Case Study of Vistakon and Disposable Contact Lenses

1427 WordsSep 23, 20066 Pages
Case Study of Vistakon and Disposable Contact Lenses Vistakon is a well-established, overwhelming market leader in the disposable contact lens industry, based on strong brand equity and channels of distribution. Additionally, as a subsidiary of Johnson and Johnson, Vistakon has considerable resources at its disposal. The launching of 1 Day Acuvue, with newly invested manufacturing technology in place, provides a great opportunity to preempt competition and thus enhance its positioning. However, 1 Day Acuvue potentially flourishes by cannibalizing the company's existing product lines such as Acuvue and Surevue. With a major portion of its sales ($250 million) coming from these products, Vistakon faces significant risk in launching 1 Day…show more content…
Recommendation We recommend that the company extend its promotional strategy used in the western regional launch to the national launch by spending $12.8 million for advertising (=$1.6mil x 2 x 4 regions), while continuing to offer $50 rebate and 5 day free trial. The price reduction to ECPs recommended earlier will strengthen the "push" strategy by increasing their gross margin. Distribution A 1% change in ECP coverage (390 ECP) contributes to 5.4% increase in the number of new customers (approximately 45,000), which in turn generates an incremental net contribution of $20.75 million. Based on the experience from the Western regional launch, we recommend that Vistakon increase their sales force nationwide in order to cover more ECPs and acquire more new customers. In doing so, the company needs to compare the geographical dispersion of ECP with the cost of hiring local sales representatives. Conclusion In summary, we recommend to Vistakon management the following: 1. Prioritize on "part time users" - as noted above, those who have high income and are therefore relatively price insensitive, who have active lifestyles, and frequently travel on business 2. Charge 10% premium over previous cost per lens to customers Price discriminate based on purchase volume (=volume discount) Improve the gross margin of ECP by lowering price 3. Continue the advertising and promotion as it did in
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