Agilent Technologies Life Sciences and Chemical Analysis Group. Marketing Audit. Trisa Robarge. May 4, 2004

Transcription

1 Robarge Audit Agilent Technologies Life Sciences and Chemical Analysis Group Marketing Audit Trisa Robarge May 4, 2004

2 Robarge Audit Executive Summary Agilent Technologies Life Sciences and Chemical Analysis is one of four Agilent business groups. Its target markets include customers in many industries, performing a number of research, investigative, or commercial pursuits. Life Sciences and Chemical Analysis has seen considerable growth over the past year, and is forecasted to continue this growth in 2004 and 2005, due to a strong presence in the growing gene expression market and focus on innovative end-toend solutions for customers. The following marketing audit evaluates critical components of the Life Sciences and Chemical Analysis group. The report highlights are shown in the tables below.

3 Robarge Audit Environmental Analysis Economic Considerations Market Segments Technology Environmental Analysis The Chinese economy is expected to remain strong in the midst of policy changes and a shift toward capitalism. United States economic concerns stem from upcoming presidential election and expiration of key tax cuts. Agilent also needs to watch for increased demand in the European Union as the union adds members and the Sixth Framework Programme expands funding for research and development. Japan, while a strong overall component of Agilent sales in 2003, continues to struggle economically, and is a minor player for LSCA. Agilent stock prices continue on an upward trend, suggesting successful implementation of marketing strategies and efficiency improvements. LSCA segments customers primarily along application types. These applications are listed here. By segmenting customers according to application, LSCA can develop end-to-end solutions and provide single-source vendor services. Additional segmenting according to geographic location and company size also allows LSCA strategic opportunities. Innovative new products, improvements to existing products, and reinvestment of profits into Agilent Laboratories allow LSCA to provide new solutions in emerging markets.

4 Robarge Audit Marketing Evaluation Objectives Strategies Tactics Four P s Sales Marketing Evaluation LSCA objectives align with corporate objectives to provide application-oriented solutions to customers. Based on this marketing audit, the framework is in place to pursue this objective, and it is consistently targeted in all areas of the audit. Strategies for achievement of the key marketing objectives include development of customer relationships, understanding needs, and providing solutions. Strategies are clear and evidenced in performance. The tactics applied toward completion of objectives and strategies are appropriate for the market segments and for LSCA. Additional tactics to consider would be increasing visibility through product placement opportunities in user groups, via smaller newsletters, and increased use of public relations. The Four P s of LSCA s marketing mix are being appropriately utilized and developed. However, more attention should be paid to developing replacement technologies for products nearing obsolescence. The group is focusing R&D on new products in new product lines, while only seeking to add value through service to existing products. Competitors may take advantage of this oversight and gain market share as a result. The sales force and customer service organization is continually improving its customer focus through training initiatives and recognition of the vital role of pre-, during, and post-sales support in the life sciences business.

5 Robarge Audit Recommendations Few issues were revealed in the areas included in this audit. However, another key area that may hold cause for concern is that of the competitors. Because LSCA is first to market with several products, it can gain market share. However, it will need to continually add value, improve product quality, and provide excellent service in order to do so. Additionally, the focus by LSCA on emerging markets increases its vulnerability in mature segments. Efforts need to be made to address the potential loss of market share by differentiation of products through service, developing replacement products for those nearing obsolescence, and cultivating strong customer relationships. Overall, the Agilent brand and LSCA are strong, and, as LSCA enters the end of the second quarter of FY 2004, continued pursuit of current strategies is recommended.

6 Robarge Audit Table of Contents 1. Executive Summary a. Environmental Analysis Table b. Marketing Evaluation Table c. Recommendations 2. Agilent Technologies Overview 3. Environmental Analysis a. United States Economy b. Chinese Economy c. Global Perspective d. Market Segments i. Table 1: Customer Types and NAICS Numbers ii. Table 2: Breakdown of Market Segments e. Technology 4. Marketing Evaluation a. Marketing Objectives b. Strategies i. Table 3: List of LSCA Strategies c. Tactics d. Four P s of Marketing i. Products and Services ii. Price iii. Place and Distribution iv. Promotion 1. Figure 1: Selected Advertisements from recent journals e. Sales 5. Conclusion 6. References

7 Robarge Audit Agilent Technologies Overview Agilent Technologies, Incorporated (Agilent) was created in 1999 following a spin-off from parent company Hewlett Packard as a part of that company s strategic effort to focus Hewlett Packard on its computer and computer peripherals products. This allowed Agilent to grow the measurement and testing portion of the company. The branding of Agilent was accomplished with a significant budget ($100 million) via a unique combination of targeted advertising and public relations. It included the purchase of advertising in the Wall Street Journal during the U.S. Open as well as television advertisements (Freeman, L. 2000). Agilent in 2004 consists of four main business units, all dedicated to their mission statement: Agilent's solutions and technologies revolutionize the way people live and work... dreams made real. (Corporate website). These business groups are Test and Measurement, Automated Test, Semiconductor Products, and Life Sciences and Chemical Analysis. An additional group, Agilent Labs, provides research and development tools for all sectors of the company. For the purpose of this audit, the focus will be on the Life Sciences Chemical Analysis (LSCA) group. An overview of environmental and marketing considerations allows an evaluation of current and past operations, offers areas of strength, and provides opportunities for strategic growth.

8 Robarge Audit Environmental Analysis United States Economy The United States economic forecast for 2004 and 2005 includes potential for continued growth in GDP in 2004, with a downturn expected in 2005 (2004, April, United States of America Country Report, p. 6). This growth is predicted to stem largely from a rise in business investment. This investment is hoped to stem from companies increasing capacity, instead of just implementing productivity improvements or replacing outdated equipment (2004, April, p. 7). Furthermore, with election year politics affecting the U.S. economy, the improvements predicted for 2004 are likely to be transient in nature. The US Dollar will continue to be weak against the Euro and the yen. The possibility that the US government [will become] more trade-protectionist in its outlook in the run-up to the November presidential election (2004, April, p. 7) means that companies doing global business, such as Agilent, need to take particular care to assess domestic and international economic factors. The downturn in the telecom industry and additional financial regulations imposed upon businesses in the United States and other countries has compelled Agilent to evaluate its marketing practices. According to Larry Holmberg, senior vice president of Marketing, Sales and Customer Support, this has required a coordinated effort to articulate how [Agilent s] products bring real business results and [focus] on coordinating efforts across geographies in order to streamline customer interfaces (2004,). Agilent will need to follow the state of the US economy and adjust its forecasts accordingly.

9 Robarge Audit Chinese Economy The relationship between Agilent and China dates back to an historic arrangement between the Chinese government and Hewlett Packard in As such, Agilent is positioned to take advantage of the growth in China s economy. China s chemical analysis market has maintained a double digit yearly growth rate for several years (2003, April 21, para. 5). Recent findings also indicate that China s pharmaceutical agency will see double-digit growth to The pharmaceutical market, valued at $20 billion, is expected to see gains in new drug development, including genetic engineering, as production efficiency improves and companies move from state to stock ownership (Miller, D. 2004, para. 1). The Economist Intelligence Unit country report for China indicates that China s GDP will see continued strong growth, estimated at 8.7% in 2004 and 8% in 2005 (2004, April, p. 5). Fueled by policy and political changes, the scientific sector may eventually benefit from the influence of Premier Wen Jiabao s concept of scientific development. However, it is not expected that far-reaching policy changes will be enacted. Instead, existing policy goals will be theoretically formalized (2004, April, p. 5). Imports grew strongly in 2003, slightly outpacing exports. The entry of China in to the World Trade Organization will contribute to a decrease in China s trade surplus from $35.4 billion in 2002 to $21 billion by 2005 (2004, April, p. 6). Several Agilent business units are focusing efforts on China, including the semiconductor testing business. The LSCA business unit also manufactures equipment specifically designed for the Chinese market, including a gas

10 Robarge Audit chromatograph (2003, April). Agilent continues to increase its presence in China, by relocating manufacturing facilities and developing educational and technical opportunities. Agilent Chairman and CEO Ned Barnholt describes the global strategy for Agilent as a whole: As markets continue to shift overseas, exporting into those markets is not a strategy for success; we need on-the-ground presence in R&D and manufacturing, as well as sales and support functions in order to remain competitive (2004, para. 4). Global Perspective The economies of the European Union and Japan are important considerations for LSCA, in addition to China and the United States. The European Union added ten members on May 1, 2004, and has seen its power and influence grow considerably. Scientific leaders within the union have created a European Research Area, to expand research from within member countries to encompass the entire union, and the Sixth Framework Programme provides funding for researchers within this area (European Union Webpage, 2004). Japan, which accounted for 11% of total sales for Agilent Technologies in 2003, also continues to be an important market ( Products and Operations). Market Segments According to Kerin, Berkowitz, Hartley, and Rudelius (2002), Market segmentation involves aggregating prospective buyers into groups that (1) have common needs and (2) will respond similarly to a marketing action (p. 239). Agilent LSCA segments its markets according to analysis type, size,

11 Robarge Audit geographical location, and customer needs. Life science businesses account for approximately 40% of LSCA s business, while chemical analysis accounts for the remaining 60%, with growth in the entire market expected to be approximately 8% annually (Agilent Technologies Fact Book, 2004, p.17). The chemical analysis segment looks to remain stable, although higher demand in China is improving profitability and sales in that sector. The profits from chemical analysis are reinvested in research and development of targeted growth segments in gene expression and proteomics (Agilent Fact Book, 2004, p. 17). The NAICS classifications for some of the representative customers are shown in Table 1. Segmentation along the lines of analysis type works well for providing solutions to LSCA customers. Table 2 provides a more complete breakdown of market segments based on analysis type. Additionally, geographic locations affect segments. As previously discussed, Agilent developed and manufactures an instrument designed for a specific market. Company size also affects segmentation, as do customer needs. Since LSCA product demand is derived from the service that the business customer provides their ultimate clients, Agilent seeks to understand the business needs of its customers. A holistic product offering approach to cover the full spectrum of needs is one route to evaluate. To pursue this strategy, Agilent needs to look at segments accordingly. LSCA recently formed a new business unit, Integrated Biology Solutions, to focus on developing solutions targeted for this market. Its intent, according to the Senior Director for science and technology strategy, is to develop deeper insights into how the science,

12 Robarge Audit applications, and market are changing by developing intimate customer relationships (Saunders, B. 2004, para. 4).

13 Robarge Audit Table 1: Agilent Customer Business Types and NAICS Numbers (Sources: Agilent Fact Book and US Census NAICS webpage, Company Name Business Type NAICS Number Aventis Pharmaceuticals 3254, Exxon Severn Trent Laboratories Petrochemical Environmental Testing (lab), (manufacturing), (refineries)

14 Robarge Audit Table 2: Industry Segments (Source: Agilent LSCA Corporate Website) Agriculture Basic Research Disease Discovery Drug Development Drug Discovery Drug Manufacturing/QA/QC Gene Expression Genotyping Nucleic Acid Analysis Proteomics

15 Robarge Audit Technology As indicated in the market segments section, Agilent reinvests profits from the life sciences and chemical analysis businesses into development of new technology in two key markets: gene expression and proteomics. It has recently released new technology in the form of a whole human genome microarray, which makes Agilent one of the first manufacturers to do so. LSCA also updated one of its gas chromatograph/mass spectrometry (GC/MS) systems in October of 2003, the first significant change to the design since its introduction. Another new software product, Cerity, was also released, targeting pharmaceutical manufacturers, in January of 2004 (2004, January 29. para. 1) Through its Agilent Labs sector, Agilent is developing new technologies across all of its business units. However, they are not investing considerable R&D into existing instrumentation. With instrumentation nearing the end of its product life cycle, they are instead electing to offer services, provide promotional upgrades, and improve the product warranty system. Marketing Evaluation Objectives of Marketing Agilent LSCA marketing objectives are clearly stated in a number of locations. The unit has charged itself with providing application-focused solutions including instruments, software, consumables and services that enable customers to identify, quantify, and analyze the physical and biological properties of substances and products (Agilent at a glance, 2004, p. 2). The objectives of the business unit align well with those of the overall corporation.

16 Robarge Audit Strategies Table 3 lists the five key strategies of LSCA as they seek to maintain market share and grow new business in innovative, developing areas of research. Additionally, Agilent Technologies corporate strategy notes that the company focuses on high-growth market opportunities in the communications, electronics and life sciences industries (Agilent Fact Book, 2004, p. 3). Therefore, the marketing strategies of LSCA align with corporate strategy, allowing the group to allocate resources effectively to tactically pursue the objectives through application of these strategies.

17 Robarge Audit Table 3: LSCA Strategies (Source: Agilent Fact Book, p. 17) Target high-growth opportunities in the life sciences such as gene expression and proteomics and become a leading solutions provider Grow market share of key system platforms in core markets Focus on growth opportunities in chemical markets while maximizing our efficiency and profitability Bring new technologies and products to market faster Leverage key technologies and strategic relationships to develop complete workflow- and application-based solutions for customers that include software, supplies, and services

18 Robarge Audit Tactics To pursue the stated strategies and achieve corporate and business group objectives, LSCA employs a variety of tactical approaches. These include careful application of the marketing mix, concentration on sales and service support, and expanding philanthropic offerings to increase the visibility of the brand. The marketing mix and sales and service support will be expanded further later in this audit. However, it is important to note that Agilent Technologies makes a concerted effort to fund programs and research. LSCA recently announced the donation of $150,000 in microarray kits to Rhodes College for use in undergraduate studies (Biotech Week. 2004, para. 1). By providing the platform on which students learn, Agilent gives itself a tactical advantage in the branding war. The student is the future worker who may be in charge of purchasing decisions, and positive experience with Agilent at an early stage builds a foundation for brand loyalty. The Four P s Products and Services LSCA provides a wide variety of products and services. The products range from microarrays and bioanalyzers to chromatographic columns and other consumables. By offering consumables along with capital equipment, Agilent is able to provide one-stop shopping for many of its customers. Services include support and maintenance of capital equipment, technical support for continuous troubleshooting and problem resolution, and training services to enhance

19 Robarge Audit customer proficiency with the equipment and techniques. Services are typically offered contractually, with different levels of support available depending on cost of the contract and age of the instrument (Agilent corporate webpage). LSCA also works with other manufacturers to offer systems solutions when Agilent is not able to supply the entire solution to a customer. These relationships include an arrangement with Gerstel for thermal desorption units, among technologies. Click here to view a table of all of Agilent s strategic alliances for the LSCA business group. This vast network of alliances greatly increases the depth and breadth of Agilent s product offerings. However, Agilent is also careful to ensure that its brand is not damaged by unhealthy alliances. The corporate website makes it clear that Agilent does not necessarily endorse the solutions offered through these channel partners. The information listed has been provided by the independent Alliance Partners. To the best knowledge of Agilent, these companies offer the types of products described, and the support services indicated. Agilent has not tested and does not endorse or certify the solutions. The companies are solely responsible for their products and support services. Agilent disclaims any and all liabilities for and makes no warranties, expressed or implied, with respect to these products, including, without limitation, the implied warranties of merchantability and fitness for a particular purpose. Distribution of these products, or information concerning these products, does not constitute Agilent's endorsement of the products, the companies or support services. Product information is subject to change without notice. (Source: retrieved May 3, 2004) Price Agilent pricing is available on the website, and through quotations. Pricing is also a factor in competitive bid situations, and LSCA retains considerable

20 Robarge Audit leeway on setting prices in order to maintain market share, particularly for mature products such as its GC/MS product line. Although the company does not release information about pricing strategies for new products, it would make sense for Agilent to utilize a comparable product pricing technique. This tool gives the marketer an idea of the price a market would bear based upon historical data. However, as Agilent continues to develop new technology, it may not have historical data upon which to base pricing decisions. Therefore, LSCA may need to use other techniques. It will be important to ensure that the value of the product is included in the overall pricing strategy. Place LSCA products are distributed through direct sales, via a personal sales force. Agilent also maintains distribution channels, both domestic and internationally. This applies to capital equipment as well as the consumables business. Customers may place orders for some pieces of capital equipment over the website, or they may elect to go through the distributor. Additionally, with governmental and large businesses, purchases take place via a bid process, with a purchasing agent having final say over which product will be purchased. However, recent research has shown that although scientists may utilize the Internet to research products, they prefer traditional methods of actually purchasing the product. A survey conducted by Bioinformatics LLC found that nearly 50% of all orders for laboratory products [take place] via traditional methods such as by phone, fax, mail, or despite the technological investment of life science suppliers to make the online purchasing process faster

21 Robarge Audit and more efficient (Martin, A. 2004, para. 1). Many of those surveyed indicated that the reason behind this reliance on the traditional methods stems from limitations set by their organization s purchasing procedures, reservations about hidden costs, and difficulty in navigating the supplier s Web site (Martin, A. 2004, para. 4) Promotion In 2003, Agilent hired Euro RSCG Tatham Partners to provide advertising agency services. These services will include advertising, interactive, direct marketing, and public relations for all of Agilent s business groups (Kirk, J. 2003, para. 16). Euro RSCG Tatham is then charged with creating the bulk of the promotional mix for LSCA along with the other business groups. Promotion of LSCA products and services takes place through advertisements in appropriate journals. The following advertisements were taken from Nature Biotechnology and LC/GC (Figure 2). They reflect a strong overall branding theme, both in the style of the ad and the copy that is included.

22 Robarge Audit Figure 1: Agilent advertising, from selected journals (Note: these advertisements are copyright 2004 Agilent Technologies; however, if I were writing this audit from the perspective of an Agilent Marketing executive, I would have authorization to use them, which is why they are represented here.)

23 Robarge Audit Bioinformatics LLC analyzed the importance of the promotional mix in marketing to scientists in the life sciences in In their findings, the market researchers noted that scientists believe that the single most important factor in drawing attention to a print advertisement is substantial technical content. (Martin, A. para. 3). A subsequent evaluation found that these same scientists also felt that ads are a convenient way of becoming an informed consumer (Martin, A. 2003, para. 4). Euro RSCG Tatham, as Agilent s advertising agency, needs to ensure that it examines these factors as it creates ad campaigns, both in print and online, for LSCA. Additional promotional tools used for LSCA include presences at trade shows, sales promotions, and direct marketing campaigns. Current sales promotions can typically be found on the company website, and include discounts, bundled product offerings, and other promotions based on geographic location as well as target market. Customers can sign up for an e-newsletter, which allows LSCA to provide timely promotional materials, advise customers on applications, and invite customers to upcoming events, seminars, or live web training. However, a large sales force also provides a significant amount of the promotional mix for LSCA. Sales Agilent maintains a large sales force that it trains to support its customer focus strategy. This training includes electronic seminars in techniques to target and keep valuable customers. The intent of this particular seminar was to improve the visibility of high-value service usage, assess the success of

24 Robarge Audit marketing campaigns, understand poor uptake of new services, and stop high usage customers from deserting [the company s] network (Agilent eseminar, 2003). Along the same lines, a new focus on streamlining customer interfaces is providing opportunities for the sales and support staff at Agilent to coordinate efforts at customer retention and satisfaction (Holmberg, 2004, para. 3). Research has shown that life sciences customers place high value on sales support, both before, during and after the sale. This consultative approach to biotechnology sales allows the scientist or researcher to feel confident that the company is interested in providing solutions, and it appeals to the customers who are classified as product sensitive (Martin, 2003b, para. 1). The primary concern of these customers is not price or performance but rather the effect the purchase of a scientific product will have on his or her research (Martin, 2003b, para. 1). Purchasing assistance and technical support after the sale are also important functions provided by the sales force. Technical support from the sales representative is particularly important when the product purchased requires indepth training (Martin, 2003b, para. 6). This customer focus allows Agilent to provide a robust, end-to-end gene expression solution, which stems from a more intimate customer relationship (Saunders, 2004, para. 5). Ensuring that the sales force is dedicated, welltrained, and is capable of providing pre-, during- and post-sales support will play a critical role in LSCA achieving customer satisfaction and the resultant brand loyalty.

25 Robarge Audit Conclusion As seen in the most recent corporate reports for Agilent Technologies, the company as a whole is experiencing a turnaround in profitability and growth. LSCA innovation provides a significant portion of the impetus behind this growth, as the company targets critical markets, focuses on countries experiencing improving research and scientific environments, and continues to utilize economies of scale to provide solutions across multiple disciplines. New initiatives spurred by executives charged with growing market share have focused LSCA on customers. Training programs for the sales force, production of quality goods, and creating innovative products to fill gaps all indicate that Agilent is well on the road toward achieving its corporate and business group objectives. Continuous improvement through reinvestment of funds will allow Agilent to stave off competitive forces and capitalize on its brand, strong market position, and large customer base.

26 Robarge Audit References Agilent in China. (2002, April). Retrieved April 12, 2004 from Agilent Technologies at a Glance. (2004) Retrieved April 15, 2004 from Agilent Technologies becomes first global company to introduce gas chromatograph made in and specifically for China. (2003, April 21). Retrieved April 27, 2004 from Agilent Technologies Corporate Report. (2003). Retrieved April 20, 2004 from Agilent Technologies eseminar: Sales & Marketing: Target and keep those valuable customers. (2003, March 4). Retrieved May 1, 2004 from Agilent Technologies Fact Book. (2004). Retrieved April 15, 2004 from Agilent Technologies introduces industry-first features in pharmaceutical software for drug quality assurance and control (Press release). (2004, January 29). Retrieved April 27, 2004 from Barnholt, N. (2004, April 19). Ned Barnholt provides observations on today s global world. Retrieved April 30, 2004 from

27 Robarge Audit html. European Union Research Webpage. (2004) Freeman, L. (2002, November 6). Fischer helps make Agilent s dreams come true (electronic version). B to B, Chicago, 85(19), 46. Retrieved May 1, 2004 from ProQuest database. Holmberg, L. (2004, April 26). Larry Holmberg, senior vice president of Agilent s Sales, Marketing and Customer Support organization, discusses the company s customer-first priorities. Retrieved April 27, 2004 from features/2004apr26_customers.html. Hoover s Online Corporate Report, Agilent Technologies (Stock Ticker: A). Accessed via University of Phoenix proxy server. Kerin, Berkowitz, Hartley, & Rudelius. (2002). Marketing. McGraw-Hill Companies. Chicago. Kirk, J. (2003, January 31). Chicago Tribune Marketing Column (electronic version). Retrieved May 1, 2004 from ProQuest database. Martin, A. (2004, March 17). Survey finds that technology-savvy scientists prefer to buy products in traditional ways. Biotech Press. Retrieved May 1, 2004 from

28 Robarge Audit Martin, A. (2001, July 19). Study examines the importance of Promotional mix in the life science market (Press release). Retrieved May 1, 2004 from Martin, A. (2003, June 25). Sales Reps can boost sales for biotech tools companies (Press release). Retrieved May 1, 2004 from Martin, A. (2003, August 18). Life scientists surveyed on effective print advertising (Press release). Retrieved May 1, 2004 from Microarray technology donated to Rhodes College. (2004, April 29). Biotech Week. Retrieved May 1, 2004 from via University of Phoenix proxy server. Miller, D. (2004, April 7). China s pharmaceutical market shows continued growth as country moves toward Western-style healthcare financing model. Press Release, Golden Triangle, Inc. Saunders, B. (2004, April 20). Agilent executive discusses opportunities in the growing gene expression market. Retrieved April 27, 2004 from ml.