CASE STUDY

MARKETING MANAGEMENT

Metabical Demand Forecasting, Pricing and Packaging – CASE

ASSIGNMENT
This case study has been created by students of EPGP-11 section B batch – Arunim Dasgupta solely for the purpose of
Marketing Management case assignment for Quarter 3. The authors do not intent to illustrate either effective or ineffective
handling of managerial situation. The authors may have disguised some names and altered some data facts to protect
confidentiality.

PROJECT REPORT
SUBMITTED by

NAME ROLL NUMBER

ARUNIM DASGUPTA EPGP-11-146
Contents
1 WHAT ARE THE ADVANTAGES/ DISADVANTAGES OF THE FORECASTING METHODS PRESENTED?
HOW WOULD YOU GO ABOUT FORECASTING THE DEMAND ? ............................................................................... 3
2 CALCULATE THE FORECASTED DEMAND FOR FIRST FIVE YEARS IN UNITS. ............................................. 5
3 WHAT PRICE WOULD YOU RECOMMEND TO PRINTUP? ................................................................................... 6
4 WHAT IS THE ROI FOR THE FIRST FIVE YEARS FOR THE RECOMMENDED PRICE? ................................... 7
5 WHAT PACK SIZE WOULD YOU RECOMMEND? WHAT ARE THE CONSIDERATIONS TO ARRIVE AT
THIS DECISION?.................................................................................................................................................................. 8
1 What are the advantages/ disadvantages of the forecasting
methods presented? How would you go about forecasting the
demand ?

Metabical is forecasted to be the first ever FDA approved prescriptive drug for treating overweight
individuals with weight loss goals. To handle the launch plan of this revolutionary drug Printup has been
assigned as Marketing lead. Based on her prior 20 years experience & experience from previous drug
launches together with market research decide to project three different demand forecasting methods.
Will discuss on the pros & cons of approaches –

Forecasting Approach 1: - Looking at number of overweight individuals in US (BMI between 25 and 30)
and narrowing down to customers aggressively trying to lose weight & again narrowing down to ones
who are willing to use weight-loss drugs.

Pros-
1. Systematic & structured method
2. Overall market has been considered while doing market research. Very less assumption

Cons-
1. Customer segmentation is quite large, hence expected behavior is unpredictable
2. A challenge for selling this across low income group
3. Will be difficult to promote this brand across multiple demographics

Forecasting Approach 2: More aggressive forecasting technique using the results from CSP survey which
specifically addresses consumer interest in a prescription weight loss drug for the overweight.

Pros-
1. Aggressively priced & estimated
2. Focuses on the uniqueness of the product features
3. Can create an image on this revolutionary attempt

Cons-
1. Tough to meet forecasted demand due to aggressive pricing
2. Customer segmentation is quite large, hence expected behavior is unpredictable

Forecasting Approach 3: Focused on the ideal target customer, educated females 35-65 of age with BMI
between 25 to 30.

Pros:
1. Aimed at a segment i.e. women above 35.
2. Aggressively priced but promoted as a one-off product.
3. Well articulated marketing strategy having balance between the price & offering.
Cons:
1. There is very small room for failure
2. Gender biased may have an adverse effect.
I would like to proceed with Approach 1 considering more detailed market research & low risk due to the
survey coverage. Though the market segment is large & customer behaviour is unpredictable but once
market starts picking up we are expecting a growth of 30% in next 5 years.
We also need to ensure that CSP need to recoup $400 Million invested in research & development of this
drug. Additionally expecting an ROI of 5% within next 5 years. Best possible way is to have a broader
market segment with moderate price & minor risk.
2 Calculate the forecasted demand for first five years in units.

Below is the forecasted demand for next 6 years (2001 – 2006)

US population growth rate (%) 0.01

Overweight (%) 0.34
Actively trying to lose weight (%) 0.35
Comfortable with weight-loss drug (%) 0.15
Repurchase - 1st time (%) 0.6
Repurchase - 2nd time (%) 0.2

All figures are in millions

US Trying Lose Use Repurchase Repurchase Expected

Year Population Overweight Weight drug Target - 1st - 2nd Demand
2001 209.00 71.06 24.87 3.73 0.37 0.22 0.04 0.64
2002 211.09 71.77 25.12 3.77 0.57 0.34 0.07 0.97
2003 213.20 72.49 25.37 3.81 0.76 0.46 0.09 1.31
2004 215.33 73.21 25.62 3.84 0.96 0.58 0.12 1.65
2005 217.49 73.95 25.88 3.88 1.16 0.70 0.14 2.00
2006 219.66 74.68 25.39 3.81 1.33 0.80 0.16 2.29

Refer to tab “Demand Forecasting” in the embedded excel.

3 What price would you recommend to Printup?
Printup came up with three distinctive pricing model having their own pros & cons.

a) Benchmarking against market competition ($74 – 4 weeks supply)

Pros: Already aware about the price variation & customer behavior.
Cons: Have a competitive disadvantage. Hard to market the product’s full value.
b) Comparison on other CSP drugs in market ($125 – 4 weeks supply)
Pros: Product on it’s own. Has a separate identify among CSP drugs
Cons: Highly priced.
c) Based on product positioning in the market ($150 – 4 weeks supply)
Pros: Product is valued well. A niche product idea.
Cons: Very highly priced.

Option 1 –
 Bit tricky as it depends on competitor which is an unknown risk.
 Considered as a mass product without any differentiator though being one of the revolutionary
products available in market.
 Product will end up competing against products that are not even in the same segment
 Brand message could be confusing

Hence: Not recommended

Option 3 –
 Price is too high
 Due to higher price customer behaviour is also unexpected & hence may shell many customers
from buying it even though they are interested
 Will not get enough market share & tough to sustain in this competitive market

Hence: Not recommended

Option 2 –
 Pricing is just right to compete in unique market segments while communicating value of the product
 Defines the effective quality & uniqueness of the product
 Pricing is sensible & in line with market expectations
 Product may take time to get the market share but it’s a worth risk taken

Hence: Recommended
4 What is the ROI for the first five years for the recommended price?

Referring to the five year demand forecasting as explained above following is the ROI for the first five
year based on the recommended price –

Price Option 2 (As per Exhibit 3)

Expected Total Supply /4 Total Manufacturer
Year Demand week Cost Gross Margin Total Cost Total Margin ROI

2001 641,672 13 66.87 58.13 557,811,712.46 484,904,962.54

2002 972,133 13 66.87 58.13 845,084,744.37 734,631,018.25

2003 1,309,139 13 66.87 58.13 1,138,047,455.76 989,303,104.58

87%
2004 1,652,788 13 66.87 58.13 1,436,784,912.89 1,248,995,169.53

2005 2,003,179 13 66.87 58.13 1,741,383,314.43 1,513,782,145.47

2006 2,292,972 13 66.87 58.13 1,993,303,433.91 1,732,775,962.52

Refer to the tab “ROI” in the embedded excel

Calculation.xlsx
5 What pack size would you recommend? What are the
considerations to arrive at this decision?
In brief –
 Due to low dose formation, individuals need to take the drug at the same time every day.
 To be fully effective drug has to be fully present in the blood stream.

Hence the optimal package would be days-of-the-week, blister style package.

Now considering the number of pills in the package CSP considered 12-weeks supply to be the best one .
But following are the key risks to it –
 Limit the number of individuals who dropped off because they forget or were too busy in
prescription refilled
 It may be out of reach of any individuals to buy 12-weeks pack in one go

The right balance should be 4-weeks supply pack. Reasons –

1. Same can be easily bought & available to any segment

2. Can see the progress & continue with weight loss program
3. Should never hesitate to buy as initial pack is only for 4-weeks – a month’s time
4. No risk of missing refill.