PharmaSim Case Preparation - Google Groups

PharmaSim Case Preparation - Google Groups

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 mo st, yet they have some negative i mage toward Allround. Negative attitude toward products alcohol ingredi

ent. Capsule is more convenient than liquid. There is a second highest demand on cough categ ory. 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 Support from retailers Increase sales forces help Promotion program

PharmaSim Case Preparation Collaborators: Direct channels & Indirect channels Promotional allowance, product turnover, sales force supp ort, co-op advertising allowances, discount volume Context: Technology development Inflation Publics 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 Dedicate d to Product category Pharmaci st Present? 2.5% 1.5% 1%

Yes Yes Yes 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 O whole shelf floor of shelf space dedicated 6 feet to brand 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 influc

ing 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 produc ts 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 multi-symptom 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 produ

cts to be recognized quickly and trusted by c onsumers. Product Cannibalization Options to minimize Always emphasize two products different functio n to help shape consumers insight about products pe rformance and imagery; Encourage consumer trials by cross selling two prod ucts together to make consumers feel different about these two products. Pricing---Margin Allrounds Average Retail Price by Channel Competiti $6.00

ve price at Grocery store $5.00 $4.00 $3.00 Retail Price $2.00 $1.00 $0.00 p e d In g ru D C

in a h g ru D G r y r e oc C i n e v

on ce n e M a ss M ch r e 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: Gr ocery store Grocerys 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 Discou nt Assumption the same volume discount Higher Retail Price Retail Price Units of

Volume Low units of volume <250 <2500 Distributi on channel Competition Manufact ure Sales Promotion al Allowance Gros s Marg in

Costs of Goods Sold 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 promoti onal allowance contribute to the sale s, the comparably high Cost of Good s Sold lead to unsatisfactory gross m argin which requires the company lo wer the costs in the future strategy. Promotion Buyer Behavior Information Collection Problem Recognition---symptoms felt by consum How does the consumer realize that he/she needs an OTC cold remed When I cannot When I cannot breathe. breathe

When I When a cannot cold lasts breathe. longer Information Research---actively searched information from many ways How does the consumer gather information about potential solutions? Scanning the When I shelf in the cannot drug store and breathe.

my own past experience When I cannot Friends and family breathe. valuation of Alternatives---based on effectiven How does the consumer evaluate alternative solutions? What are his/her decision criteria? The moreI When potent product cannot are sold behind breathe. the

counter Safety Whenand I scientific cannot evidence breathe. of effectivenes s Product Choice---final decision made after reviewing medicines ingredients and functio What brand was actually chosen, and why did he/she choose it? When I Sudafed cannot with breathe. Ephedrine

When I Private cannot label or breathe. generic brands ost-Purchase Evaluation---affect their later cho How satisfied was the consumer with the brand chosen? Will his/her satisfaction change the purchase process for the next purc When I Very cannot satisfied breathe. with Sudafed When I Cold

cannot do medicines breathe. not always seem to work very well Promotion Buyer Behavior Observations of Purchase Observations of Purchase How much effort does the individual put into purchasing OTC product 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 store

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 els 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 someones suggestions to select the OTC products. When purchasing the product for others, consumers will purchase it according to others 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

n 5Cs Company Customer Competitor Collaborato r 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 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

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. 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. Collaborato Technology development, inflation rate and public knowledge and perception transition. r n STP There are a lot of segments for selection in PharmaSim. Cold, Segmentati cough, allergy and multi-symptom in the form of liquid and on

capsule for adults and children. Targeting 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 Positioning 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 n 4Ps Assumption: Period 2 decisions Margin structure: Costs of goods, Retail margin, promotional allowance

Channels/ One dollar increase on MSRP: $0.62 <250 Pricing $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 its high brand awareness in cold remedy Cannibaliz area ations 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 categor y CBBE model

Brand Elements Criteria Clear evidence of store checks Impact of Retail brand on category Retail er Produ ct 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?

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