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Harvard Business Case: Metabical Solution

Digi ta lAdBlog.com / November 20, 2012

Demand/Pricing Formulation Executive Summary:

There are three main demand strategy’s that make reasonable sense to asses the demand for Metabical within the

first five years. To get the most out of each demand scenario the most optimal pricing structure was applied to each.

Scenario 2 was chosen with the lowest pricing structure to market to a wider audience during the launch with and

affordable price. Pricing can always been tweaked and justified if the product is successful and there is respective

demand by the consumer base.

Scenario #1

The first scenario narrows down the target market by the follow process: 1 take the # of overweight individuals in the

United States (71.06 million), 2 reduce 71.06 million by 35% which is the estimated population trying to lose weight,

3 reducing this by 15% which is the amount comfortable with weight loss drugs which is 3.73 million, 4 Metabical

will capture 10% in year one, 15% in year 2, 20% in year 3, 25% in year 4, and 30% in year 5. The Lowest pricing

structure was chosen because the population chosen was very general and may contain a large percentage of people

who are price sensitive. I believe this is not an effective demand function for Metabical because the audience is too

broad. This model also in theory will capture a small % of the target market in relation to the other models which

makes it very difficult to attain a positive ROI. This model will only bring in 185 million in revenue and is not acceptable

to create a 5% ROI. This is not even enough to cover the R&D and marketing costs.

YearOverweight

In US

Population

Trying to

Lose

Weight

(35%)

Comfortable

With

Weight

Loss drugs

(15%)

Medibical

Will

Capture

Population

Captured

One

Supply(20%*24.80)

Two

Supply(60%*49.60)

Full

Cycle(20%*74.40)

1 71,060,000 24,871,000 3,730,650 10% 373,065 1,850,402 11,102,414 5,551,207

2 71,060,000 24,871,000 3,730,650 15% 559,598 2,775,604 16,653,622 8,326,810

3 71,060,000 24,871,000 3,730,650 20% 746,130 3,700,805 22,204,829 11,102,414

4 71,060,000 24,871,000 3,730,650 25% 932,663 4,626,006 27,756,036 13,878,018

5 71,060,000 24,871,000 3,730,650 30% 1,119,195 5,551,207 33,307,234 16,653,621

Profit- 185,040,200 ROI -53% in 5 Years

Scenario #2 (Chosen Scenario)

The Second Strategy is more aggressive which takes the US population (209 million) and takes 34% of it who are

people who are overweight which comes out to 71.06 million. Next 12% which is the target for Metabical is taken out

which comes out to 8.527 million. Metabical will capture 10% in year one, 15% in year 2, 20% in year 3, 25% in year

4, and 30% in year 5. The lowest pricing structure was chosen because this demographic may look into other methods

to lose weight such as Jenny craig. This model produces a ROI of 5.7% which meet the requirements of upper level

management on making a 5% ROI on 400million in research and development costs. The pricing structure is the low

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which will lower the financial risk to customers. This gives the product a better chance to sell its predicted volume. This

studied demographic contains individuals who are ready to take a pill to lose weight. Marketers cannot always predict

how a specific demographic will react to a product so a slightly broad approach will lead to opportunity for a huge

amount of revenue from not only the target market but other similar markets. (possibly a % of overweight women of

other ages may buy into the product)

Year US Pop34%

Overweight

12%

Target

Market

Metabical

CapturesCaptured

One

Supply(20%

* $24.80)

Two

Supply(60%

* $49.60)

Full

Cycle(20%

* $74.40)

1 209,000,000 71,060,000 8,527,200 10% 852,720 $4,229,491 $25,376,947 $12,688,474

2 209,000,000 71,060,000 8,527,200 15% 1,279,080 $6,344,237 $38,065,421 $19,032,710

3 209,000,000 71,060,000 8,527,200 20% 1,705,440 $8,458,982 $50,753,894 $25,376,947

4 209,000,000 71,060,000 8,527,200 25% 2,131,800 $10,573,728 $63,442,368 $31,721,184

5 209,000,000 71,060,000 8,527,200 30% 2,558,160 $12,688,474 $76,130,842 $38,065,421

Profit: 422,949,120

ROI: 5.7% In 5 Years.(Bottom Line)

The 5.7% ROI in this scenario shows steady growth for Metabical and is consistent with the goals of management. In

this pricing scenario a feasible number of potential customers will be targeted and captured. It is important to analyze

the demographics of what kind of customers are purchasing each year and tweak the demand forecast or marketing

strategy if necessary. For the initial forecast a broad approach is taken with the goal of matching the 5% ROI on the

400 million dollar research and development costs. The forecast was built in Microsoft excel and can easily be

modified if management feels the need to tweak any of the factors.

Scenario #3

The third scenario targets Educated Females from ages 35-65 who are overweight (BMI of 25-30) which equates to a

population of 4.3 million people. In year one Metabical expects to have a capitalization of 30%, then 35%, 40%, 45%,

50% respectively in the following 4 years. The highest tier of pricing was chosen due to the demographic selection.

Females who are 35-65 have the money to purchase weight loss products and will fork over the money for a

prescription. The prescription nature of the product justifies the high tier of pricing as well as the coveted FDA approval.

The ROI comes out to 67% which is a best cast scenario. I believe the pricing structure and demand forecast is

justified because this in many cases will be a life saving product, and a pioneer in prescription weight loss. The

problem with this scenario is that the ROI seems to be unrealistic when management is only expecting a 5% ROI.

Capturing 50% of such a specific market over 5 years may be unreasonable and contain a fundamental flaw. Of

course, the price could be lowered but we feel that this is an appropriate price for the demographic and lowering the

price will affect the brand image of an elite product in the target market.

Year Market % CapitalizationOne

Supply(20%*74.80)

Two

Supply(60%*149.6)

Full

Cycle(20%*224.2)

1 4,300,000 30 1,290,000 $19,298,400 $115,790,400 $57,895,200

2 4,300,000 35 1,505,000 $22,514,800 $135,088,800 $67,544,400

3 4,300,000 40 1,720,000 $25,731,200 $154,387,200 $77,193,600

4 4,300,000 45 1,935,000 $28,947,600 $173,685,600 $86,842,800

5 4,300,000 50 2,150,000 $32,164,000 $192,984,000 $96,492,000

Profit: 1.26 Billion

ROI: 215% (Unrealistic)

Marketing Communications Executive Summary:

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Metabical, a prescription weight loss pill will be marketed to overweight women in the age group of 25-65. There are

two main groups that Metabical is targeting to- end users and doctors. The powerful message that being overweight

can lead to life threatening diseases and that Metabical can help will be the focus of the marketing message to both

end users and Doctors. Tracking and control after the launch is a key component to a successful venture for

Metabical.

Target Market

Metabical will be marketed to overweight women of the age from 25-65. According to a 2007 marketing survey it was

determined that women 10% more women then men are dissatisfied with their current weight, 20% more women then

men visited a healthcare provider for a yearly physical, 15% more women then men want to change their behavior to

live a healthy lifestyle, 30% more women then men failed to lose weight in the past 5 years, 30% more women then

men were dissatisfied with current weight loss options on the market. These results make it clear that women are the

most likely gender to purchase Metabical. The age group of 25-65 is justified because these women have expendable

income which would allow them to purchase an expensive prescription weight loss drug. It is important to maintain a

healthy lifestyle and diet when taking Metabical; this is important to understand in order to have successful weight loss

with Metabical . The women of these demographic are “knowledgeable about the importance of nutrition and exercise,

they are ready to make a change.” The women of this demographic are also “focused on reclaiming former weight they

are motivated and willing to alter current behavior” These psycho graphic behaviors are consistent with the marketing

message of Metabical. This age demographic is quite large but it is necessary to target all of these potential

customers in order understand who is buying into the product as the marketing plan evolves over the next few years.

We anticipate that other demographics will also purchase the product and this is a major consideration in the ensuing

years in what the final evolution of the product will be.

Marketing Communications

Metabical is a unique product to market due to the fact that a message has to be conveyed to the end user as well as

health care providers who recommend and write prescriptions (doctors). The target market as stated above is

overweight women aged 25-65. It is important to reach the market through a variety of venues to instill the importance

of purchasing the prescription. A mix of Print media, television, radio and online advertising will be exploited to reach

the majority of the target market. Print advertising will come in the form of pamphlets and other informative documents

that will be placed at medical clinics, weight loss facilities, doctors offices and other relevant institutions that promote

weight loss and a healthy lifestyle. They must instill a sense of urgency to the end user, that the time to act is now

and they should contact their health care provider to learn more about this new FDA approved weight loss drug.

Online Advertising is effective for targeting the specific target market of women who are searching for weight loss

supplements and are of age 25-65. The success of these campaigns can be measured by the amount of impressions

the advertisement has received as well as successful requests for more information when an advertisement is clicked

an an interaction takes place. Television and radio will be utilized weeks before the drug is released to the public in

order to create hype and a viral marketing effect. The types of channels that the advertisements will be shown are news

channels, channels relating to health and also channels that women watch frequently in order to reach our target

market.

Being overweight is a serious health concern that leads to life threatening diseases, judgment from society and an

overall lower quality of life. The marketing message to the target market must address this point. “Those extra 20

pounds could be killing you. Being overweight leads to heart disease, high blood pressure, diabetes, and gallbladder

disease. Its time to get healthy – Let Metabical guide you to a happier, healthier you.” This is a powerful message that

will speak to these women who are serious about losing weight and is consistent with our goal to spread awareness of

the dangers of being overweight. It is also essential to make sure customers as well as doctors are aware of the

coveted FDA Approval because people will be hesitant to buy the drug if they are unaware of FDA’s approval.

Targeting the professional and medical community requires a different approach. We will utilize print ads in leading

medical publications (journal of the American medical association) and interactive ads adjacent to online physician

resource information (PDR.net) to raise awareness about the drug and its benefits. The marketing communication

geared towards professionals will be formulated to educate them about the safety, research and development, and

compliance. (proper way to prescribe Metabical) The marketing message chosen is: “Atherosclerosis, coronary artery

disease, high blood pressure, diabetes, and gallbladder disease. Your overweight patients are dying for help.

Introducing Metabical – FDA Approved Weight loss drug.” This message has all of the elements of a successful

advertising campaign for Metabical. Like the consumer message, this message is consistent in that it is meant to

shock the doctor by listing the actual diseases associated with weight loss. The end of the message gives credibility

to the product by announcing that the FDA approves the drug. It is essential to be equally successful in the marketing

to doctors as patients because if the Medical Community accepts the drug as an effective and safe method of loosing

weight, more and more doctors will recommend it to patients and positive PR will follow.

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A comprehensive support program will be implemented to enable customers to receive the support they need during

their weight loss journey. The center of the support system is the website that will be developed and will include:

Reference materials, a weight loss tracker, food diary, nutritional and calorie calculator and a forum for personal

support. Other weight loss programs have support programs that have proven to be successful in the past, therefore it

is essential to include this component during the launch of the product. The website will include Social media

functionality including a Twitter and Facebook where customers and doctors can talk about their successes when

taking Metabical. It is important to model the program after other successful weight loss supplements to make sure no

important aspect is missed: An internal case study of Alli, the OTC weight loss supplement will be conducted by the

marketing department to gain a greater understanding of their support program. Goals for the support program will be

tracked and controlled including extracting data from doctors about how the patient found out about Metabical as well

as the success of interaction with the website and social media initiatives.

Positioning

It is important to determine Metabical’s positioning in the weight loss market in order to carry out a sound marketing

plan. Metabical is different then over the counter weight loss supplements because it can only be obtained via

prescription. This gives an image of an elite product that is effective, FDA approved and can only be prescribed a

doctor. People trust their doctors and the FDA which gives Metabical a distinct advantage from over the counter wight

loss products. Women who have not has success in the past with over the counter weight loss supplements are ready

for a prescription strength option such as Metabical. After 5 years on the market Metabical should be considered the

most trusted, effective and #1 prescribed weight loss drug on the market.

Time line Prior To Launch

1 Year Prior → Develop Advertising Campaigns and Marketing Materials

6 Months Prior → Utilize Focus groups to test effectiveness of chosen campaign

3 Months Prior → Direct Marketing to Doctors and healthcare providers

Day of Launch → Press Release, Viral Media Campaign

After Launch → Tracking and Control – Make sure the target demographic is being reached. Every year analyze

effectiveness of price, packaging, and target market.

Budget

After analyzing the budget it has been concluded that the money allocated is appropriate. The marketing budget

should decline by a small percentage every year as the product gains brand awareness and receives free PR from

blogs, news mediums, and word of mouth recommendation from customers and doctors.

November 20, 2012 in Case Studies, Harvard. Tags: Business Case, Case Study, Harvard, Metabical, Solution

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