Datril Case Essay

My recommendation to Marvin Koslow is to follow the prototypic prelude of pricing Datril at par with Tylenol ($2.85 retail price, $1.69 condescension hail), leveraging Bristol-Myers brand name, and lieu Datril as an analgesic with similar relief effects to the those of the already successful, acetylsalicylic acid-based buffered aspirin and Excedin, but more(prenominal) gentle on the stomach, and without the side effects of aspirin. By doing so, Datril will primarily target aspirin users, specifically those from Bufferins and Excedins modern consumer base, who suffer from upset stomach. I explain my rationale below. According to the case, when Datril was introduced to test foodstuffs per the strategy I recommended, it failed to achieve the projected sales figures within the first month. Although I have no access to those sales projections, I could argue that the whitethorn have been everyplaceoptimistic. The discernment is that Tylenol was well established (8% grocery shar e) in the analgesic market which has traditionally been dominated by aspirin-based products. Therefore, directly competing against Tylenol at the same price is unlikely to get out in quick market share and monetary gains within a month.Koslow should have allowed more time, say a medium channel of 6 months to match duration of the marketing expenses to be committed, before thinking about switching to the separate strategy. In addition, it can also be argued that the early success of Datril in the test market with the lower selling price may not be representative of its true performance over the medium to long run. Before defending my recommendation in detail, I would like to highlight the approximately prominent risk of introducing Datril as a cheaper alternative to Tylenol not accounting for the contenders repositioning or defensive marketing strategies. Those could include the following o One of the fastest responses that McNeil Labs could come up with is to reduce the price to trade, and subsequently the selling price, of Tylenol to match that of Datril. Doing so could result is public accusations of false advertising, thereby reversing the quick gains that Datril could make, and potentially wasting the $6 million on inaccurate communication of information to the public, which could potentially result in insulted, angry and dissatisfied customers due the belief that they have been deceived.Bristol-Myers will have to incur the cost of pulling all current advertisements, and an additional cost of having to launch another advertising campaign. o McNeil could also respond by changing its currently hidebound advertising approach (i.e. focusing on physicians and trade) by aggressively advertising Tylenol to the public, exploiting the fact that its current advertising expenditure is less than $2 million a year and possibly until now utilizing the actor and expertise of the mother company, Johnson & Johnson. This could potentially solidify the sales and ma rket share of Tylenol, making it an even tougher contestation to Datril. Given Tylenols market share, the speed of executing either one of the above strategies, or both together, could heavily minimize Datrils penetration of the market. Furthermore, per Exhibit A, Datril will inquire to sell 13.3 million bottles (at a trade cost of $1.05) or 60 million (at a trade cost of 70 cents) just to break-even.This is highly inefficient, in terms of both numbers contribution margin, compared to Tylenol. Moreover, given over the actual quantities of Tylenol sold in 1974 (around 19.1 million bottles per Exhibit B), Datrils achievement of break-even quantities seems even more doubtful, given the risks highlighted above. Quality cannot be a differentiation because both products are virtually very(a) as pain relievers therefore the best strategy is to combine the well-established reputation of Bristol-Myers, the well-known effectiveness of Bufferin and Excedin, with the value or differentiatio n being the gentleness of the product on upset stomach.Furthermore, Bristol-Myers possesses a banging consumer base for its aspirin-based products, a base that is larger than that of McNeil Labs Tylenol users. This is Bristol-Myers main competitive advantage its own consumers who may suffer from the typical side effects of aspirin. Targeting those specific customers and communicating to them the value of eliminated side effects should be Datrils positioning and differentiating strategy. Cannibalization from Bufferin and Excedin, should it happen, should not necessarily be viewed negatively, since my recommended selling price of $2.85 is take over that of these aspirin products.Exhibit A Break-Even Analysis for Tylenol and the different pricing scenarios for Datril (per bottle of blow pills) Breakeven Analysis for Product Tylenol orgasm 1 Same price as Tylenol Approach 2a Cheaper than Tylenol Approach 2b Cheaper w/lowered trade cost $ $ $ $ Unit equal (Variable Cost) 0.60 0. 60 0.60 0.60 Trade Cost (Selling Price to Retailers) $ 1.69 $ 1.69 $ 1.05 $ 0.70 Fixed Cost (Advertising) 2,000,000 6,000,0006,000,000 6,000,000 Break-Even Quantity Fixed Cost/(Trade Cost-Unit Cost) 1,834,862 5,504,587 13,333,333 60,000,000 Contribution Margin (Unit) 64% 64% 43% 14%