Metabical, a new weight loss supplement from Cambridge Sciences Pharmaceuticals, is made for moderately overweight individuals. Prior to its final approval by the FDA, its senior director of marketing, Barbara Printup, plans for the product launching and must come up with critical decisions. Her decision must put into consideration long term profitability and the desired ROI.
John A. Quelch; Heather Beckham
Harvard Business Review (4183-PDF-ENG)
April 14, 2010
Case questions answered:
- How does Metabical compare to current weight-loss options?
- What are the pros and cons of the forecasting methods presented by Printup? If you had to estimate the demand for this product, how would you go about it? What would your demand (unit) forecast look like for the first five years?
- What consideration should be taken in to account when making decisions about the package count? What package size would you recommend?
- What pricing strategy approaches would you suggest for Printup to explore? What are the advantages and disadvantages of each strategy? What Price would you recommend?
- What impact does your pricing decision have on profitability? What is the ROI over the first five years for each of the pricing strategies identified?
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Case answers for Metabical: Pricing, Packaging, and Demand Forecasting for a New Weight-Loss Drug
1.) How does Metabical compare to current weight-loss options?
The basis of competition of Metabical compared to current weight-loss options is outcomes/results, the safety profile of the treatment regime, and price, ease of use, required lifestyle changes. Competition has structured itself around these key-value perceptions to the adult overweight population.
Within the <30 BMI overweight segment, Metabical has shown hands down superior results compared to the competition. Those who took Metabical maintained weight loss levels within 10% of clinical trial results for at least 3 years.
Metabical is FDA approved and has a great safety profile (compared to Meridia, Xenical is prescribed only in BMI >= 30 categories, and also marred by side effects as severe as liver damage, kidney stone, etc. Alli is FDA approved, yet 30 cases of liver damage reports for Xenical and Alli are under investigation; OTC drugs are unregulated plagued by bad reputation on safety profile). The side effect happens when consumed high calories and fat (hence assigned close to diet plan options when we talk about if it requires lifestyle changes dimension of competition)
Pricing for monthly supply: Alli $63 (a good reference for parity pricing), OTC options around $100 average, Support group are around $40, Diet plans $1k-1.6k, Gym options are around $100 per month. Since Metabical is FDA approved, superior outcomes drug therapy, it can be charged at a premium. Metabical is also easy to use, (one pill a day compared to Alli which is 3 pill a day).
Based on the landscape, I tried to simulate the perception map of competition. Overall, Metabical has an edge in terms of superior outcomes, safety profile, ease of use. If we can solve the problem of optimal package size, appropriate price…