Botox Case-Case
1. In 2003, is estimated that 7 million women in the primary target market will use Botox 4
times per year, and an additional 12 million women in the primary target market will use
Botox 1 time per year. During that year, the company estimates it will sell 12 million
vials of Botox. Additionally 3 million teens are likely to receive an average of 1.3 Botox
injections. How many men will use Botox if the average male customer has two
injections per year? Assume all Botox will be sold and used within these three segments.
2. What is the market penetration rate of the primary market of women aged 30 – 64 with
household income greater than $50,000 in 2003?
3. Heavy users (those receiving more than 3 shots per year) pay an average of $250 per
shot, while light users (those receiving less than 2 shots per year) pay an average of $650
per shot. Moderate users (those receiving 2 – 3 shots) pay an average of $400 per shot.
If heavy users account for 58.5% of the 48 million shots, and moderate users account for
8.5% of the shots, which segment is most profitable for Doctors? Which segment is most
profitable for Allergan?
4. Given that Allergan will sell 12 million vials of Botox in 2003, advertising expenses
directly attributable to the line will be $50 million and the expected contribution margin
will be 60%, what is the cost of producing the 12 million vials of Botox?
5. If Allergan wants to increase direct to consumer advertising by $50 million giving the
product total advertising expenditures of $100 million, while maintaining production
costs, what happens to the contribution margin if sales do not increase? How much do
sales need to increase if the company wants to maintain a 60% contribution margin?
Given the preceding target market information is this plausible? What other markets
could Allergan cultivate?
6. The doctors that use Botox are not only concerned with their profits in one year, but what
the lifetime value of a customer is. To calculate lifetime value, the National Plastic
Surgeons’ association has estimated the cost to initially attract the customer, retain the
customer, and the average contribution margin for various segments. The company has
determined that a 15% discount rate is appropriate. The following table outlines the costs
and margin for physicians across the various segments. Which segment provides the
greatest long-term value?
Segment Heavy Moderate Light Teens Males
female female female
Yearly margin per customer $450 $750 $550 $715 $600
Acquisition cost $150 $175 $150 $75 $200
Retention cost $25 $75 $0 $75 $50
Estimated life as a Botox 7 years 3 years 1 year 3 years 1 year
customer
7. How could Allergan and physicians use these types of calculations to better position and
market Botox?