Datril Case

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My recommendation to Marvin Koslow is to follow the first approach of pricing Datril at par with Tylenol ($2.85 retail price, $1.69 trade cost), leveraging Bristol-Myers’ brand name, and positioning Datril as an analgesic with similar relief effects to the those of the already successful, aspirin-based Bufferin and Excedin, but more gentle on the stomach, and without the side effects of aspirin. By doing so, Datril will primarily target aspirin users, specifically those from Bufferin’s and Excedin’s current consumer base, who suffer from upset stomach. I explain my rationale below. According to the case, when Datril was introduced to test markets 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 may have been overoptimistic. The reason is that Tylenol was well established (8% market share) 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 result in quick market share and monetary gains within a month. Koslow should have allowed more time, say a medium run of 6 months to match duration of the marketing expenses to be committed, before thinking about switching to the other 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 most prominent risk of introducing Datril as a cheaper alternative to Tylenol: not accounting for the competitor’s repositioning or defensive marketing strategies. Those could include the following: o One of the quickest 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...
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