Pharmasim Decisions

This week was decisions for Pharmasim 3-7 and it was a crucial decision making process for our group because we introduced a new product, Allround+.  This line extension was a 12-hr multi-capsule, children's liquid cold medicine. The children's liquid cold medicine market was chosen because it was attractive with only one other brand competitor. Also, for Allround in period 3, inflation was forecasted to be 3.0%, so prices increased 3.0% which would brought Allround to $5.76.

Ad messaging was changed to 30%, Benefits to 20% and Comparison was decreased to 30% from 40%.  Additionally, the "help you rest" message was changed to "minimize side effects". We thought that it was a more positive message to convey to consumers. With these decisions customer satisfaction seemed to approve of removing alcohol last period, as it is viewed as a side effect, which helped correlate to our new message. However, nothing was changed in the formula this period. Co-Op Advertising was increased from $1.4M to $2.0M just for more support in advertising of Allround and the sales force remained the same. This was a very successful period for us. Revenue was +14%, Gross Margin +13%, Net Income +30%, and the Stock Price increased to $44.46.

For period we increased the price of Allround, based on inflation forecast to $5.85. We then sacrificed some our profit margins for Allround+ and made the price $5.30. This was to gain ground over our competitor, Coldcure, in the market whose price ultimately dropped with ours to $5.29.  At the same time we didn’t alter the sales force, which left us with $36.6M after the report purchases.  So, there was $11.0M for Allround and $25.6M for Allround+, according to the plan.  Then, this was split between ad and promotion.  Then we decided to cut promo spending for Allround in half and then allocate the rest to ads.  This meant that Allround+ was able to have a somewhat higher promotional allowance. Thus, using our  $47.9M budget we allocated $8M to Allround and $18.8M to Allround+, which aligns with our marketing plan. Allround+ now has 30% primary, 20% benefits, 40% compare w/ Coldcure, and 10% reminder. This allowed for Revenue to increase 4%, Gross Margin +4%, Net Income -12%, and the Stock Price dropped to $44.14. Overall, our product is priced well but there is a desire for more coupons. Our brand perception has started to decrease.

For period five for our special decision we chose to do clinical studies to provide evidence of product effectiveness for $4M as well as train the detailers on side effects, drug interactions, and proper usage for $1M. We also needed to reduce budget by $2.5M so we left sales force and promotions the same and ad spend was reduced by $1M for Allround and $1.5M for Allround+. Since inflation was forecasted at -.5%, the price of Allround was reduced. However, we decided to keep the price of Allround+ the same so that we can start to “increase” prices and grow our product. So far these were our most successful decisions as well as our most successful period. Revenue is +4%, Gross Margin +4%, Net Income +5%, and stock price rose to $46.35.

For period 6 our special decision was in regards to Allstar being pitched new advertising vehicles. We decided to place our product in a movie expected to be popular with young adults for $100K as well as run an ad contest to have customers come up with a clever ad run on the web for $1M. We also decided not to start another line extension. The new product Allright did not align with our marketing plan because we did not discuss the allergy market or a nasal spray. At the same time, inflation was forecasted at +2% so we decided to increase the price of Allround to $5.94 as well as raise the price of Allround+ to $5.50. Lastly, lack of consumer promotion for Allround was putting us at a disadvantage and we were running over capacity at the same time. Therefore, some of Allround+'s ad spending was shifted to Allround promotion. Also, primary spending for Allround was increased again to maintain awareness.  At the same time, Allround was given more promotional allowances, since we were losing some shelf space. We these decisions our figures suffered. Revenue was down -3%, Gross Margin -4%, Net Income -9%, and the Stock Price dropped to $41.68. It was said that there were some mixed comments about Allround+ via social media and that our special decision for marketing appealed to a wide variety of groups, but a more focused approach may have been more effective. Prices dropped 1.3% compared to inflation rising 2.1%. Overall, we had our ups and downs this were and we are not in a favorable position going into period seven but there is also a lot of decisions still to be made and we are still trying to grow our lines in their respective markets.