Case Study

Consumer products giant Procter & Gamble (P&G) is producing many product lines including laundry detergents (Ariel, Tide), paper towels (Bounty, Plenty, Charmin), shampoo (Head & Shoulders, Pantene, Pert), fabric softeners (Lenor, Downy, Gain), personal and beauty products (Olay, Wella, SK-II), dishwashing detergents (Dawn, Fairy), batteries (Duracell), toothpaste and dental mouthwash (Crest, Scope, Oral-B), dog and cat foods (Iams, Innova). Also, it is producing many products such as electric razors, coffeemakers, toasters, and blenders all of them under the brand name Braun. Furthermore, it is producing razors, shaving soap, shaving cream, body wash, deodorant and anti-perspirant under the brand name Gillette. All of the above products come in different sizes, colors, models, smells, etc

To meet its ambitious growth goals, P&G developed a new-ventures unit, staffed with employees whose job was to develop new-product ideas and then pass them on the appropriate business unit for development. The new-ventures unit examined the $3.3 billion pain-relief market to see if the company had any skills that it might apply to that market. It already knew much about this market due to its previous marketing of Aleve pain reliever (since sold to Bayer). Further, from its work on Pampers, Charmin, and Bounty, the company also had excellent knowledge in paper technology.

Merging these two capabilities, P&G's researchers developed the idea of the "external painkilling"a product that consumers could use externally to provide long-lasting warmth to specific areas of the body where they experienced pain. After seven years of consumer and scientific testing, P&G announced that it would launch ThermaCare Heat Wraps.

P&G designed ThermaCare for the temporary relief of minor muscle and joint aches and pain associated with overexertion , tensions, injures , and arthritis . The HeatWraps were portable, air-activated, disposable (single-use), self-heating devices that provided a continuous low-level therapeutic heat (40oC) for up to eight hours.

The ThermaCare HeatWrap was a small pad that looked like a very thin diaper and came in shapes designed for the lower or upper back, the neck or arm, and the abdomen.

ThermaCare is a flexible therapeutic heat patch designed to stick to multiple locations on your body. Only ThermaCare has patented heat cell technology that penetrates deep to the source of pain, increasing blood flow to promote healing , while relieving muscle pain for up to 16 hours. So you don't just feel better but you get better.

ThermaCare works differently than other HeatWrap brands. ThermaCare delivers a therapeutic, effective level of heat that accelerates healing at the source of pain. The heat from our patented heat cells increases blood flow, which brings oxygen and nutrients to damaged tissue , relieving pain and accelerating healing. ThermaCare is free of odors, and it conforms to your bodys natural shape so it comfortably stays in place, even on the go.

P&G's marketers were excited about what they saw as a break-through product. The company planned to price the product at $2.99 per box at retail, producing a 25% profit margin for retailers, well above the margin for other pain-relief products. The package contained either two wraps in the back size or three wraps in the neck, arm, or abdomen sizes.

The company planned to concentrate on U.S. sales during the first year. It decided to allocate up to $90 million for an integrated promotional campaign to introduce ThermaCare. To design the campaign, P&G hired D'Arcy Masius Benton & Bowles, advertising agency it had used for many years.

The agency knew for an innovation product, it needed a breakthrough promotion campaign. After all, P&G was offering a unique product that presented consumers with many new concepts at the same time. Consumers would not be familiar with the product or how it worked. How could the advertising and promotion keep consumers from shrugging and taking another pain pill? How could it educate consumers about what ThermaCare was, what it did, and how it was different from other pain-relief strategies? How could it help P&G make ThermaCare the next Tide?

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Required:

Question: Explain the first 3 steps of setting up the price with application on Thermacare heatwraps