Over the Counter Medicine is a thriving industry that will not be disappearing anytime soon. Medicine is what keeps production moving and prevents society from crashing. The industry is a very competitive one in which several companies are fighting amongst one another to receive the most business possible from the target market. Allstar Brands is the over the counter medicine company that is responsible for Allround. Currently Allround is the market share leader in OTC cold and allergy remedy market. Allround offers a 4 hour multi-symptom cold liquid to its customers that are meant to remedy all of the five basics symptoms. The five basic symptoms that the OTC works to remedy are aches and fevers, nasal congestion, chest congestion, runny nose, and cough. Medicines created by the OTC are organized into five different categories that are meant to remedy one of the five basic symptoms. Analgesics such as aspirin and acetaminophen are created to remedy the effects of aces and fevers. Decongestants are created to battle against nasal congestion. Expectorants were created to cure chest congestion. Antihistamines were created to stop runny noses. Lastly, cough suppressants were created to prevent constant coughing. Allround was created with the idea of curing all five symptoms with one medicine.
The over the counter medicine industry relies heavily on customers. Over the counter medicine providers are responsible for figuring out a number of different questions. Who are their customers? What are their customers’ values? Who are their competitors? What are their strategies? What are the company’s goals and capabilities? Figuring out the answer to all these questions is vital if an over the counter medicine company wishes to remain relevant in the industry. While these questions allow for a company to understand where they are in the industry, other questions arise from this answer. The next questions a company asks are; Are we satisfied with where we are and if not where do we want to be? How should we get to where we would like to be? Strategies and plans are mandatory in finding the best solution to these questions.
The target market for over the counter medicine consists of several demographics. The market includes young singles, young families, mature families, empty nesters, and retired citizens. The two determining factors in which a customer measures the brand are by price and effectiveness. Consumers tend to charge high amounts for medication. The only way customers will tolerate such high prices is if the medication is effective as well. If a price for a medication is perceived high, that is perfectly fine as long as the effectiveness of the remedy is high as well. As we discussed in class, parents are willing to pay any amount to insure the health of their sick child. If your perceived price is very high but your medicine is not very effective, strategies must be rethought because they will not work. Customers are willing to pay extra money if a product’s benefits outweigh the costs. If the cost’s outweighs the benefits then the product will not be purchased that often.
Allstar is going against four competitors who also offer OTC medicine in the form of cold liquids, cough liquids, allergy capsules, cold capsules and allergy sprays. B and B Healthcare offer two products. The two products offered are “Believe” which is a 4 hour allergy cold capsule and “Besthelp” which is a 4 hour cold capsule. The two products offered by B and B Healthcare, Believe and Besthelp are both less expensive and less effective than Allround. Cure Pharmaceuticals offer the product “Coughcure” which is a 4 hour cold liquid remedy. Coughcure charges a higher price than Allround for a product that is not as effective. Driscol offers three products. The three products are “Defogg” a 4 hour allergy capsule, “Dripstop” a nasal cold spray, and “Dryup” a 4 hour multi-symptom cold capsule. Two products, Defogg and Dripstop, are cheaper than Allround but are not as effective. Dryup, Driscol’s third product, is more expensive than Allround but is not as effective. Ethik Inc. also offers three products. The three products offered are “Effective” a nasal cold spray, “End” a 4 hour cold liquid, and “Extra” a 12 hour cold capsule. The two products Effective and Extra are less expensive and less effective than Allround. The third product offered, End, is the same price as Allround however it is less effective.
The competitive OTC market in the previous three periods has seen several product introductions and has seen major increases in promotional and advertising expenditures. Competition is attempting to spend more money on advertising in an attempt to increase brand awareness. Allround has a large amount of brand awareness and has led the market in advertising expenditures in recent periods. Competitors are also attempting to reach out to new targets by introducing new products. Allstar’s goals are to understand customer needs, create awareness, find the best models of distribution, and find the right price to charge for their product. Allround is capable of creating new products that could possibly lead to more sales. Introducing new reformulation for the cold liquid is an option. Allround minus the alcohol could possibly boost the amount of sales made by young families. Alcohol is often viewed as a negative attribute but it helps patients feel relieved and raises the ability for them to rest. Another interesting concept would be the possibility of adding a cough expectorant to the cold liquid in an attempt to reach out to those who may have chest congestion. The major goal is to give customers a product that they are happy with so that Allstar can receive the biggest return on investment. Allstar is looking for a way to make the largest profit among all OTCs’. Advertising and promotions play a large part in getting customers to purchase your product; however there are other factors involved in turnover. Brand Perception is one of these factors. While companies work to promote their products for a particular type of symptom relief, their products may not be purchased for that reason. Customers interpret products by the results they receive.
This chart below shows the Brand Perception for Allstar and their competitors:
Even though Allstar dominates the OTC industry, competitors still have many strengths and weaknesses that they can work with in order to get into the best position possible in the future. All of Allstar’s competitors’ main weakness is that they do not make medicine that is as effective as Allstar. Allstar is the most effective when it comes to the OTC industry and dominates this part of the market. All B and B, Curall, Driscol, and Ethik struggle to compete when it comes to creating a medicine that is as effective as Allstar’s. A strength that B and B has over Allstar is that they offer multiple medicine in the forms of an allergy capsule and a cold capsule. Allstar only offers once medicine in the form of a 4 hour cold liquid. Driscol and Ethik also have multiple medications that they offer to customers in forms such as nasal cold sprays and even 12 hour multi-symptom relief cold capsule pills. B and B, Driscol, and Ethik would be very wise to work off of this strength to expand the variety of medicines offered and should work to utilize their lower prices charged to customers. Curall Pharmaceuticals is in the worst shape because they charge a higher price for a medicine that is not as effective as Allstar’s. Curall should also work to expand the types of medicines offered to customers and should work on making their products more effective if they wish to charge high prices.
Several types of advertising exist in the marketing industry, each serving their own purpose. Primary advertising works to raise brand awareness. If people are already aware of your brands existence, it would be smart to put more effort into reminder advertising. Reminder advertising helps brands maintain current levels of awareness. In order to sell a product, one must point out all the benefits of a product. Benefit advertising points out all benefits to customers and shows them how the benefits outweighs the costs. Advertising can also be used in a comparison approach that positions Allround against other brands. This method of advertising shows customers why they should purchase Allround as opposed to another OTC. Quite often we see commercials with Verizon and sprint using the comparison method of advertising. Companies will often hire an advertising agency to assist in advertising. Allstar has three options when it comes to advertising agencies. Brewster, Maxwell and Wheeler offer a high quality of work but charges 15% commissions. Sully and Rodgers offers a medium quality of work but charges 10% commission. Lester Loebol and comp offer a low quality of work but charges 5% commissions. Allstar in recent periods has worked with Brewster, Maxwell and Wheeler, but feel as though profit would be much larger without them. Allstar is faced with several decisions. Allstar has two main goals: One they would like to give up less commission to these advertising agencies. Two they do not want to ruin their reputation. If Allstar were to hire Lester Loebol and comp, they would save more money but their reputation might possibly be ruined due to the low quality work provided by that agency. The best bet for Allstar would to hire Sully and Rodgers. Allstar would save 5% commission and would still receive a reasonable quality work.
Several forms of promotion exist among the marketing industry. Promotions include distribution of free trial size packages in which customers gain the ability to sample Allround before making a purchase. Trial sizes encourage consumers to try the product. Companies will hold promotions and then measure conversion ratios based off of the promotion. Conversion ratios are the percentage of those aware of brands who have tried it. More people being aware of your brand lead to more purchases. Coupons another type of promotion helps stimulate repurchase and trials among shoppers. Points of purchase attempts to create consumer brand switching after they have purchased a product. There are the three general methods of promotion that deal with raising a brands awareness and attempt to get a customer to switch to your brand.
Shelf Allocation is also a form of promotion. Poor placement can lead to smaller turnover. Companies pay retailers a lot of money but there are other factors that determine shelf allocation. The four basic factors of shelf allocation are product turnover, promotional allowance, sales force support, and co-op advertising. Promotional allowances are additional discounts to the channel in which the item is being sold. Co-op advertising provides incentives to the channel to feature a specific brand in their own advertising. Allround is selling for a lower price at CVS. CVS is happy because they are receiving more customers and Allstar is happy because they are receiving a larger amount of turnover. The direct sales force sells directly to the retail outlets. The direct sales force works to maintain relationships with current retailers and works to develop new retail accounts. The direct sales force is also responsible for presenting trade promotions, promotional allowances, and new product introductions to retailers. The Indirect sales force is made up of wholesalers, merchandisers, and detailers. Wholesalers distribute to retailers who do not buy directly from manufacturers. Merchandisers focus on special promotions and shelf space. Detailers distribute free samples and promotional materials to influence physicians and pharmacists. Promotions can be used to trick people into forgetting that you raised your prices. Promotions allow for customers to sample your product before they purchase it.
Companies spend millions of dollars in advertising and promotions only to find out that their product is not producing the turnover that would satisfy them. While advertising and promotions plays a large part of producing turnover, there are several other factors that must be taken into account. In class we discussed reasons why people do not purchase our products. The first reason we spoke about is because sometimes products could simply be too costly. Way in which Allround could counter raising their prices is by offering promotions in the form of coupons and free sample trials. Allstar could even make smaller, more economical size packages in which they offer a lesser quantity at a reasonable price. Other reasons customers may be unwilling to purchase a product or a brand are because they may hold undesirable side effects or maybe the product has limited use opportunities. Allround contains some alcohol in the formula, maybe parents do not wish for their sick children to consume alcohol. Removing the alcohol in a line extension would not be a terrible alternative for Allround. People do not purchase medicine before they become ill. After becoming sick is when people usually purchase medicine so limited use is a major fact in why people aren’t buying your product. The other factor Allstar must remember is that people only buy small quantities of medicine when they are sick. Customers do not purchase medicine is bulk. Allstar does a great job in raising brand awareness however, if people do not fully understand the benefits of the product, most likely they will not purchase it. There are many reasons why people don’t purchase the product. Advertising and promotions help to increase turnover but countless factors contribute to a slow up in turnover.
The over the counter medicine industry will continue to be one that never dies out. Medicine is what keeps our society running. Allstar holds the world’s largest market share in the industry and will continue to thrive as long as they continue to follow their current strategies. A couple changes could be made to improve their productions however; the path they are currently on will not damage them or their reputation. If I could recommend a couple of changes, I would tell Allstar to focus on receiving better shelf allocation and I would also suggest that Allstar hires Sully and Rodgers as their advertising agency. Allstar’s brand awareness is already so high that if they lost a small amount of quality in their advertising it wouldn’t make a difference. They would make more of a profit as well because they would only be charged 10% commission rather than 15%. Over time the differences in commissions add up to a large number. My last recommendation to Allstar would be to actually introduce a couple of line extensions as well as expand their medicine so that customers aren’t forced to purchase liquids. Customers should be able to receive a choice. The medicine that customers decide to use should be based on preference. Allstar would be doing itself good if they expanded from just liquids to capsules and even maybe nasal sprays. Companies that want to stay relevant today must be capable of being versatile. Why do you think cable providers offer phone service and internet service as well? Companies do not just focus on one part of their industry anymore. Companies must be skilled all around offering great services in all fields of their industry.
