Target market for Lilly/ ICOS launch and rationale
The target market for Lilly ICOS launch should be the UK market. The determination of the target market is based on the market performance of the competitor’s product, Viagra. According to the available data, Viagra is currently supplied in the US, France, German, Italy, Spain, and the UK market. However, the dissatisfaction level is very high in the UK market with 30% of the total UK market showing to be dissatisfied with the product. Lilly ICOS would, therefore, take up the opportunity and approach the market with the highest level dissatisfaction with the competitor’s product, Viagra. This would form the best target market since the consumers will prefer its product compared to the competitors. Additionally, 100% of the UK market would also be willing to try the Cialis. In the UK market, Viagra has 100% of dropouts who would be willing to try the Cialis product. This strategy is referred to as the niche market and would be helpful in ensuring that the company keeps high level of sales for the products. Lilly ICOS target market is also determined by the number of competitors in the market. Unlike the other markets, UK market forms the best niche due to lower number of competitors.
Market positioning for Cialis launch
Market positioning refers to the exact position that the company would serve with its new product upon its launch. The market position for the Cialis product is based on the market dominance of the competitors’ products in the market. In the targeted UK market, Lilly ICOS should position itself in the dis-satisfied customers of the Viagra product. Given that there is a high level of dissatisfaction for the Viagra; Cialis would find an appropriate position by filling the gap that exists in the market. This can be done by positioning itself majorly in the U.S and UK market which has the level of dissatisfaction. Therefore, the appropriate market positioning for Cialis launch would be the U.S market since it has a larger population consumers which increases the sales revenue for the company over a given period (Ofek, 2010). The selected market positioning is based on value creation and it aims at increasing the value of the company through the new product available for the customers in the market.
Marketing mix elements for suggested Cialis launch
Lilly marketing mix elements for the suggested Cialis launch comprises of four major elements; the price, product, place and promotion. The first element is the price. This refers to the price at which the potential consumers would be willing to offer for the product in the market. Lilly should ensure that it presents its products for sale at the lowest possible prices to attract more consumers in the market. Therefore, considering the market prices of the competitors’ product Cialis would be priced at $15 per pill to attract new customers. Although a lower product price would have an effect of reducing the total revenue earned by the company from the sales of drugs, it would be important for new product to position itself in the market. Low product price for a new product is important in making the product establish itself in the market.
Product as a marketing mix element describes the unique features of the product to be launched that will make it attractive to the customers. Cialis, unlike Viagra is a suitable drug for the ED patients given its ability to last longer in the body. This makes it unique and would be attractive to the customers in the market. Therefore, when making the drug launch, the company would expect a bigger market share. As the new product is launched in the market, it would be impossible to make any change in the product or the brand name. However, as it continues to penetrate into the market several adjustments can be made to the brand name of the product itself (Ofek, 2010).
Promotion as a marketing mix element describes the type of promotional tool that the company would use in marketing the new product. When selecting the promotional tool, the important factors that the company needs to consider include the message that it needs to pass to the target patients and the channel through which the message is passed. Lily ICOS target market for the product is majorly the UK market. The promotion includes the message that the company would communicate to the patients, physicians, and partners. To the patients, the message should include the price and the basic features of the product. The patients are also interested in the effectiveness of the product. Therefore, the message should include a description of what makes it different from the other products in the market. The physicians are also interested in the effectiveness of the drug as well as a description of how to use the drug. Therefore, to physicians the message communicated should include the drug abuse. To the partners, the message communicated should be the advantages that the drug has to them. In addition, it should communicate the side effects of using the drug. This message is important to ensure that there is proper use of the drug. A push model should be used in the marketing strategy. Under the push model, the company will force the product to the customers by delivering it to them at the appropriate time in the required quantity.
Finally, there is the place element of marketing mix. This describes the channels of distribution that the company is expected to use to ensure that the drugs reach the target market at the appropriate time and cost. For the new product, Cialis, the company should use a direct distribution channel where it directly supplies the drugs to the target market. This will reduce the costs that are involved in the supply and ensure that the drugs are sold at the lowest possible prices in the market. Direct distribution results in a reduced price unlike the indirect method where intermediaries such as retailers and wholesalers are to be involved. The most appropriate marketing model that the company would select for the Cialis launch is the push model in which it forces the product into the customers. This will be effective in increasing the units of sales and increasing the product market share.
Proposed marketing budget
Marketing $/Gross Profit (Revenue-variable cost) = x%
Revenue = $1.5 billion
Gross profit margin = 90%, Gross profit = 90100 × $1.5 billion = $1.35 billion
Variable costs = $108 million (advertising expense)
Marketing $ = $108 million
X = $108 million$1,350 million = 8%
X = 8%
Proposed marketing spend/ (Revenue- Variable cost) = x %
Proposed marketing spendGross Profit = 8%
Gross profit = (revenue – variable cost) = ($1,500 - $108) = $1,392 million
Proposed marketing spend$1,392 million = 8%
Proposed marketing spend = $1,392 million × 8% = $111.36 million
If the percentage gross profit is to be the same as the proposed marketing spend, then the revenue is calculated as
Proposed marketing spend = $111.36 million
Gross profit = $111.36 million
Revenue = Gross Profit + Variable cost = ($111.36 million + 108 million) = $219.36 million
The gross profit would be equal to the proposed marketing spend which is $111.36 million. To obtain the revenue, the gross profit is added to the variable cost; which is the advertising expense to get the revenue as shown above.
Cost of goods sold = Revenue – Gross Profit
Revenue = $1,500 million
Gross profit = $111.36 million
Cost of goods sold = ($1,500 - $111.36) million = $1,388.66
The revenue target at this cost of goods sold by the company is not reasonable. Although there is a high cost of sales, the company would still make profits from its operations which are lower than the target. Therefore, the marketing spend is determined as;
(Price x Units) - (Variable cost x Units)
Assume target revenue is $1,800 million
Marketing spend = Gross profit (x %)
Gross profit = Revenue – Variable costs = ($1,800 - $108) million = $1,692 million
Marketing spend = $1,692 million × 8% = $135.36 million
Assuming that the target revenue is $1,800 from the sales of Cialis, the marketing spend would be $135.36 million according to the above analysis. This marketing expense is reasonable since it does not have serious effects on the gross profit earned by the company
Pfizer’s response and defense for the market position
Pfizer’s market position with regard to Viagra product would be influenced by the introduction of Lily ICOS’ new product, Cialis in the market. There would be a reduction in the market position due to the reduction in the number of customers. As a response to the change in the market position, the company would adjust in its product offering by improving on its quality. With the introduction of Cialis in the market, majority of the customers would prefer to use the new product rather than Viagra. Therefore, to improve the quality of the product, the company will increase its effective which would further increase its marketability. Pfizer can also respond to the market position by lowering its product price.
As it is currently, majority of the consumers in the UK and US markets would drop the Viagra for Cialis irrespective of the price. Therefore, to retain the market position, it can reduce the price relative to the competitor’s Viagra. A reduction in the prices increases the demand for the product which leads to an improved sales units and revenue. Furthermore, Pfizer can defend the market position by increasing the intensity of its marketing and product promotion. An increased level of marketing will increase the level of sales made by the company hence assisting to retain the market position. Product marketing is improved by adopting new market strategies such as new market entry. The company can make an entry into a new and unexploited market with the product. For instance, Pfizer can introduce its products to the markets such as Asia and Africa.
In conclusion, launching of the new product will have to consider a number of issues as addressed in the discussion. As a new product, Lilly ICOS needs to consider the product pricing relative to the competitors, the product, and promotion as major marketing mix element. An aggressive marketing strategy in the market where the competitor has a low market share and position such as UK and US should be exploited with the new product. However, Pfizer needs to review its marketing strategy to ensure that it retains its market position. As seen from the discussion, these strategies include entry into new markets and revised pricing model for the product. Reducing the prices and intensifying the product promotion will assist the company retain its market position.
Reference
Ofek, E. (2010). Product Team Cialis: Getting Ready to Market. US: Case Study.
