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CASE SUMMARY:TenderCare Disposable Diapers Rocky Mountain Medical Corporation Founded in 1982, $400000 in 1983, $2.4 Million Mil lion in 1984 expected $3.4 in 1985 Tom Cagan – President and Director since 1984’April Dr. Rober Morrison – Vice-president for R&D and Chairman of Board Josh Bosch- Vice President of Manufacturing Lawrence Bennett – VP Marketing with responsibility for (a) TenderCare (b) Two lines of Phototherapy Two other VP’s for Personal and Controller (Total Six Persons in Board) Board) Phototherapy Products: Treatment to treat infant Jaundice which happens to 5-10% newborn kids. Two line of products by RMM, Hospital line – Alpha Lite, Home line – Baby Lite TenderCare Marketing Cagan and Bennett appointed marketing consultant Alan Anderson for his 25% in first year and 12% for following two years. They also employed local marketing consultant on the advisary board (12 members business and medical experts) experts) who finalised name TenderCare (remember (remember it is yet to be launched). Market Characteristics 11 million babies in 1985. Daily use from 0 to 15 with average of 5. Two trends of market (a) Increase in use of disposable diapers from present 70 to 90% by 1990 (b)Purchase of high-quality disposable diapers
Total dollar sales in 1985 expected to be 3.0 Billion (15 billion units) Growth rate thought is 14% for money and 8% in units Foreign market Canada currently 0.25 billion with expected growth of 20% till 1990 After 1990 market saturates and by 1995 start declining Competition Procter & Gamble (Brands Pampers P ampers (1984 32% 1985 28%, Luvs 1984 & 1985 20%) Kimbley Clark (Huggies 1984 24% 1985 28%) Others (24% in 1984 & 1985) - Weyerhaeuser & Johnson & Johnson- But they made for private labels and not in their own name Johnson & Johnson came with their product with premium features in 1981 but not a significant player now although they are in the market. market. Marketing strategies for TenderCare Licensing strategy: Licensing design to others- already discarded by Bennett Diaper Rash Strategy Target (11% market) to 65000 family practitioners, 45000 paediatrician and dermatologist and 290000 nurses (Total 400000). Launch only in California as they lack resources for all country launch Expenses (a) Mailing list $60 per 1000 names (b)@ 250 print & post (c) $ 400 per 1000 for sending sample one to each (d) $ 6 per demonstration by RMM (d) $ 1000 per advertisement in medical journal reduces to 700 for repetitive ads but a waste as it cover entire country (e) $ 3000 per medical convention Price $ 3.8 per pack of 12 (8 to 10% higher than 18 pack of others) will give 9% margin to RMM and 30% higher margin to retailers Assumption: (a) If doctor prescribes, cost is no matter (b) Prominent shelf placement Budget : Not yet decided Special Occasion strategy Travel, Day care centres centres – 11 million units units Bedtime 9 million units, Target: Target: Bedtime
Color Advertisement $20000 country and $10000 for local edition, B& W Adv = 75% Direct mail list $50 per 1000 (total 1 to 3 million names) other cost same ($250, $400) Budget $250000 for adv. And between 300000-700000 for direct mail Superior packaging dimensionally same with 12 units in comparison to other’s 18 units. Seller margin 40% company margin 6% (Reduced from 9% in first case) Head on Strategy (Frontal attack strategy) Mass advertising, In-store demonstrations with ‘touch tests’ Budget 60:30:10 for Television, Magazine and Other (Total budget not yet decided) Packaging options (a)16 units with same price of 18 packs of others (b) 18 pack with 9% higher price Competitive price strategy as Bennett belivies that even if we give higher margin as earlier they will not pass on to consumers. This strategy will have pre-dealer 9% higher prices because manufacturing cost of TenderCare is higher. In both the cases RMM has margin of 3 cents per pack (16 unit or 18 unit, same margin) Summary In case of first option FDA approval is required. If FDA considers experiments conducted by Dr. Morrison approval will be faster. If not, it will take time although chances of getting approval are high. FDA approval is not required if in place of treatment of diaper rashes you just say (a)More Dry (b) Dryness help treat rashes Every month of delay means lost revenue, speed was of essence. Financial implication For California entry RMM would require to bring stock issue and could generate 1-3 Billion dollars depending on offer price and no. of shares. With this investment RMM expects to generate profit after 1 year and use profits for R&D and extension to other markets. Dr. Morrison expects adult diaper market currently at $300 million and underpeds for beds at $50 million market (annual). Finally higher technology can be applied in any market including sanitary pad market which is very big. The Questions in order of asking
Do you agree with the management decision not going through licensing route even though having finance shortage for launching the product? Answer: Yes we agree because licensee will control everything from marketing, pricing, packaging and RMM will receive only negotiated royalty.
Should RMM go without FDA Clearance route and drops the claim ‘Treating diaper rash’ because on failure of the test it has to be dropped. Or wait for approval of FDA which is most likely but may take time. Answer: Wait for one month period (as given in case on page 75 first column, sixth row from bottom) and FDA’s position could be known. Than according launch with or without claims.
What strategy should be adopted by RMM for marketing the TenderCare and Why A) The Diaper Rash Strategy B) The Social Occasion Strategy C) The Head-on Strategy Answer: Although speed is essence, still wait for month for FDA’s hint and then proceed without FDA on Dryness and Dryness help concept. Social occasion strategy has limited market and Head-on strategy is very competitive with less profits. What should be: Pricing Policy: Premium pricing (higher pricing with 12 unit pack) Packaging Policy: Dimensionally same of 12 units (other’s 18 unit) with better packaging than others Placement Position: Prominent Shelf with higher margin to seller.
