Download PharmaSim Case Preparation

Pharmasim Strategic plan
Group: KISS
Members:
Zhuobin Chen, Jiajia Cai, Young Pei Lee
Xiaoying Ma, Zhen Yang, Wei Wang
Nov. 1st, 2010
Agenda
PharmaSim Case (5Cs)
Place/Channel Motivation Assignment
Product Cannibalization
Pricing/Margin
Promotion – Buyer Behavior Assignment
Marketing Plan
Overall Retail Brand CBBE
PharmaSim Case Preparation
Company: Allround is a 4-hour multisymptom liquid manufacturer with unique
products and high market share.
Goals: find new opportunities & maintain market
leadership

 Strengths: Increase
budget, high brand awareness,
market leader, unique product
 Weaknesses: Low
retention ratio; low market share
in other categories, relatively high price, placement in
shelf space.
PharmaSim Case Preparation
 Customers recognize Allround most, yet
they have some negative image toward
Allround.
 Negative
attitude toward product’s alcohol ingredient.
 Capsule is more convenient than liquid.
 There is a second highest demand on cough category.
 Preference on new brands and brands that fill very specific
needs.
PharmaSim Case Preparation
Competitors are entering multi-symptom
markets.
B&B health care, Curall Pharmaceuticals, Discol Corporation and Ethik
Incorporated.
Competitors’
Move: Enter the cold market and compete with us.
Our reactions:
Product ingredients improvement
Increase sales forces help
Support from retailers
Promotion program
PharmaSim Case Preparation

Collaborators:
 Direct
channels & Indirect channels
 Promotional allowance, product turnover, sales force support, co-op
advertising allowances, discount volume
• Context:
Technology development
Inflation
Public’s increasing concern about their health issues.
Great needs in the OTC cold remedy market.
Channel
OTC Cold
Remedies
Name
of
Outlet
Describe
Typical
of
customer
Drug Stores
Grocery Stores
Mass Merchandisers
Traditional
customer,
Professionals,
Baby-boomers.
Fashionista,
Quality pursuers,
Female customer.
Brand aspirationals;
Price-sensitive affluent;
Value-price shoppers.
Approx. %
of Store
Dedicated
to Product
category
Pharmacist
Present?
Approxima
te Number
of
brand
carried
2.5%
1.5%
1%
Yes
17
Yes
20
Yes
15
Channel
Brand
ZICAM
Drug Stores
Grocery Stores
Mass Merchandisers
# of SKUs for brand
5*10
13/13/13/6/7/2/2
7/10/4/3
Approximate linear feet of shelf O whole shelf floor
space dedicated to brand
6 feet
Part of one shelf floor
4 feet
A small portions of one shelf
floor
2 feet
MSRP of primary
SKU (if available)
N/A
N/A
N/A
Standard retail price
$ 12.49
$ 9.89
$ 8.96
Promotion price
$ 8.99
$ 9.89
$ 8.96
N/A
N/A
Describe
any
promotion As advertised (Sale)
vehicles (Pops, coupons, etc.)
Channel---an important factor influcing sales
and influenced by retailer
Importance of shelf space
 70% of all purchase decisions are made in-store
 Eye-level shelf space
 Comparison with nearby products











Gain shelf space
The volume of sales
The profit margin for retailers
The competitiveness relation with retailers’ private label
products
Uniqueness of the new brand (New niche)
Channel Motivation
Customer demands & Profit margin
Less direct competitiveness relations with the own private label
Good relationship with retailers and manufactures
Logistics cooperation
Product Cannibalization---products differentiation
helps to reduce product cannibalization
Cannibalization refers to a reduction in sales volume, sales revenue, or market share
of one product as a result of the introduction of a new product by the same
producer (From Wikipedia).
Line extension choices we have :
 4-hour cold liquid for children;
 12-hour multi-symptom capsule;
 4 hour cough liquid;
WHY??????
 Most different;
 Current: 4-hour multi-symptom liquid---emphasizing multisymptom reliever function with no ingredients for cough
 New line: Cough liquid----COUGH!
Product Cannibalization
Benefits from core product
 Different product, same brand----Allround;

The highest brand awareness help new products
to be recognized quickly and trusted by
consumers.
Product Cannibalization
Options to minimize

Always emphasize two products different function
to help shape consumer’s insight about products
performance and imagery;

Encourage consumer trials by cross selling two
products together to make consumers feel different
about these two products.
Pricing---Margin
Allround’s Average Retail Price by Channel
$6.00
$5.00
Competitive
price at
Grocery
store
$4.00
$3.00
$2.00
$1.00
$0.00
Retail Price
We make an assumption that Allrounds usually offer <2500+ units
of volume in grocery store which resulted in the biggest volume
discount 48.6% in Grocery stores.This advantage will contribute to
Allrounds ‘retail sales significantly.
Pricing
Conclusion: Allround ‘s the most important channel: Grocery store
Grocery’s sales
increase
significantly
The Role of MSRP
Our retail price will
be positioned
according to MSRP
MSRP-MSRP*15%~40%(volume
discount)
Manufacturer's
Suggested Retail Price
Retail price
Impact on Distributor
• Increase $1
MSRP
MSRP
Volume
Discount
• Assumption
the same
volume
discount
• Higher Retail
Price
Retail
Price
Units of
Volume
• Low units of
volume
• <250
• <2500
Distributio
n channel
Competition
Manufacture
Sales
Promotional
Allowance
Costs of
Goods Sold
Gross
Margin
Gross
Margin:
190.8
500
450
Gross
Margin:
225.3
Gross
Margin:
204.1
Gross
Margin:
271.8
400
350
300
Manufacture Sales
Costs of Goods Sold
Promotional Allowance
250
200
150
100
50
0
Allstar
B&B
Curall
Ethik
Although 18% (or $74.9M)’s promotional
allowance contribute to the sales, the
comparably high Cost of Goods Sold lead to
unsatisfactory gross margin which requires the
company lower the costs in the future
strategy.
Promotion – Buyer Behavior
Information Collection
Problem Recognition---symptoms felt by consumers
How does the consumer realize that he/she needs an OTC cold remedy?
When I
cannot
When
I cannot
breathe.
breathe
When I
When
a cold
cannot
lasts
longer
breathe.
Information Research---actively searched
information from many ways
How does the consumer gather information about potential solutions?
Scanning
theI shelf
When
in thecannot
drug store
and my own past
breathe.
experience
When I
cannot
Friends and family
breathe.
Evaluation of Alternatives---based on effectiveness
How does the consumer evaluate alternative solutions?
What are his/her decision criteria?
TheWhen
more potent
I
product
are sold
cannot
behind
the
breathe.
counter
Safety
andI
When
scientific
cannot
evidence
breathe.of
effectiveness
Product Choice---final decision made after
reviewing medicine’s ingredients and function
What brand was actually chosen, and why did he/she choose it?
When I
Sudafed
with
cannot
Ephedrine
breathe.
When I
Private
label
cannot
orbreathe.
generic
brands
Post-Purchase Evaluation---affect their later choice
How satisfied was the consumer with the brand chosen?
Will his/her satisfaction change the purchase process for the next purchase?
When I
Very
satisfied
cannot
with
Sudafed
breathe.
When
I
Cold
medicines
docannot
not always
breathe.
seem
to work
very well
Promotion – Buyer Behavior
Observations of Purchase
Observations of Purchase
How much effort does the individual put into purchasing OTC products?
Base on their symptoms to choose the products.
Find and compare the price of OTC products in the stores.
Consider the safety and side effect of OTC products.
Referrals from customers and pharmaceutists in the stores.
Observations of Purchase
Who else influences the decision?
Friends
Family
Relatives
Pharmaceutists
Doctors
Spokesman
Advertising
Observations of Purchase
Does the consumer purchase for himself/herself or for someone else?
As for the first two questions, consumers not only purchase OCT
products for themselves, but also for others, such as friends, families, or
relatives. Consumers highly rely on their habitual brands or someone’s
suggestions to select the OTC products. When purchasing the product for
others, consumers will purchase it according to others’ needs.
Promotion – Buyer Behavior
Assignment
Buyer Behavior Link to Promotional Plan
Advertising Message:
Functionality and safety of a product.
Less price-sensitive
In-store information
Word of mouth
Point of Purchase Display:
Shelf space is important.
Coupons:
No information
PharmaSim Marketing Plan
5Cs
Company
Goals: new market and current competitive market
Measures to determine direction: customer feedbacks, market reports.
Strength: multi-functionality, high effectiveness and high brand awareness and market share.
Weakness: solo dosage form, low retention rate, no specific target area
Customer
Underlying needs: quality, functionality, safety and effectiveness of the products.
Benefits: relieve from illness earlier and safer
Current trends: Great needs in the OTC cold remedy market. Consumers have negative attitude
toward alcohol in the drug formulation. capsule is more convenient than liquid form
Competitor
primary competitors : B&B health care, Curall Pharmaceuticals, Discol Corporation and Ethik
Incorporated.
Their moves: following after us entering cold remedy market, which is the fastest growth market
Our reactions: reformulation, line extension, sales force changes and adjustment on pricing and
promotion strategies.
Collaborator
Direct channels: including Independent drugstores, chain drugstores, grocery stores, convenience
stores, mass merchandisers
Indirect channels: wholesalers, merchandisers and detailers
Ways to motivate them: promotional allowance, discount, sales force and etc.
Collaborator
Technology development, inflation rate and public knowledge and perception transition.
PharmaSim Marketing Plan
STP
Segmentation
Targeting
Positioning
There are a lot of segments for selection in PharmaSim. Cold, cough, allergy and
multi-symptom in the form of liquid and capsule for adults and children.
We are targeting at adult multi-symptom area and we are trying to target at
adult cold area. Hopefully, cough in the long run.
Value proposition: be high quality, highly effective, absolute safe and relatively
cheaper price.
Pricing strategy: Market leader, prevent new entry
Advertising strategy: stressing on new functions of the products and its
effectiveness.
Channel partner: In-store setting and shelf allocation by channel partner
make it easier for customers to have in store shopping decisions
PharmaSim Marketing Plan
4Ps
Channels/
Pricing
Assumption: Period 2 decisions
Margin structure: Costs of goods, Retail margin, promotional allowance
One dollar increase on MSRP: $0.62 <250
$0.54 250~2500
$0.51 >2500
$0.49 Wholesalers
line extension: 4 hour cough liquid
The new line will definitely benefit a lot from current core product because of
Cannibalizat its high brand awareness in cold remedy area
ions
Two Options: 1. always emphasizing different functions between two brands
2. encourage consumer trials by cross selling two products
together
Overall Retail brand CBBE
Impact of Retail brand on category
 CBBE model
 Brand Elements Criteria
 Clear evidence of store checks

Impact of Retail brand on category
 Retailers would choose the product which fit their
own strategy
 Retailers' brands may shift customers’ perceptions
about products
38
Customer-based Brand Equity Pyramid
Help to live a
better life
Good Quality
and
Effectiveness;
Convenient;
user-friendly
Affordable price;
Famous;
OTC drug--- 4-hour multi-symptom liquid
Customer-based Brand Equity Pyramid
Help to live a
better life
Good Quality
and
Effectiveness;
Convenient;
user-friendly
Affordable price;
Famous;
OTC drug--- 4-hour multi-symptom liquid
Customer-based Brand Equity Pyramid
Help to live a
better life
Good Quality
and
Effectiveness;
Convenient;
user-friendly
Affordable price;
Famous;
OTC drug--- 4-hour multi-symptom liquid
Brand Element Criteria Evaluation
Walmart
Walgreens
Target
Brands
Low end High end Low end
High end
Low end High end
Sudafed
3.38
3.38
6.99
16.99
Advil
3.38
3.38
Equate
2.36
34.96
Zyrtez
17.97
34.94
15.99
40.99
5.84
20.09
Claritin
4.92
25.58
10.49
34.99
8.84
28.19
Allergy Medication
4.12
5.97
Benadryl
3.97
11.22
5.49
10.99
8.99
8.99
Alavert
8.58
18.85
25.99
25.99
8.79
9.49
Chlortrimeton
2.76
9.97
9.99
9.99
Zicam
8.96
18.98
8.99
13.49
Ayr
2.87
4
3.59
4.99
Nellmed
12.74
34.98
Walgreens
3.99
39.99
Similasan
7.99
7.99
Little noses
3.99
5.99
Triaminic
4.99
12.99
5.49
5.49
Pedia Care
6.49
6.49
8.99
8.99
Vicks
4.48
5.58
5.99
14.99
Dimetapp
4.99
10.99
Allergy Buster
15.49
15.99
NeilMed
9.99
14.99
Contac
6.99
9.99
Alka-Seltzer
5.77
5.77
4.99
4.99
SinusSense
10.99
36.99
BreathRight
4.97
12.98
6.99
14.99
Arfin
4.38
7.74
8.29
8.29
Theraflu
4.97
4.97
Coricidin
4.98
5.43
Nasal
6.67
6.67
4way
5.68
5.96
Up & up
2.04
8.64
Detailed Store Check
Conclusion:
1. It seems like that Zyrtez, Claritin,
Benadryl and Alavert are the
common brands sold in all stores
among those common brands,
generally walmart offers a lower
prices than other two stores
and Target has higher prices tagged.
Important to mention, only
Walgreens and Target has line
specifically for kids.
2. For the private label products,
Equate from walmart prices from
2.36 to 34.96 and Walgreens from
walgreens ranges from 3.99 to 39.99.
Up & Up prices the lowest at 2.04
but has a narrower range to 8.64
3. Walmart and Walgreens have
about the same complete and various
product lines in the category of
allergy.
In comparison, Target just has a few
lines, of which most are common
brands.
43
Store Check
Independent area
 Various brands

Comfortable environment
 Fashion and ethic

Coupon & Ads usage
 Customer-friendly

Thank you for listening.
Any questions?