As a successful pharmaceutical marketing manager, you have come to realize that

Question

As a successful pharmaceutical marketing manager, you have come to realize that not all of your customers are equally profitable, even if one generates more sales than others. Pharmaceutical manufacturers depend on physicians to prescribe their patented and branded drugs over competitive drugs. In one of your team's sales meetings, you suggested departing from industry practice, shifting toward viewing physicians as long-term strategic assets and, subsequently, targeting them based on potential profitability rather than currerit sales. In addition, you informed your team that by identifying the profitability of physicians, you will be able to not only segment rather thc profile, and target the most profitable group, but also understand their characteristics and offer them more attention You concluded your presentation by acknowledging that adapting your firm's service to your customer's profitability your chances for success in the marketplace. Keeping in mind that your service can be customized to even higher profitability levels, you sort pbysicians into profitability classifications. Highly profitable physicians can be given VIP treatment and special attention, and customers of average profitability can be encouraged to generate higher profitability. Unprofitable customers can be nurtured and converted to better profitability classifications, while those contributing to losses can be dropped. Figure 1: Applioation of the Activity-Based Costing (ABC) Method to Customer Physicians sales of Prescription uro-x Genorated by Partieslar Physician (Heasured by IMS Sealth) Physieian (A): $10,000 Physiciae () $14,00 Physician (C)1 $15,000 MacBook Pro 11 ? 2 4

Explanation / Answer

1. CALCULATION OF TOTAL EXPENSES FOR EACH PHYSICIAN

PHYSICIAN A PHYSICIAN B PHYSICIAN C PHYSICIAN D

a. Salesperson call 10 3 5 30

b. Cost per Call $ 125 $ 125 $ 125 $125

c. Sales Rep Tracelling Cost $1250 $375 $625 $3750

(a*b)

d. Service Physicians Visit 8 5 2 20

e. Service Cost Per Visit $50 $50 $50 $ 50

f.Service Physicians Cost $400 $250 $100 $1000

(d*e)

g. Free Samples 5 5 3 18

h. Cost Per Sample $25 $25 $ 25 $ 25

i. Free Sample Costs $ 125 $125 $75 $450

(g*h)

j.Promotional Giveaways Visits 10 4 5 22

k. Cost Per Promotional Visit $60 $ 60 $60 $60

l. Promotional Giveaways Cost $600 $240 $300 $1320

(j*k)

M. Expense For Each Physician $2375 $ 990 $1100 $6520

(c+f+i+l)

2.   CALCULATION OF OPERATING PROFIT FOR EACH PHYSICIAN

Physician A Physician B Physician C Physician D

a. Sales $10000 $14000 $15000 $18000

b. Total Expenses $2375 $990 $1100 $6520

(Calculated In 1st Part)

c. Operating Profit $7625 $ 13010 $13900 $ 11480

(a-b)

3. Calculation Of Operating Profit as a Percentage Of Sales

Physician A Physician B Physician C Physician D

a. Sales $ 10000 $14000 $15000 $18000

b. Operating Profit $ 7625 $13010 $13900 $11480

c. Operating Profit % 76.25 % 92.92 % 92.66% 63.77 %

In The Given Question No Of Units Sold Of The Upo x Prescription and Margin Per Unit Is Missing Hence The Operating Profit and Operating Profit as a percentage of sales has been calculated on basis of data given in the question . Hence the first part of the question and the answer arrived at is given in the list of options while the other two parts answer cannot be seen in the list of options .

  

  

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.