Target Market
65% of 230 million adults in US were considered over weight, obese or severely obese
The primary target market decided by the company after extensive market survey and research was having the following characteristics
- The product was useful only for people having BMI of 25 to 30
- Even though the percentage of overweight men was greater (67%) to that of women (62%), women in the age group of 25 to 65 were thought of as the primary customers
- Income generation capacity of $50000 to $ 80000
- Educated women with at least a college degree
- Women concerned about weight loss and ready to make changes in lifestyle to achieve that
Competition
Weight loss options ranged from prescription drugs to over the counter remedies to various diets and exercise plans. Various entities faced safety concerns and had been filed against as promising false claims.
Since a few products like OTC herbs did not require stringent FDA regulation it was difficult to determine the extent of complications created by them. Only OTC drug Alli was approved by the FDA.
Packaging and Pricing
In order to determine the optimum pricing for the product we use three varied methods
- Compare it with Alli, the non-prescription form of orlistat
Alli was to be taken 3 times a day and came as a 50 day starter pack which cost about $ 120 which comes around to $ 2.4 per day and $.80 per tablet.
The company decided to sell Metabical at a premium since it did not have the harmful effects and also would have to be taken once a day
Given the option, the pricing should be between $3 to $5 per day over a course of 12 weeks or 90 days.
The revenue generated in such a case will be between $ 90 to $ 150 per month or $1080 to $ 1800 per year.
Since, Metabical is a prescription drug, it is not wise to sell it at $3 per day and earn a revenue of $1080 per year.
Likewise $5 per day seems to be quite high and will not be favorable to the target group.
$120 per month will be suitable for a four week supply.
- The second method was to compare other CSP drug margins. Since the margin was approximately 70% for every new drug, the retail price would be $125 for a 4 week supply
- The third method for pricing focused on value the customers derived from successfully completing a program. It was estimated to be around $150 for a 4 week supply.
Keeping all the 3 methods in mind a price in the range of $4 to $4.5 per day seems optimum for the product.
CSP decided to have a blister style package for Metabical, would be convenient to the user since it would allow them to keep track of dosing.
The company was facing difficulties in determining the range of dosing in a pack. Keeping the price options calculated above in mind, it makes more sense to have packages containing 4 week supply at a time. Even though it increases the changes that people would forget to complete the entire regimen, the price would not be otherwise too high for people not being able to pay for a complete course at once.
Demand Forecasting
Three methods have been used to forecast the demand
- Number of overweight individuals between 25 and 30
2008 = 65% of 230 million = 149.5 million
1999 to 2000 = 34% of 209 million = 71.09 million
1988 to 1994 = 33% of 185 million = 61.05 million
1976 to 1980 = 31.6% of 163 million = 51.5 million
% actively trying to reduce weight = 35%
2008 = 52.32 million
1999 to 2000 = 24.88 million
People comfortable with weight loss drugs = 15%
2008 = 7.84 million
Market penetration:
1st year = 10% =.784 million
2nd year = 1.11 million
By year 5 = 2.35 million
- 12% respondents make immediate appointment with their healthcare provider
2008 = 149.5 *12% = 17.94 million
Marker penetration:
1st year = 10% = 1.79 million
2nd year = 2.69 million
By 5th year 30% = 5.38 million
- Ideal target customer
Potential users = 4.3 million
Market penetration
1st year = 30% = 1.29 million
2nd year = 1.5 million
By year 5 = 50% = 2.15 million
Therefore going by all three methods of forecasting demand, Metabical seems to have a steady demand in the future. Being the only weight reducing drug to be approved by FDA and the positive clinical trial results, the product is likely to do well.
by
madhurima (student)
