Datril Case

950 Words Feb 16th, 2013 4 Pages
My recommendation to Marvin Koslow is to follow the first approach of pricing Datril at par with Tylenol ($2.85 retail price, $1.69 trade cost), leveraging Bristol-Myers’ brand name, and positioning Datril as an analgesic with similar relief effects to the those of the already successful, aspirin-based Bufferin and Excedin, but more gentle on the stomach, and without the side effects of aspirin. By doing so, Datril will primarily target aspirin users, specifically those from Bufferin’s and Excedin’s current consumer base, who suffer from upset stomach. I explain my rationale below. According to the case, when Datril was introduced to test markets per the strategy I recommended, it failed to achieve the projected sales figures within the …show more content…
This is Bristol-Myers’ main competitive advantage; its own consumers who may suffer from the typical side effects of aspirin. Targeting those specific customers and communicating to them the value of eliminated side effects should be Datril’s positioning and differentiating strategy. Cannibalization from Bufferin and Excedin, should it happen, should not necessarily be viewed negatively, since my recommended selling price of $2.85 is double that of these aspirin products.

Exhibit A – Break-Even Analysis for Tylenol and the different pricing scenarios for Datril (per bottle of 100 pills)
Breakeven Analysis for Product Tylenol Approach 1 - Same price as Tylenol Approach 2a - Cheaper than Tylenol Approach 2b - Cheaper w/lowered trade cost $ $ $ $ Unit Cost (Variable Cost) 0.60 0.60 0.60 0.60 Trade Cost (Selling Price to Retailers) $ 1.69 $ 1.69 $ 1.05 $ 0.70 Fixed Cost (Advertising) 2,000,000 6,000,000 6,000,000 6,000,000 Break-Even Quantity [Fixed Cost/(Trade Cost-Unit Cost)] 1,834,862 5,504,587 13,333,333 60,000,000 Contribution Margin (Unit) 64% 64% 43% 14%

$ $ $ $

Assumptions: 1. As per the case, unit cost for producing each bottle of acetaminophen-based tablets (including Tylenol and Datril) is 60 cents 2. The trade cost for Approach 1 was assumed to be $1.69 in order for the pricing scenario to be perfectly equal to that of Tylenol (i.e. unit cost, trade cost, and ultimately selling price to end customers). 3. For simplicity, advertising is the only fixed cost

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