Botox solution

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Botox solution
Professor Richard Hamilton
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1. How many men will use Botox if the average
male customer has two injections per year?
primary market 7 million women x 4 injections per year   28 heavy 58.3
additional 12 million women x 1 injection per year   12 light 25.0
teens 3 million x 1.3 injections per year   3.9 light 8.1
total 43.9
men 1.9 million x 2 injections per year   4.1 moderate 8.5
total 48
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2. What is our market penetration of the primary
market of 29 million women in our primary
market?
primary market 29
projected reach 19

• If the primary market has 29 million women - and
  we are projected to reach 19 million of them, our
  market penetration is 19/29 or 65.52

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3. a. which segment is most profitable for
Doctors?
Heavy Users 250 per shot 59 28,080,000 shots
more than 3  
doctor each vial costs 400 - or 100 per shot and is sold for 250 per shot gr profit margin
  gross profit of 150 x 28.08 million shots 4.212 billion 60
Light Users 650 per shot 33.00 15,840,000 shots
less than 2  
doctor each vial costs 400 - or 100 per shot and is sold for 650 per shot gr profit margin
  gross profit of 550 x 15.84 million shots 8.712 billion 85
Moderate Users 400 per shot 8.5 4.1 million shots
2-3 shots  
doctor each vial costs 400 - or 100 per shot and sold for 400 per shot gr profit margin
  gross profit of 300 x 4.1 million shots 1.23 billion 75
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3. b. Which segment is most profitable for
Allergan?
Revenue for Allergin 48,000,000 X 100
4,800,000,000. Ad Cost on a per shot basis
50,000,000/48,000,000 1.041.Given that the
margin will be kept at 60, the 50,000,000
promotional cost of 1.04 per shot eats into
that bound by 1.04.
Based on the calculations below - each vial costs
155.83 to produce - making each shot cost 38.96
heavy users volume 28 million shots x 61.04 gr profit 1.709 billion
moderate users volume 4.1 million shots x 61.04 gr profit 250.264 million
light users volume 15.9 million shots x 61.04 gr profit 970.536 million
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4. what is the cost of producing the 12 million
vials of Botox
Allergan  
sales of 12 million vials _at_ 400 each 4.8 billion

advertising expense 50 million
60 contribution margin 2.88 billion
cost of goods 1.87 billion
   
cost per vial 155.83
cost per shot 38.96
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5. a. what happens to the contribution margin if
sales do not increase?
sales of 12 million vials _at_ 400 each 4.8 billion
   
advertising expense 100 million
58.96 contribution margin 2.83 billion
cost of goods 1.87 billion
5. b. How much do sales need to increase if the
company wants to maintain a 60 contribution
margin?
Given that the contribution margin is 60 and
that the cost of goods sold will remain constant
- to cover the additional 50 million dollars in
ad spending - sales will have to increase
by 50 million / .60 or 83.3333 million
dollars. Remember that for every dollar in sales
earned - Allergan can only keep 0.60 as gross
profit. Therefore to amass 50 million dollars
the firm will need to generate 83.333 million in
sales revenue.
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5. c. Given the preceding target market
information, is this plausible?
An additional 83.33 million in sales represents
almost 1 million additional shots (83.88 million
/ 100 per shot). Given that we can expect to
sell 48 million shots in year one - an increase
of 2.
5. d. What other markets could Allergan cultivate?
Allergan could expand their reach and target
post operative surgery patients - actors/models -
international markets. Again, the discussion
should come back to communication strategy and
the synergy, if any, that can be developed across
segments.
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6. Which segment provides the greatest long-term
value?
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7. How could Allergan and physicians use these
types of calculations to better position and
market Botox?