Metabical:

Pricing, Packaging and Demand

Forecasting for a New Weight
Loss Drug

Introduction
Metabical

is

revolutionary

product

created

by

Cambridge

Sciences

Pharmaceuticals (CSP) and which is believed to be the first FDA approved

prescription drug for overweight individuals with weight-loss goals. The existing
prescription drugs were limited to severely obese people usage and had negative
side effects which outweighed their positives. Only a few drugs like Alli were present
in market for moderately obese people with weight loss plans, but it also had side
effects. Metabical, on the other hand, did not display any such negative side effects
in its trial runs and thus was being considered a good solution for weight loss drug.
The benefits of Metabical include:
-

FDA approved prescription drug

First drug in moderately overweight segment with lesser side-effects.
Only needed to be consumed once in the day.
Promotes better lifestyle

Main target Market:

-

Overweight Females (BMI 25-30)

College educated between age of 35 and 65 years.
Having income level $50000 to $80000

For the launch of Metabical there were two critical decisions in front of CSP:
1. Packaging
2. Pricing
Optimal Packaging size for the drug:
The optimal Packaging size for the drug would be a 12 week packaging. The concern
put forward against a 12 week pack is that the price of a 12 week pack would deter
the customers from purchasing the drug. But the thing to be kept in mind is the
target market which is the overweight females between the ages of 35 and 65.
Since this target group is more health conscious the target group is relatively price
inelastic. Thus this target group would not be hesitant to pay the price for a 12
week pack of Metabical. Another positive impact that a 12 week pack has is that it
increases the likelihood of consumers experiencing positive and lasting results and
they are less likely to drop out of using the drug.

Pricing decision for Metabical

Before making the pricing decision it is important to understand the demand
forecasting model of the company. CSP has decided to look at demand forecasting
from 3 different approaches.
The pros and cons of the 3 approaches are as follows:
Approach No. 1: Benchmarking against market competition
-

Pros: Existing standard for pricing is already in place. Goals setting and

achieving is made easy.

Cons: Positioned as a similar product to its competitors like Alli in the market.
This makes it hard for the product to realize its full market value.

Approach No. 2: Measuring Value Proposition

-

Pros: Realization of full market value. Metabical is placed as a niche product.

Cons: Can be perceived to be too aggressively priced. Huge dependence on
consumer perception.

Approach No. 3: Product position market

-

Pros: Product is valued appropriately. It gives an idea of a niche product.

Cons: Full value may not be extracted. There is a possibility that a broad
market segment may not be willing to pay for the value of the product set.

Existing Pricing options available to CSP:

The ROI calculated at different prices of Metabical:

Retail Price
Method 1

$75
64.17%

$125
16.01%

$150
8.08%

Method 2

18.10%

91.98%

147.03%

Method 3

24.94%

75.94%

126.39%

Analysis of the 3 prices for Metabical

1. Retail Price $75 for a 4 week pack
Strategic fit:
Is not a good fit with CSPs corporate strategy
Although this will lead to Metabical gaining a large user base initially the
70% margin is not a good strategic fit for the organization over a long term
Metabical is a more effective product compared to competitor and should
be priced higher otherwise it loses the edge.
Financial Attractiveness:
Not attractive on account of.
Negative ROI (-25%)
Poor NPV because of the smaller size of the target market compared to
other two methods , which leads to lower overall revenues over 5 years . NPV
of $709.5 million
Final Assessment
Not recommended
High chance of competitor based pricing backfiring
Financial attractiveness is not good for pursuing this price point.
2. Retail Price: $ 125 for a 4 week pack
Strategic fit:
It is a good fits with the companys strategy
Although the short term revenues are lower than for price point of $150,
this will help Metabical project itself as an affordable premium product over a
long term period.
Financial Attractiveness:
Financially attractive on account of:
ROI close to 75%, which easily meets the expected minimum ROI of 5%.
Pricing set is sensible, and is in line with the market expectations
Attractive NPV of the project at this price, NPV approx. $1.5 billion

Overall Assessment
Recommended
In line with the corporate strategy
Price point is just right to compete in the market segments while
communicating value of the product to the customers
3. Retail Price: $150 for a 4 week pack
Strategic fit
Due to a high starting price point, the product may not be able to capture
required market share
Too high pricing may deter the customers from buying the product.
Financial Attractiveness:
Although it is attractive but still not recommended
Generates high ROI 126%, but the pricing is unrealistic
Such high pricing for a new product may turn away customers in the highly
competitive marketplace.
Overall Assessment
Not recommended
Too high pricing as indicated by the market research.
At this level of pricing, company may push away many consumers from
considering Metabical