The single most rewarding opportunity faced by the company is how to position Datril to the general public in 1975 and gain substantial and sustainable market share in the analgesics market. This situation is an opportunity because Bristol-Myers needed to figure out how to successfully price and promote Datril as it launched in the analgesics market. Two main options are available (1) whether to promote Datril as a direct point of sale towards the consumer or (2) to adopt the traditional and more conservative route as that of Tylenol and promote Datril towards the trade only. Ultimately, to establish a price point that allows Datril to compete with Tylenol given like functionality. The company should target aspirin users through direct marketing and position Datril as an effective functional alternative given the absence of side effects that are typically present with aspirins. Marketing through extensive advertising campaigns would be required to encourage and increase market share. Bristol-Myers could also leverage other brand association on the packaging. Situation Overview
Datril’s goal was to solidify Bristol-Myers’ position in the analgesic market and gain share in the rapidly growing acetaminophen market. Because the acetaminophen market was dominated by Tylenol, it was only natural that the strategic options that Bristol-Myers was considering involved price cutting and/or comparison marketing to Tylenol. Action Overview
To take advantage of this opportunity the company should target current aspirin users since that market share is 90% and not target current Tylenol users since they are already converts and therefore, perceive no value in changing to Datril. The aspirin market is dominated by 3 main players and Bristol-Myers’ has two of the brands. Attracting current aspirin user will no doubt also benefit Tylenol, while at the same cannibalize Bristol-Myers own aspirin brands. A vertical brand extension using Datril as the upscale brand, positions it at a potential $680 million dollar market of which Tylenol/acetaminophen’s current share is a mere $55 million.
•The target customers are current aspirin users because this represents a 90% share of the analgesics market. •Tylenol is Datrils main competitor and is currently dominating a fast growing Acetaminophen market. Tylenol and Datril have the exact same components with Datril being the cheaper alternative of acetaminophen.
•The value proposition is based on a review and analysis of the benefits, costs and value that an organization can deliver to its customers, prospective customers, and other constituent groups. It is also a positioning of value, where Value = Benefits – Cost.
•Datril offered a greater inherent value from a functional perspective; that of raising the pain threshold and reducing fever without having any anti-inflammatory effects of aspirin. This would make Datril more likely to be adopted. Since Datril’s lower retail price of $1.85 and a trade of $1.05 is a greater cost benefit than Tylenol which retails at $2.85 with a trade price of $1.69. Additionally, acetaminophen provided a sense of feeling better than aspirin.
•Datril and Tylenol both consisted of the same ingredients and thus had no differentiation other than cost. Datril did have brand association and recognition given other well established Bristol-Myers brands promoted through main advertising channels. McNeil Labs promoted Tylenol, limited to physicians and the trade. Tylenol had a market share of 8% and Datril potential could get a larger market share by targeting aspirin users.
•Increased profitability is achieved by either increasing revenues or by lowering costs. Bristol-Myers strategy of pricing Datril $1.00 cheaper than Tylenol this potentially results in increased sales volume and thus increase revenues. Reducing costs could also increase revenue. For example, Tylenol’s advertising costs of $2 million a year compared to Datril’s planned advertising expense of $6 million over 6 months, gives it a higher contribution margin (see Exhibit 1).
•Consumers do not always evaluate prices objectively. Often a referenced price is a known and available price, like that of a competitor. Pricing Datril at par with Tylenol and advertising it as a new substitute with same features may have been a fraught tactic in a short-run test environment. Market penetration and share take time and is unknown. Additionally, a price war could have ensued with Tylenol due to cost differences especially in advertising.
•Lowering price as Datril did in the test markets resulted in it capturing almost half of the acetaminophen market. Furthermore, margin per unit revenue (see Exhibit 2) at a retail price of $1.85 and a trade price of $1.05 was still positive, with the introductory retailers deal at $0.70 – cost-plus price. This strategy involved an advertising costing $6 million over 6 months. If Tylenol matched Datril’s price apart from the price war, the advertising campaign would be moot and if changed, require additional expense.
•The market for acetaminophen was growing at a rate of 5:1 to that of aspirin. Studies had shown that the side-effects from acetaminophen were less than aspirin. Bristol-Myers could have used the change in consumer consumption pattern and the shifting demand between the 2 analgesic variants as a means for positioning Datril using an effective campaign strategy.
•New distribution modes could be pursued such as convenience stores and pharmacies this would have given Datril a competitive and creative advantage in addition to first mover benefits. For Bristol-Myers, additional revenue stream these additional retail option provided an additional revenue stream.
The key aspects of the marketing mix employing the 4ps:
•Product: A cheaper Acetaminophen tablet with the same quality as Tylenol •Price: $1.85 for 1 bottle of 100 pills. The competitor offers the same quantity for $2.85. •Place: The product is to be sold all retailers (big and small) to target mass market, compared to Tylenol which mostly targets physicians and trade. Action Rationale
The proposed action is the best approach to take advantage of the identified opportunity for the following reasons: •As a product, Datril’s value proposition is in its offering as an acetaminophen-based drug. An analgesic perceived superior to the aspirin-based alternatives due to fewer side effects; with a functional value similar to its only competitor Tylenol; in a market experiencing exponential growth. •By not targeting the same segment as Tylenol and not positioning itself as the lower cost alternative, Datril would potentially avoid a price war. •Additionally, If Tylenol immediately lowered its price then Datril will no longer possess its positioning in the market, as its competitive advantage would be lost.Without a competitive advantage, target customers will not perceive that there is a compelling reason to purchase Datril. •Moreover, If Tylenol targets mass market instead of focusing on trade and physicians, it would also have resulted in a very competitive market for Datril. •And finally, some customers will leave aspirin and convert to Datril, thereby cannibalizing Bristol-myers aspirins. Conclusion
The above analysis reflects our strong belief that the proposed action to position Datril in the aspirin market would successfully increase market share while not prompting a price war with Tylenol. Being a new entrant competing for space in an incumbent’s territory means that one has to try harder. In attempting to do more, a media campaign based on promoting similarities to Tylenol, will have little impact other than escalating the advertising bill, while lowering Datril’s cost competitiveness. A promotion based on a like functionality would not appeal to a Tylenol/ Acetaminophen user. With a price position being easily defendable, the greater value lies in going up the value chain, pursuing the $625 million aspirin market that is seeing a shift to acetaminophen use. As this market grows, Datril could even compete with Tylenol on price by having a regular variant priced lower than Tylenol but with same functionalities, and some upscale extensions like an extended relief or extra strength version, equal to or higher priced than Tylenol. In doing so, it allows Datril to establish itself on a differentiation strategy, alongside a similarity based position.