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Group Case I:
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Pharmacia & Upjohn, Inc.
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Rogaine Hair Regrowth Treatment
By Marina Sicic, Brittany Marshall, and Elisa Herrmann

Alternatives
Alternatives to the Rogaine Hair Growth treatment are prescription and non -prescription products such as shampoos, lotions and conditioners, which are mostly used when the hair is thinning. In total, men and women in the U.S. are spending over $300 million every year on such products. Additionally, they spend about a $100 million for elixirs, teas, and horse-hoof ointments. If hair loss is very noticeable, other alternatives such as hairpieces and wigs, hair transplants, and drugs are utilized to fight against the loss of hair. Together these options make consumers spend $1.3 billion per year. We will look at these substitutes closer in the following section and analyze how much big their market share is.
More than two million U.S. citizens use hairpieces and wigs. They spend about $400 million per year on theses pieces, including their maintenance. Cost of care per year is between $300 and $600. This option can be produced with real human hair lasting about a year, or with synthetic hair, lasting for about two years. For men, a small hairpiece made out of real hair can cost between $1,000 and $3,500, pieces made out of synthetic hair total between $1,800 and $2,500. For women, a wig costs about $2,000.
Another alternative are hair transplants. Men and women in the U.S. spend about $800 million per year on this surgical procedure. There are different ways to transplant hair. The procedures of “punch” and “strip grafting” cost between $3,500 and $15,000. The procedure of “male pattern baldness reduction” charges the patient between $2,000 and $3,500 plus transplant fee. To the cost of the surgery, possibly a short stay at the hospital can be added. Also the surgery’s result is not indefinite, with time the transplanted area will become bald again.
The third option mentioned above is the use of (prescription) drugs. Before April1996, there was only one drug (Rogaine) approved for men in 1988 and for women in 1991 by the FDA for restoring hair growth. It treats only male pattern baldness. It has to be applied twice a day on the thinning area or on the balding area continuously for at least four to six months. The product showed effects by 30% of the males less than 30 years (35% of males under 30 experience hair loss). The cost for the patient per month is $50 -$60, and up to $125 for higher concentrated products. In 1996, Rogaine was released as a nonprescription drug with the FDA statement that it regrows hair meaningfully for 25% of men and 20% of women.

Analysis of Alternatives
Analyzing the different alternatives, it is clear that the market with the largest revenue of $800 million is the hair transplant solution, followed by the option to use hairpieces and wigs spending $400 million. The third biggest spender of $100 million is the market for elixirs and teas, etc. However, the largest revenue does not necessarily mean the largest market to address the products to. Only 11.3% of men and 11.1% of women are willing to spend more than $1,000 and only 7.1% of men and 5.3% of women are willing to spend $600 to $1,000 on treatment. Thus, looking at the costs of the hairpieces and transplants, which are generally above $600, the market share is only 18.4% for men and 16.4% for women.
Furthermore, 27.7% of men and 23.2% of women are willing to spend $100 up to $599 for balding treatment. However, there is no product mentioned above that clearly falls into this price category, except the care costs for wigs or the purchase of smaller hairpieces. The market that the Rogaine brand should focus on are the men (27%) and the women (28.5) that are willing to spend $99 or less on treatment. Right now the regular Rogaine product with 2% concentration falls right into the middle of the pricing scale. Moreover, Rogaine has the opportunity to convince the market segment that does not know how much they are willing to spend, that Rogaine is the product to choose because of a good quality/price relationship. This market share accounts for 26.9% of the men and 31.9% of the women. In total, Rogaine could cover a market as big as 53.9% for men and 60.4% for women. However, in this market they will be competing against cheaper generic brands as well as products such as elixirs and teas.