Analyzing Demand Forecasting

Year Total Approximate US

Adult Population
2008 230,000,000
2009 233,000,000
2010 235,000,000
2011 238,000,000
2012 240,000,000
Source : http://datacenter.kidscount.org/

To calculate the overweight Individuals in US within 5 years, we have decided to

multiply the total the US Adult Population each year by 34% which is the percentage
of overweight US population with ranging BMI from 25 30 (considered to be fixed).

Method 1 2008 2009 2010 2011 2012

Overweight
Individuals in 78,200,000 79,220,000 79,900,000 80,920,000 81,600,000
US
35% who were
actively trying 27,370,000 27,727,000 27,965,000 28,322,000 28,560,000
to lose weight
15% who are
comfortable
4,105,500 4,159,050 4,194,750 4,248,300 4,284,000
with weight
loss drugs
10% of Y1
410,550 623,858 838,950 1,062,075 1,285,200
Purchase
Repurchase
246,330 374,315 503,370 637,245 771,120
2nd
Finish
Metabical 49,266 74,863 100,674 127,449 154,224
Program 3rd
Total Sales 706,146 1,073,035 1,442,994 1,826,769 2,210,544 7,259,488

According to the first approach, there are some conditions that should be followed to
forecast the demand within the next five years, comprising of ; first, from the total
adult population varying each year in the United States multiplied by 34%, then we
can get the overweight Individuals in US. Secondly, sales would be predicted to be
narrowed to 35% (people who are actively trying to lose weight). The third stage,
After getting the total people who are actively trying to lose weight, potential sales
should be narrowed again to 15% who are comfortable with weight-loss drugs. After
that, based on previous Printups experience, Metabical was likely to capture 10% of
the individuals in the 1st year, and then there was an 5% increase each year until the
fifth year (1st year 10% x 4,105,500 ; 2nd year 15% x 4,159,050 ; 3rd year 20% x
4,194,750; 4th year 25% x 4,248,300 ; 5th year 30% x 4,284,000). The forth
condition that there was 60% of the first users that would purchase second supply,
then the fifth condition was only 20% from the previous total individuals each year
that would repurchase the remaining supply.
 Method 2 Year 1 Year 2 Year 3 Year 4 Year 5
Overweight
79,220,000 79,900,000 80,920,000
Individuals in US 78,200,000 81,600,000
12% ready to
request a 9,384,000 9,506,400 9,588,000 9,710,400 9,792,000
prescription
10% of Y1 Purchase 938,400 1,425,960 1,917,600 2,427,600 2,937,600
Repurchase 2nd 563,040 855,576 1,150,560 1,456,560 1,762,560
Finish Metabical
112,608 171,115 230,112 291,312 352,512
Program 3rd Total Unit
Total Sales 1,614,048 2,452,651 3,298,272 4,175,472 5,052,672 16,593,115

According to the second approach, Metabical would concentrate 12% who are readily
to go their health care provider from the overweight Individuals In US. Secondly,
there were similar conditions to the previous approach, in which there was 10%
increase in first year and 5% increase each year starting from 2nd year to the fifth; (1st
year 10% x9,384,000; 2nd year 15% x 9,506,400; 3rd year 20% x 9,588,000; 4th year
25% x 9,710,400; 5th year 30% x 9,792,000). The third, the same condition was
applied to this approach, that there was 60% of the first users that would purchase
second supply, then the fourth condition was only 20% from the previous total
individuals each year that would repurchase the remaining supply.

Method 3 Year 1 Year 2 Year 3 Year 4 Year 5

Ideal target consumer,
educated females 35-65
4,300,000 4,300,000 4,300,000 4,300,000 4,300,000
of ages with BMI range
of 25-30
30% of the market in
1,290,000 1,505,000 1,720,000 1,935,000 2,150,000
the first year
Repurchase 2nd 774,000 903,000 1,032,000 1,161,000 1,290,000
Finish Metabical
154,800 180,600 206,400 232,200 258,000
Program 3rd Total Unit
Total Sales 2,218,800 2,588,600 2,958,400 3,328,200 3,698,000 14,792,000

For the third approach, firstly, Metabical has decided a ideal target 4,3 million
potential users, which was different from previous approaches, using 230 million x
34%. Secondly, Metabical has decided to narrow the demand forecasting by 30%
increase in the first year and 5% increase in the following year until the fifth year.
After that, the same conditions were applied to this condition that 60% would
repurchase second supply and 20% would finish the program.

Calculating The Gross Margin

Method 1 with Pricing Option 1

Year 1 Year 2 Year 3 Year 4 Year 5 Total
Total Sales (Units) 706,146 1,073,035 1,442,994 1,826,769 2,210,544
Gross Profit
$17,512,421 $26,611,266 $35,786,251 $45,303,871 $54,821,491 $180,035,300
Annual Fixed Cost $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000
Marketing Budget $23,000,000 - - - -
Net Profit
$(6,687,579) $25,411,266 $34,586,251 $44,103,871 $53,621,491 $151,035,300
 Method 1 with Pricing Option 2
Year 1 Year 2 Year 3 Year 4 Year 5 Total
Total Sales (Units) 706,146 1,073,035 1,442,994 1,826,769 2,210,544
Gross Profit $41,050,621 $62,379,096 $83,886,051 $106,196,171 $128,506,291 $422,018,230
Annual Fixed Cost $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000
Marketing Budget $23,000,000 - - - -
Net Profit $16,850,621 $61,179,096 $82,686,051 $104,996,171 $127,306,291 $393,018,230

Method 1 with Pricing Option 3

Year 1 Year 2 Year 3 Year 4 Year 5 Total
Total Sales (Units) 706,146 1,073,035 1,442,994 1,826,769 2,210,544
Gross Profit $52,819,721 $80,263,011 $107,935,951 $136,642,321 $165,348,691 $543,009,695
Annual Fixed Cost $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000
Marketing Budget $23,000,000 - - - -
Net Profit $28,619,721 $79,063,011 $106,735,951 $135,442,321 $164,148,691 $514,009,695

Method 2 with Pricing Option 1

Year 1 Year 2 Year 3 Year 4 Year 5 Total
Total Sales (Units) 1,614,048 2,452,651 3,298,272 4,175,472 5,052,672
Gross Profit $40,028,390 $60,825,750 $81,797,146 $103,551,706 $125,306,266 $411,509,257
Annual Fixed Cost $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000
Marketing Budget $23,000,000 - - - -
Net Profit $15,828,390 $59,625,750 $80,597,146 $102,351,706 $124,106,266 $382,509,257

Method 2 with Pricing Option 2

Year 1 Year 2 Year 3 Year 4 Year 5 Total
Total Sales (Units) 1,614,048 2,452,651 3,298,272 4,175,472 5,052,672
Gross Profit $93,829,990 $142,580,790 $191,739,546 $242,734,106 $293,728,666 $964,613,097
Annual Fixed Cost $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000
Marketing Budget $23,000,000 - - - -
Net Profit $69,629,990 $141,380,790 $190,539,546 $241,534,106 $292,528,666 $935,613,097

Method 2 with Pricing Option 3

Year 1 Year 2 Year 3 Year 4 Year 5 Total
Total Sales (Units) 1,614,048 2,452,651 3,298,272 4,175,472 5,052,672
Gross Profit $120,730,790 $183,458,310 $246,710,746 $312,325,306 $377,939,866 $1,241,165,017
Annual Fixed Cost $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000
Marketing Budget $23,000,000 - - - -
Net Profit $96,530,790 $182,258,310 $245,510,746 $311,125,306 $376,739,866 $1,212,165,017

Method 3 with Pricing Option 1

Year 1 Year 2 Year 3 Year 4 Year 5 Total
Total Sales (Units) 2,218,800 2,588,600 2,958,400 3,328,200 3,698,000
Gross Profit $55,026,240 $64,197,280 $73,368,320 $82,539,360 $91,710,400 $366,841,600
Annual Fixed Cost $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000
Marketing Budget $23,000,000
Net Profit $30,826,240 $62,997,280 $72,168,320 $81,339,360 $90,510,400 $337,841,600

Method 3 with Pricing Option 2

Year 1 Year 2 Year 3 Year 4 Year 5 Total
Total Sales (Units) 2,218,800 2,588,600 2,958,400 3,328,200 3,698,000
Gross Profit $128,986,240 $150,483,947 $171,981,653 $193,479,360 $214,977,067 $859,908,267
Annual Fixed Cost $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000
Marketing Budget $23,000,000
Net Profit $104,786,240 $149,283,947 $170,781,653 $192,279,360 $213,777,067 $830,908,267

Method 3 with Pricing Option 3

Year 1 Year 2 Year 3 Year 4 Year 5 Total
Total Sales (Units) 2,218,800 2,588,600 2,958,400 3,328,200 3,698,000
Gross Profit $165,966,240 $193,627,280 $221,288,320 $248,949,360 $276,610,400 $1,106,441,600
Annual Fixed Cost $1,200,000 $1,200,000 $1,200,000 $1,200,000 $1,200,000
Marketing Budget $23,000,000
Net Profit $141,766,240 $192,427,280 $220,088,320 $247,749,360 $275,410,400 $1,077,441,600

5 Years Gross Margin Method 1 Method 2 Method 3

Pricing Option 1 ($24,80) $180,035,300 $411,509,257 $366,841,600
Pricing Option 2 ($58,13) $422,018,230 $964,613,097 $859,908,267
Pricing Option 3 ($74,80) $543,009,695 $1,241,165,017 $1,106,441,600

NET PROFIT
5 Years NET PROFIT Method 1 Method 2 Method 3
Pricing Option 1 ($24,80) $151,035,300 $382,509,257 $337,841,600
Pricing Option 2 ($58,13) $393,018,230 $935,613,097 $830,908,267
Pricing Option 3 ($74,80) $514,009,695 $1,212,165,017 $1,077,441,600

After getting the demand forecasting, to get the gross margin, total sales every year
should be multiplied by the Gross Profit.
Gross Profit = Total Sales x Manufacturer Gross Margin
After getting the gross profit, the next step is to calculate the net profit.
Net Profit = Gross Profit ( Annual Fixed Cost + Marketing Budget)
Calculating the ROI

ROI =

Investment what should be included are the marketing budget $23,000,000 and the
R&D costs for Metabical $ 400,000,000, with the total at $423,000,000

Year 1 Year 2 Year 3 Year 4 Year 5 Total

Method 1 -1.58% 6.01% 8.18% 10.43% 12.68% 35.71%
Pricing Option 1 Method 2 3.98% 14.46% 19.55% 24.82% 30.10% 92.91%
Method 3 6.77% 18.69% 25.23% 32.02% 38.81% 121.52%
Method 1 3.74% 14.10% 19.05% 24.20% 29.34% 90.43%
Pricing Option 2 Method 2 16.46% 33.42% 45.04% 57.10% 69.16% 221.19%
Method 3 22.82% 43.09% 58.04% 73.55% 89.06% 286.56%
Method 1 7.29% 14.89% 17.06% 19.23% 21.40% 79.87%
Pricing Option 3 Method 2 24.77% 35.29% 40.37% 45.46% 50.54% 196.43%
Method 3 33.51% 45.49% 52.03% 58.57% 65.11% 254.71%

Conclusion
According to the calculation, we decide to go with third approach of demand
forecasting and second pricing option, because we calculate the price of production
cost is $73,5. If we choose the price option 1, we only get 2% of gross profit margin,
and If we use CSP estimated retail price for Metabical from previous case ranging
from $3 to $5 per day, so If we calculate for 4-weeks supply, it will cost $84 - $140.

The reason why we choose the third approach of demand forecasting is because the
potential customers who will buy the Metabical is mostly women based on exhibit 2
from previous case, stating that :
75% of women and 65% of men surveyed were dissatisfied with their current
weight
55% of women and 40% men surveyed said they want to change their
behaviour to live a healthy lifestyle.
60% of women and 30% of men surveyed had tried and failed to lose weight
in the past five years.
65% of women and 35% of men surveyed were dissatisfied with current
weight loss option on the market.
Therefore, we conclude that the third approach of demand forecasting meets the
survey result. We predict that the launch that will be held in 2009 will be successful if
we target on educated females with age ranging from 35 65 years old.