Joe Formulary identified the need for discount pharmaceutical products when a local discount store asked him to produce such products based on the demand from the consumers at his store.  Contacting several additional independent storeowners in the local area (grocery stores, pharmacies, and other retail shops), he found others very interested in offering these items as well. 

The national market for discount pharmaceuticals is well documented.  The National Journal of Business has reported that booming consumer interest in reliable, value consumer products (such as supermarket brands) has broadened to include pharmaceutical products as well.  Additionally, a recent edition of the Southwestern Daily Business Gazette named the Massive City area as a specific example of an area where demand for discount pharmaceuticals far exceeded supply.

Further research has identified distinct groups of consumers in the broad market for pharmaceutical products by which the market can be segmented.  The market can be broken into three distinct segments.  First, those price sensitive, lower income consumers who primarily purchase products based on the lowest available prices make up a growing percentage of the market for pharmaceuticals.  Next, an also growing segment of middle income consumers tend to make purchasing decision based on value (the best quality at the best price).  Finally, higher income consumers, that make up a declining majority of the market, tend to be brand conscious in their buying behavior, meaning that they purchase products based on the perceived higher quality of major brands. 

Based on this market research and company forecast, Mr. Formulary has developed a winning strategy for capitalizing on the consumer demand for discount pharmaceutical products by effectively targeting certain segments of this market.  The following table (Market Segments) illustrates the results of the company’s market research: