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Metabical Co. Pricing policy Case Study. In order to profitably satisfy customer needs, the firm must first understand its internal and external situation. A useful framework for performing situation analysis is the 5Cs analysis. That is an environmental

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Introduction

Pricing policy - Case Study #2 Metabical Submitted by: Safanov Efrat, 312063696 Szaingurten Ruben Matias, 321647083 Gartzman Omer, 036064145 Manteka Vicky, 039834700 Submission date: 19-01-2012 Situation Analysis In order to profitably satisfy customer needs, the firm must first understand its internal and external situation. A useful framework for performing situation analysis is the 5Cs analysis. That is an environmental scan of five key areas especially applicable to market decisions: Company CSP is international healthcare company that develops, manufactures and markets products for treating metabolic disorders, gastrointestinal diseases, immune deficiencies and other chronic and medical conditions. CSP's Metabical would be the first prescription drug approved specifically for overweight individuals (BMI 25 to 30). According to CSP R&D team, this product is far more superior comparing to other weight loss prescribed medicines, due to its low dose active ingredients. For this same reason, it is far less harmful to inner organs comparing to other drugs available for this purpose in the market. The main negative side affect is caused when users consume high level of fat and calories. CSP has invested 10 years of research and $400 million in the development of Metabical. Customers In principle, Metabical would be attractive to all overweight individuals, but a primary target audience was established to the purpose of developing a communication strategy: The ideal Metabical audience was found to be overweight women, age 35-65 who were college-educated. This audience is more health conscious and visited the doctor more often, and shall receive adequate-assuring information of the product from him. It was estimated that approximately 4.3 million women are included in this category. Unlike other drugs in CSP's portfolio, most health insurance carriers were not expected to reimburse patients for Metabical costs, meaning the customers will carry the full price of the product. Competition Weight loss options ranged from prescription drugs to over the counter (OTC) remedies to various diet and exercise plans. ...read more.

Middle

The price is determined according to Alli's price with a premium, since Metabical has less harmful side effects and needs to be taken only once a day. The profitability calculations for each one of the demand forecasts can be seen in Table 5. Demand 1 Demand 2 Demand 3 Q - units sold (M) 6.50 5.20 3.91 R = Q * p (M$) 487.39 389.91 293.62 RC = Q * p / 3 (M$) 162.46 129.97 97.87 VC = Q * v (M$) 163.76 131.01 98.66 FC (M$) 429.00 429.00 429.00 Profit (M$) -267.84 -300.07 -331.91 Table 5 - Benchmarking profitability by three demand forecasts 2. Cost + This pricing option is based on Metabical's cost structure. The average CSP gross margin for a new prescription drug is approximately 70%. Based on this information, we can reach a pricing of $125 () for a one month-long supply. The profitability calculations for each one of the demand forecasts can be seen in Table 6. Demand 1 Demand 2 Demand 3 Q - units sold (M) 6.50 5.20 3.91 R = Q * p (M$) 812.32 649.85 489.37 RC = Q * p / 3 (M$) 270.77 216.62 163.12 VC = Q * v (M$) 163.76 131.01 98.66 FC (M$) 429.00 429.00 429.00 Profit (M$) -51.22 -126.78 -201.41 Table 6 - Cost + profitability by three demand forecasts 3. Value to costumer From a cost-savings perspective, CSPs Outcomes Research Group established that overweight individuals spend roughly $450 out-of-pocket more each year on health care versus a person that did not carry excess weight. Given that in just a year, an individual will (in average) save $450, it is fair to assume that sum will be the value to costumer, without even taking into consideration the many other positive effects (social, psychological) of a slimmer figure. A quick calculation shows that if $450 is the value to costumer for a three month-long treatment, each one month-long refill should be priced at $150, since The profitability calculations for each one of the demand forecasts can be seen in Table 7. ...read more.

Conclusion

o Collaboration with key fitness trainers. CSP needs to identify key fitness trainers and secure collaboration with them. The agreement should include Metabical's promotion to the trainer's customers in return for commission rates or a fixed payment. The trainers' promotion can be face-to-face or as an opinion article in their respective websites. * Promotion using dietitians - CPS should try to promote Metabical to dietitians since probably many of the target audience can afford them on a regular basis. The dietitians can make the customers aware of the new drug and its results, especially with a healthy eating habit. The promotion can be done by setting up attractive free conferences with Metabical's drug introduction as one of the key lectures. Promoting to all US overweight individuals that actively try to lose weight * Promotion with the pre-portioned packaged food delivery services. The company can collaborate with these delivery services in the following way - the delivery services can advertise the new drug as a safe way to lose more weight and in return, Metabical's introductory package can include a set of coupons for the pre-packaged food delivery service, that will be subsidized by CSP. This will also increase Metabical's positive effect on the consumer since the drug is more effective with healthier eating habits. * Promotion with weight management support programs. The company can collaborate with the weight management support programs and emphasize that the drug is most effective when behavior modification and healthier eating habits. * On-line/Newspaper advertising - CPS needs to identify key opinion makers (bloggers, magazine column writes, etc.) in the weight-loss industry. These people help formulate the public opinion regarding various diets and weight loss tips. CPS should try to promote Metabical to them using whitepapers of the research results and/or monetary incentive. Place The channels of distribution are various pharmacies and the manner of distribution is similar to other CPS drugs. Price According to our proposed pricing model, we propose to sell both introductory and refill packages of the same brand at the same price. ...read more.

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