Question

Read the following case carefully and then answer the questions.

In the movie Face/Off, John Travolta got a new look by exchanging faces with Nicolas Cage. Unfortunately, he got a lot of trouble along with it. John could receive a much less troublesome new look by using Botox, a treatment discovered by Vancouver’s Dr. Jean Carruthers, who came upon the cosmetic potential of Botox in 1982 while treating a woman with eye spasms.

Botox is marketed by Allergan, a specialty pharmaceutical firm. Founded in 1950, Allergan, Inc., with headquarters in Irvine, California.

In 1990, Allergan was just a small firm selling little-known eye and skin drugs and over-the-counter contact lens cleaners. The introduction of Botox wasn’t such a big deal initially. After all, typical of Allergan specialty products, it was just another specialty drug aimed at a small market (treatment of cross-eye) and supported by little marketing effort.

That was before doctors discovered that injecting Botox around eyes not only eliminated ocular problems, it erased frown lines as well. Once that happened, the buzz was on between doctors and patients. Before long, plastic surgeons across Canada were giving face-saving injections. Demand also grew for the drug from American doctors, but they initially had to give it to patients as an “off-label” treatment since Botox was not approved by the FDA for cosmetic use until the spring of 2002. Even though Allergan could not initially openly market the product for cosmetic purposes in the United States, by 2001 sales of Botox rocketed to $585 million and were growing between 25 percent and 35 percent per year. That translates into over 1.6 billion Botox cosmetic procedures performed on roughly 850,000 patients.

The good news for Allergan does not end with wiping out frown lines. Botox also effectively treats migraine headaches, chronic neck and back pain, excessive sweating, and possibly spastic disorders. With all those target markets, Botox could become a blockbuster drug – with more than a billion dollars in sales – bringing Allergan out of the backwaters of the pharmaceutical business.

Botox Cosmetic is botulinum toxin A, a heavily diluted version of the feared botulinum toxin found in spoiled canned soups and vegetables. It contains only 20 units of the toxin, compared to the thousands of units found in spoiled food, but it works in the same way – by paralysing facial muscles to the point where they can no longer contract.

Frown lines are definitely a sign of age, use, and wear. They occur when facial muscles contract, drawing the skin up. When the muscles relax, the lines disappear. As we get older, it becomes more difficult to relax, so that we seldom fully relax our facial muscles.

Although eliminating frown lines sounds great, there is at least one small problem. Totally relaxed forehead muscles leave you incapable of rendering any expression at or above the eyes. For the celebrities and stars that were among the first to use Botox, this resulted in “performance” problems. One TV star commented that when the director kept telling her to show anger, she replied “I am, I am.” Unfortunately, nothing was moving on the upper half of her face. As a consequence, she stopped using Botox except for Emmy awards night!

For others, however, the loss of expression might be a positive. Business people seeking a softer look might want to eliminate frown lines that make them look irritated or impatient. Trial lawyers attempting to establish rapport with juries might want to eliminate expressions of annoyance and anger. And sales representatives might want to appear unperturbed by what their clients and customers are saying. But while some observers think Botox could give us a kinder, gentler-looking population, others think it could turn us into a world of zombies.

Besides loss of expression, Botox produces additional side effects. When used on the forehead and around the eyes, Botox can cause drooping eyelids (you won’t be able to close or open them completely – this could be either a sexy or a dopey look). Used around the mouth, Botox may cause slurred speech, a droopy mouth, and constant drooling. Other possible side effects include nausea, allergic reactions, headaches, respiratory infections, flu symptoms, and redness and swelling around the injections. The redness and swelling usually go away in a couple of days.

Because a Botox cosmetic treatment lasts only three to six months, all side effects are temporary. This also means, however, that Botox treatments must be repeated when the effects wear off. While that is bad news for consumers, it’s good news for doctors and marketers of the drug. The margins on Botox are quite high – around 80 percent. A vial of Botox Cosmetic costs about $780.00 and can be used for four injections. May patients have more than four injections during a single visit because they get multiple areas on their face injected with Botox so depending on the doctor’s pricing scheme, each treatment can be $975 to $1900. That’s quite a nifty profit for a treatment that usually takes less than 15 minutes and it’s quite a bill for the patient, because insurance companies do not pay for Botox Cosmetic treatments.

Botox has become so lucrative and the demand so great that the treatments are sometimes offered in a party atmosphere. Doctors usually ask a current patient to invite 10 to 15 prospective clients to a party at his or her home, where the partygoers are offered such tidbits as chocolates, brie, and champagne. After a brief social period, the doctor gives a short lecture on Botox and invites the partygoers to sign up go treatment. Patients take turns leaving the room, to take the applause of other partygoers, and the doctor gives the injections in private. Parties provide a nonclinical atmosphere more conductive to patients receptivity and reduce the time and costs incurred by the doctor. Even good champagne costs less than nurses, receptionists, and rent, and the doctor can give patients a price break- maybe charging only $250 per treatment at a party. Thus, parties are “good” for everyone, Some doctors, however, object to the “party scene” on the basis that this is a medical treatment and not a social gimmick. Therefore, thy hold multiple client sessions in their offices in the evening with the same benefits of price breaks for patients and lower costs and less time for themselves.

Once allowed to advertise Botox for cosmetic purposes, Allergan wanted to capitalize on its popularity. It identified the primary market as the approximately 29 million women between the ages of 30 and 54 with household incomes over $95,000. Within that market, the company believed that 7 million women greatly concerned about their appearance were likely to be heavy users. While women constitute the bulk of the market, there are also plenty of guys who want a smoother forehead. Middle-aged men made up 13.8 percent of the market for Botox in 2001, up from 6.1 percent the year before, making males the fastest-growing user segment.

To reach these markets, Allergan began spending $98 million on marketing in 2002. The backbone of this consumer-oriented campaign was advertisements on TV and in twenty-four magazines such as People, The New Yorker, Vogue, andInStyle. Allergan estimated that 90 percent of the audience would see ads at least ten times a year. Most of the ads featured models in everyday clothing and wearing wedding bands - a look that communicated the message that Botox is for everyone.

In addition to the consumer campaign, Allergan began an industry outreach campaign directed at doctors and pharmacists. Beginning with the company website (www.allergan.com), health professionals could obtain information about Botox and its use. The company also beefed up its sales force and armed salespeople with promotional materials for distribution to health professionals. Finally, it conducted clinics demonstrating the appropriate use of Botox in treating patients for cosmetic purposes.

All of this was part of CEO David Pyott’s plan to move Allergan into position as a major player in the pharmaceuticals industry. When he took office in 1998, he found that Allergan had not changed its strategy in decades. Among his first moves were closing plants, slashing jobs, and cutting overhead. To refocus the company, he selected target industries for growth and started making the moves necessary to achieve that growth. The company increased R&D expenditures by 26 percent and expanded the sales force by 28 percent. As a result, Allergan actually employed more people by the end of 2002 than it had two years earlier. The expanded sales force allowed Allergan to establish relationships with many more doctors and pharmacists, relationships that Pyott believes are the basis for sales growth. After all, patients don’t buy treatments directly; doctors buy Botox and use it on patients. As of 2009, David Pyott remains Chairman of the Board and CEO.

Allergan’s major growth opportunity is the ophthalmologic market, where rival Alcon is number one. The second growth target will be dermatology, where Botox gives the company a major advantage and where it can grow by acquiring new formulas or purchasing a license from a foreign producer. Doing that is more cost-effective than developing new products in the R&D laboratory from scratch.Allergan increased R&D spending 13 percent in 2008 over 2007, to approximately $729 million. Allergan ranks in the top quartile of its peer group companies for R&D investment as a percentage of sales in both the pharmaceutical and medical device industries.

Sales of Botox fuel much of this growth, as Allergan’s margins on Botox are about 60 percent. To prevent the competition from developing their own Botox, the formula for making it is one of the most closely held secrets in the world. With the dollars from Botox, Allergan can increase its marketing efforts, add products to its line, and attack competitors. The best news of all is that sales of Botox are not likely to decline unless consumers and movie starts suddenly face up to this age – wrinkles and all.

1- Write a positioning statement for Botox to communicate with customers.

2- Into which consumer product classification does the Botox fall? What are the implications of this classification for Allergan’s marketing strategy?

3- What new product pricing strategy do you think Allergan used when it introduced the Botox?

4- Based on the desirable qualities that a good brand name should possess; what is your opinion of Botox (which is a preparation of botulinum toxin used to treat muscle spasm and to remove wrinkles) as a brand name? Why?

5- Explain the distribution strategy used by Allergan to distribute Botox?

6- Draw the various flows in marketing channel of Botox and the direction of these flows.

7- If you are asked to develop an effective communication campaign to promote Botox in the Middle East, explain briefly the steps of developing this campaign.

Answer 1

1. For the modern appearance conscious being, Botox is the world’s best treatment drug for ocular problems and frown line eraser. Another product of Allergan to improve your facial appearance. A frown-lines free face improves your confidence and impression. Live young.

2. Botox falls on the specialty goods category since the product contains special and unique features. Consequently, Allegan opt to emphasis more on its composition to inform consumers of its benefits.

3. Botox as a new product in the market, Allergan opt to have used the Life cycle pricing strategy. It must have been introduced at a high price to emphasis its value, with planned price deductions to attract late customers.

4. The brand name Botox is ideal for the product. As a chemical product, describing the chemical components for the product is of essence in the products name. The importance of descriptive branding is to create customer confidence with the products composition.

5. Allegan uses direct distribution strategy. Its products path is from producer to end consumer. Allergan is responsible for the administration of Botox, selling the product directly to them.

6.

7.

Steps to develop an effective communication campaign to promote Botox in the Middle East.

i. Set communication goals and objectives

ii. Develop a key message of Botox for the Middle East population.

iii. Identify effective local channels of communication.

iv. Identify accessible resources for communication such as airtime.

v. Set time-lines and indicators of action plan.

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