Market Share at the Low End of the Market

I was struck by a recent article about statins. A recent study has found that these cholesterol lowering drugs reduce the heart risk in even healthy patients. That fact was not what struck me, though. What jumped out at me was the size of the market share for generic statins. The generics in the statin market make up 49% of total prescriptions. The well-known Lipitor is the leading branded statin, at 27%, followed by Crestor at 9%, Vytorin at 7%, and Zetia at 6%. But the generics dominate all of those branded drugs. (See “Low-end products are gaining share of market” in the Symptoms and Implications on

In our study of several hundred Price Leader products, those at the low end of a market, we found that there were two basic types of price leader competitors. Price Leader competitors distinguish themselves from the industry-leading Standard Leader products on the basis of offering different benefits to either, or both, of the buyer of the product and the user of the product. The buyer and the user may, in fact, be the same person, but their respective needs differ in each activity. (See “Turmoil Below: Confronting Low-End Competition” in the Perspectives on

The first type of Price Leader we call a Predator. Predator products offer the user the same benefits as the industry-leading Standard Leader product, but offer fewer benefits for the buyer. For example, the product may have the same ingredients but have a lesser known brand name or be more difficult to find in the stores. Private label suppliers, PC clone makers, Advanced Micro Devices, semiconductors and Drypers disposable diapers are examples of Predator competitors.

The second type of Price Leader product is a Stripper. This low-end competitor reduces benefits for both the buyer and the user. These companies reduce the Functions and Features available to the user. They offer the buyer less well-known brand names, low marketing budgets and often inconvenient locations for purchase. Jet Blue Airways, Motel 6 and Costco Wholesale Corp are examples of Stripper competitors.

It is rare for these low-end competitors to garner more than 15% of a market’s unit sales. It does happen, but not often. When it does happen, it is most likely to be a Predator competitor who will do it.

Generic statins are Predator products, but their market share is astonishing. It serves as eloquent witness to the power of institutional buyers over corporate marketing. The big buyers of statin drugs, corporations and insurance companies, have forced the growth of the generic drugs. The drug companies’ marketing programs have ceded market share to the generics in order to hold the branded product’s prices high. My guess is that the calculus behind this decision by the drug companies is a good one, though the trade-off between a high market share and lower price, compared to a higher price and much lower market share, are probably pretty close.

Posted 12/1/08


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