Baxter: Changing Environments and Lifetime Strategies

By S. Vandermerwe and Marika Taishoff

Baxter (A): Changing Customer Environment

This is the first of a two part series. The overriding aim of the series is to demonstrate how a company must change from the traditional transactional product approach to one more suited to the new world. The old model is based on selling more products at certain margins using conventional marketing tools, whereas the new approach is about the lifelong value of customers and how to achieve that so that everyone in the system gains.

The series challenges participants to relook strategic focus and marketing strategy to become customer driven and create an enduring competitive advantage in a maturing competitive environment where price has become the key differentiator. The cases emphasize what is meant by customer focus and the value added service approach, and the implications of a transformation to this way of doing business on the thinking and internal workings of an organization.

The articles discuss the dilemma facing Baxter Renal Division, in the UK specifically, and in Europe generally. Their main product is the bag and solution for dialysis treatment for kidney disorder. Although Baxter had 80% market share by the mid-1990s two major threats had emerged: (1) a competing treatment, cheaper on a bag-for-bag basis, was increasingly being favored by new economic buyers who had become the more powerful decision makers and; (2) Baxter’s dominance in its product market was being challenged by low-cost competitors. In Case A, an unprecedented crisis confronted Peter Leyland, recently appointed UK Business Director: five key hospital accounts had been lost. Moreover, the key success factors in the business – the number of patients treated, the kind of treatment received, the number of bags sold, and the proportion or market share of those cared for with their treatment – were all going downhill.

Leyland was convinced that the only route to long term growth and profitability was not by trying to beat the competition at the same old game, but rather by taking the lead and changing the way the industry operated. Part of his challenge was getting various customers – buyers, users and influencers – to think and behave differently. Leyland and his team embark on a customer-focused strategy starting with end users and working backwards. **ecch European Case Awards Category Winner 2002**

Case abstract adapted from The European Case Clearing House. Full case available at www.ecch.com

Baxter (B): Total Lifetime Customer Strategy

In case (B), Leyland has presented the lower than expected results, and the conservative outlook for the coming year, to top management. He has persuaded them to give him a year without budgeted results in order to reverse the steady deterioration in results. The case goes on to describe how Baxter achieves the promised success. Instead of competing for market share of bags based on price, Leyland creates and leads in a newly articulated “market space” – “renal insufficiency management” – where providing results over time through a series of value added services, for all customers – hospital and health authorities and senior management, economic buyers and patients – would become the key measure of success. The cases are built around the understanding and measuring of the total lifetime value of customers to an organisation and similarly quantifying the value of the corporation to these customer sets. **ecch European Case Awards Category Winner 2002**

Case abstract adapted from The European Case Clearing House. Full case available at www.ecch.com