Why Customer Do NOT buy drugs through the web? December 10, 2008 Rob Brockel Huckjin Lee Sultan Alkauzam Seunghun Seok.

Index Description of the marketing issue to be analyzed using the dataset PEW Data Model Statement and Hypothesis Description of Data Interpretation of the findings Summary and Conclusion

PROLOGUE Online Prescription Drugs (3:37)Online Prescription Drugs Ad – Online Pharmacy : Canada Pharmacy (0:30) Ad – Online Pharmacy : Canada Pharmacy How to save money? (1:29) How to save money? Hazards of Buying Prescription drugs online (June 2007) (2:11)Hazards of Buying Prescription drugs online (June 2007)

Description of the marketing issue Pew Survey Data Cross Sectional Data Single period Disaggregated Data (individual level) Issue to be analyzed. Why Customer Do NOT buy drugs through the web.

Pew Data Classify Variables to categories: usage of computer, the internet. Usage and perception toward search engines Perception on buying drugs on the internet Demographics Restriction on using the net for children. Opinions about the content of the media Channels (the net, TV)

Pew Data Categories are taken in the model: usage of computer, the internet. Usage and perception toward search engines Perception on buying drugs on the internet Demographics

Why Buying drugs interesting ? Drugs market Grew 3.8 Percent in 2007 (sale $286.5 Billion) Huge chance for Pioneer to grow through (3.8% Buy)

Why Buying drugs interesting ? Marketing through the net has boomed last 10 years.

Type of Model Used PEW Data Set Our dependent variable (DO4): Have you ever PURCHASED prescription drugs on the Internet, whether you placed the order yourself or someone else did it for you? Yes or No question – Must use Binary Logistic Model

Model Specification The problem we chose to discuss – why people are more likely NOT to buy prescription drugs online. In our regression analysis we assigned 1 for NO and 0 for YES No being people did not buy drugs online Yes being people did buy drugs online Our independent variables were chosen based on relevance Used a significance level of 0.05

Choosing Independent Variables Originally we went through every variable in the PEW data set to choose which ones we felt were relevant to the decision making process of whether or not to buy drugs online Also included all demographic variables Ran model Looked at significance levels of all variables Continued to run regressions and purge variables until significance level was below 0.05

Independent Variables SE5 Thinking about your own Internet searches…How much of the information you search for online is information that you absolutely NEED TO FIND, for instance to accomplish an important task or answer an urgent question you have? DO1 Switching topics…Have you, personally, ever gone on the Internet to look for information about prescription drugs? DO16 In general, do you think purchasing prescription drugs online is as safe as purchasing them at a local pharmacy, or do you think purchasing them online is LESS safe? DO18 Others argue that people should not be allowed to purchase prescription drugs online because not all online pharmacies are licensed in the United States, and there’s no way to guarantee the safety of drugs that come from other countries. Do you agree or disagree with that argument?

Independent Variables AGE What is your age? HAND Does any disability, handicap, or chronic illness keep you from participating fully in work, school, housework, or other activities, or not? RXD Do you, personally, take prescription drugs on a regular basis, only occasionally, or never? INC Last year, that is in 2003, what was your total family income from all sources, before taxes. Just stop me when I get to the right category… (READ 1-8)

Hypothesis Eight Independent Variables Based on intuition we felt people would be more likely NOT to buy drugs online because of: Safety Lack of Infrastructure Less Income Confidence in Online Search Demographic Variables Overall we feel that currently people will not want to purchase prescription drugs online for the reasons above Familiarity with the internet and computer infrastructure standardization will increase online prescription drug buying over the coming years

Description of Data Total number of Pew data set – 3,938 3,930 data were included in our analysis Dependent Variable DO4: Have you ever PURCHASED prescription drugs on the Internet, whether you placed the order yo urself or someone else did it for you? FrequencyPercentValid PercentCumulative Percent Valid Yes No Total

Description of Data (Independent Variables) SE5: Thinking about your own Internet searches…How much of the information you search for online is information that you absolutely N EED TO FIND, for instance to accomplish an important task or answer an urgent question you have? FrequencyPercentValid PercentCumulative Percent ValidAll, Most, Some, or Very little? Don’t know/Refused Total MissingSystem Total DO1: Switching topics…Have you, personally, ever gone on the Internet to look for information about prescription drugs? FrequencyPercentValid PercentCumulative Percent Valid Yes No Don’t know/Refused Total

Description of Data (Independent Variables) DO16: In general, do you think purchasing prescription drugs online is as safe as purchasing them at a local pharmacy, or do you think purc hasing them online is LESS safe? FrequencyPercentValid PercentCumulative Percent ValidAs safe Less safe (VOL) Depends Don’t know/Refused Total DO18: Others argue that people should not be allowed to purchase prescription drugs online because not all online pharmacies are license d in the United States, and there’s no way to guarantee the safety of drugs that come from other countries. Do you agree? FrequencyPercentValid PercentCumulative Percent ValidAgree Disagree Don’t know/Refused Total

Description of Data (Independent Variables) HAND: Does any disability, handicap, or chronic illness keep you from participating fully in work, school, housework, or other activities, or n ot? FrequencyPercentValid PercentCumulative Percent ValidYes No Don’t know/Refused Total RXD: Do you, personally, take prescription drugs on a regular basis, only occasionally, or never? FrequencyPercentValid PercentCumulative Percent ValidRegular basis Occasionally Never Don’t know/Refused Total

Description of Data (Independent Variables)  INC: Descriptive Statistics NMinimumMaximumMeanStd. Deviation INC Last year, that is in 2003, what was your total family income from all sources, before ta xes. Just stop me when I get to the right category. (READ) Valid N (listwise) 3938 Table 2-8. INC Last year, that is in 2003, what was your total family income from all sources, before taxes. FrequencyPercentValid PercentCumulative Percent Valid Less than $10, $10,000 to under $20, $20,000 to under $30, $30,000 to under $40, $40,000 to under $50, $50,000 to under $75, $75,000 to under $100, $100,000 or more Don't know/Refused Total

Description of Data (Independent Variables) Table 2-9. AGE: Descriptive Statistics NMinimumMaximumMeanStd. Deviation AGE What is your age? Valid N (listwise) 3886

The model The model = (-1.016) (SE5) (DO1) (DO16) + (-0.092)(DO18) + (-0.018)(AGE) (HAND) (RXD) + (-0.3)(INC) + random events BS.E.WaldDfSig.Exp(B) Step 1 a se do do do Age Hand Rxd Inc Constant

Hypotheses validation H1: The less critical your online searches, the less likely you are to buy drugs online. (Prescription drugs are an important purchase) - Coefficient: People who use the Internet for other purposes are more likely to purchase drugs through the Internet than people who don’t - Supported

H2: People who have not gone on the internet to search for prescription drugs are less likely to buy them online. (Lack of confidence in internet searching) - Coefficient: Supported - Importance of experience of going online for information about drugs in accordance with purchasing them online because Hypotheses validation (cont.) ∙ experiences would increase the level of confidence in Internet searching

H3: People who feel that buying drugs online are not as safe are less likely to buy them online. (Less safe) - Coefficient: Supported - The extent to which how safe people feel about purchasing prescription drugs online is considered to be one of the most influential factors in deciding purchase of prescription drugs online Hypotheses validation (cont.)

H4: People who agree with this statement are less likely to buy prescription drugs online. (Less safe) - Coefficient: Supported - People who disagree with allowing purchasing prescription drugs online are less likely to purchase prescription drugs online because Hypotheses validation (cont.) ∙ they believe online drugs are not as safe as those in a local pharmacy

H5: Those who are older are less likely to buy drugs online. (Lack of confidence and skills in searching) - Coefficient: Not supported - The older are more likely to buy drugs online because ∙ they need more drugs due to their health conditions ∙ many Internet education programs provided by government and communities help the older to learn how to use the Internet Hypotheses validation (cont.)

H6: Those who are not handicapped are less likely to buy prescription drugs online. (More mobile) - Coefficient: Supported - They are more likely to purchase drugs online because Hypotheses validation (cont.) ∙ They might take drugs more often ∙ Convenience and low-cost

H7: People who rarely take prescription drugs are less likely to buy them online. (People who don’t buy regularly would want to see a doctor) - Coefficient: Supported - People who take drugs on a regular basis are more likely to buy drugs online ∙ They need to buy drugs more often and in a large quantity Hypotheses validation (cont.) ∙ Convenience and low-cost

H8: The higher income people earn, the less likely to purchase prescription drugs online. (Less need for low-cost) - Coefficient: Not supported - People who earn more money are more likely to buy drugs online because ∙ Online purchase require customers to be equipped with proper infrastructure of the Internet and a PC Hypotheses validation (cont.) ∙ not low-cost, but convenience is the primary reason

Conclusion - segmentation ◆ Online drug market can be segmented by ① whether or not people are handicapped ② the income level ① whether people take drugs on a regular basis ② the extent people rely on online information - Demographics - Behaviors

Conclusion - targeting ◆ Marketing managers should target ① those who rely much on online information ② those whose incomes are high ③ those who are handicapped or have disabled family members ④ those who believe that online drugs are as safe as those in a pharmacy ⑤ those who take drugs on a regular basis ⑥ the elder ⑦ those who believe that people should be allowed to purchase prescription drugs online ⑧ potential customers

Conclusion – targeting (cont.) ◆ In order to target efficiently - Liftchart Online purchase of drug # of responses Percentile of deciles saying Yes Lift Index 1 Yes Yes Yes Yes Yes Yes0.0 7 Yes0.0 8 Yes Yes Yes

Conclusion – Targeting (cont.) ◆ Advertising - Safety is a crucial factor - Ads with trusting celebrities with a positive image to inform people that online drugs are as safe as those in a local pharmacy - Place the ads on popular search engines to be exposed to those who often use the Internet for information that they need