Marketing and Lowest Pricing Structure

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Demand/Pricing Formulation Executive Summary:
There are three main demand strategy’s that make reasonable sense to asses the demand for Metabical within the first five years. To get the most out of each demand scenario the most optimal pricing structure was applied to each. Scenario 2 was chosen with the lowest pricing structure to market to a wider audience during the launch with and affordable price. Pricing can always been tweaked and justified if the product is successful and there is respective demand by the consumer base.

Scenario #1
The first scenario narrows down the target market by the follow process: 1st take the # of overweight individuals in the United States (71.06 million), 2nd reduce 71.06 million by 35% which is the estimated population trying to lose weight, 3rd reducing this by 15% which is the amount comfortable with weight loss drugs which is 3.73 million, 4th Metabical will capture 10% in year one, 15% in year 2, 20% in year 3, 25% in year 4, and 30% in year 5. The Lowest pricing structure was chosen because the population chosen was very general and may contain a large percentage of people who are price sensitive. I believe this is not an effective demand function for Metabical because the audience is too broad. This model also in theory will capture a small % of the target market in relation to the other models which makes it very difficult to attain a positive ROI. This model will only bring in 185 million in revenue and is not acceptable to create a 5% ROI. This is not even enough to cover the R&D and marketing costs.

Year

Overweight
In US

1
2
3
4
5

71,060,000
71,060,000
71,060,000
71,060,000
71,060,000

ComfortableMedib
Population
With
ical
One
Trying to
Population
Weight
Will
Supply(20
Lose Weight
Captured
Loss drugs Captu
%*24.80)
(35%)
(15%)
re
24,871,000 3,730,650 10% 373,065 1,850,402
24,871,000 3,730,650 15% 559,598 2,775,604
24,871,000 3,730,650 20% 746,130 3,700,805
24,871,000 3,730,650 25% 932,663 4,626,006
24,871,000 3,730,650 30% 1,119,195 5,551,207

Two
Full
Supply(60%
Cycle(20%*74.40)
*49.60)
11,102,414
16,653,622
22,204,829
27,756,036
33,307,234

5,551,207
8,326,810
11,102,414
13,878,018
16,653,621

Profit- 185,040,200 ROI -53% in 5 Years
Scenario #2 (Chosen Scenario)
The Second Strategy is more aggressive which takes the US population (209 million) and takes 34% of it who are people who are overweight which comes out to 71.06 million. Next 12% which is the target for Metabical is taken out which comes out to 8.527 million. Metabical will capture 10% in year one, 15% in year 2, 20% in year 3, 25% in year 4, and 30% in year 5. The lowest pricing structure was chosen because this demographic may look into other methods to lose weight such as Jenny craig. This model produces a ROI of 5.7% which meet the requirements of upper level management on making a 5% ROI on 400million in research and development costs. The pricing structure is the low which will lower the financial risk to customers. This gives the product a better chance to sell its predicted volume. This studied demographic contains individuals who are ready to take a pill to lose weight. Marketers cannot always predict how a specific demographic will react to a product so a

slightly broad approach will lead to opportunity for a huge amount of revenue from not only the target market but other similar markets. (possibly a % of overweight women of other ages may buy into the product)

Ye
US Pop
ar

34%
Overweight

1
2
3
4
5

71,060,000
71,060,000
71,060,000
71,060,000
71,060,000

209,000,000
209,000,000
209,000,000
209,000,000
209,000,000

Meta
12% Target bical
Market
Capt
ures
8,527,200 10%
8,527,200 15%
8,527,200 20%
8,527,200 25%
8,527,200 30%

One
Two
Full
Captured Supply(20% Supply(60% * Cycle(20% *
* $24.80)
$49.60)
$74.40)
852,720
1,279,080
1,705,440
2,131,800
2,558,160

$4,229,491
$6,344,237...
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