Group: KISS Members: Zhuobin Chen, Jiajia Cai, Young Pei Lee Xiaoying Ma, Zhen Yang, Wei Wang Nov. 1 st, 2010 Pharmasim Strategic plan

Agenda  PharmaSim Case (5Cs)  Place/Channel Motivation Assignment  Product Cannibalization  Pricing/Margin  Promotion – Buyer Behavior Assignment  Marketing Plan  Overall Retail Brand CBBE

PharmaSim Case Preparation Company: Allround is a 4-hour multi- symptom liquid manufacturer with unique products and high market share. Goals: find new opportunities & maintain market leadership Strengths: Increase budget, high brand awareness, market leader, unique product Weaknesses: Low retention ratio; low market share in other categories, relatively high price, placement in shelf space.

Customers recognize Allround most, yet they have some negative image toward Allround. Negative attitude toward product’s alcohol ingredient. Capsule is more convenient than liquid. There is a second highest demand on cough category. Preference on new brands and brands that fill very specific needs. PharmaSim Case Preparation

Competitors are entering multi-symptom markets. B&B health care, Curall Pharmaceuticals, Discol Corporation and Ethik Incorporated. Competitors’ Move: Enter the cold market and compete with us. Our reactions: Product ingredients improvement Increase sales forces help Support from retailers Promotion program

Collaborators: Direct channels & Indirect channels Promotional allowance, product turnover, sales force support, co-op advertising allowances, discount volume Context: Technology development Inflation Public’s increasing concern about their health issues. Great needs in the OTC cold remedy market. PharmaSim Case Preparation

Channel

Channel

Channel---an important factor influcing sales and influenced by retailer  Importance of shelf space 70% of all purchase decisions are made in-store Eye-level shelf space Comparison with nearby products  Gain shelf space The volume of sales The profit margin for retailers The competitiveness relation with retailers’ private label products Uniqueness of the new brand (New niche)  Channel Motivation Customer demands & Profit margin Less direct competitiveness relations with the own private label Good relationship with retailers and manufactures Logistics cooperation

Line extension choices we have : 4-hour cold liquid for children; 12-hour multi-symptom capsule; 4 hour cough liquid; WHY??????  Most different;  Current: 4-hour multi-symptom liquid---emphasizing multi- symptom reliever function with no ingredients for cough  New line: Cough liquid----COUGH! Product Cannibalization---products differentiation helps to reduce product cannibalization Cannibalization refers to a reduction in sales volume, sales revenue, or market share of one product as a result of the introduction of a new product by the same producer (From Wikipedia).

Benefits from core product Different product, same brand----Allround; The highest brand awareness help new products to be recognized quickly and trusted by consumers. Product Cannibalization

Options to minimize Always emphasize two products different function to help shape consumer’s insight about products performance and imagery; Encourage consumer trials by cross selling two products together to make consumers feel different about these two products. Product Cannibalization

Pricing---Margin Competitive price at Grocery store

We make an assumption that Allrounds usually offer <2500+ units of volume in grocery store which resulted in the biggest volume discount 48.6% in Grocery stores. This advantage will contribute to Allrounds ‘retail sales significantly.

Conclusion: Allround ‘s the most important channel: Grocery store Grocery’s sales increase significantly Pricing

The Role of MSRP Our retail price will be positioned according to MSRP

Manufacturer's Suggested Retail Price Retail price MSRP-MSRP*15%~40%(volume discount)

Impact on Distributor Increase $1 MSRP MSRP Assumption the same volume discount Volume Discount Higher Retail Price Retail Price Low units of volume Units of Volume <250 <2500 Distribution channel

Competition Gross Margin Promotional Allowance Manufacture Sales Costs of Goods Sold

Gross Margin: Gross Margin: Gross Margin: Gross Margin: 271.8

Although 18% (or $74.9M)’s promotional allowance contribute to the sales, the comparably high Cost of Goods Sold lead to unsatisfactory gross margin which requires the company lower the costs in the future strategy.

Promotion – Buyer Behavior Information Collection

When I cannot breathe. When I cannot breathe Problem Recognition---symptoms felt by consumers When I cannot breathe. When a cold lasts longer How does the consumer realize that he/she needs an OTC cold remedy?

Information Research---actively searched information from many ways When I cannot breathe. Friends and family Scanning the shelf in the drug store and my own past experience How does the consumer gather information about potential solutions?

Evaluation of Alternatives---based on effectiveness When I cannot breathe. The more potent product are sold behind the counter Safety and scientific evidence of effectiveness How does the consumer evaluate alternative solutions? What are his/her decision criteria?

When I cannot breathe. Sudafed with Ephedrine Private label or generic brands Product Choice---final decision made after reviewing medicine’s ingredients and function What brand was actually chosen, and why did he/she choose it?

When I cannot breathe. Post-Purchase Evaluation---affect their later choice Very satisfied with Sudafed Cold medicines do not always seem to work very well How satisfied was the consumer with the brand chosen? Will his/her satisfaction change the purchase process for the next purchase?

Promotion – Buyer Behavior Observations of Purchase

How much effort does the individual put into purchasing OTC products? Observations of Purchase Base on their symptoms to choose the products. Find and compare the price of OTC products in the stores. Consider the safety and side effect of OTC products. Referrals from customers and pharmaceutists in the stores.

Observations of Purchase Who else influences the decision? Friends Family Relatives Pharmaceutists Doctors Spokesman Advertising

Does the consumer purchase for himself/herself or for someone else? Observations of Purchase As for the first two questions, consumers not only purchase OCT products for themselves, but also for others, such as friends, families, or relatives. Consumers highly rely on their habitual brands or someone’s suggestions to select the OTC products. When purchasing the product for others, consumers will purchase it according to others’ needs.

Promotion – Buyer Behavior Assignment Promotion – Buyer Behavior Assignment Buyer Behavior Link to Promotional Plan

Advertising Message: Functionality and safety of a product. Less price-sensitive In-store information Word of mouth Point of Purchase Display: Shelf space is important. Coupons: No information

PharmaSim Marketing Plan 5Cs Goals: new market and current competitive market Measures to determine direction: customer feedbacks, market reports. Strength: multi-functionality, high effectiveness and high brand awareness and market share. Weakness: solo dosage form, low retention rate, no specific target area Company Underlying needs: quality, functionality, safety and effectiveness of the products. Benefits: relieve from illness earlier and safer Current trends: Great needs in the OTC cold remedy market. Consumers have negative attitude toward alcohol in the drug formulation. capsule is more convenient than liquid form Customer primary competitors : B&B health care, Curall Pharmaceuticals, Discol Corporation and Ethik Incorporated. Their moves: following after us entering cold remedy market, which is the fastest growth market Our reactions: reformulation, line extension, sales force changes and adjustment on pricing and promotion strategies. Competitor Collaborator Direct channels: including Independent drugstores, chain drugstores, grocery stores, convenience stores, mass merchandisers Indirect channels: wholesalers, merchandisers and detailers Ways to motivate them: promotional allowance, discount, sales force and etc. Collaborator Technology development, inflation rate and public knowledge and perception transition.

PharmaSim Marketing Plan STP There are a lot of segments for selection in PharmaSim. Cold, cough, allergy and multi-symptom in the form of liquid and capsule for adults and children. Segmentation We are targeting at adult multi-symptom area and we are trying to target at adult cold area. Hopefully, cough in the long run. Targeting Value proposition: be high quality, highly effective, absolute safe and relatively cheaper price. Pricing strategy: Market leader, prevent new entry Advertising strategy: stressing on new functions of the products and its effectiveness. Channel partner: In-store setting and shelf allocation by channel partner make it easier for customers to have in store shopping decisions Positioning

PharmaSim Marketing Plan 4Ps Assumption: Period 2 decisions Margin structure: Costs of goods, Retail margin, promotional allowance One dollar increase on MSRP: $0.62 <250 $ ~2500 $0.51 >2500 $0.49 Wholesalers Channels/ Pricing line extension: 4 hour cough liquid The new line will definitely benefit a lot from current core product because of its high brand awareness in cold remedy area Two Options: 1. always emphasizing different functions between two brands 2. encourage consumer trials by cross selling two products together Cannibalizat ions

Overall Retail brand CBBE Impact of Retail brand on category CBBE model Brand Elements Criteria Clear evidence of store checks

38 Impact of Retail brand on category  Retailers would choose the product which fit their own strategy  Retailers' brands may shift customers’ perceptions about products

Customer-based Brand Equity Pyramid Help to live a better life Good Quality and Effectiveness; Convenient; user-friendly Affordable price; Famous; OTC drug--- 4-hour multi-symptom liquid

Customer-based Brand Equity Pyramid Help to live a better life Good Quality and Effectiveness; Convenient; user-friendly Affordable price; Famous; OTC drug--- 4-hour multi-symptom liquid

Customer-based Brand Equity Pyramid Help to live a better life Good Quality and Effectiveness; Convenient; user-friendly Affordable price; Famous; OTC drug--- 4-hour multi-symptom liquid

Brand Element Criteria Evaluation

WalmartWalgreensTarget BrandsLow endHigh endLow endHigh endLow endHigh end Sudafed Advil3.38 Equate Zyrtez Claritin Allergy Medication Benadryl Alavert Chlortrimeton Zicam Ayr Nellmed Walgreens Similasan 7.99 Little noses Triaminic Pedia Care Vicks Dimetapp Allergy Buster NeilMed Contac Alka-Seltzer SinusSense BreathRight Arfin Theraflu4.97 Coricidin Nasal6.67 4way Up & up It seems like that Zyrtez, Claritin, Benadryl and Alavert are the common brands sold in all stores among those common brands, generally walmart offers a lower prices than other two stores and Target has higher prices tagged. Important to mention, only Walgreens and Target has line specifically for kids. 2. For the private label products, Equate from walmart prices from 2.36 to and Walgreens from walgreens ranges from 3.99 to Up & Up prices the lowest at 2.04 but has a narrower range to Walmart and Walgreens have about the same complete and various product lines in the category of allergy. In comparison, Target just has a few lines, of which most are common brands. Conclusion: 43 Detailed Store Check

Store Check Independent area Various brands Comfortable environment Fashion and ethic Coupon & Ads usage Customer-friendly

Thank you for listening. Any questions?