Product Team Cialis Summary Week 2, EWMBA 206 Who am I My name is ganesh iyer. And I would like to tell you something about myself. I am originally from the city of Bombay in India. I have an undergraduate degree in electrical engineering and an MBA from the university of Bombay. I also have a Ph.D in marketing from the University of Toronto. I have seven years of corporate experience in a wide variety of marketing jobs and industries both in India and in North America. I have worked as a product manager. In the early part of my career I have handled the largest brand of alcoholic beverages in India. then in the later part of my career I swicthed to being a product manager for in the pharmaceutical industry when I began working for Boots Pharmaceuticals which with glaxo’s is one of the largest pharmaceutical conglomerate in Europe. In fact one of the brands that I handled was “Advil” some of you may recognize that as a headache tablet. Perhaps this change in my carreer was probably to make up for all the hangover headaches that I must have been responsible for as a product manager for alcoholic beverages. I have also worked as a sales manager and have handled large sales forces. Finally in Canada I have worked as a marketing research specialist before I joined the Phd program when I did projects for companies like Shell, McKinsey Consulting and Ault Foods. I have consulted for P&G and.. I have also provided consulting on competition and antitrust policy issues to various agencies. My research deals with economic analysis of marketing problems. During my Ph.D I got training in microeconomic theory, a frontier level mathematical theory of competitive analysis and strategy called game theory and industrial organization. And so I use these theoretical framework to attack various marketing problems. I am particularly interested in problems dealing with distrbution channels, retailing and customer service. In terms of teaching I have taught the principles and other advanced marketing management courses as also a course in marketing research. One thing that you will notice that I will often tend to get very excited in the class and you will have to get used to that. I love teaching this principles course and also my research and you will see that this translates into high energy levels in the class. So now enough about me. Lets us get to hear about each one of you. I would like each one of you to introduce yourself say a few sentences about yourself……

Part 1: Product Positioning Execution Toolkit Product Manager’s Positioning Strategy Toolkit 1: For whom am I? Identify the Target Consumer Segment. For _____________, (Target Market) 2: Who am I? (value proposition, usp) our product/service is ______________________________________________ (Most Important Claim/Unique Selling Proposition) 3: Why buy me? (support) because ___________________ (Single Most Important Support) 4: And not the competition? (competitive set) among all ___________________ (Competitive Set)

The Four Positioning Questions For whom am I? (Target customer segment) Who am I? (Value proposition, USP) Why buy me? (Support) And not the competition? (Competitive Advantage)

Positioning a New Product in a Market with an Incumbent Where will demand come from? increase primary category demand (new customers) steal from competitors (existing customers of rival) re-capture dissatisfied customers (not happy with existing brand/solution) Which of the above segments are able to perceive as relevant a given way of positioning benefit/improvement? (Learning, Self-selection) With whom can we leverage dimensions that are objectively measurable? With whom can we leverage dimensions that are not objectively measurable? Evolution of Positioning: In what phase to target each segment? (Build category vs. build brand vs. protect brand)

Erectile Dysfunction Drugs– Vertical Positioning A benefit associated with a performance or quality Attribute, typically objective, for which consumers differ in valuation. Examples in Automobiles, PC, Retail Markets 36h 4h ~4h Viagra (Pfizer) Levitra (Bayer/GSK) Cialis (Lilly/Icos)

Erectile Dysfunction Drugs– Horizontal Positioning A benefit that is a matter of “taste” or “attitude” often associated with psychographics, lifestyle, or underlying attitude Naughty/Mischievous Romantic Attitude towards sexual relationship

Competition & Vertical vs. Horizontal Positioning of New Products One firm at low end One firm at high end Well defined objective benefit where more of is better Consumers know how much improvement is worth to them Difference in willingness to pay for improvement Segmentation based on tradeoff between particular benefit(s) and willingness to pay One firm offers benefit B benefit A Price sensitivity not a primary issue More is not necessarily better for everyone Heterogeneity in tastes, attitudes

Leverage Unquantifiable Dimensions- Vertical Reliability/Consistency/Count on it

Target Market Selection and the Incumbent Firm Presence of Incumbent firm creates a new layer of segmentation (users, drop outs, never tried but aware, never tried not aware) = Behavior- based segmentation. Does dis-satisfaction with existing = high willingness to try something new? User of incumbent brand = hard to switch = last resort? Who has advantage with those that never tried? How do other relevant parties/influencers factor in?

Evolving Positioning Courage Sympathy Fight condition Macho Winning Success Excitement Wild Naughty Building Category Building Brand Protecting Brand

Importance of Positioning Becoming more important in pharmaceuticals: 78% of drugs that entered the market in past six years were classified by FDA: “not likely to be improvements over drugs already sold to treat the same condition”. Prevalence of lifestyle/Quality of life drugs Positioning is not what you do to the product but what you do to the mind of the consumer!

Positioning Strategies Product Quality: (Ford: Quality is job 1) Class of Users: (Pepsi generation). Owning the category (Coke: The Real thing) Against a Competitor (Avis) Repositioning Hertz

Positioning Strategies Away from Competition (7-Up the Uncola)

Customer Analysis: Market Research Study

Options Tell consumers 7Up possesses soft drink attributes point of parity (see also K&K p. 312-314). Emphasize fresh, clean taste (and no caffeine) point of difference

7Up: “The Uncola”

Positioning Traps (1) Positioning on unimportant/irrelevant attributes 1992

Positioning Traps (2) Positioning with the wrong attributes Diet Beer Gablinger’s Introduced in 1967 as a “low calorie” diet beer Lite beer by Miller Less filling…means you can drink more! Everything you wanted in a beer (like getting drunk)…and less. 1/3 calories means you can drink 2 extra and call it even!

Positioning Traps (3) Positioning on someone else’s benefits…positioning is sticky Burger King unable to claim “fast.” Already taken by McDonalds. Mercedes Benz and General Motors unable to claim “safety.” Already taken by Volvo.

Part 2: ED Market Updates: Global Performance Is Cialis better off with or without DTC in the launch phase? 8% 51% 41% February Australia 7% 62% 31% November Canada 12% 65% 23% USA 22% 42% 36% August Mexico 17% 45% 38% May Brazil 48% 29% March Spain 15% 37% France 47% Italy 19% 46% 35% Germany 66% 26% U.K. Viagra® Cialis® Share of PDE5 Market – Dec 2005 Launch Date 2003 Country Levitra® Shares range from 25-50% around the world, with us rapidly touching the heels of Viagra

Cialis and ED Market- An Update In the US 2004 ($1.03Billion) Viagra 65% ($672 million) Cialis 20% ($206.6million) Levitra 11% ($112 million) In the US 2005 ($1.1Billion) Viagra 61% ($665 million) Cialis 25% ($273million) Levitra 14% ($140 million) Worldwide 2004 Viagra $1.7Billion Cialis $552million Levitra $265 million Cialis in 2005 $746.6million

ED Market Competitive Reactions Advertising in the US first 11 months of 2004: Viagra $98million Cialis $151million Levitra $147million The “Cialis Promise” – Lilly gives men three free tablets of Cialis. If not satisfied Lilly will pay for three free tablets of Levitra or Viagra. If satisfied another round of Cialis. A Comparative Trial (92% ask for Cialis again) Viagra “loyalty program” for every six prescriptions- get seventh free

ED Market Further Updates: Medical Experts: Men with ED problems = 30 million in US. Men who are interested in being treated probably half of that. Worldwide (a modest 5-10% increase in 2004, likewise in 2005) Number of new prescriptions is going down in US: 10% fewer in October 05’ compared to October 04’ GlaxoSmithKline sold marketing rights outside the US back to Bayer– “The ED market hadn’t grown as fast as the company had hoped…tough to sell the drugs without the help of consumer ads” (in most of Europe direct-to-consumer advertising is prohibited) Sexual performance drugs likely to be covered by Medicare’s new prescription benefit beginning next year (limited quantities, only when medically necessary). Lilly sets deal to acquire ICOS for $ 2.1 Bn.

Competitive Advantages First-Mover Advantages Lock customers in. Association with category Network effects (among influencers, consumers) Economies of scale Second-Mover Advantages Free-ride on first-mover’s costs of educating the market Learn from leader’s mistakes Learn the market size Parallel Entry Market may pay more attention when two companies are entering together. Benefit from increased category awareness

Learning Positioning is not what you do to the product but what you do to the mind of the consumer! Good Positioning is an integrated answer to 4 questions For whom am I? (Target customer segment) Who am I? (value proposition, usp). Why buy me? (support) And not the competition? (competitive advantage)