Marketing Management - Term Paper II: Case Study

CASE STUDY
Pharmacia & Upjohn, Inc.: Rogaine Hair Growth Treatment

CASE SUMMARY

Since 1988, Rogaine Hair Regrowth Treatment had been sold as a prescription drug in United States of America (USA). As the only medically approved hair regrowth treatment, Rogaine has enjoyed cumulative sales of $700 million in the USA and exceeded $1 billion worldwide since its inception.

Rogaine was approved for sales without prescription or over-the-counter (OTC) by the U.S. Food and Drug Administration (FDA) on February 9, 1996. The company has further requested for FDA for a three-year period of marketing exclusivity for non-prescription Rogaine under the Waxman-Hatch Amendments to the U.S. Food, Drug and Cosmetic Act prescriptions.

With the launch of nonprescription Rogaine expected in April 1996, the company pursued a tight deadline in order to ensure Rogaine can be quickly and widely available to the consumers. Extensive marketing programs for Rogaine had been outlined, which targeted men and women aged 25 to 49. Rogaine would be positioned as the only medically proven hair regrowth treatment that was available OTC. Separate packages with different instruction and apparatus would be made available for men and women and priced at $29.50, approximately half of Rogaine’s prescription price for one-month supply. Rogaine would be made available widely in the pharmacies and hair-care section of food, drug and mass-merchandise retail outlets.

Estimated marketing spending of $75 million was allocated for the first six-month period of the Rogaine and related Progaine shampoo. More than half of the budget would be allocated to consumer advertising. Retail store buyers of health and beauty aids were also told by Rogaine officials that the brand had retail sales potential of $250 million per year.

However, Pharmacia & Upjohn, Inc had been notified by the FDA that it had been denied the marketing exclusivity of nonprescription Rogaine on April 5, 1996.

STATEGIC ISSUES AND PROBLEMS

By 9th April 1996, the FDA had approved for non prescription sales, three competing generic version of Rogaine which also contained 2-percent solution of minoxidil, the active chemical ingredient in Rogaine that encourage hair growth. These generic brands would normally be priced 25 percent to 50 percent less than brand named product and not advertised.

These factors raised several sales and marketing questions:

1. The actual sales potential in term of units and dollars for Rogaine sales with the increased competition. Without competition, Rogaine had forecasted sales of $1 billion within a five years period.

2. The effect of Rogaine sales figure. Due to its loss of U.S. patent protection and marketing exclusivity as well as entry of generic competitors, Rogaine will lose its monopoly position.

Pharmaceutical industry analysts estimated that most prescriptive drugs would lose up to 60 percent of their sales volume within six months after their patents expired due to the entry of generic products. However, there are instances such as Nicorette Gum which enjoyed sales dollars increased of almost 6 percent in 1995 due to increased advertising as well as no direct branded or generic competition except nicotine patch.

In the case of Rogaine, there would be availability of directly similar generic with own branding treatment solution containing the 2 percent minoxidil active ingredient from Baush & Lomb, Alpharma and Lemmon Company. In addition, Merck was testing Proscar, a prostate medicine for hair growth which would be available in pill form.

Due to these developments, Rogaine need to review its U.S. marketing strategies and formulate ways to cushion the adverse potential impact especially as non-prescription Rogaine had already been distributed to retailers. Advertising as well as sales promotion activities were also ready for implementation.

Other steps that Rogaine could also consider include:

1. Evaluating repeat sales prospect of loyal customer via sales history of prescription Rogaine. Trial and repeat purchase pattern need to be stimulated. Sales pattern need to be studied in order to determine sales growth contribution.
2. Marketing plan modification to take into account the competitive environment that Rogaine would face as the generic brands emerged.

INSIGHTS FROM ROGAINE EXPERIANCE

In the USA, there were an estimated 40 million balding men and 20 million women with thinning hair who were spending over $300 million annually for hair thickening treatment products such as prescription hair shampoos, lotions and conditioners. A further $1.3 billion were spend to prominent hair loss treatment such as hairpieces, wigs, hair transplants and drugs such as minoxidil. Other hair loss treatments such as elixirs, teas, horse-hoof ointment and the like commanded another $100 million.

1. Rogaine had been sold in the United States since 1988 as the only medically proven hair regrowth treatment for men and women with common hereditary hair loss problem.
2. Rogaine is a long term hair loss prevention products to be used twice daily for at least four to six months before results are seen. Lifetime usages of minoxidil are needed to ensure hair growth and retention are permanent.
3. Rogaine was earlier approved by FDA in the USA only for men starting 1988. Earlier marketing effort to introduced the prescription Rogaine were through the following medium:
- Medical community introduction by trained Rogaine sales force as well as advertisement in medical journals and periodical;
- Televisions and print advertising from soft messaging of “see your doctor.. if you’re concerned about hair loss” to outright naming of Rogaine as a solution for hair loss as approved by FDA.
4. The estimated amounts of consumer-measured media advertising for Rogaine were $4,914,500 (1989), $9,347,500 (1990) and $3,443,000 (1991).
5. Sales records in the USA were $70 million (1989), $95 million (1990) and $103 million (1991).
6. The price of prescription Rogaine may cost users from $600 to $900 per year depending on pharmacies or physician office fees. To stimulate physicians’ visits, rebates are given to users who received Rogaine prescriptions from their physicians in term of $10 certificate against the purchase of first bottle of Rogaine or $20 for sending the first four box caps from Rogaine bottles purchased. Other advertising media includes information packets distributed via barbershops and salons, 150,000 copies of informational videos as well as a 800 numbers for call queries. The Upjohn Company spend between $40 - $50 million annually to market prescriptive Rogaine since its introduction through 1991 which includes professional and consumer advertising, the price-sales promotion program, and selling expense.
7. FDA approval for women to use Rogaine begun in 1991. The female-market entry plans were similar to the men including the pricing and reference of Rogaine’s name in advertisements. Advertisements appeared in magazines such as Cosmopolitan, People, US, Vogue and Women’s Day. However, the advertising copies for women are differentiate in regards to the fact that women were less likely to discussed hair loss problem as opposed to men.
8. The price-sales promotions for women include a $10 incentive to visit a dermatologist or physicist and an 800 number for calls to receive Rogaine brochures. Other initiatives included distribution of brochures in drugstores or doctors’ office, journal advertisings, direct mails and sales staff support services. In 1992, the total marketing budget for the female market launch was $20 million and sales increased to $122 million due to expanded customer base. The total consumer advertising was $12,569,600.
9. By 1995, Rogaine was marketed to both men and women. Three new advertising campaigns were specifically targeted to the different gender. The aggressive advertising was essential in order to maintain the sales of Rogaine. Cost of advertising in measured media was $34,579,800 (1993), $32,404,000 (1994) and $40 million (1995). Rogaine also created the first ever infomercial for a prescription drug (1995) as well as a World Wide Web site.
10. Rogaine also build a Rogaine prospect and user database to support a relationship marketing program which was useful for targeting prospects and users for direct mail and telemarketing. This method resulted in people starting Rogaine treatments to remain with it longer. Sales of Rogaine was down to $84 million (1992) and plateau at $96 million (1994 & 1995). In 1995, Rogaine sales outside the United States were $30 million in face of generic brands and substitute products.
11. Among improvements to Rogaine line was examination of minoxidil concentrate that would only require one application daily, easier-to-use gel, Progaine hair thickening shampoo as well as Rogaine 5-percent minoxidil formulation.
12. However, FDA’s final decision of allowing three others generic brand forced Rogaine to retake new courses of action.

MARKETING PLAN FOR OVER-THE-COUNTER ROGAINE

In view of the earlier FDA ruling, Rogaine had developed a new marketing planning process with mission to create a new product category “hair regrowth category”. The marketing program expenditure was $75 million. Half of the expenses were to be dedicated to advertising to create awareness as well as increasing trial of the product by the consumers.

1. Rogaine Targeting, Product Positioning and Packaging
- Target market were both men and women aged 25 to 49.
- Packaging for specific gender will be differentiated in term of box color, usage instruction and applicators.
- Single packs with one 60-mililieter Rogaine bottle as well as double and triple packs will be made available.
2. Rogaine Advertising and Promotion
- Advertising were done with the objectives of raising consumer’s awareness of Rogaine’s recently approved nonprescription status, encourage product trials as well as communicate user’s expectations.
- Advertising approach will also be gender specifics to address the needs and habits of each gender.
- Intensive media advertisements were targeted within four weeks of non-prescription Rogaine launce. These include television and print advertisements, direct mailing as well as Rogaine Pharmacy Kits.
- Direct marketing efforts will be done via money-saving coupons, hair care newsletters, styling suggestions as well as comments from users, dermatologists and other authorities.
3. Rogaine Distribution and Pricing
- Rogaine will be available at pharmacies or hair care sections of food, drugs as well as mass retail outlets;
- Non prescription Rogaine would be 50 per cent cheaper that prescription Rogaine with pricing from $29.50 (single-pack), $55.00 (double-packs) and $75.00 (triple-packs).

PROPOSED PLAN OF ACTION AFTER FDA DECISION
Rogaine will need to reconsider some of their objectives and marketing strategies due to the FDA ruling. Even with competitions, Rogaine can still retain its position as the ultimate hair loss treatment solutions with the right marketing strategies.

Goals and Objectives
1. Rogaine should capitalize its position as the pioneer in hair loss treatment technology in order to achieve superior positioning in the hair loss market segment preference.
2. Rogaine should aim for majority of market share in view of three others generic brands entering the market for 2 percent minoxidil solution for hair loss treatment.
3. At minimum, Rogaine sales should breakeven to its full total cost of production and marketing.

Target Market

1. Advertising and Promotion
Marketing plan effectiveness of non prescription Rogaine should be monitored. New marketing strategies focusing on retaining customer satisfaction as well as loyalty are vital to ensure continued success of Rogaine. The initial period of OTC drug status should be utilized to build brand loyalty as well as name recognition in the OTC market (Harrington & Sheppard, 2002).

As balding or thinning hair were natural occurrences to most men and women as they aged, advertisement should also cater to new potential users to persuade them in using Rogaine as their first choice of hair regrowth treatment. Efforts should be made to retain their loyalty to ensure possibility of lifetime usage of Rogaine which would result in bigger share of the market segment.

Dual strategy marketing directly to the customer as well as via physician can be further maintain to gain advantage by additional credibility of Rogaine as an OTC drug due to recommendations by physicians.

2. Capturing Other Hair Loss Market Segments
The ease of availability as well as cheaper prices may attract the other hair loss alternatives segments to purchase Rogaine. For hairpieces (toupees) and wigs users spend around $400 million annually for the products including periodic cleaning and styling. A further $800 million annually were spent on hair transplants procedures.

By positioning Rogaine as easily available, easy and effective treatment; these segments can be captured as Rogaine’s new consumers. Based on the new pricing of $29.50 per bottle for a month usage, there are around 3.4 million* new customers markets to be captured. (*1.2 billion/($29.50 x 12 months) = 3.4 million).

3. New Pricing Strategy
Prescription Rogaine cost around twice the price of non prescription Rogaine. Based on the Gallup Organization Survey of 1,000 U.S. Adults commissioned by Advertising Age, Rogaine would be positioned to capture a further 13.5 percent of men and 9.7 percent of women on top of 18.4 percent of men and 16.4 percent of women that would pay $600 and above for treatment of balding.

4. Retaining the Rogaine Brand
Despite increase competition, Rogaine would still retain its reputation as the pioneer drug for restoring hair growth both for men and women approved by the FDA. Effective marketing strategy as well as further R&D should be formulated to retain its reputation.

By being proactive, Rogaine would be able to reach its targeted clientele of male pattern baldness, which accounted for 95 percent of all hair loss cases of both genders. As Rogaine was a long term solution with minimum commitment between six months to a year before hair growth improvements can be seen, Rogaine customers would be a captive market for a certain period of time.

Sales history as well as trial and repeat purchase pattern of existing Rogaine client should be analyst to determine ways to ensure customer loyalty.

5. Production of Related Rogaine Products
Pharmacia and Upjohn, Inc. have allocated an annual budget of $1 billion for research and development (R&D) especially targeted for developing new product line and line extension. Rogaine could consider further development of R&D focusing on variation of Progaine shampoos, gels or mousse form as well as tablet remedies for hair regrowth. Research on the feasibility of increasing the minoxidil strength may result in Rogaine Extra Strength with better result in regrowing hair in shorter period of time.

Tools such as coupons or discounts for purchase of Rogaine related items such as shampoo etc could also be considered.

REFERENCES

Kotler P, Keller KL, Swee HA, Siew ML & Chin TT (2006) Marketing Management: An Asian Perspective, Pearson Prentice Hall
Kerin R.A. & Peterson R.A. (2007) Strategies Marketing Problems, Cases and Comments, 10th Edition, Pearson Prentice Hall

Harrington, P. & Shephard, M.D. (2002), Analysis of the Movement of Prescription Drugs to Over-the-Counter Status, Journal of Managed Care Pharmacy
http://www.amcp.org/data/jmcp/Review-499-508.pdf