Metabical: Pricing, Packaging, and Demand Forecasting for a New Weight-Loss Drug
Problem Statement
Setting the price for a new drug prescription emerges as a top problem in this case. The Cambridge Science Pharmaceutical (CSP) has gained success in developing the valuable drug prescription in the form Metabical. However, after getting approval from the federal government and the medical authorities, it seems tough to come with the new product on the market at an appropriate price, especially in a market where customers contain higher bargaining power. It is necessary for the company to engage all key stakeholders, including the packaging firms, suppliers, and insurers to set the price, but profitability is also a prominent concern for the company.
The problem emerges when the company estimates the sales and profitability initially in the competitive market and the responsiveness of the overweight people in the country. There is confusion in investigating the customer behavior and making the decision. It seems high risk when setting the price, as overpricing may convert the customers and underpricing may impair profitability. It is a big issue, which emerges before launching the product, and obviously, there is a need to fix this issue as soon as possible to make Metabical successful in the drug prescription market.
Alternative Evaluation
Instead of setting the competitive price of Metabical immediately, the management of the company considers the different alternatives regarding pricing. These alternatives are in the form of different pricing strategies. The first alternative is to set the premium price for the Metabical. The advantage of this alternative is immense sales, as the overweight people are willing to pay high process for Metabical. The disadvantage of this alternative is the cost to maintain the high brand image with the passage of time.
The second alternative to this big issue is comparing the other CSP drug margins. The company, by using the past data of the different drug prescribed for the customers can derive the average price ($75.00). The advantage of this alternative is to sustain the sales and target low-income people. The disadvantage is customer responsiveness, as the customers, who are so certain of the other companies, find it tough to try a new one. The average pricing, based on the other CSP drug margins, can depict the profit, beyond expectations.
The third alternative is the idealization of the target market and setting higher prices for the specific customers. The company can use skimming pricing due to the intentions of overweight customers. The advantage is grabbing the immense range of customers, following the increasing obesity rate in the US. The disadvantage is the customer will, which may stay below expectations.
| Population in Millions | US Adult | |||
| Overweight | Obese | Severely Obese | Population | |
| (25 ≤ BMI < 30) | (30 ≤ BMI < 40) | (BMI ≥ 40) | (millions)* | |
| 1999 to 2000 | 71.06 | 53.922 | 9.823 | 209 |
| 1988 to 1994 | 61.05 | 37.185 | 5.365 | 185 |
| 1976 to 1980 | 51.508 | 23.472 | No Data | 163 |
| 1999-2000 | ||
| Men (BMI > 25) | Women (BMI > 25) | |
| Prevalence (millions) | Prevalence (Millions) | |
| Overall | 140.03 | 129.58 |
| Age (Years) | ||
| 20 to 34 | 121.22 | 107.635 |
| 35 to 44 | 141.284 | 132.924 |
| 45 to 54 | 149.017 | 135.223 |
| 55 to 64 | 151.525 | 152.779 |
| 65 to 74 | 161.348 | 146.509 |
| 75 and older | 138.776 | 124.564 |
| 2001 | |
| Obesity | |
| Education Level | Prevalence (millions) |
| Less than High School | 57.266 |
| High School | 48.488 |
| Some College | 43.89 |
| College | 32.813 |
| 2001 | |
| Income Level | Obesity (millions) |
| Less than $25,000 | 67.925 |
| $25,000-$40,000 | 65.417 |
| $40,000-$60,000 | 63.327 |
| More than $60,000 | 56.012 |
Recommendation
Following the increasing rate of obesity in the United States, the best strategy is to come up with the premium pricing strategy by researching the market. For Instance, to get the Metabical in the limelight in the market, the management has to collect the data of people who are intended to pay increasingly desperate to reduce the weight. It is a fact that the numbers of these customers are increasing, and the company can make higher revenue. However, with this pricing strategy, the company can also depict the differentiation process, high pricing and revenue streams can justify the attractive packaging. It is highly recommended that the company should conduct a comprehensive demand forecasting to justify the high process of the Metabical. After this, another suggestion is triggered with customer interests. Combining premium pricing and demand forecasting can assist the company to derive customer interest along with the different insights.
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