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Metabical - Marketing Case Study

Shrishti Gupta, profile picture
Shrishti Gupta

CSP is considering options for pricing, packaging, and demand forecasting for its new weight-loss drug Metabical. Three demand forecasting models were analyzed estimating the potential market between 4.3-9.8 million customers. Packaging and pricing strategies were evaluated using a matrix to determine ROI under different scenarios. Pricing at $150 targeting the ideal customer profile was estimated to achieve a 5.73% ROI, meeting CSP's objective.

Marketing
Related topics:
Pricing Strategy • Weight Loss
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Pricing, Packaging and Demand Forecasting for a New Weight-Loss Drug
CSP’s Market Share Opportunity New Product Opportunity 0 % Increased Market Share ?? % IDENTIFIED MARKET OPPORTUNITYScope Packaging Demand Pricing Recommendation - - - $ 3,74 Bn per annum Market for Weight-Control Products As of 2008
• > 65% of 230 Mn (~158 Mn) adult American population is considered overweight, obese or severely obese • CSP’s identified market segment: ~81.65 Mn (35.5%) overweight Americans TARGETING IDENTIFIED MARKET SEGMENTScope Packaging Demand Pricing Recommendation - - - 51.5 61.05 71.06 81.65 23.47 39.04 53.92 62.51 5.37 9.82 13.27 1980 1990 2000 2008 Overview of Overweight, Obese, & Severely Obese Population (Mn) in USA Overweight (BMI 25-30)* Obese (BMI 30-40)* Severely Obese (BMI >40)* Population Index 2008
PRODUCT DESCRIPTION - METABICAL First ‘Food & Drug Administration (FDA)’ approved prescription drug for overweight population To be launched by Cambridge Science Pharmaceuticals (CSP) after 10 years in RnD To be launched in North American market within 9 months – by January 2009 Clinically proven weight-loss drugs targeted at overweight adults (BMI 25-30) Strong endorsement by medical community -> survey respondents show curiosity Scope Packaging Demand Pricing Recommendation - - - 12-week treatment plan - to consume one pill at same time everyday
OBJECTIVESScope Packaging Demand Pricing Recommendation - - - CSP spent 10 yrs in R&D @ $ 400 Mn FDA Approval Requires Packaging Decision Launch Metabical Apr 2008 Jan 2009 now Pricing Decision Demand Forecast & ROI Determination Determine Optimal Package Size - Required for FDA approval Recommend Final Pricing Strategy - Achieve a 5% ROI within 5 years Establish Initial Demand Forecasts - Assess market potential and acquisition 1 2 3
Information Required OBJECTIVES RETURN ON INVESTMENT (ROI) DEMAND PACKAGE PRICE Scope Packaging Demand Pricing Recommendation - - - CSP spent 10 yrs in R&D @ $ 400 Mn FDA Approval Requires Packaging Decision Launch Metabical Apr 2008 Jan 2009 now Pricing Decision Demand Forecast & ROI Determination
EVALUATION CRITERIAScope Packaging Demand Pricing Recommendation - - - CSP spent 10 yrs in R&D @ $ 400 Mn FDA Approval Requires Packaging Decision Launch Metabical Apr 2008 Jan 2009 now Pricing Decision Demand Forecast & ROI Determination Conservative Demand Highest ROI Greatest Potential Uplift
WEIGHT-LOSS PRODUCTS MARKET Scope Packaging Demand Pricing Recommendation - - - $ 3,74 Bn per annum Market for Weight-Control Products As of 2008 Competition Analysis
Days of the Week Blister Style Insurance Implications No Subsidies Package Size 12 Weeks 4 Weeks PACKAGING Scope Packaging Demand Pricing Recommendation - - - ROIDEMAND PACKAGE PRICE
DEMAND MODEL 1 FORECASTING DEMANDScope Packaging Demand Pricing Recommendation - - - Demand Model 1 Demand Model 2 Demand Model 3 ROIDEMAND PACKAGE PRICE Approx. In Millions (Mn) 4.29 Population that is ‘Overweight’ ‘Overweight’ people who are trying to lose weight ‘Overweight’ people trying to lose weight who are willing to use medication US Population 35.5% 35% 15%
DEMAND MODEL 2 FORECASTING DEMANDScope Packaging Demand Pricing Recommendation - - - Demand Model 1 Demand Model 2 Demand Model 3 ROIDEMAND PACKAGE PRICE Approx. In Millions (Mn) 9.8 Population that is ‘Overweight’ ‘Overweight’ people who would seek an appointment if a prescription drug were available US Population 35.5% 12% Market Description Market Potential Demand Scenario 1 ‘Overweight’ people trying to lose weight who are willing to use medication to help 4.29 million Recap
DEMAND MODEL 3 FORECASTING DEMANDScope Packaging Demand Pricing Recommendation - - - Demand Model 1 Demand Model 2 Demand Model 3 ROIDEMAND PACKAGE PRICE Approx. In Millions (Mn) 4.3 CSP Research determined population size of ideal target market: overweight females, age 35-65, college educated, health- conscious & visited the doctor more often US Population 35.5% Market Description Market Potential Demand Scenario 1 ‘Overweight’ people trying to lose weight who are willing to use medication to help 4.29 million Demand Scenario 2 ‘Overweight’ people who would seek an appointment if a prescription drug were available 9.8 million Recap
FORECASTING DEMAND: SNAPSHOTScope Packaging Demand Pricing Recommendation - - - Demand Model 1 Demand Model 2 Demand Model 3 ROIDEMAND PACKAGE PRICE Market Description Market Potential Demand Scenario 1 ‘Overweight’ people trying to lose weight who are willing to use medication to help 4.29 million Demand Scenario 2 ‘Overweight’ people who would seek an appointment if a prescription drug were available 9.8 million Demand Scenario 3 CSP Research determined population size of ideal target market: overweight females, age 35-65, college educated, health-conscious & visited the doctor more often 4.3 million
PRICING MODELSScope Packaging Demand Pricing Recommendation - - - ROIDEMAND PACKAGE PRICE Recall Packaging Demand Price Modelling 5% ROI within 5 years
Factors Influencing Pricing Strategies PRICING MODELS: THE THREE C'SScope Packaging Demand Pricing Recommendation 3C’s - - ROIDEMAND PACKAGE PRICE PRICE Competitor or Competition 1 3 Customer or Demand 2 Company or Cost 5% ROI in 5 years Country: USA Population BMI: 25-30 • OTC Drugs, • Herbal Remedies, • FDA Approved (Alli, BMI>30) • Non-FDA Approved Competitor based Company based Customer based
Factors Influencing Pricing Strategies PRICING MODELS: THE THREE C'S $75 Scope Packaging Demand Pricing Recommendation 3C’s - - ROIDEMAND PACKAGE PRICE Competition 1 3 Demand-based 2 Cost-based OTC Weight-loss Drugs: $63-$100 Premium** Benchmark to Direct Competition Alli – Cost Per 28 Days (4 weeks) * $ 48.72 Metabical – Proposed Price 28 Days (4 weeks) $ 75 Gross Margin (%) > 50 % Competitor based Company based Customer based Competition-based Strategy * Alli – closest comparable (non-prescription) drug ** FDA approved prescription strength medication
Factors Influencing Pricing Strategies PRICING MODELS: THE THREE C'S $125 Scope Packaging Demand Pricing Recommendation 3C’s - - ROIDEMAND PACKAGE PRICE Competition 1 3 Demand-based 2 Cost-based Competitor based Company based Customer based CSP’s avg. Gross Margin = 70% Benchmark to CSP’s other Drug Margins Other Drug Gross Margins ~ 70 % Metabical – Proposed Price 28 Days (4 weeks) $ 125 Cost-based Strategy
Factors Influencing Pricing Strategies PRICING MODELS: THE THREE C'S $150 Scope Packaging Demand Pricing Recommendation 3C’s - - ROIDEMAND PACKAGE PRICE Competition 1 3 Demand-based 2 Cost-based Ideal Target Customer value offer Competitor based Company based Customer based Benchmark to Value delivered to Customers Overweight Individuals Additional Annual Out-of-Pocket Expenses on Healthcare * $ 450 Metabical – Proposed Price 28 Days (4 weeks) $ 150 Metabical’s Complete 12-week Treatment $ 450 Demand-based Strategy * CSP’s Research (Outcomes Research Group)
ROI FROM PRICE/DEMAND MATRIXScope Packaging Demand Pricing Recommendation 3C’s - - Competitor based Company based Customer based Model 1 Actively Trying to Lose Weight Model 2 Ready to Request a Prescription Model 3 Ideal Target Market Initial Market 4.3 million 9.8 million 4.3 million Market Acquisition* First Year: 10% Years 2,3,4,5: 5% Total @ Year 5: 30% First Year: 30% Years 2,3,4,5: 5% Total @ Year 5: 50% Repurchasing Behaviour** First 4 weeks: 100% Second 4 Weeks: 60% Third 4 Weeks: 12% Total Sales 2.2 million packages 4.2 million packages 3.7 million packages Demand Pricing ROIDEMAND PACKAGE PRICE * Penetration estimates are based on CSP historical experience. Customers are conservatively assumed not to "repeat" a treatment subscription within the five year period. ** Based on data from test trials during R&D phase
ROI FROM PRICE/DEMAND MATRIX NB: Costs include: $ 400 Mn Research & Development, $ 23 Mn initial marketing budget, $ 1.2 Mn annual fixed costs of production, $ 25.20 variable costs per package produced Scope Packaging Demand Pricing Recommendation 3C’s - - Competitor based Company based Customer based ROIDEMAND PACKAGE PRICE Model 1 Actively Trying to Lose Weight Model 2 Ready to Request a Prescription Model 3 Ideal Target Market 5 Year Results Market: 4.3 Mn Packages Sold: 2.2 Mn Market: 9.8 Mn Packages Sold: 4.2 Mn Market: 4.3 Mn Packages Sold: 3.7 Mn Competitor $75 Premium Market Placement Sales: $166 Mn ROI: (192.65%) Sales $316 Mn ROI: (69.60%) Sales: $227 Mn ROI: (88.55%) Company $125 Average Gross Margin Sales: $276 Mn ROI: (75.59%) Sales: $527 Mn ROI: (1.76%) Sales: $462 Mn ROI: (13.13%) Customer $150 Consumer Value Model Sales: $332 Mn ROI: (46.33%) Sales: $632 Mn ROI: 15.20% Sales: $555 Mn ROI: 5.73% Demand Pricing Evaluation Criteria: Min 5% ROI
ROI FROM PRICE/DEMAND MATRIX NB: Costs include: $ 400 Mn Research & Development, $ 23 Mn initial marketing budget, $ 1.2 Mn annual fixed costs of production, $ 25.20 variable costs per package produced Scope Packaging Demand Pricing Recommendation 3C’s - - Competitor based Company based Customer based ROIDEMAND PACKAGE PRICE Model 1 Actively Trying to Lose Weight Model 2 Ready to Request a Prescription Model 3 Ideal Target Market 5 Year Results Market: 4.3 Mn Packages Sold: 2.2 Mn Market: 9.8 Mn Packages Sold: 4.2 Mn Market: 4.3 Mn Packages Sold: 3.7 Mn Competitor $75 Premium Market Placement Sales: $166 Mn ROI: (192.65%) Sales $316 Mn ROI: (69.60%) Sales: $227 Mn ROI: (88.55%) Company $125 Average Gross Margin Sales: $276 Mn ROI: (75.59%) Sales: $527 Mn ROI: (1.76%) Sales: $462 Mn ROI: (13.13%) Customer $150 Consumer Value Model Sales: $332 Mn ROI: (46.33%) Sales: $632 Mn ROI: 15.20% Sales: $555 Mn ROI: 5.73% Demand Pricing Evaluation Criteria: Min 5% ROI
Customer based Skimming Strategy - PRICING MODELS: SKIMMING STRATEGYScope Packaging Demand Pricing Recommendation 3C’s Skimming - ROIDEMAND PACKAGE PRICE Leverage on the buyers’ willingness to pay
PRICING MODELS: SKIMMING STRATEGY Year 1 Price $150 Market 4.3 Mn Penetration 30% Year 2 Price $150 Market 4.3 Mn Penetration 5% Year 3-5 Drop price to $99 Market 9.8 Mn Penetration 5% Scope Packaging Demand Pricing Recommendation 3C’s Skimming - Customer based Skimming Strategy - ROIDEMAND PACKAGE PRICE Skimming Strategy
PRICING MODELS: SKIMMING STRATEGY Skimming Revenue Base Model Revenue Scope Packaging Demand Pricing Recommendation 3C’s Skimming - Customer based Skimming Strategy - ROIDEMAND PACKAGE PRICE Determine ROI Skimming Model 12.51% Base Model 5.73%
PRICING MODELS: QUANTITY STRATEGYScope Packaging Demand Pricing Recommendation 3C’s Skimming Quantity Customer based Skimming Strategy Quantity Differentiator ROIDEMAND PACKAGE PRICE Price Differentiation Demographic Geographical Temporal Benefit-based Quantity-based Bundling What is Quantity-based Price Differentiation? Offer identical or similar products to different customers or segments at different prices • The avg. price per unit varies depending on the quantity purchased – i.e., customers benefit from volume discounts • Customer loyalty is directly proportional to the discounts offered
PRICING MODELS: QUANTITY STRATEGY Third Month (12%) Second Month (60%) First Month (100%) Buys Starter Pack $150 Buys Double Pack $225 Buys Single Pack $150 Buys Single Pack $150 %? %? Scope Packaging Demand Pricing Recommendation 3C’s Skimming Quantity Customer based Skimming Strategy Quantity Differentiator ROIDEMAND PACKAGE PRICE To Model Impact on ROI Uptake of Quantity Offer Year 1 Price $150 Market 4.3 Mn Penetration 30% Year 2-5 Price $150 Market 4.3 Mn Penetration 5% (each year) ROI 5.73% over 5years Quantity Strategy Recall Repeat Purchase Behaviour Model
PRICING MODELS: QUANTITY STRATEGYScope Packaging Demand Pricing Recommendation 3C’s Skimming Quantity Customer based Skimming Strategy Quantity Differentiator ROIDEMAND PACKAGE PRICE Determine ROI Max. Uptake 10.41% No Uptake 5.73%
ROI FROM PRICE/DEMAND MATRIXScope Packaging Demand Pricing Recommendation 3C’s Skimming Quantity Customer based Skimming Strategy Quantity Differentiator ROIDEMAND PACKAGE PRICEEvaluation Criteria Conservative Model Highest ROI Greatest Uplift Potential Model 3 Ideal Target Market Skimming Strategy Quantity Differentiation Strategy 5 Year Results Initial Market: 4.3 Mn Packages Sold: 3.7 Mn Packages Sold: 5.1 Mn Packages Sold: 3.8-4.5 Mn Market Penetration Strategy Ideal Target Market Reduce Price in Year 3 to attract additional customers "ready to request a prescription" Offer Qty Discount to capture greater repeat purchases Price per 4-week Pack: $150 Consumer Value Model ROI: 5.73% ROI: 12.51% ROI: 5.73-10.41% Demand Pricing
ROI FROM PRICE/DEMAND MATRIXScope Packaging Demand Pricing Recommendation 3C’s Skimming Quantity ROIDEMAND PACKAGE PRICEEvaluation Criteria Conservative Model Highest ROI Greatest Uplift Potential Model 3 Ideal Target Market Skimming Strategy Quantity Differentiation Strategy 5 Year Results Initial Market: 4.3 Mn Packages Sold: 3.7 Mn Packages Sold: 5.1 Mn Packages Sold: 3.8-4.5 Mn Market Penetration Strategy Ideal Target Market Reduce Price in Year 3 to attract additional customers "ready to request a prescription" Offer Qty Discount to capture greater repeat purchases Price per 4-week Pack: $150 Consumer Value Model ROI: 5.73% ROI: 12.51% ROI: 5.73-10.41% Demand Pricing Customer based Skimming Strategy Quantity Differentiator
OUR RECOMMENDATION Minimum Conservative ROI Estimate 12.51% Combination of Demand Models •Ideal Target Market (4.3 Mn) •Ready to Request Prescription (9.8 Mn) 4 Week Blister Style Packaging Most Conservative ROI Estimate with Highest Potential for Uplift Scope Packaging Demand Pricing Recommendation 3C’s Skimming Quantity Conservative Demand Highest ROI Greatest Potential Uplift Skimming Strategy Start @ $150 in Year 1 Drop to $99 in Year 3 1 2 3 Recap
Pricing, Packaging and Demand Forecasting for a New Weight-Loss Drug
APPENDIX – SURVEY RESULTS Sample (Men & Women) 2000 100.00% Not satisfied with current weight 1400 70.00% Actively trying to lose weight 700 35.00% Comfortable using weightloss drugs 105 5.25% Seek prescription from healthcare provider 240 12.00% CSP Survey Results
APPENDIX – POPULATION ESTIMATION USA Adult Population in Mn CAGR % Year 1980 163 Year 1990 185 1.27 Year 2000 209 1.23 Year 2008 230 1.22 USA Population Estimation for 2008 % of overweight people %OW CAGR % %obese CAGR% %morbidly obese CAGR% Year 1976-1980 31.6 14.4 Year 1988-1994 33 0.031 20.1 0.02 2.9 Year 1999-2000 34 0.05 25.8 0.08 4.7 0.23 Total BMI >25 Year 2008 35.5 0.5 27.2 5.8 68.46 No. of overweight individuals 2008 (in Mn) 81.65 Conservative estimate of this figure 78.2 Estimate for % Overweight People in USA 2008
APPENDIX – DEMAND FORECAST 1 Description % Amount First Purchase (100%) Second Purchase (60%) Third Purchase (20%) Total packages sold (12 weeks) No. of overweight individuals in US (2008) 81,650,000.00 Individuals actively trying to lose weight 35% 28,577,500.00 Individuals ^ comfortable using drugs 15% 4,286,625.00 Acquired customerbase in Yr 1 10% 428,662.50 428,662.50 257,197.50 51,439.50 737,299.50 Acquired customerbase in Yr 2 5% 214,331.25 214,331.25 128,598.75 25,719.75 368,649.75 Acquired customerbase in Yr 3 5% 214,331.25 214,331.25 128,598.75 25,719.75 368,649.75 Acquired customerbase in Yr 4 5% 214,331.25 214,331.25 128,598.75 25,719.75 368,649.75 Acquired customerbase in Yr 5 5% 214,331.25 214,331.25 128,598.75 25,719.75 368,649.75 TOTAL 2,211,898.50 Revenue Revenue Recurrent Costs Total Costs Gross Margin ROI PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 331,784,775.00$ 55,739,842.20$ 485,489,842.20$ -153,705,067.20$ -46.33% PR 2 - Average Margin Price (COMPANY) 125.00$ 276,487,312.50$ 55,739,842.20$ 485,489,842.20$ -209,002,529.70$ -75.59% PR 1 - Premium Price Point (COMPETITOR) 75.00$ 165,892,387.50$ 55,739,842.20$ 485,489,842.20$ -319,597,454.70$ -192.65% DEMAND FORECAST 1 - OVERWEIGHT, WANT TO LOSE IT, HAPPY WITH DRUGS PRICING DEMAND FORECAST 1
APPENDIX – DEMAND FORECAST 2 Description % Amount First Purchase (100%) Second Purchase (60%) Third Purchase (20%) Total packages sold (12 weeks) No. of overweight individuals in 2008 81,650,000.00 Respondents ready to seek prescription 12% 9,798,000.00 Acquire customerbase in Yr 1 10% 979,800.00 979,800.00 587,880.00 117,576.00 1,685,256.00 Acquire customerbase in Yr 2 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 Acquire customerbase in Yr 3 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 Acquire customerbase in Yr 4 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 Acquire customerbase in Yr 5 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 TOTAL 4,213,140.00 Revenue Revenue Recurrent Costs Total Costs Gross Margin ROI PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 631,971,000.00$ 106,171,128.00$ 535,921,128.00$ 96,049,872.00$ 15.20% PR 2 - Average Margin Price (COMPANY) 125.00$ 526,642,500.00$ 106,171,128.00$ 535,921,128.00$ -9,278,628.00$ -1.76% PR 1 - Premium Price Point (COMPETITOR) 75.00$ 315,985,500.00$ 106,171,128.00$ 535,921,128.00$ -219,935,628.00$ -69.60% DEMAND FORECAST 2 - OVERWEIGHT, WOULD SEEK PRESCRIPTION PRICING DEMAND FORECAST 2
APPENDIX – DEMAND FORECAST 3 Description % Amount First Purchase (100%) Second Purchase (60%) Third Purchase (20%) Total packages sold (12 weeks) Ideal Target Market: women 35-65 OW 4,300,000.00 Acquire customerbase in Yr 1 30% 1,290,000.00 1,290,000.00 774,000.00 154,800.00 2,218,800.00 Acquire customerbase in Yr 2 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00 Acquire customerbase in Yr 3 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00 Acquire customerbase in Yr 4 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00 Acquire customerbase in Yr 5 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00 TOTAL 3,698,000.00 Revenue Revenue Recurrent Costs Total Costs Gross Margin ROI PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 554,700,000.00$ 93,189,600.00$ 522,939,600.00$ 31,760,400.00$ 5.73% PR 2 - Average Margin Price (COMPANY) 125.00$ 462,250,000.00$ 93,189,600.00$ 522,939,600.00$ -60,689,600.00$ -13.13% PR 1 - Premium Price Point (COMPETITOR) 75.00$ 277,350,000.00$ 93,189,600.00$ 522,939,600.00$ -245,589,600.00$ -88.55% PRICING DEMAND FORECAST 3 DEMAND FORECAST 3 - IDEAL TARGET MARKET
APPENDIX – DEMAND FORECAST 4 Description % Amount First Purchase (100%) Second Purchase (60%) Third Purchase (20%) Total packages sold (12 weeks) Ideal Target Market: women 35-65 OW 4,300,000.00 Acquire customerbase in Yr 1 30% 1,290,000.00 1,290,000.00 774,000.00 154,800.00 2,218,800.00 Acquire customerbase in Yr 2 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00 Acquire customerbase in Yr 3 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 Acquire customerbase in Yr 4 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 Acquire customerbase in Yr 5 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 TOTAL 5,116,484.00 Revenue Revenue Recurrent Costs Proportion Costs Proportion GM Proportion Sales PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 332,820,000.00$ 55,913,760.00$ 279,904,488.09$ 52,915,511.91$ 52.12% PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 55,470,000.00$ 9,318,960.00$ 46,650,748.01$ 8,819,251.99$ 8.69% VAR PR 4 - Skimming Strategy (YEAR 3) 99.00$ 83,420,172.00$ 21,234,225.60$ 77,376,720.23$ 6,043,451.77$ 13.06% VAR PR 4 - Skimming Strategy (YEAR 3) 99.00$ 83,420,172.00$ 21,234,225.60$ 77,376,720.23$ 6,043,451.77$ 13.06% VAR PR 4 - Skimming Strategy (YEAR 3) 99.00$ 83,420,172.00$ 21,234,225.60$ 77,376,720.23$ 6,043,451.77$ 13.06% SUMMARY OF RESULTS Revenue Recurrent Costs Total Costs Gross Margin ROI TOTAL SALES PERIOD - SKIMMING MODEL 638,550,516.00$ 128,935,396.80$ 558,685,396.80$ 79,865,119.20$ 12.51% PRICING STRATEGY 4 - SKIMMING MODEL PRICING DEMAND FORECAST 3
APPENDIX – DEMAND FORECAST 5 Description % Amount Buy pack 1 (100%) Buy pack 2&3 Buy pack 2 only Buy pack 3 (20%) TOTAL Doubles TOTAL Singles VAR: Uptake VAR: Uptake Ideal Target Market: women 35-65 OW 4,300,000.00 50.00% 10.00% Acquire customerbase in Yr 1 30% 1,290,000.00 1,290,000.00 645,000.00 129,000.00 25,800.00 645,000.00 1,444,800.00 Acquire customerbase in Yr 2 5% 215,000.00 215,000.00 107,500.00 21,500.00 4,300.00 107,500.00 240,800.00 Acquire customerbase in Yr 3 5% 215,000.00 215,000.00 107,500.00 21,500.00 4,300.00 107,500.00 240,800.00 Acquire customerbase in Yr 4 5% 215,000.00 215,000.00 107,500.00 21,500.00 4,300.00 107,500.00 240,800.00 Acquire customerbase in Yr 5 5% 215,000.00 215,000.00 107,500.00 21,500.00 4,300.00 107,500.00 240,800.00 TOTAL 1,075,000.00 2,408,000.00 Revenue Revenue Recurrent Costs Proportion Costs Proportion GM Proportion Sales TOTAL SALES PERIOD - SKIMMING MODEL 603,075,000.00$ 114,861,600.00$ 544,611,600.00$ 58,463,400.00$ 9.69% PRICING STRATEGY 5 - QTY DIFFERENTIATION MODEL PRICING DEMAND FORECAST 3
FIXED VARIABLE DESCRIPTION AMOUNT UNIT PR 1 - Premium Price Point (COMPETITOR) 75.00$ per package PR 2 - Average Margin Price (COMPANY) 125.00$ per package PR 3 - Consumer Value Price (CUSTOMER) 150.00$ per package VAR PR 4 - Skimming Strategy (YEAR 3) 99.00$ per package VAR PR 5 - Qty Diff Strategy (DBL OFFER) 225.00$ per double package Variable Costs 25.20$ per package R&D Cost 400,000,000.00$ million sunk costs Marketing Cost 23,000,000.00$ million total estimate Fixed Annual Cost 1,350,000.00$ million per year TOTAL COSTS (5yr) 429,750,000.00$ million over 5 yrs APPENDIX – FIXED VARIABLE PRICING

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Metabical - Marketing Case Study

  • 1. Pricing, Packaging and Demand Forecasting for a New Weight-Loss Drug
  • 2. CSP’s Market Share Opportunity New Product Opportunity 0 % Increased Market Share ?? % IDENTIFIED MARKET OPPORTUNITYScope Packaging Demand Pricing Recommendation - - - $ 3,74 Bn per annum Market for Weight-Control Products As of 2008
  • 3. • > 65% of 230 Mn (~158 Mn) adult American population is considered overweight, obese or severely obese • CSP’s identified market segment: ~81.65 Mn (35.5%) overweight Americans TARGETING IDENTIFIED MARKET SEGMENTScope Packaging Demand Pricing Recommendation - - - 51.5 61.05 71.06 81.65 23.47 39.04 53.92 62.51 5.37 9.82 13.27 1980 1990 2000 2008 Overview of Overweight, Obese, & Severely Obese Population (Mn) in USA Overweight (BMI 25-30)* Obese (BMI 30-40)* Severely Obese (BMI >40)* Population Index 2008
  • 4. PRODUCT DESCRIPTION - METABICAL First ‘Food & Drug Administration (FDA)’ approved prescription drug for overweight population To be launched by Cambridge Science Pharmaceuticals (CSP) after 10 years in RnD To be launched in North American market within 9 months – by January 2009 Clinically proven weight-loss drugs targeted at overweight adults (BMI 25-30) Strong endorsement by medical community -> survey respondents show curiosity Scope Packaging Demand Pricing Recommendation - - - 12-week treatment plan - to consume one pill at same time everyday
  • 5. OBJECTIVESScope Packaging Demand Pricing Recommendation - - - CSP spent 10 yrs in R&D @ $ 400 Mn FDA Approval Requires Packaging Decision Launch Metabical Apr 2008 Jan 2009 now Pricing Decision Demand Forecast & ROI Determination Determine Optimal Package Size - Required for FDA approval Recommend Final Pricing Strategy - Achieve a 5% ROI within 5 years Establish Initial Demand Forecasts - Assess market potential and acquisition 1 2 3
  • 6. Information Required OBJECTIVES RETURN ON INVESTMENT (ROI) DEMAND PACKAGE PRICE Scope Packaging Demand Pricing Recommendation - - - CSP spent 10 yrs in R&D @ $ 400 Mn FDA Approval Requires Packaging Decision Launch Metabical Apr 2008 Jan 2009 now Pricing Decision Demand Forecast & ROI Determination
  • 7. EVALUATION CRITERIAScope Packaging Demand Pricing Recommendation - - - CSP spent 10 yrs in R&D @ $ 400 Mn FDA Approval Requires Packaging Decision Launch Metabical Apr 2008 Jan 2009 now Pricing Decision Demand Forecast & ROI Determination Conservative Demand Highest ROI Greatest Potential Uplift
  • 8. WEIGHT-LOSS PRODUCTS MARKET Scope Packaging Demand Pricing Recommendation - - - $ 3,74 Bn per annum Market for Weight-Control Products As of 2008 Competition Analysis
  • 9. Days of the Week Blister Style Insurance Implications No Subsidies Package Size 12 Weeks 4 Weeks PACKAGING Scope Packaging Demand Pricing Recommendation - - - ROIDEMAND PACKAGE PRICE
  • 10. DEMAND MODEL 1 FORECASTING DEMANDScope Packaging Demand Pricing Recommendation - - - Demand Model 1 Demand Model 2 Demand Model 3 ROIDEMAND PACKAGE PRICE Approx. In Millions (Mn) 4.29 Population that is ‘Overweight’ ‘Overweight’ people who are trying to lose weight ‘Overweight’ people trying to lose weight who are willing to use medication US Population 35.5% 35% 15%
  • 11. DEMAND MODEL 2 FORECASTING DEMANDScope Packaging Demand Pricing Recommendation - - - Demand Model 1 Demand Model 2 Demand Model 3 ROIDEMAND PACKAGE PRICE Approx. In Millions (Mn) 9.8 Population that is ‘Overweight’ ‘Overweight’ people who would seek an appointment if a prescription drug were available US Population 35.5% 12% Market Description Market Potential Demand Scenario 1 ‘Overweight’ people trying to lose weight who are willing to use medication to help 4.29 million Recap
  • 12. DEMAND MODEL 3 FORECASTING DEMANDScope Packaging Demand Pricing Recommendation - - - Demand Model 1 Demand Model 2 Demand Model 3 ROIDEMAND PACKAGE PRICE Approx. In Millions (Mn) 4.3 CSP Research determined population size of ideal target market: overweight females, age 35-65, college educated, health- conscious & visited the doctor more often US Population 35.5% Market Description Market Potential Demand Scenario 1 ‘Overweight’ people trying to lose weight who are willing to use medication to help 4.29 million Demand Scenario 2 ‘Overweight’ people who would seek an appointment if a prescription drug were available 9.8 million Recap
  • 13. FORECASTING DEMAND: SNAPSHOTScope Packaging Demand Pricing Recommendation - - - Demand Model 1 Demand Model 2 Demand Model 3 ROIDEMAND PACKAGE PRICE Market Description Market Potential Demand Scenario 1 ‘Overweight’ people trying to lose weight who are willing to use medication to help 4.29 million Demand Scenario 2 ‘Overweight’ people who would seek an appointment if a prescription drug were available 9.8 million Demand Scenario 3 CSP Research determined population size of ideal target market: overweight females, age 35-65, college educated, health-conscious & visited the doctor more often 4.3 million
  • 15. Factors Influencing Pricing Strategies PRICING MODELS: THE THREE C'SScope Packaging Demand Pricing Recommendation 3C’s - - ROIDEMAND PACKAGE PRICE PRICE Competitor or Competition 1 3 Customer or Demand 2 Company or Cost 5% ROI in 5 years Country: USA Population BMI: 25-30 • OTC Drugs, • Herbal Remedies, • FDA Approved (Alli, BMI>30) • Non-FDA Approved Competitor based Company based Customer based
  • 16. Factors Influencing Pricing Strategies PRICING MODELS: THE THREE C'S $75 Scope Packaging Demand Pricing Recommendation 3C’s - - ROIDEMAND PACKAGE PRICE Competition 1 3 Demand-based 2 Cost-based OTC Weight-loss Drugs: $63-$100 Premium** Benchmark to Direct Competition Alli – Cost Per 28 Days (4 weeks) * $ 48.72 Metabical – Proposed Price 28 Days (4 weeks) $ 75 Gross Margin (%) > 50 % Competitor based Company based Customer based Competition-based Strategy * Alli – closest comparable (non-prescription) drug ** FDA approved prescription strength medication
  • 17. Factors Influencing Pricing Strategies PRICING MODELS: THE THREE C'S $125 Scope Packaging Demand Pricing Recommendation 3C’s - - ROIDEMAND PACKAGE PRICE Competition 1 3 Demand-based 2 Cost-based Competitor based Company based Customer based CSP’s avg. Gross Margin = 70% Benchmark to CSP’s other Drug Margins Other Drug Gross Margins ~ 70 % Metabical – Proposed Price 28 Days (4 weeks) $ 125 Cost-based Strategy
  • 18. Factors Influencing Pricing Strategies PRICING MODELS: THE THREE C'S $150 Scope Packaging Demand Pricing Recommendation 3C’s - - ROIDEMAND PACKAGE PRICE Competition 1 3 Demand-based 2 Cost-based Ideal Target Customer value offer Competitor based Company based Customer based Benchmark to Value delivered to Customers Overweight Individuals Additional Annual Out-of-Pocket Expenses on Healthcare * $ 450 Metabical – Proposed Price 28 Days (4 weeks) $ 150 Metabical’s Complete 12-week Treatment $ 450 Demand-based Strategy * CSP’s Research (Outcomes Research Group)
  • 19. ROI FROM PRICE/DEMAND MATRIXScope Packaging Demand Pricing Recommendation 3C’s - - Competitor based Company based Customer based Model 1 Actively Trying to Lose Weight Model 2 Ready to Request a Prescription Model 3 Ideal Target Market Initial Market 4.3 million 9.8 million 4.3 million Market Acquisition* First Year: 10% Years 2,3,4,5: 5% Total @ Year 5: 30% First Year: 30% Years 2,3,4,5: 5% Total @ Year 5: 50% Repurchasing Behaviour** First 4 weeks: 100% Second 4 Weeks: 60% Third 4 Weeks: 12% Total Sales 2.2 million packages 4.2 million packages 3.7 million packages Demand Pricing ROIDEMAND PACKAGE PRICE * Penetration estimates are based on CSP historical experience. Customers are conservatively assumed not to "repeat" a treatment subscription within the five year period. ** Based on data from test trials during R&D phase
  • 20. ROI FROM PRICE/DEMAND MATRIX NB: Costs include: $ 400 Mn Research & Development, $ 23 Mn initial marketing budget, $ 1.2 Mn annual fixed costs of production, $ 25.20 variable costs per package produced Scope Packaging Demand Pricing Recommendation 3C’s - - Competitor based Company based Customer based ROIDEMAND PACKAGE PRICE Model 1 Actively Trying to Lose Weight Model 2 Ready to Request a Prescription Model 3 Ideal Target Market 5 Year Results Market: 4.3 Mn Packages Sold: 2.2 Mn Market: 9.8 Mn Packages Sold: 4.2 Mn Market: 4.3 Mn Packages Sold: 3.7 Mn Competitor $75 Premium Market Placement Sales: $166 Mn ROI: (192.65%) Sales $316 Mn ROI: (69.60%) Sales: $227 Mn ROI: (88.55%) Company $125 Average Gross Margin Sales: $276 Mn ROI: (75.59%) Sales: $527 Mn ROI: (1.76%) Sales: $462 Mn ROI: (13.13%) Customer $150 Consumer Value Model Sales: $332 Mn ROI: (46.33%) Sales: $632 Mn ROI: 15.20% Sales: $555 Mn ROI: 5.73% Demand Pricing Evaluation Criteria: Min 5% ROI
  • 21. ROI FROM PRICE/DEMAND MATRIX NB: Costs include: $ 400 Mn Research & Development, $ 23 Mn initial marketing budget, $ 1.2 Mn annual fixed costs of production, $ 25.20 variable costs per package produced Scope Packaging Demand Pricing Recommendation 3C’s - - Competitor based Company based Customer based ROIDEMAND PACKAGE PRICE Model 1 Actively Trying to Lose Weight Model 2 Ready to Request a Prescription Model 3 Ideal Target Market 5 Year Results Market: 4.3 Mn Packages Sold: 2.2 Mn Market: 9.8 Mn Packages Sold: 4.2 Mn Market: 4.3 Mn Packages Sold: 3.7 Mn Competitor $75 Premium Market Placement Sales: $166 Mn ROI: (192.65%) Sales $316 Mn ROI: (69.60%) Sales: $227 Mn ROI: (88.55%) Company $125 Average Gross Margin Sales: $276 Mn ROI: (75.59%) Sales: $527 Mn ROI: (1.76%) Sales: $462 Mn ROI: (13.13%) Customer $150 Consumer Value Model Sales: $332 Mn ROI: (46.33%) Sales: $632 Mn ROI: 15.20% Sales: $555 Mn ROI: 5.73% Demand Pricing Evaluation Criteria: Min 5% ROI
  • 22. Customer based Skimming Strategy - PRICING MODELS: SKIMMING STRATEGYScope Packaging Demand Pricing Recommendation 3C’s Skimming - ROIDEMAND PACKAGE PRICE Leverage on the buyers’ willingness to pay
  • 23. PRICING MODELS: SKIMMING STRATEGY Year 1 Price $150 Market 4.3 Mn Penetration 30% Year 2 Price $150 Market 4.3 Mn Penetration 5% Year 3-5 Drop price to $99 Market 9.8 Mn Penetration 5% Scope Packaging Demand Pricing Recommendation 3C’s Skimming - Customer based Skimming Strategy - ROIDEMAND PACKAGE PRICE Skimming Strategy
  • 24. PRICING MODELS: SKIMMING STRATEGY Skimming Revenue Base Model Revenue Scope Packaging Demand Pricing Recommendation 3C’s Skimming - Customer based Skimming Strategy - ROIDEMAND PACKAGE PRICE Determine ROI Skimming Model 12.51% Base Model 5.73%
  • 25. PRICING MODELS: QUANTITY STRATEGYScope Packaging Demand Pricing Recommendation 3C’s Skimming Quantity Customer based Skimming Strategy Quantity Differentiator ROIDEMAND PACKAGE PRICE Price Differentiation Demographic Geographical Temporal Benefit-based Quantity-based Bundling What is Quantity-based Price Differentiation? Offer identical or similar products to different customers or segments at different prices • The avg. price per unit varies depending on the quantity purchased – i.e., customers benefit from volume discounts • Customer loyalty is directly proportional to the discounts offered
  • 26. PRICING MODELS: QUANTITY STRATEGY Third Month (12%) Second Month (60%) First Month (100%) Buys Starter Pack $150 Buys Double Pack $225 Buys Single Pack $150 Buys Single Pack $150 %? %? Scope Packaging Demand Pricing Recommendation 3C’s Skimming Quantity Customer based Skimming Strategy Quantity Differentiator ROIDEMAND PACKAGE PRICE To Model Impact on ROI Uptake of Quantity Offer Year 1 Price $150 Market 4.3 Mn Penetration 30% Year 2-5 Price $150 Market 4.3 Mn Penetration 5% (each year) ROI 5.73% over 5years Quantity Strategy Recall Repeat Purchase Behaviour Model
  • 27. PRICING MODELS: QUANTITY STRATEGYScope Packaging Demand Pricing Recommendation 3C’s Skimming Quantity Customer based Skimming Strategy Quantity Differentiator ROIDEMAND PACKAGE PRICE Determine ROI Max. Uptake 10.41% No Uptake 5.73%
  • 28. ROI FROM PRICE/DEMAND MATRIXScope Packaging Demand Pricing Recommendation 3C’s Skimming Quantity Customer based Skimming Strategy Quantity Differentiator ROIDEMAND PACKAGE PRICEEvaluation Criteria Conservative Model Highest ROI Greatest Uplift Potential Model 3 Ideal Target Market Skimming Strategy Quantity Differentiation Strategy 5 Year Results Initial Market: 4.3 Mn Packages Sold: 3.7 Mn Packages Sold: 5.1 Mn Packages Sold: 3.8-4.5 Mn Market Penetration Strategy Ideal Target Market Reduce Price in Year 3 to attract additional customers "ready to request a prescription" Offer Qty Discount to capture greater repeat purchases Price per 4-week Pack: $150 Consumer Value Model ROI: 5.73% ROI: 12.51% ROI: 5.73-10.41% Demand Pricing
  • 29. ROI FROM PRICE/DEMAND MATRIXScope Packaging Demand Pricing Recommendation 3C’s Skimming Quantity ROIDEMAND PACKAGE PRICEEvaluation Criteria Conservative Model Highest ROI Greatest Uplift Potential Model 3 Ideal Target Market Skimming Strategy Quantity Differentiation Strategy 5 Year Results Initial Market: 4.3 Mn Packages Sold: 3.7 Mn Packages Sold: 5.1 Mn Packages Sold: 3.8-4.5 Mn Market Penetration Strategy Ideal Target Market Reduce Price in Year 3 to attract additional customers "ready to request a prescription" Offer Qty Discount to capture greater repeat purchases Price per 4-week Pack: $150 Consumer Value Model ROI: 5.73% ROI: 12.51% ROI: 5.73-10.41% Demand Pricing Customer based Skimming Strategy Quantity Differentiator
  • 30. OUR RECOMMENDATION Minimum Conservative ROI Estimate 12.51% Combination of Demand Models •Ideal Target Market (4.3 Mn) •Ready to Request Prescription (9.8 Mn) 4 Week Blister Style Packaging Most Conservative ROI Estimate with Highest Potential for Uplift Scope Packaging Demand Pricing Recommendation 3C’s Skimming Quantity Conservative Demand Highest ROI Greatest Potential Uplift Skimming Strategy Start @ $150 in Year 1 Drop to $99 in Year 3 1 2 3 Recap
  • 31. Pricing, Packaging and Demand Forecasting for a New Weight-Loss Drug
  • 32. APPENDIX – SURVEY RESULTS Sample (Men & Women) 2000 100.00% Not satisfied with current weight 1400 70.00% Actively trying to lose weight 700 35.00% Comfortable using weightloss drugs 105 5.25% Seek prescription from healthcare provider 240 12.00% CSP Survey Results
  • 33. APPENDIX – POPULATION ESTIMATION USA Adult Population in Mn CAGR % Year 1980 163 Year 1990 185 1.27 Year 2000 209 1.23 Year 2008 230 1.22 USA Population Estimation for 2008 % of overweight people %OW CAGR % %obese CAGR% %morbidly obese CAGR% Year 1976-1980 31.6 14.4 Year 1988-1994 33 0.031 20.1 0.02 2.9 Year 1999-2000 34 0.05 25.8 0.08 4.7 0.23 Total BMI >25 Year 2008 35.5 0.5 27.2 5.8 68.46 No. of overweight individuals 2008 (in Mn) 81.65 Conservative estimate of this figure 78.2 Estimate for % Overweight People in USA 2008
  • 34. APPENDIX – DEMAND FORECAST 1 Description % Amount First Purchase (100%) Second Purchase (60%) Third Purchase (20%) Total packages sold (12 weeks) No. of overweight individuals in US (2008) 81,650,000.00 Individuals actively trying to lose weight 35% 28,577,500.00 Individuals ^ comfortable using drugs 15% 4,286,625.00 Acquired customerbase in Yr 1 10% 428,662.50 428,662.50 257,197.50 51,439.50 737,299.50 Acquired customerbase in Yr 2 5% 214,331.25 214,331.25 128,598.75 25,719.75 368,649.75 Acquired customerbase in Yr 3 5% 214,331.25 214,331.25 128,598.75 25,719.75 368,649.75 Acquired customerbase in Yr 4 5% 214,331.25 214,331.25 128,598.75 25,719.75 368,649.75 Acquired customerbase in Yr 5 5% 214,331.25 214,331.25 128,598.75 25,719.75 368,649.75 TOTAL 2,211,898.50 Revenue Revenue Recurrent Costs Total Costs Gross Margin ROI PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 331,784,775.00$ 55,739,842.20$ 485,489,842.20$ -153,705,067.20$ -46.33% PR 2 - Average Margin Price (COMPANY) 125.00$ 276,487,312.50$ 55,739,842.20$ 485,489,842.20$ -209,002,529.70$ -75.59% PR 1 - Premium Price Point (COMPETITOR) 75.00$ 165,892,387.50$ 55,739,842.20$ 485,489,842.20$ -319,597,454.70$ -192.65% DEMAND FORECAST 1 - OVERWEIGHT, WANT TO LOSE IT, HAPPY WITH DRUGS PRICING DEMAND FORECAST 1
  • 35. APPENDIX – DEMAND FORECAST 2 Description % Amount First Purchase (100%) Second Purchase (60%) Third Purchase (20%) Total packages sold (12 weeks) No. of overweight individuals in 2008 81,650,000.00 Respondents ready to seek prescription 12% 9,798,000.00 Acquire customerbase in Yr 1 10% 979,800.00 979,800.00 587,880.00 117,576.00 1,685,256.00 Acquire customerbase in Yr 2 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 Acquire customerbase in Yr 3 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 Acquire customerbase in Yr 4 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 Acquire customerbase in Yr 5 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 TOTAL 4,213,140.00 Revenue Revenue Recurrent Costs Total Costs Gross Margin ROI PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 631,971,000.00$ 106,171,128.00$ 535,921,128.00$ 96,049,872.00$ 15.20% PR 2 - Average Margin Price (COMPANY) 125.00$ 526,642,500.00$ 106,171,128.00$ 535,921,128.00$ -9,278,628.00$ -1.76% PR 1 - Premium Price Point (COMPETITOR) 75.00$ 315,985,500.00$ 106,171,128.00$ 535,921,128.00$ -219,935,628.00$ -69.60% DEMAND FORECAST 2 - OVERWEIGHT, WOULD SEEK PRESCRIPTION PRICING DEMAND FORECAST 2
  • 36. APPENDIX – DEMAND FORECAST 3 Description % Amount First Purchase (100%) Second Purchase (60%) Third Purchase (20%) Total packages sold (12 weeks) Ideal Target Market: women 35-65 OW 4,300,000.00 Acquire customerbase in Yr 1 30% 1,290,000.00 1,290,000.00 774,000.00 154,800.00 2,218,800.00 Acquire customerbase in Yr 2 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00 Acquire customerbase in Yr 3 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00 Acquire customerbase in Yr 4 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00 Acquire customerbase in Yr 5 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00 TOTAL 3,698,000.00 Revenue Revenue Recurrent Costs Total Costs Gross Margin ROI PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 554,700,000.00$ 93,189,600.00$ 522,939,600.00$ 31,760,400.00$ 5.73% PR 2 - Average Margin Price (COMPANY) 125.00$ 462,250,000.00$ 93,189,600.00$ 522,939,600.00$ -60,689,600.00$ -13.13% PR 1 - Premium Price Point (COMPETITOR) 75.00$ 277,350,000.00$ 93,189,600.00$ 522,939,600.00$ -245,589,600.00$ -88.55% PRICING DEMAND FORECAST 3 DEMAND FORECAST 3 - IDEAL TARGET MARKET
  • 37. APPENDIX – DEMAND FORECAST 4 Description % Amount First Purchase (100%) Second Purchase (60%) Third Purchase (20%) Total packages sold (12 weeks) Ideal Target Market: women 35-65 OW 4,300,000.00 Acquire customerbase in Yr 1 30% 1,290,000.00 1,290,000.00 774,000.00 154,800.00 2,218,800.00 Acquire customerbase in Yr 2 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00 Acquire customerbase in Yr 3 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 Acquire customerbase in Yr 4 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 Acquire customerbase in Yr 5 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00 TOTAL 5,116,484.00 Revenue Revenue Recurrent Costs Proportion Costs Proportion GM Proportion Sales PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 332,820,000.00$ 55,913,760.00$ 279,904,488.09$ 52,915,511.91$ 52.12% PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 55,470,000.00$ 9,318,960.00$ 46,650,748.01$ 8,819,251.99$ 8.69% VAR PR 4 - Skimming Strategy (YEAR 3) 99.00$ 83,420,172.00$ 21,234,225.60$ 77,376,720.23$ 6,043,451.77$ 13.06% VAR PR 4 - Skimming Strategy (YEAR 3) 99.00$ 83,420,172.00$ 21,234,225.60$ 77,376,720.23$ 6,043,451.77$ 13.06% VAR PR 4 - Skimming Strategy (YEAR 3) 99.00$ 83,420,172.00$ 21,234,225.60$ 77,376,720.23$ 6,043,451.77$ 13.06% SUMMARY OF RESULTS Revenue Recurrent Costs Total Costs Gross Margin ROI TOTAL SALES PERIOD - SKIMMING MODEL 638,550,516.00$ 128,935,396.80$ 558,685,396.80$ 79,865,119.20$ 12.51% PRICING STRATEGY 4 - SKIMMING MODEL PRICING DEMAND FORECAST 3
  • 38. APPENDIX – DEMAND FORECAST 5 Description % Amount Buy pack 1 (100%) Buy pack 2&3 Buy pack 2 only Buy pack 3 (20%) TOTAL Doubles TOTAL Singles VAR: Uptake VAR: Uptake Ideal Target Market: women 35-65 OW 4,300,000.00 50.00% 10.00% Acquire customerbase in Yr 1 30% 1,290,000.00 1,290,000.00 645,000.00 129,000.00 25,800.00 645,000.00 1,444,800.00 Acquire customerbase in Yr 2 5% 215,000.00 215,000.00 107,500.00 21,500.00 4,300.00 107,500.00 240,800.00 Acquire customerbase in Yr 3 5% 215,000.00 215,000.00 107,500.00 21,500.00 4,300.00 107,500.00 240,800.00 Acquire customerbase in Yr 4 5% 215,000.00 215,000.00 107,500.00 21,500.00 4,300.00 107,500.00 240,800.00 Acquire customerbase in Yr 5 5% 215,000.00 215,000.00 107,500.00 21,500.00 4,300.00 107,500.00 240,800.00 TOTAL 1,075,000.00 2,408,000.00 Revenue Revenue Recurrent Costs Proportion Costs Proportion GM Proportion Sales TOTAL SALES PERIOD - SKIMMING MODEL 603,075,000.00$ 114,861,600.00$ 544,611,600.00$ 58,463,400.00$ 9.69% PRICING STRATEGY 5 - QTY DIFFERENTIATION MODEL PRICING DEMAND FORECAST 3
  • 39. FIXED VARIABLE DESCRIPTION AMOUNT UNIT PR 1 - Premium Price Point (COMPETITOR) 75.00$ per package PR 2 - Average Margin Price (COMPANY) 125.00$ per package PR 3 - Consumer Value Price (CUSTOMER) 150.00$ per package VAR PR 4 - Skimming Strategy (YEAR 3) 99.00$ per package VAR PR 5 - Qty Diff Strategy (DBL OFFER) 225.00$ per double package Variable Costs 25.20$ per package R&D Cost 400,000,000.00$ million sunk costs Marketing Cost 23,000,000.00$ million total estimate Fixed Annual Cost 1,350,000.00$ million per year TOTAL COSTS (5yr) 429,750,000.00$ million over 5 yrs APPENDIX – FIXED VARIABLE PRICING