Executive Summary
Allstar is one of the most recognized names in the packaged food industry across the globe. Allround is the most successful brand of the Allstar group in the allergy and cold relief market. Allround brand is a consistent brand success in terms of sales and profitability and along these lines, it has become the most crucial component not only for the pharmaceutical division of Allstar but for its entire business. For the reason, cash flow of Allround can facilitate them to take increased opportunities offered by the emerging markets. However, Allround has increasingly become a concern for the pharmaceutical division of Allstar due to the changing competitive conditions of the cold remedy market. The last three years sales period has turned around Allround to become a profitable brand. However, the reports of the recent performance quarter seem to be bit disappointing and Allstar realized that Allround has been encountering intense competition from the market, as well as, the market conditions are changing rapidly and this reality is posting a number of intimidations, which needs to look after immediately or else they may influence the brand recognition and market share of Allround. Moreover, it will also affect its sales, cash flows, and profitability. This marketing report discusses the marketing decisions and strategies that were undertaken by Allstar to meet its market competition, to increase its sales volume and to enhance its brand recognition and profitability.
PharmaSim Simulation – Marketing Analysis Report
Competitive Environment Analysis
Allstar Brand is one of the most acknowledged names in the packaged food industry across the globe. Allround is the most successful brand of the Allstar group that pioneers the OTC (over-the-counter medicine) allergy and cold market by upholding approximately 40.4% market share of the cold medicine and 23.8% of the cold & allergy market. Allround brand is a consistent brand success in terms of sales and profitability, and it has also become the most crucial component not only for the pharmaceutical division of Allstar but for its entire business. For the reason, cash flow of Allround can facilitate them taking increased opportunities offered by the emerging markets (Doucette & McDonough, 2013).
Apparently, during the last three years sales period, Allround turned out to be a profitable brand; although the reports of the recent performance quarter seem to be unsatisfactory and Allstar realized that Allround has been encountering strong competition from the market. This needs to be taken care of as the situation has the potential to negatively influence the brand recognition and market share of Allround, and will essentially affect the sales, cash flows, and profitability of the company.
Actions Taken By the Competitors
The major market actions taken by the competitors in the last three years period include the introduction of new products to offset Allround’s upshot, as well as, increased advertising and promotions to attain the better brand recognition and eventually increase sales volume and profitability. Since its market debut from period 1, Allround brand has become one of the most effective on-the-counter remedial for multiple cold symptoms in the market.
Similarly, it also have most successful financial averages. However, the cold and allergy remedy has a number of competitors that are consistently contending for acquiring a greater market share in relation to Allround brands. Major market competitors include B&B Health Care’s Believe and Besthelp, Curall’s Pharmaceutical’s Coughcure, Driscol Corporation’s Defogg & Dryup and Ethik Incorporated’s Effective, End and Extra.
During the last three years, the cold & allergy remedy industry comes across several changes that influence Allround in a way that it lost one whole share point of the market share. For instance, to encounter the competition forwarded by Allround, its competitors made a number of new product introduction that intends to meet the needs and demands of the same target market. On the other hand, the existing competitors increased advertising and promotion on their products like Coughcure and End, Extra and Besthelp.
The intense competition calls brands to put extra emphasis on their marketing skills in order to develop better brand recognition, brand awareness, and enhanced brand visibility as well. At the start of the simulation, Allround was already enjoying the highest brand recognition in the market with the highest trail rate as well. This positively influenced its branding strategy as there was no need to create a buzz for it. But as the competition started to stiffen, Allround required better brand recognition in order to get the attention of the buyers so that they purchase Allround brand by asking them with their name (Dogramatzis, 2015).
Changes Encountered by Allstar in Business Environment
At the beginning of period 1, Allstar was already a powerful and established brand in the market, and using its brand identity. It pushed Allround brand in the market that helped it creating a buzz. However, during the last three period, it has encountered a number of changes in business environment. Competition is getting stern necessitating Allstar to amplify its marketing efforts so that their products attain enhanced recognition among other available substitutes in the market. After the market placement of Allround brands, the biggest change in business environment faced of Allstar was the inflaming opposition.
For instance, in the first period, Driscol announced Dryup’s introduction by the end of period 3 successfully captures 14.9% of total market share. Likewise, in period 2, Coldcure was introduced by Curall and in the beginning of the period, 3 B&B announced Besthelp+. Another major change was the increasing rate of inflation that causes increase in prices too. For instance, in period 1, prices increased by 2.8% due to the increase in the inflation rate that reached up to 3.1%. Similarly, in period 2, the prices changes by 2.4% as the inflation rate changes to 4.3%. Apart from inflation, price change and competition, the advertising, and promotional expenses also increased.
Future Business Environment & Trends
Although Allround was the pioneer and market leader in providing symptom formulation for chest congestion, nasal congestion, ache relief, and cough & cold cure; however, now the business environment is changing. The brand identity of Allstar and high trial rate helped Allround maintaining a sound market position, as well as, acquiring a lion’s market share. Whereas Allround is now at the maturity stage and the major concern is to retain that customer who has tried Allround.
Future business trends projected on the basis of the last three period indicates that the competition is going to be sterner as all the other brands including Allround are endeavoring to persuade the customer that their product is best to alleviate the cold symptoms. Hence, the future trends call for high product differentiation that not only increase consumer awareness for the product but also satisfy them. The contemporary retail environment is requiring Allround to enhance its advertising and promotion so that the brand earn better visibility, recognition, and loyalty of the targeted audience.
Marketing-Mix Decisions Analysis
Period 1 - Marketing Mix Analysis, Decisions, Problems & Results
During the first period, Allround launched as the pioneer market product, which shortly become the market leader for cold symptoms. However, it immediately faced competition from Dryup. Since it was only available in the liquid form, it required expansion in the product line. While considering the price, Allround was highly priced as compared to competitors such as Besthelp+, which set a reasonable price due to its high market performance.
While referring to place, Allround was well sold to mass merchandise and wholesalers due to its medium product quality and multipurpose functional treatment. This resulted in making Allround the bestseller with the highest number of customers. Talking about the promotion, Allround offered a high promotional allowance to push the sales through mass merchandise and wholesalers, which helped it developing its customer base while bringing in the highest trail rate for the product. Considering the STP (segmentation, targeting and positioning), Allround targeted physicians and customers who were looking for short and quick solutions for treating multiple symptoms at the same time. Allround was positioned as the medium-level cold remedy that treats multiple cold symptoms simultaneously and targeted people with average household income. Allround segmented its market for the customers who like to use medicines at the night time due to strong chemical, antihistamine, and alcohol efficiency (Athavale et.al, 2015). This effective segmentation helps Allround to become one of the most preferred and effective remedy for multiple cold symptoms at the same time.
Initially the price was increased from $5.29 to $5.45 in order to manage the inflation rate and increasing market price. In order to find out the adequate price, Allround carried out a market price survey. This makes Allround realized that its product is perceived as the most effective cold relief and consumers would be willing to buy the product even if the prices would be slightly raised. Allround also increases its sales force from 127 personnel to 135 in order to push sales and increase revenues.
In the same way, setting the promotional allowance setting to 18% ($74.6 million) for the mass merchandise and wholesalers enabled them to record high sales volume and pushing it to the market effectively. Special decision made was to drop alcohol as a component because the targeted segment of Allround preferred having a no-alcohol option for cold relief/ While considering advertising, it was initially based on a blend of comparisons and benefits communicated to the targeted audience.
The results of all the the above-mentioned strategies showed net income to be $87.5 million, market share to be 23.4% and manufacturing sales to be $414.2 million. The major problem that comes across during this period was of inflation and increased competition. However, the company was set in the right direction.
Period 2 - Marketing Mix Analysis, Decisions, Problems & Results
The major decisions and strategies that were undertaken within this period include the rise in product price i.e. from $5.45 to $5.70. The prices were set after realizing that Allround price was close to tradeoff, and the consumer is willing to pay for it. Allround undertook a consumer satisfaction survey and attained the highest satisfaction rate i.e. 60.4% as compared to competitors. Allround increased its sales force from 135 to 150 personnel. Promotional allowance percentage was kept constant i.e. 18 %; however, the promotional budget was increased from $7 million to $10 million. Apparently, advertising budget was also increased from $20 million to $20.7 million. In this period, Curall introduced Coldcure and prices increased by 2.4% as the inflation rate increased up to 4.3%. Due to the preference of no-alcohol relief, Allround was required to rethink about the reformulation of the Allround products.
There were some tough decisions made during this period. One of the most challenging decisions was the increase in price. However, the increase in price did not impact the sales and the increase in sales force resulted in increased sales volume and higher revenues. The major challenges during this period were again inflation and increase in expenses that resulted in decline in net income and market share. Although the company increased the sales force and promotional budget, as well as, manufacturing sales increased to $426.6 million from $414.2 million; however, the end results showed a decrease in net income from $87.5 million to $84.9 from, and the decline in market share i.e. 22.5% from 23.4%.
Period 3 - Marketing Mix Analysis, Decisions, Problems & Results
In this period, the market price increased by 3% and the inflation rate reached 5.2%. Due to this increase in inflation rate, the price of Allround was increased from $5.70 to $6.20. Allround also introduced an extension in product line by the name of Allround+, which was produced in the form of capsules. The high price was justified for this as it was in the form of a capsule, and has improved formulation and effectiveness. The sales force was increased from 150 to 200 people as the mass merchandisers grew by 16%, as well as, the new product line also needed an additional sales force. The promotional allowance was decreased to $71.8 million from $76.8 million. Allround spent $8.5 million over promotional allowances, $3 million on improving point of purchase efficacy, $0.5 million on enlarging the trail size, $2 million on Ad, and $3 million on promotional coupons. Total advertising expenditure reported to be $16 million. Allround also hired the best advertisement agency i.e. BMW that charged a percentage of 15%, which was the highest.
The results showed a decrease in net income to be $68.2 million, the decline in market share i.e. 22.5% from 20.4%, and decrease in manufacturing sales i.e. from $414.2 million to $398.9 million. The major challenges faced during this season were the further increased inflation rate and price of the product. The major problems in this season were the decrease of $2 million in the net income and subsequent decrease in sales and market share. The manufacturing sales dropped even though the product line has been extended. In order to cope up with the problem, Allround came up with a new product line, as well as, enhanced promotions and advertising. The company should also have dropped the alcoholic component by now in order to change the perception among consumers and eventually prop up the declining sales.
Period 4 - Marketing Mix Analysis, Decisions, Problems & Results
Allround+ is introduced with better effectiveness and formulations out of which the alcoholic components have also been dropped and the type has also been changed from liquid to capsule. Additionally, Allround+ is perceived as a high-quality brand due to its improved formulation. The price of Allround+ was kept high to convey the thought that higher the quality, higher will be the price. Additionally, higher price delivers more value and improved brand image (Doucette & McDonough, 2013). Allround+ also sells well with the wholesalers and mass merchandise, and successfully acquired higher market share. Allround+ targeted young families, individuals, mature families, retired individuals, and empty nesters. It was positioned to be a premium on the counter drug for multiple cold and allergy symptoms with maximum effectiveness while having no alcoholic components.
The brand faced no major challenges during this period. The change in its formulation showed its commitment towards its consumers’ health and the decisions taken during this period largely changed the picture in favor of the company. Eventually, these changes have also helped the firm to increase its market share. The only thing that would have been done differently is to have a more aggressive promotional campaign to capitalize on the changes made by the firm.
Period 5 - Marketing Mix Analysis, Decisions, Problems & Results
In this period, the first problem that came across was the introduction of Besthelp+ by B&B. Allstar also requested to be allowed to sell one of its prescriptions to the allergy medication market; however, the process expected to take few years. Also, market price increased by 3% and the inflation rate increased by 6.4%. As a result, Allround raised the price to $6.2. Allround increased the price according to Tradeoffs survey and the price was still lower than Best help. Salesforce was also encased to be 255 personnel to increase the sales volume and also to put the emphasis on the distribution channels. The promotional allowance was again set to 18% and promotional expenses were kept at $8.5 million. Advertising expense was kept at $12 million as Allround+ was already a known brand.
The results showed an increase in net income from $68.2 million to $71.1 million, the decline in market share i.e. 21.8% from 22.5%, and increase in manufacturing sales i.e. $438.9 million $414.2 million. Competition from Best help and inflation rate seems to be the biggest challenges. Although the sales increased during this period; however, the competition has a detrimental impact on the market share. Moreover, the increase in expenses has resulted in further decline in net income.
Period 6 - Marketing Mix Analysis, Decisions, Problems & Results
Ethik announced the introduction of End+ and Driscol has also reformulated Defogg. Additionally, the market price increased to 4.6%; whereas, the inflation rate increased by 8.5%. The promotional spending increased to $1.5 million and advertising spending to $15.8 million. The price of Allround was set to $6.9 and $7.5 for Allround+. However, the survey of tradeoffs shows that the price of Allround+ has exceeded the acceptance range of customers. It was also realized that the promotional allowance is also higher than the competitors.
The company faced various challenges during this period. The major challenges faced by the firm were the rising inflation rate, the above-than-average price of its product, introduction of substitute products by the competition, and the exaggerating promotional budget. This has further made things worse for the company as it keeps on losing its marketing share and consistently declining net income despite of increased sales.
Recommendations for New Management
Purchase Information & Reports
New management team is recommended to acquire the maximum amount in order to keep track of moves that are decided to be taken. This will help Allstar maintaining a proactive approach and therefore, taking marketing and advertising initiatives that are adequate for the situation. This will also facilitate them to keep their advertising budget low. Allstar can purchase this information from marketing agencies, mass merchandisers, and wholesalers. Since the competition is stern, that is why it is necessary to invest vigilantly to avoid financial loss (Athavale et.al, 2015).
Understand Your Advertising Message
It is also recommended to understand the advertising message that the Allround management opts to delivers as an advertising message determines advertising budget. This is essential because your advertising message decides what will be your advertising budget (Smith, 2014). Advertising and promotional play a significant role for Allstar because it can help to differentiate Allround and Allround+ from other available products. Allround’s management should focus on advertising and promote a blend of Allround’s benefits and its comparison.
Pertinent Budgeting For Advertising
Allstar needs to learn that increase in the budget is not always a good thing. The budget should be decided as per the market needs. Allround’s management needs to learn how they should appropriately allocate the budget for promotions and advertising thatcould help them to increase their sales volume, enhancing brand awareness, and profitability of the business (Gagnon & Carroll, 2012). We have seen that even an increase in advertising budget cannot always bring high profitability and high sales. Adequate allocation of the budget is necessary to get results (Doucette & McDonough, 2013).
Manage Capacity Issues With Price
Allstar should also focus on managing capacity and sales issues by managing price. Managing price could help to manage the increase or decrease in sales volume. It should be taken in a way that market price should be used to determine the projected sales volume, and then the production should be planned accordingly (Gagnon & Carroll, 2012).
Conclusion
The Allstar group and its most successful brand of Allrough started out well in the market. It was successful in creating strong brand recognition and brand equity. The price was reasonable, the firm maintained a strong sales force, and the formulations were also changed to make the product better and more effective. Apparently, the firm lost track in the middle due to challenges that it faced related to rising competition, increasing inflation rate and mounting expenses. The sales of its product kept on increasing but the brand has been continuously losing the market share along with the decline in net income. However, despite the current situation and challenges, Allstar could improve by having a proactive approach, by understanding the marketing message they are delivering, setting adequate promotional budget and by managing capacity issues along with the price.
References
Athavale, A. S., Banahan, III, B. F., Bentley, J. P., & West-Strum, D. S. (2015). Antecedents and consequences of pharmacy loyalty behavior.International Journal of Pharmaceutical and Healthcare Marketing, 9(1), 36-55. Retrieved on July 12, 2016
Dogramatzis, D. (2015). Pharmaceutical marketing: a practical guide. Taylor & Francis US. Retrieved on July 12, 2016
Doucette, W. R., & McDonough, R. P. (2013). Beyond the 4Ps: using relationship marketing to build value and demand for pharmacy services.Journal of the American Pharmaceutical Association, 42(2), 183-194. Retrieved on July 12, 2016
Gagnon, J. P., & Carroll, N. V. (2012). A strategy for marketing pharmacy services. American pharmacy, 22(1), 53-56. Retrieved on July 12, 2016
Smith, M. C. (2014). Principles of pharmaceutical marketing. Routledge. Retrieved on July 12, 2016
