Case Summary The Cambridge Sciences Pharmaceuticals (CSP), an international healthcare company completed successful clinical trials for

its latest weight loss prescription drug, Metabical. With final FDA approval expected, the launch was planned for January 2009. However, they needed a clear marketing communications strategy to be in place before the launch. After 10 years and $400 million spent on research and development, it was critical that CSP positions Metabical correctly in the marketplace. Barbara Printup the senior director of marketing CSP was very much aware that the segmentation, targeting, and positioning were important factors to be considered in order to ensure that the launch and the post-launch marketing of the drug yielded strong sales and product longevity given the highly competitive market for weight loss solutions. For the purpose of creating a communications strategy, Printup had targeted college educated women between the age group of 35-65 for their product after comprehensive studies indicated that they were more health conscious. This market size was around 4.3 million. As many of the insurers were not going to reimburse clients for the drug the pricing strategy was going to play a crucial role in the success of the launch. Printup had developed 3 pricing models to choose from. The first strategy was to price their product at a premium price to that of their competitor Alli. The second option was to price it in line with the profit margins realized from the sale of their other prescription drugs. The third option worked out to be overpriced, it mainly concentrated on value to the customers who completed the program successfully. Metabical showed best results on a 12 week plan. The drug had to be administered every 24 hours and so Printup thought they could adopt the packing used by birth control pills which was a days of the week, blister style package. One question remained: How many in a pack? Given the required plan, one option was to make it a 12 week pack, but Printup was worried that may prove to be expensive as a one-time buy. They could stick with the standard which was one week supply. A right balance between the consumers affordability and likely hood they were going to complete the program was key. Sales were expected to be high with the value proposition of the product, but an exact number was required. Again three different models were considered to project the demand over the coming 5 years. Printup understood she would have to further analyze and choose from the different pricing and packing options as they had a direct impact on sales and profitability keeping in mind consumer behavior and the interaction between the health care provider and the customer.

How Does Metabical compare to current weight loss options? Metabical was the only prescription drug to achieve the FDA no side effects Metabical is the first prescription drug for the overweight segment (BMI 25-30).It is a low-dose formula that reduces stress on heart and liver functions. Moderate weight loss for overweight people not the obese like other weight loss drugs. Metabical was a dual-layer, controlledrelease formulation. The first layer contained an appetite suppressant, Calosera, while the second layer contained a fat blocker and calorie absorption agent, Meditonan. What are the pros and cons of the forecasting methods presented by Printup? Which method of forecasting would you suggest?
Method 1

Pros:

Cons:

1. Method is well structured. 2. The whole market pertaining to Over-Weight is considered in the forecast & assumptions are very less. Most of the data comes from market research. 1. Considering that the product is first of its kind, its full value is not being leveraged. 2. The estimated range of the segment is very broad hence difficult to predict 3. The product may not be accepted by low-income group as easily as compared to high-income group. 4. Its difficult to create a brand across various demographics.

Method 2

Pros:

Cons:

1. In this method, aggressive pricing & estimation is followed. 2. Uniqueness of product is being focused upon. 3. The focus is on creating an image which offers unique features. 1. The targets set by aggressive pricing may be too high to achieve. 2. The estimated range of product is still very broad, it makes prediction of behavior difficult.

Method 3

Pros: age.

1. The target customers under this method are women above 35 years of 2. Although the product is focused for a particular segment, it is priced aggressively. 3. The image created by product is very clear and the positioning is precise along with attractive pricing. 1. Niche segment of women reduces the chances of failure but straight away decreases almost half of the segment.

Cons:

We would have selected our target market as both men and women. Narrowing down of target could be done by focusing on college educated individuals (21%) and those who are health conscious and willing to go to a health care center for prescription (12%). What considerations should be taken into account when making decisions about the package count? What package size would you recommend? Cambridge Sciences Pharmaceuticals (CSP) should take into account the timing decisions as well as the pricing of the product when making decision about the package count. As, in the FDA trials, the majority of individuals reached their weight-loss goals by week 12 and in order to be fully effective the drug had to be present in the blood stream because skipping a tablet means its effectiveness would decrease. So, ideally CSP would have liked to package a 12-week supply in one dosing but this would higher pricing and it would affect the number of potential customers. Even though the customers would be able to complete the entire program and would give long lasting result as the idea behind this is that the customers usually forget to get their prescriptions refilled. But it will limit only to those who can afford the entire medication program with one-time pay. Therefore, it is advisable to pack Metabical in one pack of four week supply which can be made affordable for everyone. However there remains a risk that the consumers will not complete the entire treatment. It is also suggested to have another packaging with 3 packs for 12-weeks supply. By attaching the comprehensive program to the 3 pack of 12 week supply it would definitely attract more customers. What pricing strategy approaches would you suggest Printup explore? What are the advantages and disadvantages of each strategy? What price would you recommend? The following are the pricing strategy approaches that we can use with Printup explore: 1) Benchmark against market competition: In this strategy we set the price according to prices of the competitors. Advantages: Since we have a base price of the competitors in mind, goals are easy to meet. It will gather a large customer base in the short term Disadvantages: Positioned as similar to other competitors in the market. Hard to market the products full value. Competitor based pricing may backfire Being a more effective product in the market place, Metabical loses the edge without any reason. Product will end up competing against products that are not even in the same segment and the brand message could get confused.

2) Measuring Value proposition: The company decides the price based on the value they perceive that they are giving to the consumers. Advantages: Full value of the product is extracted The niche is created for the brand Disadvantages: Aggressive pricing can result in the consumers taking a longer time to accept the product. The market demand and the revenue can be overestimated. Product will not gain market share easily High prices may risk the product getting alienated from other products in the category 3) Leveraging product position market: The pricing is done keeping the value as well as the positioning and consumer base in mind. Advantages: Realistic goals and revenue returns are set up. Pricing is just right to compete in unique market segments while communicating value of the product Metabical will be able to project itself as a premium product over the long term Disadvantages: Full value of the product is not extracted. The product may take some time to get accepted due to higher than average pricing. What impact your pricing decision have on profitability? What is the ROI over the first five years for each of the pricing strategies identified? Pricing the product at $125 for a 4-week supply will be ideal as results show a forecasted 5year 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 as it is targeting the niche customer base and the pricing is based on the research data of CSPs Outcomes Research Group. Educated females (36-65 age) with BMIs between 25 and 30 looks to be the most attractive. The ROI calculations are listed below: Retail Price is $75 1. ROI(Method 1) 64.17% 2. ROI(Method 2) 18.10% 3. ROI(Method 3) 24.94%

Retail Price is $125 1. ROI(Method 1) 16.01% 2. ROI(Method 2) 91.18% 3. ROI(Method 3) - 75.94% Retail Price is $150 1. ROI(Method 1) 8.08% 2. ROI(Method 2) 147.03% 3. ROI(Method 3) 146.39%