Preferences for purchase of an over-the-counter pain medicine from online pharmacy: a Finnish case on pharmacy retailer brand, price and counselling service

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School of Business | Master's thesis
Degree programme
Information and Service Management (ISM)
Enhancement of e-pharmacy and allowance of discounts of OTC medicines are suggested as possible measures to increase competition in the Finnish pharmacy sector. In addition, e-commerce has become embedded in modern-day shopping behaviours; for online medicines purchase, both the online pharmacy number and the services have improved dramatically during the past five years. The University Pharmacy (Yliopistion Apteekki, or YA) wishes to study this complex phenomenon from different viewpoints of e-pharmacy. Objective: The study attempts to elicit YA online customers’ preferences for the purchase of a non-acute over-the-counter (OTC) product from the e-commerce and pharmaceutical services viewpoints of e-pharmacy. It aims to uncover customer segments with preference heterogeneity and estimate YA online brand value and price sensitivity across segments. Methods: A Choice-based conjoint study is designed on 2 attributes related to e-commerce and 1 attribute related to pharmaceutical services (medicines information). Individual utilities are estimated using the Hierarchical Bayes (HB) method while segmentation is done using Latent Class Analysis (LCA). The identified clusters receive further description from background variables on socio-demographics, previous health training, residence area and online shopping activity. YA online brand value and medicines information value are calculated using utilities obtained from HB and LCA while price sensitivity is observed through changes in demand on Sawtooth Software Online Simulator. Findings: The study receives valid responses from 3,118 adult customers, who are discovered to have different preferences and classified into 5 segments after careful evaluation of information criteria, model stability and managerial interpretability. The largest segment can be further split into two for better managerial interpretability. It is found that the YA loyalists (10.8%) and Advice segment (7.2%) value the YA online brand more than online price competition. They are also the segments that are the least price sensitive. Price (27.6%) and Outlet (31.6%) segments have strong preferences for low prices and for nearest pharmacies, respectively. The Practical (22.8%) segment is pragmatic in enjoying both the easy access of nearest pharmacies and good online discounts. Managerial implications: The study provides insights into the different preferences for an OTC purchase of YA’s online customer base. This may contribute to future targeting and customer service strategies to optimise YA’s product and service offerings. Private pharmacies will also benefit from the analysis of demand and price changes and the analysis of medicines information service value.
Thesis advisor
Halme, Merja
OTC pain medicine, customer preferences, choice-based conjoint analysis, retailer brand, medicines information, price sensitivity, latent class analysis, e-pharmacy
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