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Metabical Case Analysis
Market Strategy-Mgmt College: Restricted To - Sba (Portland State University)
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lOMoARcPSD|5741059
Cody Layton
Marketing 464
Metabical Case Analysis
Problem Statement:
Metabical was introduced by the Cambridge Sciences Pharmaceuticals as a prescription drug for safe and
effective weight loss. Although it was still awaiting the approval of the FDA, it was created to promote weight loss for
moderately overweight individuals. The most significant problem currently facing Metabical is that the product is
scheduled to launch in January (2009) but no positioning/pricing strategy or demand forecasting has been developed.
Metabical has to recover the $400 million that was spent on research and development and the FDA approval. To do
this, Metabical needs to evaluate their positioning within the market, and based on demand forecasting, choose a target
with the most forecasted demand in order to cover the $400 million in startup costs. For the rest of this analysis I will
explain three strategies to try and estimate Metabical demand for its first five years of operation.
Alternative Evaluation:
1. The first option for selecting an appropriate target market is the following process:
I. Take the number of overweight people in the US (71.06 million)
II. Multiply this by 35% (estimated population wanting to lose weight) – 24.87 million
III. Multiply this number by 15% (amount comfortable with weight loss drugs)- 3.73 million
IV. Metabical can estimate that they will capture 10%, 15%, 20%, 25%, and 30% in years 1-5.
In this example, I chose to select the lowest pricing structure due to the fact that this specific population is
extremely vague and will have a significant number of consumers heavily influenced by price. This could prove to not be
the most efficient way to estimate demand for Metabical, being that this consumer group is very general. It is very likely
that this model will only capture a small amount of Metabical’s target market, which makes achieving a positive ROI
almost impossible. By using this demand forecasting model we can estimate that this option only produces $185 million
in revenue dollars, which will not accomplish the 5% ROI needed by management, or the R&D costs
Year People Population People not People Captured One Two Full Cycle
“overweight wishing to opposed to Metabical people Supply Supply (20% x
” in US lose weight loss captures (expected) (20% x (60% x $74.40)
weight prescription (expects) $24.80) $49.60)
(35%) s (15%)
1 71,060,000 24,871,000 3,730,650 10% 373,065 1,850,40 11,102,41 5,551,207
2 4
2 71,060,000 24,871,000 3,730,650 15% 559,598 2,775,60 16,653,62 8,326,810
4 2
3 71,060,000 24,871,000 3,730,650 20% 746,130 3,700,80 22,204,82 11,102,41
5 9 4
4 71,060,000 24,871,000 3,730,650 25% 932,663 4,626,00 27,756,03 13,878,01
6 6 8
5 71,060,000 24,871,000 3,730,650 30% 1,119,195 5,551,20 33,307,23 16,653,62
7 4 1
Profit is $185,040,200. Which produces an ROI of -53% after 5 years
2. A more aggressive strategy is also available for Metabical:
I. Take population of the United States (209 million)
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lOMoARcPSD|5741059
Cody Layton
Marketing 464
II. Take 34% of this (people who are overweight) - 71.06 million.
III. Take 12% of this (Target market of Metabical) – 8.527 million
IV. Metabical can estimate that it will capture 10%, 15%, 20%, 25%, and 30% in years 1-5.
I chose to select the lowest pricing option here because this demographic is likely to choose other wait
loss alternatives like weight watchers. From assessing this model we can see that it achieves a ROI of 5.7%. This will
satisfy the desires of management. This particular demographic is composed of people that are willing to take a pill to
lose weight. It is not possible for marketers to fully predict how a consumer group is going to react to a product, so a
wide audience approach can create a big opportunity for a significant amount of money from this target market, and
others.
Year US Overweigh Target Metabical Captured One Supply Two Supply Full Cycle
Population t people Market Captures (20% x (60% x (20% x
(34%) (12%) 24.80) 49.60) 74.40)
1 209,000,00 71,060,000 8,527,20 10% 852,720 $4,229,491 $25,376,94 $12,688,47
0 0 7 4
2 209,000,00 71,060,000 8,527,20 15% 1,279,080 $6,344,237 $38,065,42 $19,032,71
0 0 1 0
3 209,000,00 71,060,000 8,527,20 20% 1,705,440 $8,458,982 $50,753,89 $25,376,94
0 0 4 7
4 209,000,00 71,060,000 8,527,20 25% 2,131,800 $10,573,72 $63,442,36 $31,721,18
0 0 8 8 4
5 209,000,00 71,060,000 8,527,20 30% 2,558,160 $12,688,47 $76,130,84 $38,065,42
0 0 4 2 1
Profit comes out to $422,949,120 leading to an ROI of 5.7% after 5 years.
A 5.7% ROI reveals gradual expansion for Metabical and is aligned well with the demands of management for
the company. If Metabical were to go with this scenario, a lot of potential customers would be targeted and captured.
Recommendation:
I believe that it is in Metabical’s best interest to target educated females within the 35-65 age group that are
also overweight (BMI of 25-30). This target is equal to 4.3 million people. Metabical estimates that it will capture 30%,
then 40%, 45%, and 50% in that order for the next 4 years. Based on the demographic selected here, the highest pricing
tier was selected for this analysis. It can be assumed that females 35-65 have a fair amount of disposable income, and
will be more willing to pay for weight loss products and prescriptions. A high price point can also be justified by the fact
that this product is also prescribed and has been approved by the FDA. In this analysis, this recommendation provides an
approximate ROI of 67%, which is the case possible. This pricing model and demand prediction is actually very realistic,
because this product has the potential to improve, and even save lives. It should also be noted that Metabical is also a
pioneer product being so innovative within the prescription weight loss industry. This recommendation does not come
free of problems. An ROI this high does seem to be a little bit unrealistic, especially when management has an ROI of 5%
as its goal. It could prove to be completely unreasonable to try and reach 50% of a unique market over 5 years. Certainly
the price can be decreased, but this is a very reasonable price for the target consumer, and it is very possible that
dropping the price is going to hurt the brand image of the prescription and lead to it not being perceived as an elite
product in the eyes of this target.
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lOMoARcPSD|5741059
Cody Layton
Marketing 464
Year Market Size Percent Capitalization One Supply Two Supply Full Cycle
Captured (20% x 74.80) (60% x 149.60) (20% x 224.2)
1 4,300,000 30 $1,290,000 $19,298,400 $115,790,400 $57,895,200
2 4,300,000 35 $1,505,000 $22,514,800 $135,088,800 $67,544,400
3 4,300,000 40 $1,720,000 $25,731,200 $154,387,200 $77,193,600
4 4,300,000 45 $1,935,000 $28,947,600 $17 3,685,600 $86,842,800
5 4,300,000 50 $2,150,000 $32,164,000 $192,984,000 $96,492,000
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