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Harvard Business Case: Metabical Solution

D i g i ta l Ad Bl o g .co m / November 20, 2012

Demand/Pricing Formulation Executive Summary:

There are three main demand strategy’s that make reasonable sense to asses the demand for Metabical within the
first five years. To get the most out of each demand scenario the most optimal pricing structure was applied to each.
Scenario 2 was chosen with the lowest pricing structure to market to a wider audience during the launch with and
affordable price. Pricing can always been tweaked and justified if the product is successful and there is respective
demand by the consumer base.

Scenario #1

The first scenario narrows down the target market by the follow process: 1st take the # of overweight individuals in the
United States (71.06 million), 2nd reduce 71.06 million by 35% which is the estimated population trying to lose weight,
3rd reducing this by 15% which is the amount comfortable with weight loss drugs which is 3.73 million, 4th Metabical
will capture 10% in year one, 15% in year 2, 20% in year 3, 25% in year 4, and 30% in year 5. The Lowest pricing
structure was chosen because the population chosen was very general and may contain a large percentage of people
who are price sensitive. I believe this is not an effective demand function for Metabical because the audience is too
broad. This model also in theory will capture a small % of the target market in relation to the other models which
makes it very difficult to attain a positive ROI. This model will only bring in 185 million in revenue and is not acceptable
to create a 5% ROI. This is not even enough to cover the R&D and marketing costs.

Population Comfortable
Trying to With Medibical
Overweight Lose Weight Will Population One Two Full
Year
In US Weight Loss drugs Capture Captured Supply(20%*24.80) Supply(60%*49.60) Cycle(20%*74.40)
(35%) (15%)

1 71,060,000 24,871,000 3,730,650 10% 373,065 1,850,402 11,102,414 5,551,207

2 71,060,000 24,871,000 3,730,650 15% 559,598 2,775,604 16,653,622 8,326,810

3 71,060,000 24,871,000 3,730,650 20% 746,130 3,700,805 22,204,829 11,102,414

4 71,060,000 24,871,000 3,730,650 25% 932,663 4,626,006 27,756,036 13,878,018

5 71,060,000 24,871,000 3,730,650 30% 1,119,195 5,551,207 33,307,234 16,653,621

Profit- 185,040,200 ROI -53% in 5 Years

Scenario #2 (Chosen Scenario)

The Second Strategy is more aggressive which takes the US population (209 million) and takes 34% of it who are
people who are overweight which comes out to 71.06 million. Next 12% which is the target for Metabical is taken out
which comes out to 8.527 million. Metabical will capture 10% in year one, 15% in year 2, 20% in year 3, 25% in year
4, and 30% in year 5. The lowest pricing structure was chosen because this demographic may look into other methods
to lose weight such as Jenny craig. This model produces a ROI of 5.7% which meet the requirements of upper level
management on making a 5% ROI on 400million in research and development costs. The pricing structure is the low

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which will lower the financial risk to customers. This gives the product a better chance to sell its predicted volume. This
studied demographic contains individuals who are ready to take a pill to lose weight. Marketers cannot always predict
how a specific demographic will react to a product so a slightly broad approach will lead to opportunity for a huge
amount of revenue from not only the target market but other similar markets. (possibly a % of overweight women of
other ages may buy into the product)

12% One Two Full

34% Metabical
Year US Pop Target Captured Supply(20% Supply(60% Cycle(20%
Overweight Captures
Market * $24.80) * $49.60) * $74.40)

1 209,000,000 71,060,000 8,527,200 10% 852,720 $4,229,491 $25,376,947 $12,688,474

2 209,000,000 71,060,000 8,527,200 15% 1,279,080 $6,344,237 $38,065,421 $19,032,710

3 209,000,000 71,060,000 8,527,200 20% 1,705,440 $8,458,982 $50,753,894 $25,376,947

4 209,000,000 71,060,000 8,527,200 25% 2,131,800 $10,573,728 $63,442,368 $31,721,184

5 209,000,000 71,060,000 8,527,200 30% 2,558,160 $12,688,474 $76,130,842 $38,065,421

Profit: 422,949,120

ROI: 5.7% In 5 Years.(Bottom Line)

The 5.7% ROI in this scenario shows steady growth for Metabical and is consistent with the goals of management. In
this pricing scenario a feasible number of potential customers will be targeted and captured. It is important to analyze
the demographics of what kind of customers are purchasing each year and tweak the demand forecast or marketing
strategy if necessary. For the initial forecast a broad approach is taken with the goal of matching the 5% ROI on the
400 million dollar research and development costs. The forecast was built in Microsoft excel and can easily be
modified if management feels the need to tweak any of the factors.

Scenario #3

The third scenario targets Educated Females from ages 35-65 who are overweight (BMI of 25-30) which equates to a
population of 4.3 million people. In year one Metabical expects to have a capitalization of 30%, then 35%, 40%, 45%,
50% respectively in the following 4 years. The highest tier of pricing was chosen due to the demographic selection.
Females who are 35-65 have the money to purchase weight loss products and will fork over the money for a
prescription. The prescription nature of the product justifies the high tier of pricing as well as the coveted FDA approval.
The ROI comes out to 67% which is a best cast scenario. I believe the pricing structure and demand forecast is
justified because this in many cases will be a life saving product, and a pioneer in prescription weight loss. The
problem with this scenario is that the ROI seems to be unrealistic when management is only expecting a 5% ROI.
Capturing 50% of such a specific market over 5 years may be unreasonable and contain a fundamental flaw. Of
course, the price could be lowered but we feel that this is an appropriate price for the demographic and lowering the
price will affect the brand image of an elite product in the target market.

One Two Full

Year Market % Capitalization
Supply(20%*74.80) Supply(60%*149.6) Cycle(20%*224.2)

1 4,300,000 30 1,290,000 $19,298,400 $115,790,400 $57,895,200

2 4,300,000 35 1,505,000 $22,514,800 $135,088,800 $67,544,400

3 4,300,000 40 1,720,000 $25,731,200 $154,387,200 $77,193,600

4 4,300,000 45 1,935,000 $28,947,600 $173,685,600 $86,842,800

5 4,300,000 50 2,150,000 $32,164,000 $192,984,000 $96,492,000

Profit: 1.26 Billion

ROI: 215% (Unrealistic)

Marketing Communications Executive Summary:

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Metabical, a prescription weight loss pill will be marketed to overweight women in the age group of 25-65. There are
two main groups that Metabical is targeting to- end users and doctors. The powerful message that being overweight
can lead to life threatening diseases and that Metabical can help will be the focus of the marketing message to both
end users and Doctors. Tracking and control after the launch is a key component to a successful venture for
Metabical.

Target Market Follow

Followwomen of the age from 25-65. According to a 2007 marketing survey it was
Metabical will be marketed to overweight
determined that women 10% more women then men are dissatisfied with their current weight, 20% more women then
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men visited a healthcare provider for a yearly physical, 15% more women then men want to change their behavior to
live a healthy lifestyle, 30% moreGet every
women new
then post
men delivered
failed to lose weight in the past 5 years, 30% more women then
toweight
men were dissatisfied with current your Inbox.
loss options on the market. These results make it clear that women are the
most likely gender to purchase Metabical. The age group of 25-65 is justified because these women have expendable
Join 65 other followers
income which would allow them to purchase an expensive prescription weight loss drug. It is important to maintain a
Enter
healthy lifestyle and diet when taking your email
Metabical; this address
is important to understand in order to have successful weight loss
with Metabical . The women of these demographic are “knowledgeable about the importance of nutrition and exercise,
Sign
they are ready to make a change.” The women of me
this up
demographic are also “focused on reclaiming former weight they
are motivated and willing to alter current behavior” These psycho graphic behaviors are consistent with the marketing
message of Metabical. This age demographic
Pow ered is
by quite large but it is necessary to target all of these potential
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customers in order understand who is buying into the product as the marketing plan evolves over the next few years.
We anticipate that other demographics will also purchase the product and this is a major consideration in the ensuing
years in what the final evolution of the product will be.

Marketing Communications

Metabical is a unique product to market due to the fact that a message has to be conveyed to the end user as well as
health care providers who recommend and write prescriptions (doctors). The target market as stated above is
overweight women aged 25-65. It is important to reach the market through a variety of venues to instill the importance
of purchasing the prescription. A mix of Print media, television, radio and online advertising will be exploited to reach
the majority of the target market. Print advertising will come in the form of pamphlets and other informative documents
that will be placed at medical clinics, weight loss facilities, doctors offices and other relevant institutions that promote
weight loss and a healthy lifestyle. They must instill a sense of urgency to the end user, that the time to act is now
and they should contact their health care provider to learn more about this new FDA approved weight loss drug.
Online Advertising is effective for targeting the specific target market of women who are searching for weight loss
supplements and are of age 25-65. The success of these campaigns can be measured by the amount of impressions
the advertisement has received as well as successful requests for more information when an advertisement is clicked
an an interaction takes place. Television and radio will be utilized weeks before the drug is released to the public in
order to create hype and a viral marketing effect. The types of channels that the advertisements will be shown are news
channels, channels relating to health and also channels that women watch frequently in order to reach our target
market.

Being overweight is a serious health concern that leads to life threatening diseases, judgment from society and an
overall lower quality of life. The marketing message to the target market must address this point. “Those extra 20
pounds could be killing you. Being overweight leads to heart disease, high blood pressure, diabetes, and gallbladder
disease. Its time to get healthy – Let Metabical guide you to a happier, healthier you.” This is a powerful message that
will speak to these women who are serious about losing weight and is consistent with our goal to spread awareness of
the dangers of being overweight. It is also essential to make sure customers as well as doctors are aware of the
coveted FDA Approval because people will be hesitant to buy the drug if they are unaware of FDA’s approval.

Targeting the professional and medical community requires a different approach. We will utilize print ads in leading
medical publications (journal of the American medical association) and interactive ads adjacent to online physician
resource information (PDR.net) to raise awareness about the drug and its benefits. The marketing communication
geared towards professionals will be formulated to educate them about the safety, research and development, and
compliance. (proper way to prescribe Metabical) The marketing message chosen is: “Atherosclerosis, coronary artery
disease, high blood pressure, diabetes, and gallbladder disease. Your overweight patients are dying for help.
Introducing Metabical – FDA Approved Weight loss drug.” This message has all of the elements of a successful
advertising campaign for Metabical. Like the consumer message, this message is consistent in that it is meant to
shock the doctor by listing the actual diseases associated with weight loss. The end of the message gives credibility
to the product by announcing that the FDA approves the drug. It is essential to be equally successful in the marketing
to doctors as patients because if the Medical Community accepts the drug as an effective and safe method of loosing
weight, more and more doctors will recommend it to patients and positive PR will follow.

Support Program

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A comprehensive support program will be implemented to enable customers to receive the support they need during
their weight loss journey. The center of the support system is the website that will be developed and will include:
Reference materials, a weight loss tracker, food diary, nutritional and calorie calculator and a forum for personal
support. Other weight loss programs have support programs that have proven to be successful in the past, therefore it
is essential to include this component during the launch of the product. The website will include Social media
functionality including a Twitter and Facebook where customers and doctors can talk about their successes when
taking Metabical. It is important to model the program after other successful weight loss supplements to make sure no
important aspect is missed: An internal case study of Alli, the OTC weight loss supplement will be conducted by the
marketing department to gain a greater understanding of their support program. Goals for the support program will be
tracked and controlled including extracting data from doctors about how the patient found out about Metabical as well
as the success of interaction with the website and social media initiatives.

Positioning

It is important to determine Metabical’s positioning in the weight loss market in order to carry out a sound marketing
plan. Metabical is different then over the counter weight loss supplements because it can only be obtained via
prescription. This gives an image of an elite product that is effective, FDA approved and can only be prescribed a
doctor. People trust their doctors and the FDA which gives Metabical a distinct advantage from over the counter wight
loss products. Women who have not has success in the past with over the counter weight loss supplements are ready
for a prescription strength option such as Metabical. After 5 years on the market Metabical should be considered the
most trusted, effective and #1 prescribed weight loss drug on the market.

Time line Prior To Launch

1 Year Prior → Develop Advertising Campaigns and Marketing Materials

6 Months Prior → Utilize Focus groups to test effectiveness of chosen campaign

3 Months Prior → Direct Marketing to Doctors and healthcare providers

Day of Launch → Press Release, Viral Media Campaign

After Launch → Tracking and Control – Make sure the target demographic is being reached. Every year analyze
effectiveness of price, packaging, and target market.

Budget

After analyzing the budget it has been concluded that the money allocated is appropriate. The marketing budget
should decline by a small percentage every year as the product gains brand awareness and receives free PR from
blogs, news mediums, and word of mouth recommendation from customers and doctors.

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November 20, 2012 in Case Studies, Harvard. Tags: Business Case, Case Study, Harvard, Metabical, Solution

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