Case5 Metabical Demand, Forecasting Anirban PDF

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A Case Study On

METABIC METABICAL AL PRICING, PACKAGING & DEMAND FORECASTI FORECASTING NG FOR A NEW WEIGHT WEIGHT-LOSS -LOSS DRUG

Submitted By Anirban Kar Roll no : EPGP – 12A – 022

Question need to be answered from the Case • What are the advantages/ disadvantages of the forecasting methods presented? How would you go

about forecasting the demand? Calculate the forecasted demand for first five years in units. • What price would you recommend to Printup? What is the ROI for the first five years for the recommended price? • What pack size would you recommend? What are the considerations to arrive at this decision?

Demand/Pricing Formulation Executive Summary: There are three main demand strategy’s that make reasonable sense to assess the demand for Metabical within the first five years. To get the most out of each demand scenario the most optimal pricing structure was applied to each. Pricing can always be tweaked and justified if the product is successful and there is respective demand by the consumer base.

Scenario #1 The first scenario narrows down the target market by the follow process: 1. take the number of overweight individuals in the United States, i.e. 209 x 34% = 71.06 million, 2. reduce 71.06 million by 35% which is estimated population trying to lose weight, which is 24.871 mil, 3. reducing this by 15% which is the amount comfortable with weight loss drugs which is 3.73 million, 4. Metabical will capture 10% in year one, 15% in year 2, 20% in year 3, 25% in year 4, and 30% in year 5. The Lowest pricing structure was chosen because the population chosen was very general and may contain a large percentage of people who are price sensitive. 6. Total Expense of 5year fixed cost, Marketing Budget and R&D cost = (1.2x5 + 23 + 400) = $430.2 M Y e a r

Overweight In US

Population Trying to Lose Weight (35%)

Comfortable with Weight Loss drugs (15%)

Metabical Will Capture

Population Captured

1

One Supply

Two Supply

Full Cycle

(20%*24.80)

(60%*58.13)

(20%*74.80)

71,060,000

24,871,000

3,730,650

10%

373,065

$18,50,402

$1,30,11,761

$55,81,052

2

71,060,000

24,871,000

3,730,650

15%

559,598

$27,75,604

$1,95,17,642

$83,71,579

3

71,060,000

24,871,000

3,730,650

20%

746,130

$37,00,805

$2,60,23,522

$1,11,62,105

4

71,060,000

24,871,000

3,730,650

25%

932,663

$46,26,006

$3,25,29,403

$1,39,52,631

5

71,060,000

24,871,000

3,730,650

30%

1,119,195

$55,51,207

$3,90,35,283

$1,67,43,157

(34% of Population)

Profit: $204432159 and ROI: (-) 53% in 5 Years I believe this is not an effective demand function for Metabical because the audience is too broad. This model also in theory will capture a small % of the target market in relation to the other models which makes it very difficult to attain a positive ROI. This model will only bring in 204 million gross margin and is not acceptable to create a 5% ROI. This is not even enough to cover the R&D and marketing costs.

Scenario #2 (Chosen Scenario) The Second Strategy is more aggressive which takes the US population (209 million) and takes 34% of its who are overweight which comes out to 71.06 million. Next 12% which is the target for Metabical is taken out which comes out to 8.527 million. Metabical will capture 10% in year one, 15% in year 2, 20% in year 3, 25% in year 4, and 30% in year 5. Y US e Population a r

34% Over weight

12% Target Market

Metabical Captures

1

209,000,000

71,060,000

8,527,200

10%

2

209,000,000

71,060,000

8,527,200

3

209,000,000

71,060,000

4

209,000,000

5

209,000,000

Population Captured

One Supply

Two Supply

Full Cycle

(20% X $24.80)

(60%X $58.13)

(20%X $74.80)

852,720

$42,29,491

$2,97,41,168

$1,27,56,691

15%

1,279,080

$63,44,237

$4,46,11,752

$1,91,35,037

8,527,200

20%

1,705,440

$84,58,982

$5,94,82,336

$2,55,13,382

71,060,000

8,527,200

25%

2,131,800

$1,05,73,728

$7,43,52,920

$3,18,91,728

71,060,000

8,527,200

30%

2,558,160

$1,26,88,474

$8,92,23,504

$3,82,70,074

Profit: $467.3 Million and ROI: 8.6% in 5 Years (Bottom Line) This model produces a ROI of 8.6% which meet the requirements of upper level management on making a 5% ROI on 430.2million in total investment costs. The pricing structure is kept low which will lower the financial risk of customers. This gives the product a better chance to sell its predicted volume. This studied demographic contains individuals who are ready to take a pill to lose weight. Marketers cannot always predict how a specific demographic will react to a product so a slightly broad approach will lead to opportunity for a huge amount of revenue from not only the target market but other similar markets. (possibly a % of overweight women of other ages may buy into the product)

The 8.6% ROI in this scenario shows steady growth for Metabical and is consistent with the goals of management. In this pricing scenario a feasible number of potential customers will be targeted and captured. It is important to analyze the demographics of what kind of customers are purchasing each year and tweak the demand forecast or marketing strategy if necessary. For the initial forecast a broad approach is taken with the goal of matching the 5% ROI on the 400-million-dollar research and development costs. The forecast was built in Microsoft excel and can easily be modified if management feels the need to tweak any of the factors.

Scenario #3 The third scenario targets Educated Females from ages 35-65 who are overweight (BMI of 25-30) which equates to a population of 4.3 million people. In year one Metabical expects to have a capitalization of 30%, then 35%, 40%, 45%, 50% respectively in the following 4 years. Females who are 35-65 have the money to purchase weight loss products and will fork over the money for a prescription. The prescription nature of the product justifies the high tier of pricing as well as the coveted FDA approval.

Year

Potential User

Metabical Captures

Capitalization

One Supply

Two Supply

Full Cycle

(20% x $24.80)

(60% x $58.13)

(20% x $74.80)

1

43,00,000

30%

12,90,000

$63,98,400

$4,49,92,620

$1,92,98,400

2

43,00,000

35%

15,05,000

$74,64,800

$5,24,91,390

$2,25,14,800

3

43,00,000

40%

17,20,000

$85,31,200

$5,99,90,160

$2,57,31,200

4

43,00,000

45%

19,35,000

$95,97,600

$6,74,88,930

$2,89,47,600

5

43,00,000

50%

21,50,000

$1,06,64,000

$7,49,87,700

$3,21,64,000

Profit: $471.3 Million and ROI: 9.5% in 5 Years (Bottom Line) The ROI comes out to 9.5% which is a best cast scenario. I believe the pricing structure and demand forecast is justified because this in many cases will be a lifesaving product, and a pioneer in prescription weight loss. The problem with this scenario is that the ROI seems to little high when management is only expecting a 5% ROI.

Marketing Communications Executive Summary: Metabical, a prescription weight loss pill will be marketed to overweight women in the age group of 25-65. There are two main groups that Metabical is targeting to- end users and doctors. The powerful message that being overweight can lead to life threatening diseases and that Metabical can help will be the focus of the marketing message to both end users and Doctors. Tracking and control after the launch is a key component to a successful venture for Metabical.

Target Market Metabical will be marketed to overweight women of the age from 35-65. According to a 2007 marketing survey it was determined that women 10% more women than men are dissatisfied with their current weight, 20% more women than men visited a healthcare provider for a yearly physical, 15% more women than men want to change their behavior to live a healthy lifestyle, 30% more women than men failed to lose weight in the past 5 years, 30% more women than men were dissatisfied with current weight loss options on the market. These results make it clear that women are the most likely gender to purchase Metabical.

The age group of 35-65 is justified because these women have expendable income which would allow them to purchase an expensive prescription weight loss drug. It is important to maintain a healthy lifestyle and diet when taking Metabical; this is important to understand in order to have successful weight loss with Metabical . The women of these demographic are “knowledgeable about the importance of nutrition and exercise, they are ready to make a change.” The women of this demographic are also “focused on reclaiming former weight they are motivated and willing to alter current behavior” These psycho graphic behaviors are consistent with the marketing message of Metabical. This age demographic is quite large, but it is necessary to target all these potential customers in order understand who is buying into the product as the marketing plan evolves over the next few years. We anticipate that other demographics will also purchase the product, and this is a major consideration in the ensuing years in what the final evolution of the product will be.

Marketing Communications Metabical is a unique product to market since a message must be conveyed to the end user as well as health care providers who recommend and write prescriptions (doctors). The target market as stated above is overweight women aged 35-65. It is important to reach the market through a variety of venues to instill the importance of purchasing the prescription. A mix of Print media, television, radio and online advertising will be exploited to reach most of the target market. Print advertising will come in the form of pamphlets and other informative documents that will be placed at medical clinics, weight loss facilities, doctors’ offices and other relevant institutions that promote weight loss and a healthy lifestyle. They must instill a sense of urgency to the end user, that the time to act is now and they should contact their health care provider to learn more about this new FDA approved weight loss drug. Online Advertising is effective for targeting the specific target market of women who are searching for weight loss supplements and are of age 35-65. The success of these campaigns can be measured by the amount of impressions the advertisement has received as well as successful requests for more information when an advertisement is clicked an interaction takes place. Television and radio will be utilized weeks before the drug is released to the public in order to create hype and a viral marketing effect. The types of channels that the advertisements will be shown are news channels, channels relating to health and channels that women watch frequently in order to reach our target market. Being overweight is a serious health concern that leads to life threatening diseases, judgment from society and an overall lower quality of life. The marketing message to the target market must address this point. “Those extra 20 pounds could be killing you. Being overweight leads to heart disease, high blood pressure, diabetes, and gallbladder disease. It’s time to get healthy – Let Metabical guide you to a happier, healthier you.” This is a powerful message that will speak to these women who are serious about losing weight and is consistent with our goal to spread awareness of the dangers of being overweight. It is also essential to make sure customers as well as doctors are aware of the coveted FDA Approval because people will be hesitant to buy the drug if they are unaware of FDA’s approval. Targeting the professional and medical community requires a different approach. We will utilize print ads in leading medical publications (journal of the American medical association) and interactive ads adjacent to online physician resource information (PDR.net) to raise awareness about the drug and its benefits. The marketing communication geared towards professionals will be formulated to educate them about the safety, research and development, and compliance. (proper way to prescribe Metabical) The marketing message chosen is: “Atherosclerosis, coronary artery disease, high blood pressure, diabetes, and gallbladder disease. Your overweight patients are dying for help. Introducing Metabical – FDA Approved Weight loss drug.” This message has all of the elements of a successful advertising campaign for

Metabical. Like the consumer message, this message is consistent in that it is meant to shock the doctor by listing the actual diseases associated with weight loss. The end of the message gives credibility to the product by announcing that the FDA approves the drug. It is essential to be equally successful in the marketing to doctors as patients because if the Medical Community accepts the drug as an effective and safe method of losing weight, more and more doctors will recommend it to patients and positive PR will follow.

Support Program A comprehensive support program will be implemented to enable customers to receive the support they need during their weight loss journey. The center of the support system is the website that will be developed and will include: Reference materials, a weight loss tracker, food diary, nutritional and calorie calculator and a forum for personal support. Other weight loss programs have support programs that have proven to be successful in the past, therefore it is essential to include this component during the launch of the product. The website will include Social media functionality including a Twitter and Facebook where customers and doctors can talk about their successes when taking Metabical. It is important to model the program after other successful weight loss supplements to make sure no important aspect is missed: An internal case study of Alli, the OTC weight loss supplement will be conducted by the marketing department to gain a greater understanding of their support program.

Positioning It is important to determine Metabical positioning in the weight loss market in order to carry out a sound marketing plan. Metabical is different than over the counter weight loss supplements because it can only be obtained via prescription. This gives an image of an elite product that is effective, FDA approved and can only be prescribed a doctor. People trust their doctors and the FDA which gives Metabical a distinct advantage from over the counter weight loss products. Women who have not has success in the past with over the counter weight loss supplements are ready for a prescription strength option such as Metabical. After 5 years on the market Metabical should be considered the most trusted, effective and #1 prescribed weight loss drug on the market.

Time line Prior To Launch 1 Year Prior → Develop Advertising Campaigns and Marketing Materials 6 Months Prior → Utilize Focus groups to test effectiveness of chosen campaign 3 Months Prior → Direct Marketing to Doctors and healthcare providers Day of Launch → Press Release, Viral Media Campaign After Launch → Tracking and Control – Make sure the target demographic is being reached. Every year analyze effectiveness of price, packaging, and target market.

Budget After analyzing the budget, it has been concluded that the money allocated is appropriate. The marketing budget should decline by a small percentage every year as the product gains brand awareness and receives free PR from blogs, news mediums, and word of mouth recommendation from customers and doctors.

Packaging Strategy • • •

A new package can make an important difference in a new marketing strategy Packaging can tie the product to the rest of the marketing strategy Packaging sends a message

Factors to consider for right packaging • • • • •

Consumer Usage and Payment capacity Unit Price of the pill Number of pills in a strip Effective Dose Easy Tracking

Recommended Pack sizes • • • •

Smaller packages: 4 weeks dose Blister style pack Days of the week packaging Full course pack: whole 12 weeks dose...