Metabical Case Solution

Demand/Pricing Formulation Executive Summary:

There are three main demand strategy’s that make reasonable sense to

assess the demand forMetabical within the first five years. To get the most out of each

demand scenario the mostoptimal pricing structure was applied to each. Scenario 2 was

chosen with the lowest pricingstructure to market to a wider audience during the launch with

and affordable price. Pricing canalways been tweaked and justified if the product is

successful and there is respective demand bythe consumer base.

Scenario #1

The first scenario narrows down the target market by the follow process: 1

st

take the # of overweight individuals in the United States (71.06 million), 2

nd

reduce 71.06 million by 35%which is the estimated population trying to lose weight, 3

rd

reducing this by 15% which is theamount comfortable with weight loss drugs which is 3.73

million, 4

th

Metabical will capture10% in year one, 15% in year 2, 20% in year 3, 25% in year 4, and

30% in year 5. The Lowestpricing structure was chosen because the population chosen was

very general and may contain alarge percentage of people who are price sensitive. I believe

this is not an effective demandfunction for Metabical because the audience is too broad. This

model also in theory will capturea small % of the target market in relation to the other models

which makes it very difficult toattain a positive ROI. This model will only bring in 185

million in revenue and is not acceptableto create a 5% ROI. This is not even enough to cover

the R&D and marketing costs.YearOverweightIn USPopulationTrying

toLoseWeight(35%)Comfortable WithWeightLoss

drugs(15%)MedibicalWillCapturePopulationCapturedOneSupply(20%*24.80)TwoSupply(60

%*49.60)FullCycle(20%*74.40)1 71,060,000 24,871,000 3,730,650 10% 373,065 1,850,402

11,102,414 5,551,2072 71,060,000 24,871,000 3,730,650 15% 559,598 2,775,604 16,653,622

8,326,8103 71,060,000 24,871,000 3,730,650 20% 746,130 3,700,805 22,204,829

11,102,4144 71,060,000 24,871,000 3,730,650 25% 932,663 4,626,006 27,756,036

13,878,0185 71,060,000 24,871,000 3,730,650 30% 1,119,195 5,551,207 33,307,234

16,653,621Profit- 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

takes34% 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 willcapture 10% in year one, 15% in year 2, 20% in year 3, 25% in year 4, and

30% in year 5. Thelowest pricing structure was chosen because this demographic may look

into other methods tolose weight such as Jenny craig. This model produces a ROI of 5.7%

which meet therequirements of upper level management on making a 5% ROI on 400million

in research anddevelopment costs. The pricing structure is the low which will lower the

financial risk tocustomers. This gives the product a better chance to sell its predicted volume.

This studieddemographic contains individuals who are ready to take a pill to lose weight.

Marketers cannotalways predict how a specific demographic will react to a product so a

slightly broad approachwill lead to opportunity for a huge amount of revenue from not only

the target market but othersimilar markets. (possibly a % of overweight women of other ages

may buy into the product)YearUS Pop

34%Overweight12%TargetMarketMetabicalCapturesCaptured OneSupply(20%*

$24.80)TwoSupply(60%* $49.60)FullCycle(20%* $74.40)1 209,000,000 71,060,000

8,527,200 10% 852,720 $4,229,491 $25,376,947 $12,688,4742 209,000,000 71,060,000

8,527,200 15% 1,279,080 $6,344,237 $38,065,421 $19,032,7103 209,000,000 71,060,000

8,527,200 20% 1,705,440 $8,458,982 $50,753,894 $25,376,9474 209,000,000 71,060,000

8,527,200 25% 2,131,800 $10,573,728 $63,442,368 $31,721,1845 209,000,000 71,060,000

8,527,200 30% 2,558,160 $12,688,474 $76,130,842 $38,065,421Profit: 422,949,120ROI:

5.7% In 5 Years.(Bottom Line)The 5.7% ROI in this scenario shows steady growth for

Metabical and is consistent with thegoals of management. In this pricing scenario a feasible

number of potential customers will betargeted and captured. It is important to analyze the

demographics of what kind of customers arepurchasing each year and tweak the demand

forecast or marketing strategy if necessary. For theinitial forecast a broad approach is taken

with the goal of matching the 5% ROI on the 400million dollar research and development

costs. The forecast was built in Microsoft excel and caneasily 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 acapitalization of 30%, then 35%, 40%, 45%, 50% respectively in the following 4 years.

Thehighest tier of pricing was chosen due to the demographic selection. Females who are 35-

65 havethe money to purchase weight loss products and will fork over the money for a

prescription. Theprescription nature of the product justifies the high tier of pricing as well as

the coveted FDAapproval. The ROI comes out to 67% which is a best cast scenario. I believe

the pricing structureand demand forecast is justified because this in many cases will be a life

saving product, and apioneer in prescription weight loss. The problem with this scenario is

that the ROI seems to beunrealistic when management is only expecting a 5% ROI.

Capturing 50% of such a specificmarket over 5 years may be unreasonable and contain a

fundamental flaw. Of course, the pricecould be lowered but we feel that this is an appropriate

price for the demographic and loweringthe price will affect the brand image of an elite

product in the target market.YearMarket % Capitalization One

Supply(20%*74.80)TwoSupply(60%*149.6)FullCycle(20%*224.2)1 4,300,000 30 1,290,000

$19,298,400 $115,790,400 $57,895,2002 4,300,000 35 1,505,000 $22,514,800 $135,088,800

$67,544,4003 4,300,000 40 1,720,000 $25,731,200 $154,387,200 $77,193,6004 4,300,000 45

1,935,000 $28,947,600 $173,685,600 $86,842,8005 4,300,000 50 2,150,000 $32,164,000

$192,984,000 $96,492,000Profit: 1.26 BillionROI: 215% (Unrealistic)Marketing

Communications Executive Summary:Metabical, a prescription weight loss pill will be

marketed to overweight women in the age groupof 25-65. There are two main groups that

Metabical is targeting to- end users and doctors. Thepowerful message that being overweight

can lead to life threatening diseases and that Metabicalcan help will be the focus of the

marketing message to both end users and Doctors. Tracking andcontrol after the launch is a

key component to a successful venture for Metabical.Target Market