a p p l i c a t i o n i s t h i s , " W i l l χ p a r t s p e r m i l l i o n of A u r e o m y c i n i n a p o r t i o n of y o u r d a i l y d i e t p r o v e t o be t o x i c ? " I f i t d i d n o t a t 7 p . p . m . i n p o u l t r y , h o w c o u l d i t a t 4 t o 5 p . p . m . i n fish? S h o u l d i t t a k e 3 y e a r s t o o b t a i n such a n answer? I f a l l o u r t o t a l costs i n o b t a i n i n g these clearances c o u l d be t a b u l a t e d , I believe t h e y w o u l d be greater t h a n o u r gross sales t o date. C a n we continue research i n fields where b a r r i e r s of t h i s t y p e are set before u s ? 1

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I n o b t a i n i n g clearance o n a n e w insecticide n o one questions t h e d e m a n d s CHEMICAL MARKETING IN THE COMPETITIVE SIXTIES Advances in Chemistry; American Chemical Society: Washington, DC, 1959.

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t h a t i t s use s h o u l d n o t p r o v e t o x i c a t the levels a t w h i c h i t is t o be used. B u t i s i t necessary t o p r o v e t h i s o n a r a d i s h , t h e n a t u r n i p , n e x t a cabbage, a n d so o n ? I n m e n t i o n i n g t h e a b o v e difficulties, I s p e a k s t r i c t l y as a m a r k e t i n g m a n . T h e r e m a y be s o u n d scientific reasons w h y some p r o d u c t s s h o u l d be d e l a y e d i n r e a c h i n g t h e m a r k e t p l a c e . C e r t a i n l y I believe t h a t o u r g o v e r n m e n t officials are e n d e a v o r i n g t o c o m p l y w i t h t h e statutes b y w h i c h t h e y a r e c o n t r o l l e d . B u t i f w e as m a r k e t i n g m e n a r e a s k e d t o s u p p o r t research i n c e r t a i n fields, a n d i f w e a r e charged w i t h t h e r e s p o n s i b i l i t i e s of m a r k e t i n g n e w p r o d u c t s f o r food a n d h e a l t h i n the c o m i n g 60's, t h e n , t h e i n c r e a s i n g d i f f i c u l t y i n o b t a i n i n g f e d e r a l clearances presents us w i t h a f o r m i d a b l e challenge. S o m u c h f o r g o v e r n m e n t a l challenges. W h a t o t h e r obstacles a r e there w h i c h w e m u s t fight a g a i n s t i n t h e c o m i n g y e a r s ?


Obsolescence Obsolescence w i l l s u r e l y h a u n t e v e r y d r u g a n d a g r i c u l t u r a l m a r k e t i n g m a n i n t h e y e a r s t o come. B e t w e e n 1948 a n d 1958, p h a r m a c e u t i c a l m a n u f a c t u r e r s i n t r o d u c e d 4829 n e w p r o d u c t s — 3 6 8 6 n e w c o m p o u n d s , a n d 1143 n e w dosage forms. T h i s i s a n average of one new p h a r m a c e u t i c a l per d a y , a n d a l m o s t e v e r y new one i s i n t e n d e d t o m a k e a n o l d one obsolete. I f t h i s c o n t i n u e s — a n d c o n t i n u e i t m u s t — a m a r k e t i n g t e a m m u s t be q u i c k t o recognize a p r o d u c t change a n d be q u i c k t o change i t s m a r k e t i n g s t r a t e g y . Patents I n a d d i t i o n t o obsolescence, t h e g r i m specter of t h e e x p i r a t i o n of patents w i l l be w i t h u s . D u r i n g t h e 60's, t h e m a j o r i t y of t h e i m p o r t a n t s u l f a d r u g a n d a n t i b i o t i c patents w i l l expire. M a n y of o u r present i m p o r t a n t insecticides w i l l also be freely a v a i l a b l e t o a l l interested m a n u f a c t u r i n g p l a n t s . C e r t a i n l y m u c h of t h i s p r o t e c t i v e loss w i l l be t e m p e r e d b y n e w p r o d u c t s s u p e r i o r t o those b e c o m i n g a v a i l a b l e . I do n o t k n o w h o w others p l a n t o meet t h i s , b u t I suppose we h a v e a challenge t o be o n t h e r i g h t t e a m w i t h t h e r i g h t p r o d u c t s a t t h e r i g h t t i m e . A t least o u r l i v e s w i l l be h a p p i e r i f w e d o so. Better Salesmen T h e r e i s n o d o u b t t h a t , i n t h e y e a r s a h e a d , m a r k e t i n g w i l l assume a n i n c r e a s i n g l y c o m p l e x a n d d e m a n d i n g role a n d t h a t i t w i l l need m e n e q u a l t o t h e j o b . O n e of the serious p r o b l e m s w i l l be t o find, t r a i n , a n d develop better sales men. T o g e t h e r , the p h a r m a c e u t i c a l houses t o d a y e m p l o y 16,000 s a l e s m e n — d e t a i l m e n — w h o s e p r i n c i p a l j o b is t o c a l l o n doctors. I t is n o t u n u s u a l f o r a single doctor t o receive v i s i t s f r o m as m a n y as s i x or seven salesmen a week. Office hours a r e short a n d doctors a r e e x t r e m e l y b u s y m e n . M u c h as t h e y m a y w a n t t o , t h e y s i m p l y do n o t h a v e t h e t i m e t o see a l l salesmen. T h o s e t h e y w i l l see are t h e ones w h o c a n a n s w e r t h e i r questions, w h o k n o w t h e i r c o m p a n y ' s p r o d u c t s , w h o c a n h e l p t h e d o c t o r b y p r o v i d i n g t h e i n f o r m a t i o n h e w a n t s . I n short, good salesmen. I n a d d i t i o n t o f a c e - t o - f a c e s e l l i n g , p h a r m a c e u t i c a l houses h a v e a l m o s t u n a n i m o u s l y c o m m i t t e d themselves t o elaborate d i r e c t m a i l c a m p a i g n s , to t h e extent t h a t t h e average A m e r i c a n doctor receives s o m e t h i n g l i k e 4000 pieces of e x p e n s i v e l y p r o d u c e d a d v e r t i s i n g a y e a r . A s p r o d u c t i o n costs increase, a n d

CHEMICAL MARKETING IN THE COMPETITIVE SIXTIES Advances in Chemistry; American Chemical Society: Washington, DC, 1959.

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as the net effectiveness of each a d v e r t i s e m e n t is w a t e r e d d o w n b y sheer n u m bers, a clear challenge seems t o present i t s e l f : t o find a better, more efficient w a y to a d v e r t i s e . O u r i n d u s t r i e s — a n d t h i s includes a g r i c u l t u r a l c h e m i c a l s as w e l l as d r u g s — h a v e a h i g h l y scientific base. E v e r y a d v e r t i s i n g m a n , therefore, has a t r u s t to present h i s wares to his m a r k e t i n a m a n n e r w h i c h w i l l do c r e d i t to t h e scientific group w h o s u p p o r t h i m . F a l s e c l a i m s , m i s l e a d i n g c o m p a r i s o n s , n o n s u p p o r t e d d a t a c a n b r i n g d i s c r e d i t n o t o n l y o n t h e p r o p a g a t o r , b u t on t h e entire i n d u s t r y as w e l l . W h e n such practices a p p e a r we m u s t do e v e r y t h i n g w i t h i n our power to see t h a t t h e y are e r a d i c a t e d . I f we do n o t , t h e v e r a c i t y of our o w n efforts w i l l soon be questioned. O u r p r o m o t i o n a l expenditures w i l l produce n e g a t i v e results. Some b u y e r s m a y be fooled for a t i m e , b u t I believe t h a t i t is b u t a short t i m e before t h e t r u t h is k n o w n a n d a d r a s t i c reverse of t h e t e m p o r a r y u p w a r d sales c u r v e greets t h e t r i c k y one. Agricultural Chemicals I n t h e r e a l m of a g r i c u l t u r a l c h e m i c a l s , three v e r y s p e c i a l challenges w i l l face the m a r k e t i n g m a n . O n e is posed b y t h e present surpluses of a g r i c u l t u r a l p r o d u c t s , a n d t h e A d m i n i s t r a t i o n s ' p r o g r a m f o r e l i m i n a t i n g t h e m . T h e second is t h e l o n g - t e r m need for e x p a n d i n g a g r i c u l t u r a l o u t p u t t o feed t h e g r o w i n g p o p u l a t i o n . A t h i r d is represented b y t h e g r a d u a l changes t h a t are t a k i n g place i n the c h a r a c t e r of f a r m s a n d i n f a r m i n g methods. I n recent y e a r s , b y reason of t h e a g r i c u l t u r a l s u p p o r t p r o g r a m enacted b y the Congress, t h e F e d e r a l G o v e r n m e n t has s u p p o r t e d t h e prices of c e r t a i n basic f a r m c o m m o d i t i e s f a r a b o v e t h e p r i c e w h i c h c o u l d be secured for these p r o d ucts i n a free m a r k e t . A t t h e s a m e t i m e t h e G o v e r n m e n t r e s t r i c t e d t h e acreage w h i c h m i g h t be p l a n t e d i n a n effort t o a v o i d o v e r p r o d u c t i o n . T h i s p r o g r a m has f a i l e d . U n d e r t h e i n c e n t i v e t o produce, f a r m e r s h a v e w o r k e d t h e i r l a n d more i n t e n s i v e l y t h r o u g h increased a p p l i c a t i o n of a g r i c u l t u r a l c h e m i c a l s , t h r o u g h t h e use of i m p r o v e d seeds, a n d the m e c h a n i z a t i o n of f a r m i n g methods.

Figure I. Farm output, past trend, and projected needs in 1975 (1947-^9 = 100) Source. U. S. Department of Agriculture



8


T h i s has caused the y i e l d s per acre to soar a n d has offset reductions i n a c r e age. O n e c a n n o t b l a m e the f a r m e r , because n a t u r a l l y one w o u l d expect h i m to m a k e e v e r y effort t o m a i n t a i n or increase his income. T h e present A d m i n i s t r a t i o n has recognized t h i s p r o b l e m a n d has a p p a r e n t l y d e t e r m i n e d t h a t the o n l y w a y t o e l i m i n a t e surpluses ie to reduce the prices at w h i c h f a r m c o m m o d i t i e s are s u p p o r t e d , at the same t i m e r e m o v i n g some of the r e s t r i c t i o n s on acreage. A l t h o u g h , i t seems u n l i k e l y t h a t the A d m i n i s t r a tion's p r o g r a m w i l l be a p p r o v e d b y the present Congress, s u c h r e m o v a l of the i n c e n t i v e t o m a i n t a i n y i e l d s o n reduced acreage c o u l d r e s u l t i n a decreased use of a g r i c u l t u r a l c h e m i c a l s . T h i s w i l l c a l l for efforts o n our p a r t t o c o n t i n u e to a d v a n c e the e d u c a t i o n of f a r m e r s b y i n f o r m i n g t h e m of w h a t we k n o w t o be t r u e , t h a t , except i n r a r e instances, the use of f e r t i l i z e r s is f a r b e l o w t h e o p t i m u m use t o achieve m a x i m u m profit. F r o m the s t a n d p o i n t of surpluses, h o w ever, w e are a g a i n p r e s e n t i n g the G o v e r n m e n t w i t h greater o u t p u t s . A r e there i n t e r n a t i o n a l m a r k e t i n g means b y w h i c h t h i s p r o b l e m c a n be a l l e v i a t e d ? T o the i n d i v i d u a l or group w h o produces the answer s h o u l d go the " A g r i c u l t u r a l O s c a r " f o r the 1960's. F o r t u n a t e l y , w e c a n l o o k f o r w a r d to a c o n t i n u e d p o p u l a t i o n g r o w t h a n d to f u r t h e r gains i n our s t a n d a r d of l i v i n g i n h e l p i n g t o solve t h i s p r o b l e m . B a s e d o n a D e p a r t m e n t of A g r i c u l t u r e a n a l y s i s , f a r m o u t p u t w i l l h a v e t o be exp a n d e d b y 30 t o 3 5 % b y 1975 t o f u l f i l l the n a t i o n ' s increased r e q u i r e m e n t s . T h i s l o n g range o u t l o o k also c a l l s for the c o n t i n u e d e d u c a t i o n of the f a r m e r s , so t h a t increased y i e l d s m a y be secured on a t o t a l acreage w h i c h is t o be l i m i t e d , i f n o t b y g o v e r n m e n t r e g u l a t i o n , a t least b y the a m o u n t of t i l l a b l e l a n d a v a i l a b l e i n the c o u n t r y . T h e recent t r e n d t o w a r d the merger of s m a l l f a r m s i n t o l a r g e r enterprises, c o u p l e d w i t h t h e increased m e c h a n i z a t i o n of f a r m s , m a k e s i m p e r a t i v e m a j o r efforts t o i m p r o v e the efficiency of t h e operations. W a s t e f u l m e t h o d s c a n n o t be t o l e r a t e d i n a large u n d e r t a k i n g w i t h o u t i n c u r r i n g e x o r b i t a n t costs. A g r i c u l t u r a l c h e m i c a l s c o n s t i t u t e a m a j o r f a c t o r i n p r o m o t i n g increased efficiency on the f a r m . A t the same t i m e , the customer for these p r o d u c t s is b e c o m i n g a n i n f o r m e d s p e c i a l i s t , a t e c h n i c a l m a n , often a business executive w i t h considerable r e s p o n s i b i l i t y . T o be successful, a s a l e s m a n w i l l h a v e t o speak h i s language. Prices S t i l l a n o t h e r i m p o r t a n t challenge t h a t w i l l s u r e l y be w i t h us has t o do w i t h p r i c e a n d p r i c i n g . W h a t has h a p p e n e d d u r i n g the p a s t decade t o t h e s e l l i n g prices of drugs a n d a g r i c u l t u r a l c h e m i c a l s ? T h e y h a v e n o t t e n d e d t o increase n e a r l y as m u c h as prices of t h e goods m a d e i n other i n d u s t r i e s . I n t h e l a s t decade the o v e r - a l l index of wholesale prices of i n d u s t r i a l goods has r i s e n b y 2 2 % — t o p i c k a f a m i l i a r a n d specific i t e m , a u t o m o b i l e prices were u p a l m o s t 4 0 % . B u t o v e r the same p e r i o d , f e r t i l i z e r prices g a i n e d 7 % , p h a r m a ceutical preparations only 3 % , and drug and pharmaceutical b u l k material prices a c t u a l l y d r o p p e d more t h a n 5 3 % . 1958 prices t h r o u g h o u t t h e c h e m i c a l i n d u s t r y a v e r a g e d a b o u t 6 % over 1948, a s m a l l e r increase t h a n i n a l l b u t t w o of the other 12 i n d u s t r i e s i n c l u d e d i n t h e g o v e r n m e n t p r i c e index. O t h e r costs h a v e also been r i s i n g d u r i n g the p a s t 10 y e a r s — w a g e s , r e search, s e l l i n g , a n d t r a n s p o r t a t i o n . T h a t l a s t i t e m represents t w o different challenges t o businessmen. I n c o n t r a s t t o t h e 6 % rise i n the s e l l i n g prices of the c h e m i c a l i n d u s t r y since 1948, f r e i g h t rates a n d t r a n s p o r t a t i o n e q u i p m e n t


CLOW—MARKETING:


9

costs h a v e gone u p between 3 8 % for a i r freight a n d 1 3 0 % for p a r c e l post rates. W e a l l c a n see t h e need for economies a n d i n g e n u i t y i n t h e face of s u c h cost increases, b u t I see another more subtle challenge here. W h i l e we i n the c h e m i -


iNoec

mocx

Figure 2. Ten-year price change for wholesale industrial and selected chemical prices, 194ft-1958 (Index 1948 =100) Source. Bureau of Labor Statistics

c a l i n d u s t r y , a n d some of our colleagues i n other sectors of t h e p r i v a t e e n t e r prise e c o n o m y h a v e i n the p a s t , a n d a g a i n t o d a y , been accused of t h e heinous c r i m e of r a i s i n g prices t o offset h i g h e r costs, t h e services o p e r a t e d , r e g u l a t e d or s u b s i d i z e d b y the F e d e r a l G o v e r n m e n t h a v e been able to e s t a b l i s h some s u b s t a n t i a l p r i c e boosts i n a m o r e or less r o u t i n e m a n n e r . I40p 120

-

100

-

80

-

+

I30%|

60 — + 60% + 52%

40 — 20

-

+

38%

+ 42%

+ 46%

ol Air Rates

Tor* Cor Rtntol

Roil Rotes

Sttom Ship Frtight Rates

Truck Freight Ratss

Parcel Post Rotts

Chemical Pricss

Figure 3. Comparison of increases in freight rates and transportation equipment costs with price increases in the chemical industry Source.

A C C C O Traffic Department and U. S. Bureau of Labor Statistics


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T h e s e cost a n d s e l l i n g p r i c e trends raise some danger signals for t h e y e a r s a h e a d , e s p e c i a l l y for t h e c o m i n g recessions. W e h a v e h a d three recessions since the w a r . Some of t h e economists w i t h w h o m I h a v e t a l k e d believe t h a t we w i l l p r o b a b l y h a v e three s i m i l a r recessions w i t h i n the next 10 y e a r s . I t is d u r i n g s u c h recession periods t h a t some m a r k e t i n g teams become j i t t e r y a n d press the p a n i c b u t t o n . I t t a k e s a l o n g t i m e to recover f r o m the side effects of such an ailment. U n q u e s t i o n a b l y , we h a v e m a n y challenges a h e a d of us. N o t a l l of t h e m w i l l be s o l v e d . I believe t h a t the m a j o r i t y of the p r o p h e t s , however, w i l l s a y t h a t enough of t h e m w i l l be s o l v e d t o g i v e us, i n t h e c o m i n g c o m p e t i t i v e 60's, t h e greatest m a r k e t s w e h a v e ever e n j o y e d .


The Challenge in Marketing for Drug and Agricultural Chemicals

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