Medico Co. A recent survey revealed that 95% of West Australians are aware of the high risk of skin cancer through prolonged exposure to the sun. The sun does not discriminate. Just about anyone engaged in outdoor activities is at risk and sun bathers run the highest risk. It was once believed that the danger lies in prolonged, continuous exposure to the harmful rays of the sun. However, it is now clear that brief but frequent exposure to the sun is just as bad. This would suggest the need for sun protection on a daily basis regardless of the nature of outdoor activities. The Cancer Council's "Slip! Slop! Slap!" message has been effective in educating the public about the importance of "slipping" on a shirt, "slopping" on some sunscreen and "slapping" on a hat when going outdoors every time. The program has been extended to include “seek!” (shelter) and “slide!” (on a pair of sunglasses). Although the sale of sunscreen has doubled in the past 10 years, there is concern that sunscreen is not used at least 50% of the time. The rest of the survey result involving a good cross-section of the population, is as follows: Reason for not using sunscreen while outdoor (any activity) Response Don't bother, never got into the habit of using one, etc. 20% Don't need it except when at the beach 80% Inconvenient, difficult to apply, oily, sticky, uncomfortable, etc. 70% The survey, published recently in a health journal, drew your attention. You are the marketing manager of the Medico Co. of Perth. Medico & the Moisturiser Market Medico is the largest locally-owned pharmaceutical company - but pales in comparison with the multinational companies which dominate the Australian pharmaceutical market. The company was founded in 1948 and is well known locally for its range of high quality moisturisers sold under the Medico brand. Moisturisers are simply lotions that restore and maintain the skin's natural moisture and are used mainly by women and babies. Familiar brands include Vaseline Intensive Care, Johnson's Baby Lotion, Olay, Dove and Nivea. Apart from the more expensive moisturisers from the leading cosmetic houses, there are at least 30 brands of mainstream moisturisers on the market available in supermarkets, discount stores, department stores, and pharmacies. Medico's moisturiser division also contract manufactures for retail chain stores (supermarkets, discount stores, pharmacies, etc.) under their house/store brands, and these account for about 50% of the division's sales volume. Marketing The company's own brand of moisturisers is sold through all pharmacies in the Perth metropolitan area. They are priced at a premium, about 50% more than other mainstream brands, allowing pharmacies to take a higher mark-up for supporting the brand at retail level. As such, the Medico brand is the best selling range among retail pharmacies. It is considered a specialty brand and is the only formulation that penetrates deep into the skin lea.

1. Medico Co.
A recent survey revealed that 95% of West Australians are
aware of the high risk of skin cancer through prolonged
exposure to the sun. The sun does not discriminate. Just about
anyone engaged in outdoor activities is at risk and sun bathers
run the highest risk. It was once believed that the danger lies in
prolonged, continuous exposure to the harmful rays of the sun.
However, it is now clear that brief but frequent exposure to the
sun is just as bad. This would suggest the need for sun
protection on a daily basis regardless of the nature of outdoor
activities. The Cancer Council's "Slip! Slop! Slap!" message has
been effective in educating the public about the importance of
"slipping" on a shirt, "slopping" on some sunscreen and
"slapping" on a hat when going outdoors every time. The
program has been extended to include “seek!” (shelter) and
“slide!” (on a pair of sunglasses). Although the sale of
sunscreen has doubled in the past 10 years, there is concern that
sunscreen is not used at least 50% of the time. The rest of the
survey result involving a good cross-section of the population,
is as follows:
Reason for not using sunscreen
while outdoor (any activity) Response
Don't bother, never got into the habit of using one, etc. 20%
Don't need it except when at the beach 80%
Inconvenient, difficult to apply, oily, sticky, uncomfortable,

2. etc. 70%
The survey, published recently in a health journal, drew your
attention. You are the marketing manager of the Medico Co. of
Perth.
Medico & the Moisturiser Market
Medico is the largest locally-owned pharmaceutical company -
but pales in comparison with the multinational companies which
dominate the Australian pharmaceutical market. The company
was founded in 1948 and is well known locally for its range of
high quality moisturisers sold under the Medico brand.
Moisturisers are simply lotions that restore and maintain the
skin's natural moisture and are used mainly by women and
babies. Familiar brands include Vaseline Intensive Care,
Johnson's Baby Lotion, Olay, Dove and Nivea. Apart from the
more expensive moisturisers from the leading cosmetic houses,
there are at least 30 brands of mainstream moisturisers on the
market available in supermarkets, discount stores, department
stores, and pharmacies. Medico's moisturiser division also
contract manufactures for retail chain stores (supermarkets,
discount stores, pharmacies, etc.) under their house/store
brands, and these account for about 50% of the division's sales
volume.
Marketing

3. The company's own brand of moisturisers is sold through all
pharmacies in the Perth metropolitan area. They are priced at a
premium, about 50% more than other mainstream brands,
allowing pharmacies to take a higher mark-up for supporting the
brand at retail level. As such, the Medico brand is the best
selling range among retail pharmacies. It is considered a
specialty brand and is the only formulation that penetrates deep
into the skin leaving only a slight trace of moisturiser on the
surface. It is the brand most recommended by dermatologists for
people with severe dryness of the skin.
The range is not advertised because the company feels that the
brand is well established and recognised. Moreover, the "push"
promotion to retail pharmacies, family doctors, and
dermatologists has been effective in maintaining steady sales
for the past 10 years. One sales representative is used to
promote the range to new doctors and pharmacies while a
further two reps work as order-takers, ensuring that the products
are adequately stocked in each outlet.
Supermarket sales are almost non-existent. The last supermarket
group recently decided to withdraw the Medico range from sale
citing poor sales as the sole reason. However, the marketing
department at Medico knows only too well. Supermarkets, in
general, reject the brand because it does not fit into the fast-
moving low-priced category. Also, many younger shoppers are
unaware of the Medico brand or think of it as an over-priced
moisturiser compared with the more familiar national brands.
Since its failed attempt in supermarkets in 1992, the company
has since been manufacturing standard formulated moisturisers

4. for these supermarket chains and pharmacies (house/store
brands) to use up its excess production capacity.
As the marketing manager for the company, you have always
wondered whether the Medico brand should have been
repositioned as a lower priced, mainstream brand sold through
supermarkets and discount stores as well. If priced
competitively, you believe that sales could double and, given
the additional marketing expenses required, profits will remain
the same. You strongly believe that the long-term future of the
brand lies in a larger market share through an increase in sales.
However, that would mean foregoing the contract manufacturing
business.
The Sunscreen Market
The sunscreen market is very similar to the moisturiser market –
but unfortunately sunscreens are mainly used in the hot summer
months and often on the beach only. It has its share of
mainstream brands (from pharmaceutical companies) including
house brands, and specialty brands from the leading cosmetic
houses. Multinational and national pharmaceutical companies
dominate the market with brands available in supermarkets,
pharmacies, discount stores, and department stores. These
companies also market the moisturisers mentioned previously.
The market has increased considerably owing to the efforts of
the Cancer Council and other government bodies. The growth
has attracted more brands into the mainstream market, now
fragmented into regular and premium segments. The regular
brands are cheaper and are bought by families and heavy users.

5. These are distributed intensively with little advertising support.
The premium brands are more "fashionable" among single
adults and carry rather exotic names although the basic
formulation is the same. In a sense, the premium brands are
image-driven and are heavily advertised. Most are sold
selectively through pharmacies and department stores.
The now-withdrawn Medico sunscreen, on the other hand, was
neither cheap nor fashionable. Industry sources claimed that it
was poorly positioned with no price advantage or image. In fact,
the Medico name is often considered too respectable and has a
"medicinal" image given the long history of the company. Such
positioning was fine for its specialty moisturisers used mainly
by people with severely dry skin. However, the existing
sunscreen market is divided quite clearly into value-for-money
and image-driven sectors.
The Breakthrough
At a recent meeting, it was revealed that the chief chemist has
successfully concocted a unique formulation, a 4-in-1 body
lotion with the following properties:
maximum (SPF 30+) sunscreen
moisturising - as effective as any of the mainstream brands
of moisturisers

6. insect repellent - as good as leading Australian brands,
Aerogard or Rid
anti-perspirant - neutral scent
The lotion resembles, and feels like, a moisturiser in that it can
be rubbed deep into the skin and is non-greasy. This sunscreen
property makes it better than a regular sunscreen since regular
sunscreen should only be applied on the skin’s surface, and not
rubbed in.
Basically, it is a body lotion that gives an 8-hour protection
against the 4 elements that are usually associated with being
outdoors, i.e., the sun, insects, skin dryness and perspiration! A
standard bottle of 250 ml will cost the same as the current
moisturiser, at $2.00 each. Each sample sachet (10 ml) costs 30
cents. For a technical reason, this new formulation cannot be
patented. Rival companies could identify the chemical makeup
within 2 years and copy the formulation.
As an experienced marketing manager, you are enthusiastic
about this breakthrough. A good product alone does not
guarantee success. Good marketing is needed. You believe that
if the new product is marketed as a moisturiser, up to 50% of
the current Medico range will be cannibalised but overall sales
volume will increase. This strategy will involve minimal
additional marketing effort – especially if the Medico brand is
used.

7. On the other hand, marketing this new product primarily as a
sunscreen will give the company the opportunity to expand into
a new market — A market that is fast growing but relatively
new to Medico. A substantial marketing effort is expected in
order to penetrate this market. There are also other marketing
possibilities/opportunities to be considered.
Marketing the new product as a 4-in-1 "wonder lotion" is
another possibility. However, there is no such product category
in Australia. Creating a new product category in the
marketplace not only requires industry support (via distribution)
but also consumer acceptance. Although this product is
scientifically proven, it needs to overcome consumer
scepticism. At the point-of-purchase, only some of the
properties can be evaluated. The others are only evident under
actual use condition. This is the most risky option – but equally
profitable if successful.
Requirement:
Prepare a 12-month marketing plan for the Medico’s new
product in Perth.

8. Appendix A
Modified Profit and Loss Statement for 2011
based on standard (regular) bottle size of 250 ml
MOISTURISER DIVISION
SALES
- Medico brand (150,000 units @$7.50 wholesale price)
- House brand (150,000 units @$3.50 wholesale price)
- Total
1,125, 000
525, 000
1,650, 000
LESS: COST OF GOODS SOLD (300,000 units @$2.00)
600, 000

9. GROSS PROFIT
1,050, 000
OPERATING EXPENSES
- promotional brochures
- sales reps salaries (3 @$50,000)
- travelling & allowances
- admin. staff salaries (2 @$30,000)
- marketing manager salary
- warehouse & delivery overheads ($0.20 per unit)
- general admin.
10, 000
150, 000
20, 000
60, 000
60, 000

10. 60, 000
20, 000
NET PROFIT 670, 000
Notes (standard 250 ml size):
Recommended Retail Price for Medico-brand moisturiser is
$14.90
Mainstream brands retail for $9.90
Supermarket/Pharmacy home-brand retails for $7.90
MARKETING PLAN
Table of Contents
Page

11. 1.0 SITUATION (S.W.O.T) ANALYSIS
1.1 Strengths
1.2 Weaknesses
1.3 Opportunities
1.4 Threats
2.0 MARKETING OBJECTIVES AND STRATEGY
2.1 Marketing/Financial Objectives
2.2 Strategy Statement

12. [including target market and product
positioning]
3.0 MARKETING MIX DEVELOPMENT
3.1 Product Design and Development Strategy
3.2 Distribution (Place) Strategy
3.3 Promotion Plan
3.4 Pricing Strategy
4.0 PROJECTED INCOME STATEMENT end-12 months

13. APPENDICES (if any)