October

24

Case Analysis #4
Mario Heredia
Metabical: Pricing, Packaging and Demand Forecasting for a New Weight Loss Drug

Marketing Management Course KATZ School of Business

controlled release formulation. It acted as an appetite suppressant and also had a fat blocker and calorie absorption agent. Alli used to block the body s absorption of fat. Metabical was to compete in the Prescriptive drug market. it had a lot of side effects. Metabical was a unique product. exercise plans and meal replacement/weight management products. Current weight-loss drugs can be classified as Prescriptive Drugs or Over-thecounter (OTC) remedies. but they were not as popular in the market segment Metabical was targeting. OTC drugs lost out to diet plans. Therefore. on the other hand. There were other products. as they were safer options. high returns drug and had built good support in the medical community. did not display as many negative effects in its trial runs and thus was being strongly endorsed by the medical community. It was pictured as a low-risk. who were needed to prescribe this drug. Metabical. OTC Drugs were not as popular among overweight individuals due to lack of regulation and safety concerns. However. . the over weight segment.1. It was the first of its kind and had that advantage. Metabical. which was focused towards a particular segment of the market. The only drug that was approved by the FDA for over-weight individuals was Alli. Previous prescriptive drugs had negative side effects that out weighed its positives. was a dual layer. for over weight individuals but not for obese and severely obese individuals. How does Metabical compare to current weight-loss options? Metabical is a revolutionary product and forecasted to be the first FDA approved prescriptive drug for overweight individuals with weight-loss goals. where there were only a few drugs available but these drugs were mainly approved for obese and severely obese individuals. leading to weight loss. on the other hand. The over-all product was far superior in achieving weightloss. which could cause dangerous medical situations. over its competitors.

Aggressively priced. 3. The estimate is still spread very broad. Hard to create a brand across multiple demographics. but portrayed as a niche brand. It is hard to predict the behavior of such a broad segment of customers. Cons: 1. women above 35. 2. Most data comes form market research. 2. 3. The Method is very structured. Will create an image of uniqueness and something that works outstanding. 2. 3. full value is not being leveraged. Cons: 1. It is hard to predict the behavior of such a broad segment of customers. Forecasting Method 3 Pros: 1.e. There is very small room for failure as it is being promoted as a niche product. . The whole over-weight market is considered in the forecast and very little data is assumed. The Method is aimed at a particular segment i. Considering it is the first of its kind. Cons: 1. A clear picture of the market they are targeting and attractive pricing in relation to the benefits the product is delivering. The estimate is spread very broad. The Method is aggressively priced and estimated. Leverages the uniqueness of the product. Forecasting Method 2 Pros: 1. May not be able to meet forecasted results due to aggressive pricing. 2. 2. 4. 2. Gender bias may mean loss of half the segment in a single shot. What are the pros and cons of the forecasting methods presented by Printup? Forecasting Method 1 Pros: 1.2. May not be accepted as easily by the low-income groups as compared to the high-income groups.

c) Leveraging product position market Pros: Product is valued well. Cons: Full value is not extracted. Hard to market the product s full value. A niche product idea. Cons: May be too aggressively priced. b) Measuring Value Proposition Pros: Full value is extracted. Cons: positioned as similar to other competitors in the market. Broad market segment may not pay for the value of the product. Goals are easy to meet. Benchmark against Leveraging Product market competition position Pricing for a 4 week supply of Metabical at $75 Pricing for a 4 week supply of Metabical at $125 Measuring Value Proposition Pricing for a 4 week supply of Metabical at $150 Do not recommend y Pricing is too high as market research indicates y This pricing may alienate many consumers from considering Metabical Do not recommend Recommend y Competitor based y Aligns with pricing may corporate backfire strategy y Metabical does y Pricing is just not have to right to compete compete at all in unique market price points that a segments while consumer wants communicating value of the product . Highly dependent on What price would you recommend? (Use options grid in answering this question Pricing -> Options Description of option Overall Assessment for financial attractiveness refer to question 4 below). What pricing strategy approaches would you suggest Printup explore? What are the advantages and disadvantages of each strategy? a) Benchmarking against market competition Pros: A base for pricing is present. Highly dependent on consumer behavior. A niche feeling is built.3.

Attractiveness y ROI is negative (25%) y Target market size is too low compared to other two methods .5 million y y y Pricing makes Metabical a premium quality product in line with product effectiveness Fits well with y company strategy Although revenues are lower in the short term. Metabical loses the edge without any reason. pricing is unrealistic y Pricing a new product at $150 a per week could be a non-starter in a highly competitive marketplace. Financial Not attractive. which surpasses the expected minimum ROI of 5% by a large margin Pricing is sensible. the product may not attain required market share Product may not be able to compete effectively given the intense competition in the market. $1. y y Very high entry price point Revenue expectations .5 billion Product may not be accepted readily given the higher than Attractive not recommended y Although ROI is 126%.y Strategic fit Does not fit well with CSP s corporate strategy y While Metabical will be able to gain a large user base initially the option does not fit the strategic goal of 70% margins over the long term y Being a more effective product in the market place. in line with market expectations NPV of approx. hence generates lower overall revenues over 5 years NPV of $709. y y y y Noteworthy risks y Product will end up competing against products that are not even y Attractive Recommended ROI is close to 75%. Metabical will be able to y project itself as a premium product over the long term Given the high starting price.

y y y in the same segment Brand message could be confusing Revenues not attractive Assumption is that the this market portion is not highly segmented y y average price point of the drug Revenue expectation could y be exaggerated due to point estimate value of market size. y Assumption is that the this market portion is y not highly segmented more unrealistic compared to other pricing strategies ROI although attractive may be unachievable Product will not gain market share easily. Assumption is that the this market portion is not highly segmented .

35-65 of age with BMIs between 25 and 30 looks to be the most attractive. the method is relative to CSPs existing product line success rate. However.98% 75. What impact does your pricing decision have on profitability? What is the ROI over the first five years of your pricing? (complete (a) forecasting questions. Forecast method2 shows higher profit margin than our proposed strategy on both price levels. A new product entering the segment for the first time is influenced by current market state.Method 3 64.03% 126.08% 147.) The spreadsheets are given on Courseweb to help you with your analysis.39% .01% 91. The ROI in this case is 75.Method 1 ROI .Method 2 ROI .960. existing competition.Method 2 ROI . The financial calculations indicate that pricing the product at $125 for a 4-week supply will be ideal as results show a forecasted 5-year gross profit margin of $859.Method 1 ROI . Ideal Consumer Segment: Educated females. Research also suggests that pricing Metabical-4 week supply at $150 was higher than what consumers in the overweight category were willing to pay. (c) calculate ROI.10% 24.Method 3 $125 Retail Price ROI . The ROI exceeds the initial expected minimum ROI value of 5% within five years of the new product s launch. (b) gross margin forecast. Hence. forecasting a new product based on older product success might not be a reliable indicator to decide on a product launch strategy.Method 3 16.858.17% 18.Method 2 ROI .94%. which doesn t seem like a viable option. The ROI calculations are listed below: $75 Retail Price ROI . and varied market dynamics.94% 8.94% $150 Retail Price ROI .Method 1 ROI . $125 & $150 and their ROIs seem attractive from the financial calculations. the strategy employed in method 3 seems to be the best and most promising because it is targeting a niche customer base and the pricing is based on the research data of CSPs Outcomes Research Group. Hence.4.

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