Kelly E. Smith Lauren A. Ruiz Leah C. Mcmenimen Nathan C. Hanson PharmaSim Final Presentation FALL 2014, MKTG 600-203  Abendroth, Lisa J.  P-Sim 4 Team   Due Date: 12/07/2014 Kelly E. Smith Lauren A. Ruiz Leah C. Mcmenimen Nathan C. Hanson

Objective /Agenda Objective Share the knowledge, output, experience, and lessons learned from P-Sim 4 Team’s last 8 weeks   Agenda Goals and Objectives of the simulation Analysis and Strategies Allroun Allround + Allright Advice to the Replacement Key Take-Away’s Summary Questions

OTC Goals and Objectives Strategic Objectives Grow Share of Manufacturer Dollar Sales: CAGR ≥ 5% annually (or ≥ 35.2%) Grow Net Income: Cumulative Average Growth Rate (CAGR) ≥ 15% annually Meet or Exceed Annual Marketing ROI ≥ 20% (ΔMarketing Expense/ΔNet Income) Increase Stock Price: CAGR ≥ 20% (or ≥ $165/share)   Guiding Principles Maintain a customer-centric focus with regard to all decisions Never sacrifice long-term success for short-term gains Build and maintain win-win relationships with all partners within the supply chain Be transparent – never deploy manipulative or deceptive marketing practices

S.W.O.T. Analysis Strengths: Weaknesses: Opportunities: Threats: Allround is the market leader in the cold remedy market Allround has the highest brand awareness (74.1%); brand trials (47.1%); most frequently purchased (21.8%); and the 2nd highest conversion ratio (63.6%) Allround has the highest product satisfaction (58.3%) Weaknesses: Allstar’s current product offering only focuses on the cold category – which only represents 59% of the Cold and Allergy remedy market Allround has a low customer retention rate compared to some competitors Allstar has a relatively small sales force to promote its product Opportunities: Allstar has the ability to expand the breadth and depth of its product line Allstar can improve shelf space, trade rating, and its return on marketing expense Threats: Consumers perceive alcoholic content in OTC medication negatively Introduction of new products by competitors can erode Allstar’s market share Other OTC competitors are receiving higher doctor recommendations than Allround

Price Strategy Increase prices to at least match annual inflation rate Monitor “Survey of Tradeoffs” to balance the price to symptom relief ratio Maintain pricing leadership position relative to each product category New product introductions will be priced at a leadership position. Subsequently, when awareness and perceived effectiveness increase, pricing will expand further Discounts will be optimized relative to competitors

Product Strategy Develop a competitive suite of cold and allergy medications that provide remedies to resolve basic symptoms, including aches and fever, nasal congestion, chest congestion, running nose, and cough Continue to investment in R&D to improve composition of existing and new products that meet the varying needs relative to each of the consumer segments Exploit opportunities to capture market share by comparing formulations and differentiating Allstar products relative to category-specific competitors, including: Allround (Multi-Symptom Cold) ⇒ Besthelp; Dryup; and Dryup+ Allround+ (Children’s Cold) ⇒ Coldcure Allright (Allergy) ⇒ Believe and Defogg

Placement Strategy Emphasize product placement to channels where, according to the “Shopping Habits” reports, consumers buy cold and allergy medications Sales Channel: Sales Shopping Habits: Cold Cough Allergy Grocery 36.7% 43.1% 34.6% 30.0% Chain Drug 28.0% 24.6% 31.1% 36.7% Independent 21.9% 18.1% 22.0% 24.1% Mass Merch 9.4% 10.0% 9.3% 5.7% Convenience 4.0% 4.2% 3.8% 3.5% Maintain distribution of headcount between Direct and Indirect to the same proportion reported in the “Sales by Distribution Channel” Develop a powerhouse Sales Force relative to competitors – targeting approximately 25% of the overall annual marketing budget to grow, hire, and train sales representatives Sales team allocated by comparing # headcount to unit sales in each channel Maintain distribution of headcount between Direct and Indirect/Wholesalers to the same proportion reported in the “Sales by Distribution Channel” Direct Sales ~ 64% Indirect/Wholesaler Sales ~ 36%

Promotion Strategy Continuously increase annual funding to support both push and pull strategies – targeting ~ 25% of the overall annual marketing budget Push strategies include targeting sales force growth to high-profile channels and increasingly growing Detailers to influence health care professionals Pull strategies will be deployed with annual budgets positioned to be higher than any other competitor. increasing Promotional Allowances to top-tier Promotional mix will be adjusted annually based on regression analysis to optimize the primary drivers of unit sales, product margin, and the marketing efficiency index Consistently outspend competitors relative to product advertising – targeting ~ 50% of the overall annual marketing budget Continue relationship with top-tier advertising agency (BMW) to maintain high-quality brand image. If budgets were temporarily constrained – consider use of mid-tier agency (S&R), but never for two years in a row

Total Portfolio Share of Manufacturer Sales: 39% Contribution Rate Growth: 5.4% Tactics to achieve success: Consumer based product decision making Standard approach to pricing across portfolio and over time with inflation rates Emphasis on benefit and competitive advertising Competitive promotional spending to incent shelf space with retail channel partners and trial purchases with consumers Consistent budget allocation between ads, sales force and channel partner promotional support

Allround Share of Mfr Sales: 26.2% Contribution Rate Growth: 15.9% Tactics to achieve success: Consumer focused decision making – Reformulation Maintain price leadership inline with inflation and symptoms solved Re-implemented compare marketing and achieved highest mfr share growth period thereafter. Maintained this in perpetuity. Created consistent investment plan in channel partners based on growth rate and volume across sales force and promotion spending – with an initial focus on gaining shelf space

Allround + Share of Mfr Sales: 7.1% Sales and Gross Margin growth: 105.3% Tactics to achieve success: Consumer focused and targeted marketing to a narrow audience of young and mature families Maintain price leadership inline with inflation and current brand in the portfolio, Allround Used competitive advertising to drive conversion consideration in conjunction with deep coupon discounts to incent trial Maintained spending on coupons in response to consumer concerns on our price/value perception Increased detailer support for channel partners at the time of launch based on the number of trips to physicians by families with children

Allright Share of Mfr Sales: 5.7% Sales and Gross Margin growth: 329.4% Tactics to achieve success: Consumer focused and targeted marketing Maintain price leadership inline with inflation and both brands in the current portfolio Used competitive advertising to drive conversion consideration in conjunction with deep coupon discounts to incent trial Maintained spending on coupons in response to consumer concerns on our price/value perception Increased detailer support for channel partners at the time of launch based on the number of trips to physicians by those with allergies for diagnosis Overall we used similar launch tactics as those in Allround+ given the success of that launch and track record of growth

Advice to the Replacement Strategy Stay with your current marketing ad partners Continue the coupon strategy Focus on your key markets Children Families (Young / Mature) Analysis Regression equation Added a lot of value Can provide more value with the larger amount of data collected Implementation Which elements in the marketing mix have been most helpful Which require extra caution What are the key metrics to track What marketing research is most useful

Key Take-Away’s Utilize each person's unique talents and strengths If you feel strongly about something share it early Discuss upfront how members of the group prefer to complete tasks (or be assigned to them) Communication: Discuss alternatives of communication outside of UST email Set expectations regarding access to UST email upfront For example: cannot access during the work day because of company firewall Trust that when someone says they will complete a test, trust them Do not set high expectations on others unless it is shared with them

Summary Objective Share the knowledge, output, experience, and lessons learned from P-Sim 4 Team’s last 8 weeks   Agenda Goals and Objectives of the simulation Analysis and Strategies Allround Allround + Allright Advice to the Replacement Key Take-Away’s Summary Questions

Questions

Thank you Kelly E. Smith (smit2865@stthomas.edu) Lauren A. Ruiz (ruiz2015@stthomas.edu) Leah C. Mcmenimen (leah.mcmenimen@stthomas.edu) Nathan C. Hanson (hans3361@stthomas.edu)