Case Analysis

Rocky Mountain Medical Corporation

Diaper Market
Key players
Main factors

3 Strategies
Diaper Rash
Special Occasion
Head on





Strengths
Strategy Diaper Rash Special Occasion Head On
Strength -Emotional Angle

-Low marketing cost

-Expert approval

-Highest margin

-Certification
-Low initial cost

-Less risk

-Easy to launch
-Larger reach

-No delay in launch

-Less chances of
imitation
Weakness -Cost of free sample

-No OTC

-Cost of manpower

-Time lag to launch

-Limited Market
-Limited market scope

-High marketing cost

-Low contribution
margin

-High marketing cost

-Loss of price
competitiveness

-No differentiating factor
Strategy Diaper Rash Special Occasion Head On
Opportunity -Early break in FDA
approval

-No competition in near
future

-High growth rate
-Possible market
leader

-High growth rate
-High growth rate
Threat -FDA approval -Consumer
acceptance unsure

-Overproduction
-Established
players in market

-High switching
cost

-Whole sellers
pocketing margin
Strategy Special Occasion Diaper Rash
Product Special Occasion product Medical product
Price 40% higher than
competitors
$3.8 / packet of 12
diapers
Place Retail stores Medical stores
Promotion -Magazines

-Direct mail
-Direct mails

-Free samples

-In office demonstration

-Advertisements in
medical journals
No of House hold in California 11% 900,000 990,000

No of Organization in California 11% *30000 3300

Mailing Cost $50/1000 50000

Baby magazine 250000

Direct mail 500,000

Total Cost 800000

Contribution Margin per diaper 0.06

Break even quantity (800000/.06)1330000


SO
No of House hold in California 11%
900,000 = 990,000
No of Organization in California 11%
*30000 = 3300
Mailing Cost $50/1000 = 50000
Baby magazine = $250000
Direct mail = $500,000

Total Cost = 800000

Contribution Margin per diaper -
.06cents per diaper

Break even quantity-
800000/.06=13333333
=13.3mn
DR
Target individuals 4,00,000
California market 400000 *
11%=44,000
Mailing list cost = $2640
cost of printing = $11,000
sample distribution cost = $17,600
demonstration costs = 44,000/2 * $6
=$1,32,000
advertisement costs =$5000
Assuming no. of conventions per year=5
convention costs=$15000
total fixed cost=$183240
contribution margin=$0.09
break even
point=$183240/.09=2.03Million
Start with special occasion strategy
Adopt Diaper rash strategy upon FDA
Approval
Continue with both , with subtle differences
Premium product at premium price