Metabical Case Analysis
bk1433EMBA 8250 – Marketing Management
Metabical Case Analysis
Decision to be Made
How can Cambridge Sciences Pharmaceuticals’ (CSP) effectively price its newest and revolutionary prescription drug, Metabical, which is aimed at helping moderately overweight adults lose weight and improve their overall health? Additional considerations need to be made for forecasting demand and deciding on the packaging count for Metabical. As Exhibit 3 of the case contained three pricing options based on a 4-week supply, these assumptions are used throughout the analysis.
Other packaging options exist and could have included 7-day, 14-day, 2-month, or full 3-month program. I agree with the 4-week option as the 2-month and 3-month packaging may be cost prohibitive for some customers and deter purchasing. The shorter periods, while less of a purchase for consumers, may not allow the individual to see noticeable results, and therefore may not encourage subsequent purchases.
Options and Analysis
Option 1: Price the 4-week supply of Metabical at $75.
Pros: Cons:
Priced at a marginal premium to closest comparable product, Alli | Brand image may take a hit being in the ‘low-priced’ market |
Most affordable option for consumers | Leaving money on the table |
Lower pricing may drive additional unit purchases | Doesn’t meet ROI targets (Exhibit 4) |
This pricing option uses the closest comparable product, Alli, as a benchmark and prices Metabical at a premium to that product. Given the requirements of delivering a 5% ROI within the first five years of the product, this is not a viable option as ROI’s range from -64% to -18% based on the demand forecast (Exhibit 4).
Option 2: Price the 4-week supply of Metabical at $125.
Pros: Cons:
Leverages other drug margins from CSP, so final pricing would be more easily accepted internally | Does not fully leverage target market’s willingness to pay for this specific drug |
Below acceptable pricing to target market customers | Other drugs may be a poor reference point given their relative success compared to that of Metabical |
This pricing option uses internal references to arrive at a price for Metabical. History may be a good indicator of future success, but given the landmark drug that Metabical is, the results may be dramatically different. Lastly, under demand forecast method 1, the required ROI is not met (Exhibit 4).
Option 3: Price the 4-week supply of Metabical at $150.
Pros: Cons:
Signifies premium product | Certain potential customers may be priced out of the market (pg. 5) |
Aligns with overweight individuals average out of pocket expenses on health care (pg. 5) | |
Acceptable price from target market | |
Ability to lower price or offer discounts, if demand is less than anticipated |
This pricing option uses other market data to inform the pricing decision. While this option may price out some of the general overweight population, specific targeting to this group may be used to explain the enhanced benefits that Metabical delivers versus any competitor in the market. Lastly, the 5% NOI requirement is met across all demand scenarios.