Biopure Corporation has two new products that are Oxyglobin and Hemopure. Oxyglobin is the first new blood substitute for the veterinary market and is ready for consumer use. Hemopure is another new blood substitute for the human market and it will take two years to launch the product from now on. Ted Jacobs, vice president for Human Clinical Trials, is concerned about creating an unrealistic price expectation for Hemopure by marketing Oxyglobin before Hemopure.
On the other hand, Andy Wright, vice president for Veterinary Products, believes that selling Oxyglobin has benefits for the company in terms of generating revenues for the use of launching Hemopure and learning how to market and make mistakes prior to the launch of Hemopure. Carl Rausch, the president and CEO of Biopure Corporation, has to decide if the release of Oxyglobin would be beneficial for the company without jeopardizing the potential of Hemopure.
The Solution: I think that launching Oxyglobin has many benefits for the company.
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For this reason, I agree with Andy Wright’s decision to begin by selling Oxyglobin. Ted Jacobs indicates that the veterinary market is small and price sensitive. He also believes that if the company prices Oxyglobin around $150, it will be very difficult to price Hemopure at $800 because of the huge difference in price for the same product.
I disagree with Ted Jacobs because although the production processes and physical characteristics of these two products are identical, Oxyglobin is targeted for the animal market whereas the target customer for Hemopure is the human market. Just because products are identical does not mean that the company prices separately; it is all about the supply and demand. The determining factor of price is the market itself, so Ted Jacobs thinks that Biopure can achieve the price points of $600 to $800. He can only estimate these price points based on the market price.
Additionally, even though the veterinary market is small and price sensitive, being the first in any market will make a huge difference and impact the company’s reputation in a positive way if the product satisfies the needs and wants of the consumers. 84% of veterinary doctors complained about the lack of alternatives to the blood transfusion in the marketplace. I believe that this is a big opportunity for Biopure to enter the veterinary market because Oxyglobin has already passed an FDA – approval process specific to the veterinary market.
If the competitors want to get a share for animal blood substitutes, they have to wait at least for two years. Waiting for Hemopure to launch both products at the same time will also put the company in a risk because of the possibility of competitors’ entrance to the veterinary market. Once Oxyglobin achieves its purpose for animals and satisfies the veterinary doctors and pet owners, the success of this product will help Biopure to easily launch Hemopure and attract the human market.
The Implementation: Andy Wright and his team can have a successful launch for Oxyglobin by implementing the followings: • The Pricing Strategy: Even though the surveys show that veterinarians recommend less-expensive treatments over more-expensive, 90% of pet owners are willing to be informed about all the available alternatives to treat their pets. For this reason, giving the many advantages of Oxyglobin relative to donated animal blood and being the only animal blood substitute in the market, Oxyglobin should carry a premium price of up to $200 per unit. The Distribution Strategy: Instead of making a contract with one of the distributors, Biopure should consider of distributing Oxyglobin by using its salesforces. By doing so, the company does not have to pay 20% of the selling price on a more-established product and 30% of the selling price on a new product. Since the estimated cost of distributing Oxyglobin is $10 to $15 per unit, Biopure would save money compared to the cost of contracting with one of the distributers which would be $60 per unit.