Marketing Case
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Even though Burroughs wellcomess action would leave a negative public image to consumers, the sales of Zovirax in U.S. market would not be greatly affected. My reasons for this conclusion are as follows:
First of all, as a prescription drug for treatment of herpes, Zovirax has a relatively high switching cost compared with Actifed and Sudafed. BW is capable of building good relationship with hospitals and doctors during the time before, thus the sales would not be strongly affected despite the fact that BWs bran image would suffer from negative publicity. Also, proven that Zovirax is an effective treatment for herpes, doctors would be reluctant to take the risk to change to another drug that might not be that helpful in treatment.
Next, Product differentiation exists in the herpes drug market, so there are relatively less substitutes in the market for Zovirax as effective treatment for genital herpes. Unlike the drugs for common cold, drugs for treatment of herpes differentiate from each other in effect, side effect, etc. Therefore, if a patient find Zovirax is effective in treating herpes, he would be willing to stop using it or change to another drug just because of BWs negative publicity.
In my opinion, Burroughs Wellcomes fears that the backlash from public will negatively impact the sales of Actifed and Sudafed in U.S. market are well founded. There are two reasons to explain this:
First of all, the negative publicity will strongly affect BWs reputation and result in negative impact the sales of Actifed and Sudafed. As the only company provides drug for treatment of AIDS but unwilling to lower the price, BWs reluctant to reduce price will hurt consumers emotional response. Consumers will feel disappointed about company and tell others how bad BW is. Thus this could be devastating to BW affecting its brand image. Furthermore, if this kind of affection against the company keeps going strong, it might lead to a boycott to all the drugs BW has, which would impact sales of Actifed and Sudafed for sure.
Second, there are many substitutes for Actifed and Sudafed available in the market and basically zero switching cost. Unlike AZT, Actifed and Sudafed can be easily replaced. The negative publicity would diminish BWs reputation with its customers, paving the way for the sales of the substitute products by competitors. The rivals would capitalize on the negative publicity of BW thus increasing market share of their products. Buyers would shift because of no switching cost. Also since there isnt much product differentiation so it will further make it easier for consumers to make comparisons.