Datril: Pioneering the Acetaminophen Market Case Study

Allstar Brands’ brand management team will make decisions based on the assumptions gained from corporate standings and market research. Allround cold medication will capitalize on its high brand awareness and solid market share to increase revenue through promotional allowances, product diversification and bigger direct to consumer promotions. Our primary focus is direct channel distribution to mass merchandisers, large grocery stores and chain drugstores. New product reformulation for children’s medicine and adult capsule are expected to increase market share and long-term profitability. We predict a reduction in advertising costs due to strong brand awareness.

Tylenol is a well-recognized brand and has established its trust and credibility with many of their customers. The Tylenol PM ad applies the three rhetorical appeals of logos, ethos, and pathos through its imagery and text. The advertisement appeals to ethos through its credibility as Tylenol is a well-known painkiller brand. Their slogan, “For what matters most,” assures their mission is to offer pain relief for its users and further induces trust in the audience.

Exhibit A – Break-Even Analysis for Tylenol and the different pricing scenarios for Datril (per bottle of 100 pills)

As the brand manager for Allround cold medicine, there were many decisions regarding product formulation, strategy, line extensions and product launches over the company’s last 10 periods. The brand was focused on remaining a profitable, mature product family within the cold medicine category, but also maintaining a premium brand image.

During this time the first DTC print advertisement for Merck an “antipneumococcal vaccine, Pneumovax(pneumococcal vaccine polyvalent) was printed in Reader’s Digest (Ventola).” That created a chain effect and shortly later “Boots Pharmaceuticals ran the first DTC broadcast advertisement, which promoted the lower price of its prescription brand of ibuprofen (Rufen), compared with Motrin (Ventola).” Today, the US pharmaceutical industry spends $3.1 billion on advertising prescription drugs directly to consumers.

Providing Over-The-Counter medicine Allstar targets people who have common health problems. The best way to segment Allstar’s customers would be by the following two major categories: illness (cold, cough, allergy) and demographics (young singles, young families, mature families, empty nesters, retired). Allstar Brands invests in marketing research to learn about the ever changing preferences and trends of the market. The information the Company gathers from this research is then used to make according decisions to satisfy each particular category of customer.

Market failure appears when there is a failure in allocation of goods and services. When the market is unsuccessful, the government is called to intervene and correct the failure. Over the years, government participation in the pharmaceutical market has been more wide-ranging than any other good or service. With the government’s ability to regulate, mandate, inform, finance and provide, their intervention to overcome market failure can be beneficial for the economy. Market failure plays a significant role in today’s economy.

For the makers of brand-name prescription drugs, generic competition is about as welcome as a virus.

Marvin Koslow, vice president for marketing services at Bristol-Myers is going to choose a positioning strategy for Datril, an acetaminophen based analgesic, in order to solidify Bristol-Myers’ position in the analgesics market and gain share in the rapidly growing acetaminophen market. There are two possible options: ‘Pricing at par with Tylenol and it as a Tylenol substitute, featuring Bristol-Myers product’ and ‘low Priced alternative to Tylenol’. I strongly recommend that Bristol-Myers choose the former option with a modification.

This happened on two occasions, the first in 1982 and the second in 1986. These episodes could have been devastating to the McNeil company by drastic decrease in consumption of the Tylenol products. The McNeil company rallied to the situation to counter this possible decrease in consumption. According to "Laurels: The National Business Hall of Fame", Tylenol's share in the one billion dollar analgesic market commanded thirty-five percent of the market before the 1982 incident. At the time of these episodes, consumer trust was damaged and market share decreased to seven percent. By February 1983, Tylenol had regained a twenty-four percent share of the market(Diary of an Amazing Comeback). In the 1990's, Tylenol again reached its thirty-five percent of the market which at this time accounted for a two billion dollar market(Laurels: The National Business Hall of Fame, Fortune). By regaining their share of the market, this demonstrated that the consumers had faith in the McNeil company's ability to produce safe and trustworthy products, i.e. Tylenol, for their comfort and happiness.

Tylenol, an over the counter prescription product from Johnson & Johnson, was one of the top brands in the analgesic market. Within the company, it was also a large income earner that commanded nearly 15% of the company’s total profits. That being the case, the 1982 crisis was not only a big blow to the brand, but also to the company as a whole. The crisis jeopardized the company’s existence; putting at risk a multi million investment which the investors had a lot of faith in. Irrespective of whether the crisis was due to malicious acts from ill motivated criminals or not, the company had to act swiftly to counter the legal issues which were ensuing and mitigate huge impending losses. It was really a trying moment for the top management of Johnson & Johnson and more so to the CEO, James Burke, who faced the toughest test of his managerial career during this time. Though the crisis was amicably solved, there were some legal issues that were imminent and some valuable lessons learnt from the episode.

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.

Tylenol was one of the most spectacular success stories in the pharmaceutical industry, because in about 6 year period, the product increased revenue from $50 million in 1975 to more than $350 million in 1981. In 1960 the company promoted Tylenol among doctors and pharmacists as an alternative pain reliever. By 1981, before the Tylenol crisis, the company had 35% market share on the analgesic market, and the company was targeting to achieve 50% for the year 19861. The chart below shows the total revenue growth for Tylenol from 1975 to 1981:

The Aleve success story marked a significant shift in the general analgesic market. Prior to Bayer Pharmaceutical’s introduction of Aleve and its identification with arthritis relief, the pervasive assumption had been that broad pain-relief positioning was necessary for attracting and maintaining customers. This white paper outlines the five key steps for excellence in marketing and explains

In pharmaceutical industry, the end user of the product (patient) is different from the influencer (doctor) influencing his decisions. This is a unique feature of pharmaceutical industry. Consumer/Patient behavior in India suggests that he will buy whatever medicine is prescribed by his doctor or physician. Therefore we can say that doctors influence the buying power of buyers. In branded market like India patients/pharmacists cannot usually substitute