CSP is considering options for pricing, packaging, and demand forecasting for its new weight-loss drug Metabical. Three demand forecasting models were analyzed estimating the potential market between 4.3-9.8 million customers. Packaging and pricing strategies were evaluated using a matrix to determine ROI under different scenarios. Pricing at $150 targeting the ideal customer profile was estimated to achieve a 5.73% ROI, meeting CSP's objective.
2. CSP’s Market Share Opportunity
New
Product
Opportunity
0 %
Increased
Market
Share
?? %
IDENTIFIED MARKET OPPORTUNITYScope
Packaging
Demand
Pricing
Recommendation
-
-
-
$ 3,74 Bn
per annum
Market for Weight-Control Products
As of 2008
3. • > 65% of 230 Mn (~158 Mn) adult American population is considered overweight,
obese or severely obese
• CSP’s identified market segment: ~81.65 Mn (35.5%) overweight Americans
TARGETING IDENTIFIED MARKET SEGMENTScope
Packaging
Demand
Pricing
Recommendation
-
-
-
51.5
61.05
71.06
81.65
23.47
39.04
53.92
62.51
5.37
9.82
13.27
1980 1990 2000 2008
Overview of Overweight, Obese, & Severely Obese Population (Mn) in USA
Overweight
(BMI 25-30)*
Obese
(BMI 30-40)*
Severely Obese
(BMI >40)*
Population Index
2008
4. PRODUCT DESCRIPTION - METABICAL
First ‘Food & Drug
Administration (FDA)’
approved prescription
drug for overweight
population
To be launched by
Cambridge Science
Pharmaceuticals (CSP)
after 10 years in RnD
To be launched in
North American market
within 9 months –
by January 2009
Clinically proven
weight-loss
drugs targeted at
overweight adults
(BMI 25-30)
Strong endorsement by
medical community
-> survey respondents
show curiosity
Scope
Packaging
Demand
Pricing
Recommendation
-
-
-
12-week treatment
plan - to consume one
pill at same time
everyday
5. OBJECTIVESScope
Packaging
Demand
Pricing
Recommendation
-
-
-
CSP spent 10 yrs in R&D @ $ 400 Mn FDA Approval
Requires Packaging
Decision
Launch Metabical
Apr 2008 Jan 2009
now Pricing Decision
Demand Forecast & ROI Determination
Determine Optimal Package Size
- Required for FDA approval
Recommend Final Pricing Strategy
- Achieve a 5% ROI within 5 years
Establish Initial Demand Forecasts
- Assess market potential and acquisition
1
2
3
6. Information Required
OBJECTIVES
RETURN ON
INVESTMENT (ROI)
DEMAND
PACKAGE
PRICE
Scope
Packaging
Demand
Pricing
Recommendation
-
-
-
CSP spent 10 yrs in R&D @ $ 400 Mn FDA Approval
Requires Packaging
Decision
Launch Metabical
Apr 2008 Jan 2009
now Pricing Decision
Demand Forecast & ROI Determination
10. DEMAND MODEL 1
FORECASTING DEMANDScope
Packaging
Demand
Pricing
Recommendation
-
-
-
Demand Model 1 Demand Model 2 Demand Model 3
ROIDEMAND
PACKAGE
PRICE
Approx. In Millions (Mn)
4.29
Population that is ‘Overweight’
‘Overweight’ people who are trying
to lose weight
‘Overweight’ people trying to lose weight
who are willing to use medication
US Population
35.5%
35%
15%
11. DEMAND MODEL 2
FORECASTING DEMANDScope
Packaging
Demand
Pricing
Recommendation
-
-
-
Demand Model 1 Demand Model 2 Demand Model 3
ROIDEMAND
PACKAGE
PRICE
Approx. In Millions (Mn)
9.8
Population that is ‘Overweight’
‘Overweight’ people who would seek an
appointment if a prescription drug were
available
US Population
35.5%
12%
Market Description Market Potential
Demand Scenario 1
‘Overweight’ people trying to lose weight who
are willing to use medication to help
4.29 million
Recap
12. DEMAND MODEL 3
FORECASTING DEMANDScope
Packaging
Demand
Pricing
Recommendation
-
-
-
Demand Model 1 Demand Model 2 Demand Model 3
ROIDEMAND
PACKAGE
PRICE
Approx. In Millions (Mn)
4.3
CSP Research determined population size of
ideal target market: overweight females,
age 35-65, college educated, health-
conscious & visited the doctor more often
US Population
35.5%
Market Description Market Potential
Demand Scenario 1
‘Overweight’ people trying to lose weight who
are willing to use medication to help
4.29 million
Demand Scenario 2
‘Overweight’ people who would seek an
appointment if a prescription drug were available
9.8 million
Recap
13. FORECASTING DEMAND: SNAPSHOTScope
Packaging
Demand
Pricing
Recommendation
-
-
-
Demand Model 1 Demand Model 2 Demand Model 3
ROIDEMAND
PACKAGE
PRICE
Market Description Market Potential
Demand Scenario 1
‘Overweight’ people trying to lose weight who are willing
to use medication to help
4.29 million
Demand Scenario 2
‘Overweight’ people who would seek an appointment if a
prescription drug were available
9.8 million
Demand Scenario 3
CSP Research determined population size of ideal target
market: overweight females, age 35-65, college educated,
health-conscious & visited the doctor more often
4.3 million
15. Factors Influencing Pricing Strategies
PRICING MODELS: THE THREE C'SScope
Packaging
Demand
Pricing
Recommendation
3C’s
-
-
ROIDEMAND
PACKAGE
PRICE
PRICE
Competitor
or
Competition
1
3
Customer
or
Demand
2
Company
or
Cost
5% ROI in 5 years
Country: USA
Population BMI: 25-30
• OTC Drugs,
• Herbal Remedies,
• FDA Approved (Alli, BMI>30)
• Non-FDA Approved
Competitor
based
Company
based
Customer
based
16. Factors Influencing Pricing Strategies
PRICING MODELS: THE THREE C'S
$75
Scope
Packaging
Demand
Pricing
Recommendation
3C’s
-
-
ROIDEMAND
PACKAGE
PRICE
Competition
1
3
Demand-based
2
Cost-based OTC Weight-loss
Drugs: $63-$100
Premium** Benchmark to Direct Competition
Alli – Cost Per 28 Days (4 weeks) * $ 48.72
Metabical – Proposed Price 28 Days (4 weeks) $ 75
Gross Margin (%) > 50 %
Competitor
based
Company
based
Customer
based
Competition-based Strategy
* Alli – closest comparable (non-prescription) drug
** FDA approved prescription strength medication
17. Factors Influencing Pricing Strategies
PRICING MODELS: THE THREE C'S
$125
Scope
Packaging
Demand
Pricing
Recommendation
3C’s
-
-
ROIDEMAND
PACKAGE
PRICE
Competition
1
3
Demand-based
2
Cost-based
Competitor
based
Company
based
Customer
based
CSP’s avg. Gross
Margin = 70%
Benchmark to CSP’s other Drug Margins
Other Drug Gross Margins ~ 70 %
Metabical – Proposed Price 28 Days (4 weeks) $ 125
Cost-based Strategy
18. Factors Influencing Pricing Strategies
PRICING MODELS: THE THREE C'S
$150
Scope
Packaging
Demand
Pricing
Recommendation
3C’s
-
-
ROIDEMAND
PACKAGE
PRICE
Competition
1
3
Demand-based
2
Cost-based
Ideal Target Customer
value offer
Competitor
based
Company
based
Customer
based
Benchmark to Value delivered to Customers
Overweight Individuals Additional Annual
Out-of-Pocket Expenses on Healthcare *
$ 450
Metabical – Proposed Price 28 Days (4 weeks) $ 150
Metabical’s Complete 12-week Treatment $ 450
Demand-based Strategy
* CSP’s Research (Outcomes Research Group)
19. ROI FROM PRICE/DEMAND MATRIXScope
Packaging
Demand
Pricing
Recommendation
3C’s
-
-
Competitor
based
Company
based
Customer
based
Model 1
Actively Trying to Lose
Weight
Model 2
Ready to Request a
Prescription
Model 3
Ideal Target Market
Initial Market 4.3 million 9.8 million 4.3 million
Market
Acquisition*
First Year: 10%
Years 2,3,4,5: 5%
Total @ Year 5: 30%
First Year: 30%
Years 2,3,4,5: 5%
Total @ Year 5: 50%
Repurchasing
Behaviour**
First 4 weeks: 100%
Second 4 Weeks: 60%
Third 4 Weeks: 12%
Total Sales 2.2 million packages 4.2 million packages 3.7 million packages
Demand
Pricing
ROIDEMAND
PACKAGE
PRICE
* Penetration estimates are based on CSP historical experience. Customers are conservatively
assumed not to "repeat" a treatment subscription within the five year period.
** Based on data from test trials during R&D phase
20. ROI FROM PRICE/DEMAND MATRIX
NB: Costs include:
$ 400 Mn Research & Development,
$ 23 Mn initial marketing budget,
$ 1.2 Mn annual fixed costs of production,
$ 25.20 variable costs per package produced
Scope
Packaging
Demand
Pricing
Recommendation
3C’s
-
-
Competitor
based
Company
based
Customer
based
ROIDEMAND
PACKAGE
PRICE
Model 1
Actively Trying to Lose
Weight
Model 2
Ready to Request a
Prescription
Model 3
Ideal Target Market
5 Year Results
Market: 4.3 Mn
Packages Sold: 2.2 Mn
Market: 9.8 Mn
Packages Sold: 4.2 Mn
Market: 4.3 Mn
Packages Sold: 3.7 Mn
Competitor $75
Premium Market Placement
Sales: $166 Mn
ROI: (192.65%)
Sales $316 Mn
ROI: (69.60%)
Sales: $227 Mn
ROI: (88.55%)
Company $125
Average Gross Margin
Sales: $276 Mn
ROI: (75.59%)
Sales: $527 Mn
ROI: (1.76%)
Sales: $462 Mn
ROI: (13.13%)
Customer $150
Consumer Value Model
Sales: $332 Mn
ROI: (46.33%)
Sales: $632 Mn
ROI: 15.20%
Sales: $555 Mn
ROI: 5.73%
Demand
Pricing
Evaluation Criteria: Min 5% ROI
21. ROI FROM PRICE/DEMAND MATRIX
NB: Costs include:
$ 400 Mn Research & Development,
$ 23 Mn initial marketing budget,
$ 1.2 Mn annual fixed costs of production,
$ 25.20 variable costs per package produced
Scope
Packaging
Demand
Pricing
Recommendation
3C’s
-
-
Competitor
based
Company
based
Customer
based
ROIDEMAND
PACKAGE
PRICE
Model 1
Actively Trying to Lose Weight
Model 2
Ready to Request a Prescription
Model 3
Ideal Target Market
5 Year Results
Market: 4.3 Mn
Packages Sold: 2.2 Mn
Market: 9.8 Mn
Packages Sold: 4.2 Mn
Market: 4.3 Mn
Packages Sold: 3.7 Mn
Competitor $75
Premium Market Placement
Sales: $166 Mn
ROI: (192.65%)
Sales $316 Mn
ROI: (69.60%)
Sales: $227 Mn
ROI: (88.55%)
Company $125
Average Gross Margin
Sales: $276 Mn
ROI: (75.59%)
Sales: $527 Mn
ROI: (1.76%)
Sales: $462 Mn
ROI: (13.13%)
Customer $150
Consumer Value Model
Sales: $332 Mn
ROI: (46.33%)
Sales: $632 Mn
ROI: 15.20%
Sales: $555 Mn
ROI: 5.73%
Demand
Pricing
Evaluation Criteria: Min 5% ROI
23. PRICING MODELS: SKIMMING STRATEGY
Year 1 Price $150
Market
4.3 Mn
Penetration
30%
Year 2 Price $150
Market
4.3 Mn
Penetration
5%
Year
3-5
Drop price
to $99
Market
9.8 Mn
Penetration
5%
Scope
Packaging
Demand
Pricing
Recommendation
3C’s
Skimming
-
Customer
based
Skimming
Strategy
-
ROIDEMAND
PACKAGE
PRICE
Skimming Strategy
24. PRICING MODELS: SKIMMING STRATEGY
Skimming
Revenue
Base Model
Revenue
Scope
Packaging
Demand
Pricing
Recommendation
3C’s
Skimming
-
Customer
based
Skimming
Strategy
-
ROIDEMAND
PACKAGE
PRICE
Determine ROI
Skimming Model
12.51%
Base Model
5.73%
25. PRICING MODELS: QUANTITY STRATEGYScope
Packaging
Demand
Pricing
Recommendation
3C’s
Skimming
Quantity
Customer
based
Skimming
Strategy
Quantity
Differentiator
ROIDEMAND
PACKAGE
PRICE
Price
Differentiation
Demographic
Geographical
Temporal
Benefit-based
Quantity-based
Bundling
What is Quantity-based Price Differentiation?
Offer identical or similar products to different
customers or segments at different prices
• The avg. price per unit varies depending on
the quantity purchased
– i.e., customers benefit from volume discounts
• Customer loyalty is directly proportional to the
discounts offered
26. PRICING MODELS: QUANTITY STRATEGY
Third
Month
(12%)
Second
Month
(60%)
First
Month
(100%)
Buys Starter
Pack $150
Buys Double
Pack $225
Buys Single
Pack $150
Buys Single
Pack $150
%? %?
Scope
Packaging
Demand
Pricing
Recommendation
3C’s
Skimming
Quantity
Customer
based
Skimming
Strategy
Quantity
Differentiator
ROIDEMAND
PACKAGE
PRICE
To Model Impact on ROI
Uptake of
Quantity Offer
Year 1 Price $150
Market
4.3 Mn
Penetration
30%
Year 2-5 Price $150
Market
4.3 Mn
Penetration
5%
(each year)
ROI 5.73% over
5years
Quantity Strategy
Recall Repeat Purchase Behaviour Model
27. PRICING MODELS: QUANTITY STRATEGYScope
Packaging
Demand
Pricing
Recommendation
3C’s
Skimming
Quantity
Customer
based
Skimming
Strategy
Quantity
Differentiator
ROIDEMAND
PACKAGE
PRICE
Determine ROI
Max. Uptake
10.41%
No Uptake
5.73%
28. ROI FROM PRICE/DEMAND MATRIXScope
Packaging
Demand
Pricing
Recommendation
3C’s
Skimming
Quantity
Customer
based
Skimming
Strategy
Quantity
Differentiator
ROIDEMAND
PACKAGE
PRICEEvaluation
Criteria
Conservative
Model
Highest ROI
Greatest Uplift
Potential
Model 3
Ideal Target Market
Skimming
Strategy
Quantity
Differentiation Strategy
5 Year Results
Initial Market: 4.3 Mn
Packages Sold: 3.7 Mn Packages Sold: 5.1 Mn Packages Sold: 3.8-4.5 Mn
Market Penetration
Strategy
Ideal Target Market
Reduce Price in Year 3
to attract additional
customers "ready to request a
prescription"
Offer Qty Discount
to capture greater repeat
purchases
Price per 4-week Pack:
$150
Consumer Value Model
ROI: 5.73% ROI: 12.51% ROI: 5.73-10.41%
Demand
Pricing
29. ROI FROM PRICE/DEMAND MATRIXScope
Packaging
Demand
Pricing
Recommendation
3C’s
Skimming
Quantity
ROIDEMAND
PACKAGE
PRICEEvaluation
Criteria
Conservative
Model
Highest ROI
Greatest Uplift
Potential
Model 3
Ideal Target Market
Skimming
Strategy
Quantity
Differentiation Strategy
5 Year Results
Initial Market: 4.3 Mn
Packages Sold: 3.7 Mn Packages Sold: 5.1 Mn Packages Sold: 3.8-4.5 Mn
Market Penetration
Strategy
Ideal Target Market
Reduce Price in Year 3
to attract additional
customers "ready to request
a prescription"
Offer Qty Discount
to capture greater repeat purchases
Price per 4-week Pack:
$150
Consumer Value Model
ROI: 5.73% ROI: 12.51% ROI: 5.73-10.41%
Demand
Pricing
Customer
based
Skimming
Strategy
Quantity
Differentiator
30. OUR RECOMMENDATION
Minimum
Conservative
ROI Estimate
12.51%
Combination of Demand Models
•Ideal Target Market (4.3 Mn)
•Ready to Request Prescription (9.8 Mn)
4 Week Blister Style
Packaging
Most Conservative ROI
Estimate with Highest
Potential for Uplift
Scope
Packaging
Demand
Pricing
Recommendation
3C’s
Skimming
Quantity
Conservative
Demand
Highest
ROI
Greatest
Potential
Uplift
Skimming Strategy
Start @ $150 in Year 1
Drop to $99 in Year 3
1 2 3
Recap
32. APPENDIX – SURVEY RESULTS
Sample (Men & Women) 2000 100.00%
Not satisfied with current weight 1400 70.00%
Actively trying to lose weight 700 35.00%
Comfortable using weightloss drugs 105 5.25%
Seek prescription from healthcare provider 240 12.00%
CSP Survey Results
33. APPENDIX – POPULATION ESTIMATION
USA Adult Population in Mn CAGR %
Year 1980 163
Year 1990 185 1.27
Year 2000 209 1.23
Year 2008 230 1.22
USA Population Estimation for 2008
% of overweight people %OW CAGR % %obese CAGR% %morbidly obese CAGR%
Year 1976-1980 31.6 14.4
Year 1988-1994 33 0.031 20.1 0.02 2.9
Year 1999-2000 34 0.05 25.8 0.08 4.7 0.23 Total BMI >25
Year 2008 35.5 0.5 27.2 5.8 68.46
No. of overweight individuals 2008 (in Mn) 81.65
Conservative estimate of this figure 78.2
Estimate for % Overweight People in USA 2008
34. APPENDIX – DEMAND FORECAST 1
Description % Amount First Purchase (100%)
Second Purchase
(60%)
Third Purchase
(20%)
Total packages
sold (12 weeks)
No. of overweight individuals in US (2008) 81,650,000.00
Individuals actively trying to lose weight 35% 28,577,500.00
Individuals ^ comfortable using drugs 15% 4,286,625.00
Acquired customerbase in Yr 1 10% 428,662.50 428,662.50 257,197.50 51,439.50 737,299.50
Acquired customerbase in Yr 2 5% 214,331.25 214,331.25 128,598.75 25,719.75 368,649.75
Acquired customerbase in Yr 3 5% 214,331.25 214,331.25 128,598.75 25,719.75 368,649.75
Acquired customerbase in Yr 4 5% 214,331.25 214,331.25 128,598.75 25,719.75 368,649.75
Acquired customerbase in Yr 5 5% 214,331.25 214,331.25 128,598.75 25,719.75 368,649.75
TOTAL 2,211,898.50
Revenue Revenue Recurrent Costs Total Costs Gross Margin ROI
PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 331,784,775.00$ 55,739,842.20$ 485,489,842.20$ -153,705,067.20$ -46.33%
PR 2 - Average Margin Price (COMPANY) 125.00$ 276,487,312.50$ 55,739,842.20$ 485,489,842.20$ -209,002,529.70$ -75.59%
PR 1 - Premium Price Point (COMPETITOR) 75.00$ 165,892,387.50$ 55,739,842.20$ 485,489,842.20$ -319,597,454.70$ -192.65%
DEMAND FORECAST 1 - OVERWEIGHT, WANT TO LOSE IT, HAPPY WITH DRUGS
PRICING DEMAND FORECAST 1
35. APPENDIX – DEMAND FORECAST 2
Description % Amount First Purchase (100%)
Second Purchase
(60%)
Third Purchase
(20%)
Total packages
sold (12 weeks)
No. of overweight individuals in 2008 81,650,000.00
Respondents ready to seek prescription 12% 9,798,000.00
Acquire customerbase in Yr 1 10% 979,800.00 979,800.00 587,880.00 117,576.00 1,685,256.00
Acquire customerbase in Yr 2 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00
Acquire customerbase in Yr 3 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00
Acquire customerbase in Yr 4 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00
Acquire customerbase in Yr 5 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00
TOTAL 4,213,140.00
Revenue Revenue Recurrent Costs Total Costs Gross Margin ROI
PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 631,971,000.00$ 106,171,128.00$ 535,921,128.00$ 96,049,872.00$ 15.20%
PR 2 - Average Margin Price (COMPANY) 125.00$ 526,642,500.00$ 106,171,128.00$ 535,921,128.00$ -9,278,628.00$ -1.76%
PR 1 - Premium Price Point (COMPETITOR) 75.00$ 315,985,500.00$ 106,171,128.00$ 535,921,128.00$ -219,935,628.00$ -69.60%
DEMAND FORECAST 2 - OVERWEIGHT, WOULD SEEK PRESCRIPTION
PRICING DEMAND FORECAST 2
36. APPENDIX – DEMAND FORECAST 3
Description % Amount First Purchase (100%)
Second Purchase
(60%)
Third Purchase
(20%)
Total packages
sold (12 weeks)
Ideal Target Market: women 35-65 OW 4,300,000.00
Acquire customerbase in Yr 1 30% 1,290,000.00 1,290,000.00 774,000.00 154,800.00 2,218,800.00
Acquire customerbase in Yr 2 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00
Acquire customerbase in Yr 3 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00
Acquire customerbase in Yr 4 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00
Acquire customerbase in Yr 5 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00
TOTAL 3,698,000.00
Revenue Revenue Recurrent Costs Total Costs Gross Margin ROI
PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 554,700,000.00$ 93,189,600.00$ 522,939,600.00$ 31,760,400.00$ 5.73%
PR 2 - Average Margin Price (COMPANY) 125.00$ 462,250,000.00$ 93,189,600.00$ 522,939,600.00$ -60,689,600.00$ -13.13%
PR 1 - Premium Price Point (COMPETITOR) 75.00$ 277,350,000.00$ 93,189,600.00$ 522,939,600.00$ -245,589,600.00$ -88.55%
PRICING DEMAND FORECAST 3
DEMAND FORECAST 3 - IDEAL TARGET MARKET
37. APPENDIX – DEMAND FORECAST 4
Description % Amount First Purchase (100%)
Second Purchase
(60%)
Third Purchase
(20%)
Total packages
sold (12 weeks)
Ideal Target Market: women 35-65 OW 4,300,000.00
Acquire customerbase in Yr 1 30% 1,290,000.00 1,290,000.00 774,000.00 154,800.00 2,218,800.00
Acquire customerbase in Yr 2 5% 215,000.00 215,000.00 129,000.00 25,800.00 369,800.00
Acquire customerbase in Yr 3 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00
Acquire customerbase in Yr 4 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00
Acquire customerbase in Yr 5 5% 489,900.00 489,900.00 293,940.00 58,788.00 842,628.00
TOTAL 5,116,484.00
Revenue Revenue Recurrent Costs Proportion Costs Proportion GM Proportion Sales
PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 332,820,000.00$ 55,913,760.00$ 279,904,488.09$ 52,915,511.91$ 52.12%
PR 3 - Consumer Value Price (CUSTOMER) 150.00$ 55,470,000.00$ 9,318,960.00$ 46,650,748.01$ 8,819,251.99$ 8.69%
VAR PR 4 - Skimming Strategy (YEAR 3) 99.00$ 83,420,172.00$ 21,234,225.60$ 77,376,720.23$ 6,043,451.77$ 13.06%
VAR PR 4 - Skimming Strategy (YEAR 3) 99.00$ 83,420,172.00$ 21,234,225.60$ 77,376,720.23$ 6,043,451.77$ 13.06%
VAR PR 4 - Skimming Strategy (YEAR 3) 99.00$ 83,420,172.00$ 21,234,225.60$ 77,376,720.23$ 6,043,451.77$ 13.06%
SUMMARY OF RESULTS Revenue Recurrent Costs Total Costs Gross Margin ROI
TOTAL SALES PERIOD - SKIMMING MODEL 638,550,516.00$ 128,935,396.80$ 558,685,396.80$ 79,865,119.20$ 12.51%
PRICING STRATEGY 4 - SKIMMING MODEL
PRICING DEMAND FORECAST 3
38. APPENDIX – DEMAND FORECAST 5
Description % Amount Buy pack 1 (100%) Buy pack 2&3 Buy pack 2 only Buy pack 3 (20%) TOTAL Doubles TOTAL Singles
VAR: Uptake VAR: Uptake
Ideal Target Market: women 35-65 OW 4,300,000.00 50.00% 10.00%
Acquire customerbase in Yr 1 30% 1,290,000.00 1,290,000.00 645,000.00 129,000.00 25,800.00 645,000.00 1,444,800.00
Acquire customerbase in Yr 2 5% 215,000.00 215,000.00 107,500.00 21,500.00 4,300.00 107,500.00 240,800.00
Acquire customerbase in Yr 3 5% 215,000.00 215,000.00 107,500.00 21,500.00 4,300.00 107,500.00 240,800.00
Acquire customerbase in Yr 4 5% 215,000.00 215,000.00 107,500.00 21,500.00 4,300.00 107,500.00 240,800.00
Acquire customerbase in Yr 5 5% 215,000.00 215,000.00 107,500.00 21,500.00 4,300.00 107,500.00 240,800.00
TOTAL 1,075,000.00 2,408,000.00
Revenue Revenue Recurrent Costs Proportion Costs Proportion GM Proportion Sales
TOTAL SALES PERIOD - SKIMMING MODEL 603,075,000.00$ 114,861,600.00$ 544,611,600.00$ 58,463,400.00$ 9.69%
PRICING STRATEGY 5 - QTY DIFFERENTIATION MODEL
PRICING DEMAND FORECAST 3
39. FIXED VARIABLE DESCRIPTION AMOUNT UNIT
PR 1 - Premium Price Point (COMPETITOR) 75.00$ per package
PR 2 - Average Margin Price (COMPANY) 125.00$ per package
PR 3 - Consumer Value Price (CUSTOMER) 150.00$ per package
VAR PR 4 - Skimming Strategy (YEAR 3) 99.00$ per package
VAR PR 5 - Qty Diff Strategy (DBL OFFER) 225.00$ per double package
Variable Costs 25.20$ per package
R&D Cost 400,000,000.00$ million sunk costs
Marketing Cost 23,000,000.00$ million total estimate
Fixed Annual Cost 1,350,000.00$ million per year
TOTAL COSTS (5yr) 429,750,000.00$ million over 5 yrs
APPENDIX – FIXED VARIABLE PRICING