Fall

08
October
24

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

Marketing Management Course

K AT Z S c h o o l o f B u s i n e s s
1. 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. Previous prescriptive drugs had negative side effects that out
weighed its positives. Metabical, on the other hand, did not display as
many negative effects in its trial runs and thus was being strongly
endorsed by the medical community.

Current weight-loss drugs can be classified as Prescriptive Drugs or

Over-the-counter (OTC) remedies. OTC Drugs were not as popular
among overweight individuals due to lack of regulation and safety
concerns. OTC drugs lost out to diet plans, exercise plans and meal
replacement/weight management products, as they were safer options.

Metabical was to compete in the Prescriptive drug market, where there

were only a few drugs available but these drugs were mainly approved
for obese and severely obese individuals. The only drug that was
approved by the FDA for over-weight individuals was Alli. Alli used to
block the bodys absorption of fat, leading to weight loss. However, it
had a lot of side effects, which could cause dangerous medical
situations. Metabical, on the other hand, was a dual layer, controlled
release formulation. It acted as an appetite suppressant and also had a
fat blocker and calorie absorption agent. The over-all product was far
superior in achieving weight-loss, over its competitors, for over weight
individuals but not for obese and severely obese individuals.

Therefore, Metabical was a unique product, which was focused towards

a particular segment of the market, the over weight segment. It was
the first of its kind and had that advantage. There were other products,
but they were not as popular in the market segment Metabical was
targeting. It was pictured as a low-risk, high returns drug and had built
good support in the medical community, who were needed to prescribe
this drug.
2. What are the pros and cons of the forecasting methods
presented by Printup?
Forecasting Method 1
Pros: 1. The Method is very structured.
2. The whole over-weight market is considered in the
forecast and very little data is assumed. Most data comes
form market research.
Cons: 1. Considering it is the first of its kind, full value is not
being leveraged.
2. The estimate is spread very broad. It is hard to predict
the behavior of such a broad segment of customers.
3. May not be accepted as easily by the low-income groups
as compared to the high-income groups.
4. Hard to create a brand across multiple demographics.
Forecasting Method 2
Pros: 1. The Method is aggressively priced and estimated.
2. Leverages the uniqueness of the product.
3. Will create an image of uniqueness and something that
works outstanding.
Cons: 1. May not be able to meet forecasted results due to
aggressive pricing.
2. The estimate is still spread very broad. It is hard to
predict the behavior of such a broad segment of
customers.

Forecasting Method 3
Pros: 1. The Method is aimed at a particular segment i.e. women
above 35.
2. Aggressively priced, but portrayed as a niche brand.
3. A clear picture of the market they are targeting and
attractive pricing in relation to the benefits the product is
delivering.
Cons: 1. There is very small room for failure as it is being
promoted as a niche product.
2. Gender bias may mean loss of half the segment in a
single shot.
3. 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. Goals are easy to meet.
Cons: positioned as similar to other competitors in the market.
Hard to market the products full value.
b) Measuring Value Proposition
Pros: Full value is extracted. A niche feeling is built.
Cons: May be too aggressively priced. Highly dependent on
consumer behavior.
c) Leveraging product position market
Pros: Product is valued well. A niche product idea.
Cons: Full value is not extracted. Broad market segment may not
pay for the value of the product. Highly dependent on

What price would you recommend? (Use options grid in

answering this question for financial attractiveness refer
to question 4 below).
Pricing -> Benchmark Leveraging Measuring
Options against market Product Value
competition position Proposition

Description Pricing for a 4

Pricing for a 4 Pricing for a 4
of option week supply of
week supply of week supply of
Metabical at $75
Metabical at Metabical at
$125 $150
Overall Do not Recommend Do not
Assessment recommend Aligns with recommend
Competitor corporate Pricing is too
based pricing strategy high as
may backfire Pricing is just market
Metabical does right to research
not have to compete in indicates
compete at all unique market This pricing
price points segments may alienate
that a while many
consumer communicatin consumers
wants g value of the from
product considering
 Pricing makes Metabical
Metabical a
premium
quality
product in line
with product
effectiveness
Strategic fit
Does not fit Fits well with Given the
well with CSPs company high starting
corporate strategy price, the
strategy Although product may
While revenues are not attain
Metabical will lower in the required
be able to gain short term, market share
a large user Metabical will Product may
base initially be able to not be able to
the option project itself compete
does not fit as a premium effectively
the strategic product over given the
goal of 70% the long term intense
margins over competition
the long term in the market.
Being a more
effective
product in the
market place,
Metabical
loses the edge
without any
reason.
Financial Not attractive. Attractive Attractive
Attractivene ROI is negative Recommende not
ss (-25%) d recommended
Target market ROI is close to Although ROI
size is too low 75%, which is 126%,
compared to surpasses the pricing is
other two expected unrealistic
methods , minimum ROI Pricing a new
hence of 5% by a product at
generates large margin $150 a per
lower overall Pricing is week could
revenues over sensible, in be a non-
5 years NPV line with starter in a
of $709.5 market highly
million expectations competitive
 NPV of approx. marketplace.
$1.5 billion

Noteworthy Product will Product may Very high

risks end up not be entry price
competing accepted point
against readily given Revenue
products that the higher expectations
are not even in than average more
the same price point of unrealistic
segment the drug compared to
Brand Revenue other pricing
message could expectation strategies
be confusing could be ROI although
Revenues not exaggerated attractive
attractive due to point may be
Assumption is estimate value unachievable
that the this of market size. Product will
market portion Assumption is not gain
is not highly that the this market share
segmented market portion easily.
is not highly Assumption is
segmented that the this
market
portion is not
highly
segmented
4. 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; (b) gross
margin forecast; (c) calculate ROI.) The spreadsheets are
given on Courseweb to help you with your analysis.
Ideal Consumer Segment: Educated females, 35-65 of age with BMIs
between 25 and 30 looks to be the most attractive.
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 $859,858,960; The ROI in this case is 75.94%.
The ROI exceeds the initial expected minimum ROI value of 5%
within five years of the new products launch. Hence, 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.

Research also suggests that pricing Metabical-4 week supply at

$150 was higher than what consumers in the overweight category
were willing to pay. Forecast method2 shows higher profit margin
than our proposed strategy on both price levels, $125 & $150 and
their ROIs seem attractive from the financial calculations. However,
the method is relative to CSPs existing product line success rate,
which doesnt seem like a viable option. A new product entering the
segment for the first time is influenced by current market state,
existing competition, and varied market dynamics. Hence,
forecasting a new product based on older product success might not
be a reliable indicator to decide on a product launch strategy. The
ROI calculations are listed below:

$75 Retail
Price
ROI - Method 64.17
1 %
ROI - Method 18.10
2 %
ROI - Method $125
24.94
3 Retail
%
Price
ROI - Method 16.01
$150 Retail 1 %
Price ROI - Method 91.98
ROI - Method 2 8.08% %
1 ROI - Method 75.94
ROI - Method 3 147.03 %
2 %
ROI - Method 126.39
3 %