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Pharmasim Markting Plan

Birmingham Business School

University of Birmingham

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Introduction

Established in 1924, Allstar Brands Corporation is the leading manufacturer of packaged

goods in the world. The company comprises of three separate divisions: Consumer Products,

International, and Pharmaceuticals. The Pharmaceutical division is responsible for the

production and marketing of ethical drugs & OTC medications.

Allround is the cash cow product for Allstar - with 40.4% market share in the OTC remedy

market. Its recent success in terms of sales and profitability were mainly due to its strong

brand awareness and product effectiveness which enabled it to achieve a high customer

satisfaction. As a result, Allround will act as a crucial component in the implementation and

success of the long term strategic plan of Allstar Brands Corporation.

Mission Statement:

To develop innovative products to cure diseases and ease the suffering of patients

Vision Statement:

To offer a complete solution to customers, in order to enhance their quality of life

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Market Overview:

Strategic Objectives

Short-term Objectives:

1. Increase sales by 3.75% to $475 Million

2. Increase stock price to $42 per stock

3. Increase overall Market share to 25 %

4. improve relationship between the company and the suppliers, retailers and customers

Long-term Objectives:

1. expand the business product portfolio in 3 years with a new product

2. be the market leader in the pharmaceutical industry in the next 5-year period

3. enhance our shareholder value

4. increase market penetration to 75% in the next 5 years

Segmentation, Targeting, Positioning

Allround products will address the multi-symptom market indiscriminately. The focus symptoms will

be aches and fever, chest congestion and cough (common to both colds and allergies).

The adopted positioning strategy will be based on the motto: because were here all-round the

year showing that Allround is suitable for all seasons and can appease all symptoms.

Value Proposition: superior-formulated product to alleviate consumers cold and/or allergy

symptoms in a short time with minimal side effects.

The trade-off will based on the concept for a superior product priced equally that brings comfort to

consumers in a brief period of time.

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Marketing Strategy

1. First period (year 1-2):

As seen in the SWOT analysis (appendix 1), Allround has a low retention rate (appendix 3).

One of the reason might be that multi-symptom medication usually suffers from low retention

rates. However, this impacts negatively on the overall sales.

To address this issue, the adopted Allround marketing strategy is Market Penetration during

the first period Year 1-2 of the plan.

The production capacity will be increased to almost 100% by investing into the production

facility to achieve its long term objectives. Short term, Allround aims to maintain its

advertisement budget to $20 Million, however it may be reduced in the future as the Allround

has already established itself in the market and has the highest brand awareness.

2. Second period - Years 3 5

During the next planning period, assuming that 1) the results from the first period are positive,

2) the sales target was achieved and 3) retention rate was increased, Allround will pursue a

Need-based Strategy.

This strategy will translate into further investment into the R&D based on the available market

research and will develop a new product, much more focused on market demand and

customer needs.

Marketing activities:

1. Product

Product development will be a secondary focus for Allround with a new product development taking

place in the second part of the planning period.

A product formulation will be proposed during Years 1-2 to answer the market demand of a more

focused product. Also, research into consumer preferences showed a strong preference for 12h-

capsule product formulation.

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During years 3-5, Allround will propose a new product to complement the existing offering on the

market. This product will be more focused on reducing higher level cold/allergy symptoms.

2. Price

For the first period, we will maintain its price to $5.29, as inflation rate continues to increase

to 3.1%.

During the second planning period, the new product will be priced similarly. In calculating the

MSRP, a combination of benchmarking with similar offerings on the market, production costs

and overhead will be used.

The price of the current product will decrease by approximately 15-20% during year 3 and will

continue to decrease to up to 30% by the end of the period, until completely withdrawn from

the market.

3. Place

Push strategy: In the short run, Allround will try to improve its relationships with its suppliers,

retailers, wholesalers and customers by increasing the trade promotion to $2 Million and

consumer promotion to $6 Million to promote sale of its products.

Distribution Channels:

1. Direct Channels: urban and suburban stores and retail chains.

2. Indirect channels: wholesalers

4. Promotion

Push Strategy: Allround will be looking to increase its direct sales force to 100 and indirect sales

force to 45 to further increase its sales through direct & indirect channels that are growing

rapidly.

Pull strategy: Allround currently enjoys the highest market share, highest brand awareness rate and

highest brand trials and most frequent purchases, the pull strategy is considered to be sufficiently

sound and healthy.

The advertising budget for the integrated marketing communications will increase by approximately

10-20% with a special focus given to the following areas:

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1. Advertising to ensure a good pull approach from the consumers

2. Social media integration and viral marketing through activities engaging consumers to share

their stories

3. A new special packaging to reflect the new product formulation and a completely new,

refreshed packaging for the second product.

Contingency plan:

At the end of the first planning period (Year 1-2), the management team will evaluate the current

results against the objectives and measure the results.

If the results achieved do not meet the objectives set, in terms of overall sales, market share and

retention rate, Allround will change the planned strategy.

In the plan, we envisage a new product launch in the second period of time. However, should the

results not be in line with the objectives, Allround will continue with a Need-based strategic

approach, market development.

In this we envisage an extension of the distribution channels to reach more remote areas. As seen

from the SWOT and the Pestel Analysis (appendix 2-3), the current customer reach extends to only

75% of the population.

Therefore, extra efforts will be put into reaching those customers as well, through indirect channels

and increasing the number of direct as well.

Also, special attention will be given to the direct sales force who will be more proactive in these area

by organizing a special structure in the sales department.

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Bibliography 2GC, n.d. 2GC Active Management. [Online]

Available at: http://2gc.eu/resource_centre/balanced-scorecard

[Accessed 02 2015].

Age, T. M. A. C. o., 1989. The Marketing Audit Comes of Age. Philip Kotler, William T. Gregor and

William H. Rodgers III.

Graham Hooley, B. N. N. P., 2011. Marketing Strategy and Competitive Positioning. 5 ed. Harlow:

Financial Times/ Prentice Hall.

Hill, C. W. L., 1988. Differentiation versus Low Cost or Differentiation and Low Cost: A Contingency

Framework. The Academy of Management Review, 13(3), pp. 401-412.

Levitt, T., 1980. Marketing Success Through Differentiationof Anything. Harvard Business Review.

Porter, M. E., 1996. What Is Strategy?. Harvard Business Review.

Porter, M. E. et al., 2011. HBR's 10 Must Reads on Strategy. s.l.:Harvard Business Review.

Robert S. Kaplan, D. P. N., 2000. Having Trouble with Your Strategy? Then Map It. Harvard Business

Review.

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Appendix 1

Financial Summary:

Industry Sales $1,491.2 M

Industry sales growth 5.50%

Retail sales $468.1 M

Manufacturers Sales $355.3 M

Promotional Allowance $60.4 M

Cost of goods Sold $122.6 M

Gross Margin $172.3 M

Consumer & Trade Promotion $ 7.0 M

Advertisement $20 M

Net Income $67.2 M

Stock Price $38.35

Production Capacity Utilization 85.10%

(Source: PharmaSim Simulation, Period 0)

The Economic prospective for the industry appear to be highly positive as the industry sales

continue to grow by 5.50% to $1,491.2 Million of which Allround accounts for $468.1 Million.

Moreover, Allround has a net Income of $67.2 Million and is the market leader in the OTC

cold and allergy market, as it continues to focus on brand awareness and trade distribution

for which it has devoted around $20 Million in Advertisement and $7 Million in consumer and

trade promotion. However, its resources are being under-utilized as the production capacity

can be enhanced to support the long term objectives of the company.

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Appendix 2

P.E.S.T.E.L Analysis

Political

- High government taxes.

- Pressure on pricing of drugs by the governments (Price Control).

- Government concerns with regard to drug usage and the market segment to

which it will be used to cater

Economical

- Consumers perceive medicine to be expensive.

- Strong Entry Barriers, such as high cost of capital investment

- Global Economic growth of 5.5% in the industry

- Highly competitive market, as companies increase their spending on

advertisements and promotions

- Increase in Inflation rate to 3.1%

- International exchange rate

Social

- Global increase in the growth of population

- Changes in consumer attitude, as consumers are becoming more health

conscious

- Product side effects and effectiveness can have a strong impact on purchase

decision of consumers

- Increase usage of drugs by senior citizens

Technological

- Significant improvement in research and development.

- Efficiency in production facilities.

- Increased use of social media, print media and internet for the purpose of

advertising.

- Customized treatments.

Legal

- Increased legislation on the advertising of drugs.

- Highly regulated

- Global law inconsistencies.

- Strict regulations regarding the

Environmental

- Safe dispose of toxic waste

- Impact of chemicals on the environment

- Environmental pressure groups

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Appendix 3

S.W.O.T Analysis

Strengths

Weaknesses

- Highest market share in OTC - cold

segment

- Highest brand awareness in the market

(74.1%)

- Highest brand trials and most frequent

purchases

- Highest customer satisfaction (58.3%)

- Marketing Efficiency Index rating of 2.04

- Strong brand perception for aches,

nasal, runny, cough and allergy

- Strong base of loyal customers

- Low retention rate (46.3%)

- Under-utilisation of resources and

product capacity

- Allround is only offered in liquid form

Opportunities

Threats

- Growing demand for nasal spray

- Growing demand for cold-alleviating

medicine, by 6.6%

- Growth in overall industry sales by 5.5%

- Still a low market penetration rate for

OTC (only 64%)

- Strong growth in various indirect

distribution channels

- Highly competitive market: 5 players

and 10 brands in total.

- Heavily regulated by government

- Capsule product formulation is

demanded by consumers

- Brand Switching customers

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Appendix 4

Porters Five Forces

Competitive Rivalry:

Allround brand competes with five other firms in the OTC cold and allergy market. Since its

establishment, it has achieved incredible level of growth and success. However, it faces stiff

competition from its direct competitor Ethik Incorporated.

Threat of New Entrants:

Allround has the highest level of brand awareness and is the most frequently purchased brand

in the market for this market segment. Its strong brand awareness in the market along with

its product effectiveness have enabled Allround to create a base of loyal customers. As a

result, it has been able to maintain a price leadership in the market. Therefore, the threat of

a new entrants is very low, as significant investment is required to enter into any of the well-

established market segments.

Bargaining power of buyer:

There are five key players that are operating in the market. Therefore, if the customer is

dissatisfied by a brand then they can switch the brand, due to which the retention rate of

Allround has plummeted down, as compared to its competitors.

Threat of Substitution:

Threat of substitution is quite low as Allround is the market leader in the OTC cold and allergy

market segments. However, it is only sold in liquid form, which can be a cause for concern for

Allstar brand, as consumers prefer the capsule formulation as it is more convenient.

Bargaining power of Supplier :

The supplier can increase the input price of the product based on the level of demand in the

market and can have a strong impact on the production supply chain. Therefore, companies

keep multiple suppliers to curb the power of suppliers. Since, consumers dont make their

decisions based on price, therefore all round can charge higher price for its products from the

customers.

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REFERENCES:

http://www.novartis.com/about-novartis/our-mission/index.shtml

http://www.ukessays.com/essays/international-business/global-pharmaceutical-industry.php