Factor analysis on marketing mix of online pharmacies – Based on the online pharmacies in China

Abstract

This article introduces the development of the online pharmacies in China and analyzes the marketing mix strategies of product, price, place and promotion, which are widely implemented by online pharmacies (n = 44) in China. The perception and acceptance of consumers toward marketing mix of online pharmacies in China by software SPSS 13.0 is also surveyed in this study. Lastly this article builds a marketing mix model of online pharmacies and derives seven common factors from the 37 marketing mix factors, namely, personal sales and service, payment method channel, price, sales promotion, OTC drugs and health foods, non-drugs and advertising.

Keywords

Online pharmacies marketing mix exploratory factor analysis

Introduction

Development of online pharmacies in China

There are a large number of online consumers in China. Over the past decade, Internet users in China have reached 513 million in total. In 2011, there were 55.8 million new Internet users. The Internet penetration rate increased by 4% and rose to 38.3%. Online shoppers increased by 20.8% and reached 194 million, and accordingly, online payment increased by 21.6% and reached 167 million in 2011.¹

In 2005, China began to implement ‘Provisional Regulations of Drug Transaction Service Approval over the Internet’, which stipulates that only retail chain pharmacies are eligible to apply for setting up an online pharmacy.² The first online pharmacy was set up at the end of 2005, thereafter, 54 online pharmacies were approved by the Provincial Food and Drug Administration by the end of 2011.³ More and more retail chain pharmacies in China began to pay attention to the business model of online pharmacies and actively apply for the qualifications of online pharmacies.

Current situation of marketing mix of online pharmacies in China

Up to the end of 2011, 46 of the 54 qualified online pharmacies in China have started online transactions. These qualified online pharmacies explore online marketing mix actively, and expand online promotion constantly to attract more and more online orders. About 44 of the 46 qualified online pharmacies were selected, and the other 2 were eliminated, which only sold in-house manufactured products. We visited the websites of the 44 qualified online pharmacies and tried to analyze and summarize their online marketing mix strategies of 4Ps (product, price, place and promotion).

Product strategies of the 44 qualified online pharmacies

About 44 qualified online pharmacies sell western medicine, Chinese traditional medicine and sexual products, 43 sell prepared slices of Chinese crude drugs, health foods, cosmetics and toiletries, and medical devices, 36 sell fertility products and 19 sell sundry items. Figure 1 shows the product strategies of the 44 qualified online pharmacies.

Figure 1.

Product strategies of the 44 qualified online pharmacies in China.

Price strategies of the 44 qualified online pharmacies

In total, 44 qualified online pharmacies offer discount, 35 offer membership benefits, 10 offer group purchases and 13 offer coupons. Figure 2 shows the price strategies of 44 qualified online pharmacies.

Figure 2.

Price strategies of the 44 qualified online pharmacies in China.

Place strategies of the 44 qualified online pharmacies

In all, 43 qualified online pharmacies allow online payment, 38 allow bank deposits, 12 allow postal remittances, 37 allow cash on delivery, 17 allow cash-and-carry and 6 allow deposit payment. Figure 3 shows the place strategies of 44 qualified online pharmacies.

Figure 3.

Place strategies of the 44 qualified online pharmacies in China.

Promotion strategies of the 44 qualified online pharmacies

Personal selling and service, sales promotion and advertising were concerned. About 44 qualified online pharmacies offer hotline, 33 offer online service, 5 offer online pharmacists, 11 offer online message, 24 offer health information, 25 offer free delivery, 44 offer free returns; 32 offer sales list, 44 offer hot-sale recommendation, 32 offer new product recommendation, 34 offer brand monopoly; 44 offer animated advertising and 27 offer related websites recommendation. Figure 4 shows the promotion strategies of the 44 qualified online pharmacies.

Figure 4.

Promotion strategies of the 44 qualified online pharmacies in China.

Research methods and questionnaire design

The preceding discussion shows the statistics and analysis of marketing mix of the 44 qualified online pharmacies in China. A questionnaire was designed to explore the consumers’ acceptance for the elements of the marketing mix of online pharmacies which are widely used by the 44 qualified online pharmacies from the consumers’ perspective. Then an exploratory factor analysis was done to build a marketing mix model of online pharmacies.

The questionnaire was based on 5-point Likert scale ranging from ‘Agree’ to ‘Disagree’. The questionnaire included two main sections. One was the consumer survey, whose purpose was to find out the consumer’s Internet experiences, the situation of online shopping and online drug purchases. The other was the elements survey, whose purpose was to find out the consumers’ acceptance for the marketing mix of online pharmacies.

First, the acceptance of consumers for the elements of product (A1 to A11) includes western medicine (prescription drugs), Chinese traditional medicine (prescription drugs), western medicine (OTC drugs), Chinese traditional medicine (OTC drugs), prepared slices of Chinese crude drugs, medical devices, health foods, cosmetics and toiletries, sexual products, fertility products, and sundry items.

Second, the acceptance of consumers for the elements of price (B1 to B6) includes discount, membership benefit, group purchase, and coupon.

Third, the acceptance of consumers for the elements of place (C1 to C8), includes online payment, bank deposits, postal remittances, cash on delivery, cash-and-carry, deposit payment, phone card payments and insurance card payment.

Fourth, the acceptance of consumers for the elements of the promotion (D1 to F3) includes personal selling and service, sales promotion and advertising. Personal selling and service includes hotline, online service, online pharmacists, online physicians, online message, email consultation, health information, free delivery, and free returns. Sales promotion includes sales list, hot-sale recommendation, new products recommendation, brand monopoly, and gifts presentation. Advertising includes animated advertising, email marketing, and related websites recommendation.

Data analysis and factor analysis

Data collection

In China, there are more than 194 million online shoppers, and most of them are young consumers. More and more consumers are keen on online shopping, but few consumers know any online pharmacy and have experience of buying drugs online. We selected some medicine, pharmacy undergraduate and graduate students who are appropriate to be selected as questionnaire respondents, because most of them have medicine background and online shopping experience, and can understand the questionnaires very well.

A total of 500 questionnaires were distributed, and 386 questionnaires were returned, the response rate was 77.2%. 58 questionnaires were eliminated due to data deficiency, the final sample was therefore made up of 328 respondents, and the effective rate was 85.0%. Factor analysis was used to identify the underlying factors.

First the missing value was dealt. Among the 328 effective questionnaires, 35 of them had a small amount of missing data, and the lack rate was 10.7%. Of the 40 items, single item was missing for 4 cases at the most, the maximum missing rate of single item was 1.0%. All of the 13,120 data points, 76 of them was missing, and the missing rate was 0.58%, much lower than 5–10%,⁴ the lack of proportion was somewhat acceptable. The missing data was checked and no significant regularity was found, the data was missing randomly and would not influence the research. Since the miss rate was low, and the data were missing randomly, the effects of different treatment methods of missing values were very similar; the maximum likelihood method would not influence the analysis result very much. So the missing data was dealt by the maximum likelihood method.

Sample frame

About 88% of the respondents had Internet experiences of over 3 years, and 92% of the respondents had experiences of online shopping. The respondents had certain knowledge about medicines and experience of online shopping, so they could respond well for the elements of marketing mix of online pharmacies. In all, 92% of the respondents had never visited any website of qualified online pharmacies in China, and 98% of the respondents had never bought drugs online, which showed that online pharmacies were unusual for most consumers, and the marketing mix of them needed continuous exploration and validation. Table 1 shows the details of the sample frame.

Table 1.

Demographic characteristics of the respondents, N = 393

1. Internet experience
Less than 1 year	5%
1 to 2 year	7%
3 to 4 year	53%
More than 5 year	35%
2. Online shopping experience
Never	8%
Occasional	64%
Often	28%
3. Whether have visited any qualified online pharmacies in China
Yes	9%
No	91%
4. Whether have purchased drug online
Yes	2%
No	98%

Analytical techniques

Analysis of reliability

Reliability analysis (Cronbach’s alpha and Corrected Item Total Correlation, CITC) was conducted to test the reliability of collected data. The alpha coefficient was 0.932, which was considered acceptable as an indication of reliability for basic research.

The CITC of most measured value were higher than 0.4 and decreased after deleting the item which implied the reliability decreases. The CITC values of A1, A2 and A11 were significantly less than 0.4, the alpha coefficient of the dimension increased after deleting A1 or A11, but it did not change after deleting A2. So A1, A2, and A11 were deleted; the CITC values of all measured values were above 0.4, and the alpha coefficient of the dimension increased from 0.778 to 0.819. The internal data consistency significantly improved in the overall data of the questionnaires. The internal consistency also increased from 0.932 to 0.942, which implied that the reliability was better after removing A1, A2, and A11. Table 2 shows the result of descriptive statistics and reliability test.

Table 2.

Result of descriptive statistics and reliability test

The factors of marketing mix of online pharmacies		Consumers’ perception		CITC	Corrected item-total correlation
The factors of marketing mix of online pharmacies		Mean	S.D.	CITC	Corrected item-total correlation
Product					0.778
A1	Western medicine (Prescription)	2.28	1.107	0.263	0.780
A2	Chinese traditional medicine (Prescription)	2.44	1.145	0.309	0.775
A3	Western medicine (OTC drugs)	3.59	1.031	0.446	0.759
A4	Chinese traditional medicine (OTC drugs)	3.51	1.049	0.505	0.752
A5	Prepared slices of Chinese crude drugs	3.57	1.008	0.574	0.745
A6	Health foods	3.90	.943	0.546	0.749
A7	Cosmetics and toiletries	3.88	.992	0.414	0.762
A8	Medical devices	3.47	1.154	0.518	0.749
A9	Sexual products	3.76	.977	0.464	0.757
A10	Fertility products	3.44	1.200	0.540	0.746
A11	Sundry items	3.81	1.209	0.218	0.787
Price					0.906
B1	Discount	4.20	0.856	0.731	0.892
B2	Membership benefit	4.20	0.851	0.784	0.882
B3	Group purchase	4.12	0.993	0.774	0.883
B4	Discount up to certain amount	4.08	0.972	0.793	0.878
B5	Coupon	4.07	0.983	0.745	0.889
Place – Payment					0.896
C1	Online payment	4.34	0.860	0.676	0.884
C2	Bank deposits	4.00	0.983	0.728	0.878
C3	Postal remittances	3.89	1.071	0.722	0.878
C4	Cash on delivery	4.35	0.848	0.576	0.892
C5	Cash-and-carry	3.90	1.060	0.702	0.880
C6	Deposit payment	3.64	1.100	0.691	0.881
C7	Phone card payments	3.71	1.106	0.706	0.880
C8	Insurance card payment	3.99	1.030	0.625	0.888
Promotion – Personnel selling and service					0.892
D1	Hotline	4.34	0.840	0.646	0.881
D2	Online contact staff	4.43	0.783	0.777	0.869
D3	Online pharmacists	4.40	0.843	0.749	0.871
D4	Online physicians	4.33	0.896	0.698	0.876
D5	Online message	4.38	0.815	0.745	0.871
D6	Health information	4.34	0.868	0.557	0.889
D7	Free delivery	4.40	0.826	0.641	0.881
D8	Free returns	4.34	0.918	0.565	0.889
Promotion – Sales promotion					0.914
E1	Sales list	3.80	1.134	0.715	0.908
E2	Hot-sale recommendation	3.65	1.164	0.842	0.882
E3	New commodities recommendation	3.61	1.170	0.852	0.879
E4	Brand monopoly	3.73	1.156	0.783	0.894
E5	Gifts presentation	3.75	1.127	0.711	0.908
Promotion – Advertising					0.704
F1	Animated advertising	3.48	1.139	0.525	0.610
F2	Email marketing	3.47	1.144	0.599	0.509
F3	Related websites	3.92	0.982	0.450	0.696

KMO and Bartlett test

Since there were prerequisites to be obtained in exploratory factor analysis, before proceeding to the results, two tests justifying the appropriateness of exploratory factor analysis were considered: Kaiser–Meyer–Olkin (KMO) test of sampling adequacy and Bartlett test of sphericity. The KMO of the entire questionnaire was 0.901, and the KMO of product, price, place, personal selling and service, sales promotion and advertising were 0.738, 0.830, 0.850, 0.885, 0.870 and 0.644, respectively; all were close to or above 0.7. The p-value of Bartlett test sphericity of entire questionnaire was 0.000, less than 0.001. So the sampling was suitable for factor analysis.

Exploratory factor analysis

Principal component analysis extraction method with orthogonal Varimax rotation was used to determine the factor loading and communalities. The communalities ranged from 0.455 to 0.850, which implied that the variances of the original values were fairly explained by the common factors. After Varimax rotation, 7 factors retained and explained more than 66% of the variance with eight values greater than 1.0. The results of the factor analysis produced a clean factor structure with relatively high loadings for the factors. Most variables had strong loadings on one factor, which reflected that there were minimal cross-loadings, and all factors were independently structured. The higher loadings signaled the correlations of the variables with the factors on which they were loaded. The results showed that the alpha coefficients of the six factors ranged from 0.704 to 0.914, well above the minimum value of 0.50, which was considered acceptable as an indication of reliability for basic research. Table 3 shows the final results of the exploratory factor analysis.

Table 3.

Final results of the exploratory factor analysis

The factors of the marketing mix of online pharmacies	Factor loading	Eigen value	Variance explained	Communalities
Product – OTC drugs and health foods
A3 Western medicine (OTC drugs)	0.855	2.583	6.980	0.778
A4 Chinese traditional medicine (OTC drugs)	0.874			0.830
A5 Prepared slices of Chinese crude drugs	0.749			0.659
A6 Health foods	0.502			0.593
Product – Non-drugs
A7 Cosmetics and toiletries	0.531	2.395	6.472	0.475
A8 Medical devices	0.686			0.553
A9 Sexual products	0.741			0.633
A10 Fertility products	0.751			0.651
Price
B1 Discount	0.712	4.074	11.010	0.674
B2 Membership benefit	0.745			0.745
B3 Group purchase	0.771			0.746
B4 Discount up to certain amount	0.772			0.741
B5 Coupon	0.722			0.692
Place – Payment method
C1 Online payment	0.576	4.412	11.923	0.601
C2 Bank deposits	0.706			0.686
C3 Postal remittances	0.733			0.682
C5 Cash-and-carry	0.704			0.632
C6 Deposit payment	0.734			0.655
C7 Phone card payments	0.765			0.669
C8 Insurance card payment	0.641			0.586
Promotion – Personnel selling and service
D1 Hotline	0.643	5.067	13.696	0.577
D2 Online contact staff	0.780			0.716
D3 Online pharmacists	0.789			0.687
D4 Online physicians	0.744			0.658
D5 Online message	0.744			0.670
D6 Health information	0.623			0.508
D7 Free delivery	0.582			0.646
D8 Free returns	0.635			0.505
C4 Cash on delivery	0.577			0.605
Promotion – Sales promotion
E1 Sales list	0.800	4.051	10.950	0.690
E2 Hot-sale recommendation	0.842			0.795
E3 New commodities recommendation	0.844			0.824
E4 Brand monopoly	0.788			0.726
E5 Gifts presentation	0.704			0.679
Promotion – Advertising
F1 Animated advertising	0.576			1.853	5.009	0.618
F2 Email marketing	0.738	0.675
F3 Related websites	0.679	0.572

After the factor analysis, four dimensions were split into seven factors. We renamed the seven factors according to the variance percentage from high to low: F1: Personal selling and service (13.696%), F2: Payment method (11.923%), F3: Price (11.010%), F4: Sales promotion (10.950%), F5: OTC drugs and health foods (6.980%), F6: Non-drugs (6.472%), F7: Advertising (5.009%). Figure 5 shows the seven influence factors of marketing mix of online pharmacies.

Figure 5.

Seven influence factors of marketing mix of online pharmacies.

Discussion and suggestion

Seven common factors were derived from exploratory factor analysis. From the rotated factor matrix by the exploratory factor analysis, each factor score equation was obtained. Product dimension in the questionnaire was split into two common factors: ‘OTC drugs and health foods’ and ‘non-drugs’. Promotion dimension was divided into three factors: ‘personal selling and service’, ‘sales promotion’, and ‘advertising’. Therefore a conclusion was drawn that ‘OTC drugs and health foods’, ‘non-drugs’, ‘payment method’, ‘price’, ‘personal selling and service’, ‘sales promotion’, and ‘advertising’ are the most important influence factors of marketing mix for online pharmacies.

Strengthening personal selling and service

‘Personal selling and service’ is the first important factor. In personnel sales and service dimension, hotline (0.154), online contact staff (0.208), online pharmacists (0.224), online physicians (0.208), online message (0.194), health information (0.177), free delivery (0.110), free returns (0.181), and cash on delivery (0.109) are high factor score coefficients, and exerted a tremendous influence on this dimension. Based on the score coefficients, the important influence factors are hotline, online contact staff, online pharmacists, online physicians, online message, health information, free delivery, free returns, and cash on delivery.

‘Provisional Regulations of Drug Transaction Service Approval over the Internet’ stipulates that online pharmacy in China should have licensed pharmacists to manage online consultations, and also have the facilities, equipments and control system to keep the contents of consultation.² At present, most qualified online pharmacies offer online consultation, and the consultations are offered by phone or Internet. It is difficult for consumers and supervisors to verify if the consultation services are actually offered by a licensed pharmacist. The consumers may suspect if the consultations are offered by pharmacists and by which pharmacist. Online pharmacies should improve the professional level and credibility of personal services, especially hotline, online contact staff, online pharmacists, online physicians, and online message offered by the professional person and contact staff. Professional services may give consumers professional medication instruction and online shopping guide, and bring a satisfactory online shopping experience for consumers, which can attract consumers to purchase drugs in online pharmacies instead of brick and mortar pharmacies.

Online pharmacies should strengthen the specialization by showing some useful health information on the websites to help consumers acquire general health knowledge. Health information can attract consumers to visit the websites of online pharmacy and increase probability of online purchase.

Online pharmacies should strengthen service support of free delivery, free returns, and cash on delivery. Delivery service and return service influence consumer’s online purchase decision very much. Online pharmacies should as much as possible relieve the expense of delivery and returns, and facilitate the process of delivery and returns, to increase the probability of online drugs purchase.

Perfecting payment method

‘Payment method’ is the second important factor. In payment method dimension, online payment (0.142), bank deposits (0.216), postal remittances (0.233), cash-and-carry (0.216), deposit payment (0.236), phone card payments (0.257), and insurance card payment (0.204) are high factor score coefficients, and exerted a tremendous influence on this dimension. Based on the score coefficient, online payment, bank deposits, postal remittances, cash-and-carry, deposit payment, phone card payment, and insurance card payment are the important influence factors. ‘Payment method’ influences consumer’s online purchase decision very much. Online pharmacies should offer various payment methods, which can meet different payment habits of consumers to increase the probability of online drugs purchase.

Phone card payment is a convenient payment method for consumers although is still not provided by any online pharmacies. Insurance card payment is not allowed by Chinese government because of policy and technology, but it is an important purchase factor for consumers with medical insurance. The high-speed developing period for the online pharmacies in China will come once insurance card online payment is realized.

Reducing price

‘Price’ is the third important factor. In price dimension, discount (0.233), membership benefit (0.242), group purchase (0.275), discount up to certain amount (0.275), and coupon (0.243) are high factor score coefficients, and exerted a tremendous influence on this dimension. Based on the score coefficient, discount, membership benefit, group purchase, discount up to certain amount, and coupon are the important influence factors.

‘Price’ influences price-sensitive consumer’s online purchase decision very much. Online pharmacies have the price advantage of low operating costs and high scale sales, so they can provide more favorable price to attract consumer to purchase drugs in online pharmacies instead of brick and mortar pharmacies or hospital pharmacies. Drugs are special commodities with low price elasticity. Favorable price has little impact on consumer’s online drugs purchase decision compared with non-drugs with high price elasticity, so online pharmacies can lower the price of health foods, cosmetics, sexual products, and fertility products.

Strengthening sales promotion

Sales promotion is the fourth important factor. In sales promotion dimension, sales list (0.279), hot-sale recommendation (0.260), new commodities recommendation (0.254), brand monopoly (0.245), and gifts presentation (0.195) are high factor score coefficients, and exerted a marked influence on this dimension. Based on the score coefficients, sales list, hot-sale recommendation, new products recommendation, brand monopoly, and gifts presentation are the most important influence factors.

Online pharmacies should enhance sales promotion to attract more and more consumers purchase online. Sales list, hot-sale recommendation, and new commodities recommendation can guide and attract consumers to purchase commodities online. Brand monopoly can facilitate consumers to purchase specific brand of commodities, and play a significant advertising effect on the specific brand. Gifts presentation can stimulate commodities purchase. ‘Measures for Supervision and Administration of Drug Distribution’ stipulates that prescription drugs and OTC drugs of class A should not be presented as gift by any pharmacy.⁵ So OTC drugs of class B and other non-drugs can be presented as gifts to consumers.

Strengthening the commodity management

‘OTC drugs and health foods’ is the fifth important factor, In OTC and health food dimension, western medicine (OTC drugs) (0.394), Chinese traditional medicine (OTC drugs) (0.396), prepared slices of Chinese crude drugs (0.319), and health foods (0.166) are high factor score coefficients, and exerted a tremendous influence on this dimension. ‘Non-drugs’ is the sixth important factor. In non-drugs dimension, cosmetics and toiletries (0.239), medical devices (0.351), sexual products (0.400), and fertility products (0.392) are high factor score coefficients, and exerted a tremendous influence on this dimension. Based on the score coefficient, western medicine (OTC drugs), Chinese traditional medicine (OTC drugs), prepared slices of Chinese crude drugs, health foods, cosmetics and toiletries, medical devices, sexual products, and fertility products are the important influence factors.

‘Provisional Regulations of Drug Transaction Service Approval over the Internet’ requires online pharmacies only can sell OTC drugs to consumers.² Most qualified online pharmacies in China sell western medicine (OTC drugs), traditional Chinese medicines (OTC drugs), prepared slices of Chinese crude drugs, health food, cosmetics and toiletries, medical devices, sexual products, and fertility products. Several online pharmacies in China sell sundry items, but based on the results of factor analysis, sundry items are not accepted by many consumers.

Online pharmacies have no specific limitations of commodities sorts compared with brick and mortar pharmacies except prescription drugs, and the commodities sorts can expand without limit. Online pharmacies can as much as increase the health-related commodities to attract the consumers who like one-stop shopping.

Improving the advertising effect

‘Advertising’ is the seventh important factor. In advertising dimension, animated advertising (0.319) email marketing (0.465), and related websites recommendation (0.447) are high factor score coefficients, and exerted a tremendous influence on this dimension. Based on the score coefficient, animated advertising, email marketing, and related websites recommendation are the important influence factors.

The score coefficient of advertising is the lowest factor, which shows that consumers are little influenced by advertising during shopping. Online pharmacies can increase the credibility of advertising, send email advertising toward specific consumers, and recommend useful health-related websites needed by consumers.

Summary

We suggest online pharmacies focus more on OTC drugs and health foods, non-drugs, payment method, price, personal selling and service, sales promotion, and advertising when they design marketing mix strategies.

Footnotes

Funding

Thanks for the Fundamental Research Funds for the Central Universities of China. Thanks for financial support of the University of Macau by the project MYRG119(Y1-L3)-ICMS12-HYJ.

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Provisional Regulations of Drug Transaction Service Approval over the Internet. No. 480 [2005] of Market supervision department of SFDA of China. http://www.sfda.gov.cn/WS01/CL0060/9432.html (accessed 23 March 2012).

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