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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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. Various entities in the weight loss had faced safety concerns and some even have been accused for deceptive marketing claims that dampened enthusiasm for the products in this market.

Listed below a quick review of the market main categories:

  1. OTC Herbal remedies (No FDA approval needed) - Since Herbal remedies do not require stringent FDA approval, the complication derived from their use might only be revealed after the product is widely used. Moreover, in many cases those treatments are unsubstantiated.
  2. OTC remedied (FDA approval needed) - While plethora of OTC weight loss solution existed, only OTC solution “Alli” was approved by the FDA for weight loss use. However, “Alli” was reported to have dangerous side effect of liver damage.
  3. Prescribed remedies (FDA approval needed) -Two common drugs in this market are “Meridia” for suppressing appetite and “Xenical” for blocking absorption of fat. Both of these drugs are intended for obese and severely obese segment, due to seriously dangerous side-effects they hold.

Due to the lack of regulation and safety concerns associated with OTC weight loss drugs, many individuals moved to other options such as diet & exercise plans.

Metabical, however, is a prescribed drug intended for the overweight market segment (BMI between 25 and 30), in which there are no prescription-drugs options available.

Collaborations

The case has not supplied any information regarding distributers, suppliers or alliances. Yet, it is reasonable to deduct that since CSP is developing, manufacturing and marketing company, the major components of the supply chain are held within the company. Therefore, it doesn’t seem there are any significant risks (or advantages) that can be derived by allies, suppliers or distributers in the current situation.

Context

With the development of Metabical, CSP is about to enter $3.74 billion market in the USA. In this market, Metabical is about to become a revolutionary product, as it is the only prescription drug to receive the FDA approval to meet the needs of individuals who are fighting with moderate weight loss goals.

According to the center of disease control, overweight is directly linked to many medical conditions, such as: Heart disease, cancer, diabetes and more. And yet, by 2008 over 65% of the 230 million adults in the US were considered above recommended weight. Despite of (or perhaps due to) the common overweight situation prevails within US population, most of health insurance companies do not cover for weight loss treatments.

Results from an extensive marketing survey of overweight individuals commissioned by CSP in 2007 revealed considerable interest in a prescription drug for moderate weight loss goals: 70% of the respondent were not satisfied with their current weight and 15% of the respondents felt comfortable with using drugs to help reach weight-loss goals.


Main Problem

The problem we are facing is this case is maximizing the profits from the new product - Metabical. The main question is how to sell a 12-week treatment plan to the customers and generate the highest profit.

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The problem stems down to 2 decisions:

  • The first problem is deciding on a pricing model for each package so that the company could generate the highest profits.
  • The second one is how to package the treatment plan – should it be sold as one package or as several packages?

In the following sections we will show possible pricing model alternatives and a suggested packaging decision.

In the end, we will formulate a recommended marketing plan for the new product.


Pricing Alternatives

As seen from FDA trials, Metabical was most effective as ...

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