Professional Documents
Culture Documents
A Marketing Analysis
By Veronica Stepanova
Executive Summary
• Many opportunities are available in the human blood market due to several disadvantages of the currently
available alternatives. Even more opportunities exist in the animal blood market.
• Oxyglobin should be positioned as a high-quality product designed for middle- to upper-class budgets.
• The price for Oxyglobin should be about $200 for the consumer and around $100 for the supplier (animal
hospital) to account for distribution markups and other carrying costs.
• Distribution should be oriented in the regional vicinity of the operation and implement larger clinics. In
addition, only emergency clinics are to be targeted.
Situation Analysis
• Patients with acute blood loss from trauma and surgery – 40% individuals aged 65+.
• Chronic anemia patients (any age) – 1.5 million for the year 1995.
• Blood loss, resulting from trauma (e.g. car accident) and exceeding 2-3 units (1 unit = 10% of total blood
content of human body) needs immediate blood transfusion.
Existing options.
• Red blood cells and their components (hemoglobin, platelets, and plasma) are collected via donations,
organized by blood collection centers and then transfused into patients.
• Current options allow for storage for 6 weeks in refrigerated conditions, consequently disposed of if
unused. Hemoglobin uses oxygen-carrying efficiency by 50% if not used within the first few weeks.
• Blood transfusion is subject to blood typing (A, B, AB, O, positive, negative) and reception/rejection by
the body. Incorrect matching may be fatal for the patient.
• Infection risks slow down the process of testing blood prior to its use and are greater if blood is not
separated into components. Infections include the risks of AIDS, hepatitis B, and contamination.
• Blood transfusion is available on-site only (hospital or emergency room); as a result, 30% trauma patients
die prior to operation.
• Blood supply is lower than demand, especially during peak periods (summer months and winter holidays,
during which car and other travel increases fewer donors and more patients).
Blood substitutes.
• Entrance into market is difficult (all current processes patented) and time-consuming – may take up to 17
years (See case Exhibit 3).
Potential to replace current blood drawing process by component separation and purification, as well as
chemical modification and stabilization of hemoglobin.� Potential to replace current blood drawing
process by component separation and purification, as well as chemical modification and stabilization of
hemoglobin.
Added benefits for patients with constricted or restricted blood vessels (smaller size improved
accessibility to organs).
Competitors/industry players.
• Require refrigeration.
Baxter:
• Large facility – production capacity of 1 million units/year, spent $250 million on R&D.
• Product – HemAssist – to be priced between $600-$800.
Northfield:
• Small facility – 10,000-unit production capability but possible expansion into 300,000 units/year.
B. Biopure Corporation.
• Production capacity of 150,000 but possible production limitations due to expected concurrent usage of
production equipment for animal version.
• Need for removal of hemoglobin clusters from product excess process in production ability.
• Cost for Biopure at $1.50 per unit of animal blood, but plan to match Baxter’s price for final consumer
product.
• 800 dogs were brought to emergency treatment due to acute blood loss in 1995, 2.5% severe.
Existing options.
• 5% of vet clinics perform emergency care, with a 75% referral rate from primary care clinics.
• Current blood banks insufficient, demand greatly exceeds supply: 2.5 out of 30 cases treated.
• 93% blood drawn from donor animals (78% in emergencies) – an ethically questionable practice.
• 150 units of blood transfused per emergency care, 17 per primary care center (Appendix A).
• Blood collection, storage, and transfusion too costly for proper operation.
• Current cost of clinical care to animal owners relatively high, undesirable.
Blood substitutes.
• Biopure’s Oxyglobin currently the only existing FDA-approved substitute ready for launch.
• No evident chemical difference in the production process between animal and human supplement.
• Animal supplement approved sooner than human equivalent due to less-strict regulations in the animal
consumer market.
• Production capacity of 300,000 units, $200 million spent on development (combined with Hemopure)
Positioning strategy. Most animal owners (enthusiasts) can be assumed to be within the middle to upper
income class, based on the extraneous costs of owning an animal (refer to case Exhibit 8 for a summary of
average costs of keeping a pet). However, many consumers proved to be price-conscious about spending
additional funds on optional services (this will be analyzed further in the pricing strategy); therefore, no
premium strategy should be used. The product should be positioned as a high-quality supplement for blood
transfusion, available to (affordable by) most animal owners.
Pricing strategy. As cited, animal owners expect to spend limited amounts of money on animal care; this is
slightly different for emergency situations, where customers are willing to spend more, as demonstrated by
the survey results (Exhibit 8; Table B). The typical cost of a blood transfusion to the customer is currently
$100 for the traditional method; however, this price was said to have been cost-unjustified. Still,
veterinarians were cited as the trusted source for determining a patient’s treatment selection, which puts
pressure on the new substitute segment to set a competitive price standard. While profit margins may prove
higher on a higher-priced item, the product’s sensitivity to reputation for being a supposedly “better,
cheaper alternative” to currently available options, which would satisfy the currently largely-unfulfilled
demand for blood transfusion, would pressure Biopure to price its Oxyglobin according to customer
expectations (See “Existing options”, page 5 of this report). Those expectations, as we can see from the
attached appendix (Appendix 1 A and B), are that the price to the consumer be about $200 ($100 to the
veterinarian – keeping the 50% markup), which would give the company the largest marginal gain in
revenues (higher prices are actually marginal losses!), while still retaining the major demand (we consider
emergency care centers more important here, since they have, proportionally, a much larger demand than
primary care centers). In terms of the price difference between Oxyglobin and its competitor in the human
segment, Baxter, the latter spent $50 million more on R&D than Biopure, so the price premium on Baxter
can be justified by higher costs; in addition, Biopure’s per-unit costs are significantly smaller because it
uses cattle blood. In addition, Biopure may price Hemopure slightly higher because of the extra processing
that goes into making it, as well as the variation in the segment and target audience (people are willing to
spend more on themselves than on animals).
Distribution. Biopure should only target emergency care practices. Although those only make up 5% of the
overall industry, 75% primary care specialists will refer an acute blood loss case (such as a trauma) to one
of these centers. Furthermore, Biopure should target large practices (3+ doctors) through regional
distributors, both of which account for the largest sales in the industry. Considering the limited volume of
supplies Biopure is going to have, a national distribution may not be desirable right away, until the
company at least increases its production capabilities. A regional distributor would be local enough to
understand the specific needs of its market (e.g., New England), and a larger vet practice could prove more
efficient (and less costly) in terms of the availability of materials and the reduction of transfers, thereby
also reducing the consumer’s costs and increasing the rate of success by providing a quicker
service (in other words, it would have more cases, but more doctors available to help overall, fewer
cases per doctor – see Exhibit 7). Of course, the drawback is that a large clinic would not be as personal.
Easier entry into secondary (human) market – “tested on animals” – more trusted than untested
competitors.
Potential to utilize production to full potential (instead of splitting up with Hemopure); later on, divide
based on larger per-unit profit (and not necessarily the stated 150:300 ratio).
- Would aid in the decision about improving current human version (complete discontinuation not an
option due to the immense initial investment in R&D);
- Reduce the shock of having to change both formulas (processes) simultaneously – longer time span gives
better flexibility and more time for testing and improvement – less drastic.
• Hemopure and Oxyglobin, although similar in purposes, are meant for two completely different
segments; they should not be compared based on price because price expectations are different for humans
than they are for animal needs; the demand for Oxyglobin is clear and significant, while the demand for the
same product in the human market is questionable. Therefore, stick with Oxyglobin – which already has
the approval – and launch it.