INGST.
* OCT14
SALES PROBLEMS OF A LAXATIVE GUM
by
Charles Eliot Norton
Course IX-B
5
Prof. A. L. Merrill,
Secretary of the Faculty,
Massachusetts Institute of Technology.
Dear Sir:
As part requirement for the degree of
Bachelor of Science, this thesis, entitled,
"Sales Problems of a Laxative Gum,"
respectfully submitted.
is herewith
I wish to acknowledge
my indebtness to Mr. Dechant and the other
officers of the Health Products Corporation for
their kindness and assistance and also to Prof.
Freeland for his many suggestions and aid.
Very truly yours,
......
TABLE OF CONTENTS
Psg
Name - - - - - - - - - - - - - - - - - - - - Object of Investigation - - - - - - - - - - - -I
- - - - - - - - - - -I
Method of Procedure - - -
Health Products Corporation-
--------
-
The Product - - - - - --- - - - - - - - - - - -
6
-
Price Determination - - - - - - - - - ----
Size of Unite and Package - - - - - - - - - - The Customer - - - --- - - - - - - - - - - - -
10
Nature and Size of Market - - - - - - - - - - Recommendations - - - - - - - - - - - - -
- ---
Appendices:
---------
A - Plant Layout----
-
B - Organization -.-- .
- -- - - - -- -
C - Appearance of BumO--
--------
-
II
-
D - Phenolphthalien - - - - - - - - - - - E - Prices and Costs - - - - - - - - - - - -
F - Facts on Population - - - - - --G - Number of Druggists
H - Advertising -"
--
-
- -
- - -- - - - -
I - Advertising Letters -------
-
-
-
-
-- - ---
J - Bibliography - - - - - - - - ---
-8
31.
-
---
I
.
I
OBJECT OF INVESTIGATION.
The purpose is to ascertain the facts pertaining to the sale of FEEN-A-MINT, the laxative gum.
Also what further methods might be employed to advantage in increasing the sale are incorporated in
the investigation and constitute the main part.
Method of Procedure.
The first step was to investigate the plant and
after that to ascertain the manufacture.
The second
was to leann the steps already employed in its sale.
This included an investigation of the prices and cost
of manufacture, together with the methods of sale now
used there.
The company and the product are given more
detailed explanation under separate headings for the
sake of clarity.
After this a study was made of the
books listed in the bibliography so as to afford the
writer a sufficient knowledge to work with.
Then the
data was assembled and put into working form so that
some picture of the whole could be obbained.
With
this accomplished, the actual writing and market survey was made and submitted as a thesis.
. . . ... . ....
THE HEALTH PRODUCTS CORPORATION.
The Health Products Corporation is located in
Newark, New Jersey.
Its
express purpose is the man-
ufacture of FEEN-A-MINT, the laxative chewing gum.
It was organized about a year or two ago.
For views
of the plant see Appendix A.
The internal organization is that of the line
type which is well adapted to such an organization
where there is the manufacture of one sole, product.
(See Appendix D.)
By studying the chart in the
Appendix a clearer idea can be obtained than by
writing.
The policy of the company may be summed up in
a very few words.
Ever since the business was start-
ed, the aim of the company has always been to give
the dealer the largest possible return on his outlay
in money expended.
Many ways have bedn utilized to
help the dealer such as; free window displays, free
advertising and special offers in helping him to place
the product on the market.
In this manner everything
has been done for the vendor except his telling his
customers, "Yes, we carry it," or his explaining what
it is.
From the above statement it can be seen that the
dealer has every means to net the largest return on
his outlay and this is the policy of the company.
The reason for my,not going into the exact nature
of the special offers was that the company asked me
not to write what they were or to go into them in any
way.
This explains why this section is so brief and
also the profits and views of advertising can be seen
in the appendix.
THE PRODUCT.
The chewing gum is manuf actured in the same manner
as ordinary gum except for the addition of phenolphthalien which has long been used as a laxative.
To
enter into any history of the industry would require
too much space and would not be of any advantage.
But a few words might be written about phenolphthalien
as a laxative.
It was first discovered when testing
for akalines in wines in Vienna.
The next step in
its development is the fact that the Germans employed
it
during the Great War and gave it
in the trenches.
to their soldiers
And since that time it
has made its
appearance in various forms on the laxative market,
among them such products as Phenol-lax, etc.
And the
sale of these easily show its success.
The product is a utility good for individual consumption.
In appearance it is very similar to the
ordinary tablet gum being about the same size and shape
and color.
Its appearance is trimmer than that of
ordinary gum due to the fact that the corners are not
rounded off.
It is made of the best essentials obtain-
able and the possibility of deterioration is protected
against as well as possible by the use of good packages.
There are no by-products, grades, styles, or other types
There are three sizes now sold: fifteen
manufactured.
cent, twenty-five cent and one dollar.
There is a real need for laxatives and that is the
economic reason for its existence.
It can not be classed
as necessity due to its being a new product although it
can be said that it possesses this attraction that it
mixes the phenolphthalein with the salivary juices of
The product is bought by young and old,
the mouth.
men and women.
And hence the question of sex does
not enter into the market at all.
The product was originated a few years ago, though
not brought out on the market till the last two years
due to the fact that there was great difficulty in
the manner and method of getting the proper proportion
of the drug into each tablet.
The demand for it has
steadily increased during that time in all sections of
the country.
As a result of this there appears to be
a large future for the product.
There is of course,
the great danger of being superseded, due to the fact
that there will always be new laxatives on the market.
They will attract the public because of the natural
desire to mankind to try something new.
This is one
element which has to be guarded against.
It possesses many attractive selling features such
as: quick turn-over and small occupancy of space on the
shelves.
It is sold through reputable jobbers.
advertising is supplied by the company.
Free
6
PRICE DETERMINATION.
The price of the product is determined by these
four.factors all of which are common to the laxative
industry.
1.
The cost of manufacture is the main factor
and real basis for the determination.
2.
The price is not dependent on the price of
chewing gum, a nickel a package, for FEEN-A-MINT is
a chewing gum laxative.
3.
Consumers are willing to pay more for a
laxative than for chewing gum.
4.
That price which will net both the manu-
facturer and the dealer a fair return on their money
invested.
For further information on prices, see Appendix E
which gives both the actual prices and per cent profits
to manufacturer,
jobber and druggist.
The price as it now exists is well adapted to
the public as it not too high for anyone to afford who
has need of a laxative.
Since the product is marketed
through jobbers and since they got a standard commission, it might be wise to determine the price more by
what is the size of unit which sells best than by
any other consideration.
The cost of manufacture is
important and in this connection it might be well to
eliminate one size of package and to base the price
on the one size which sells best.
this is:
The reason for
that although the product is sold in the
laxative field, it is made as a gum which is marketed
in a field which has two sizes (five sticks or ten
tablets) for the price of a nickel.
And, therefore,
if it was marketed as a one size - one price article,
the publicts attention might be more easily attracted
and thereby an increase in sales made.
This might well
be accomplished by trial.
/I
8.
SIZE OF UNIT AND PACKAGE
This appears to be a rather important factor
in the analysis for at present the gum is marketed
in packages of two sizes: one contains eight pieces
or tablets and the other sixteen.
This is a diff-
erent unit from that which gum is usually sold in
and hence might affect the market materially.
The
customary unit is ten tablets to the package.
As
pointed out in the section on price determination,
there is no standard price to contend with and as
a result of that it is very important that the size
of unit be found which affords the best sales.
As
it is impractable to manufacture a large number of
sizes at one time, due to the increased cost of
production, the only solution which can be offered
for the determination is to employ trial packages
in certain small areas of different types.
This
could be accomplished by taking a small section of
New York City or a district similar to Brockton,
Mass., and trying out several packages of different
sizes there.
The actual bulk size of the package
is not so important as the appearance of it for it
must be attractive looking and also contain on it
the necessary information for its use since it is a
drug.
The container should also state the character
and quality of the good.
As is quite frequent with
many companies of this type, the general advertising
and window displays show the container in order to
familiarize the public with its appearance.
As regards the appearance of the package now
employed, it is of the checker-board pattern which
is frequently used and which attracts attention
easily.
The material is cardboard which is well
adapted to the product as it is not too expensive
and protects the gum from deterioration.
The shape
of the package is unimportant as it has little
bearing.
As a result of the foregoing statements, the
question of size can only be determined through trial
and the question of appearance can often be determined.
by the same means.
THE CUSTOMER
As regards the customer, the question of population and location is important, for where there
is the greatdst density of urban population, there
will be the largest sales with the least effort.
Appendices F and G afford the data on population
and number of drug stores.
This information is
also useful in the question of undeveloped territory.
But the individual customer is the person that
must be reached and it is worth while to consider
his nature.
In this field, he is usually influenced
by buying habit as much as anything else.
question of price is not so importgnt,
The
for he is
looking for quality and purity.
There is no doubt that this product supplies a
need and that it is bought more or less from habit.
Although in the case of smokers who often chew gum
before they go to sleep at night to relieve their
throats, such a product may overcome their old habit,
still there are a large number of people who must
be reached through advertising or word of mouth.
There is no limitation on the market due to sex, but
there are racial prejudices against gum and also the
literacy of the buyer must be sufficient to know how
to take medicines.
Religion does not affec# the
market, nor age assuming of course that it is given
to users who are old enough to know how to chew gum
and that is quite a youthful age.
Except in the case of the smokers mentioned above
it may be a necessity to educate the buyer to chew
this gum at the time when he is accustomed to taking
a laxative since it may conflict with thd time he
wants to chew gum or the time he wants to take a
laxative.
THE NATURE AND SIZE OF THE MARKET
Transportation does not materially affect
this marlcet any more than that of any other purgative
and hence the cost of the product takes that into
account.
The distribution is made through the cus-
tomary channel of:
MANUFACTURER---JOBBER---RETAILER---C ONSUMER.
The reasons for this are quite apparent:
1.
It im the customary way.
2.
Jobbers handle other lines than yours and
therefore, druggist is compelled to buy a certain
amount of your product.
3.
It reduces the expenses of storage and ware-
housing. (All sales are made this way except for a
small mail-order business which will be discontinued
in time.
Of course all special offers have to come
from the home office.)
The terms given to the jobber are the customary seventeen and one half percent.
be seen in Appendix E.
The actual terms can
In regards to the retailer
the price is sufficiently low to net him a large return on his investment.
This must be so as the entire
business of the company depends on retail sales.
This is also true on account of the fact that the
product falls into the category of food stuffs
where the turnover must be made in a certain period
of time to avoid decadence.
In this connection Lhe question of the advertising enters.
It
It must be primarily educational.
must also be protective to avoid new products
encroaching on the field.
Alohg with this, it must
also develop new sales and combat competitor's adcertising.
It
must depend entirely on the nature
of the product and its appeal correspond with the
motives for purchase.
The ultimate consumer should
be the object of the appeal.
The company should
advertise at all times for quite evident reasons.
It should be advertised in local papers and national
ones.
So far I do not think the results of the ad-
vertising campaigs have been ehecked up.
It was
found that, by advertising in the program of Barnum
and Baileyts Circus and after that by sending round
salesmen, that the sales were greatly increased.
The market so reached is both urban and rural
and it can safely be said that a great percentage
of the population have a need for such a product.
It does not seem logical to assume that by
cheapening the product that a greater market could
be gained, because it could not be reduced in price
im
materially without reducing the retailer's profit
too much to warrant it.
This is also true since
it falls within the income range of everyone.
The
market is entirely independent of any other.
The potential market is very large for it embranes this entire country.
But it must be remember--
ed in this statement, that to open up new fields will
require better methods since the areas chosen will
decrease in population.
And this means better sales
-
men.
The actual market is at present confined to the
Eastern Part of this country.
The chief factors which
limit it are competition and price,
The element of
climete and weather are only important as regards the
preservation of the product.
RECOMMENDATIONS.
From the fore-going analysis, it seems that
there are two recommendations which are worth
investigating in practice:
1.
that it
The standardization of the article so
falls into the one size - one price
class.
2.
The use of trial packages in different
areas to determine the proper size and appearance.
16
APPENDICES
t7
APPENDIX A
is
V
STORE
PA CNIhG
ROOM.
ROOM
FA C TOR Y.
GIN MGR
GFW OfFICE.
R00AI
I
I
Plan View of Entire Factory.
Y
GE/V
AlGA.
SE.
ACCOUNT!4G
DLII
7T6S'E
P/7P/iR
LJLJJLI
Plan View of Office
I i,
ROLL/NO(
It
H
'0
kNIE-ADING
oYP~
UolE~
elO7O
I-J.
0
It
0
ct
0
Ii
COAT/V
I
.1
71N//#YF
ca TTI MG
Al A CH/Ne5.
£'Rr/N6 eOARD S
p
at
PACkING
p4CA/N&
REJK.
045.
P1an View of Packing Room
APPE1DIX B
Organization.
(Line Type.)
V
GEN
NAA'A6FR.
I
50/ew Afa.
peFow/A.
1--11
I
0T. Sa-s
50I
If.
9Q
APPENDIX C
1
Appearance of the Gum
Top
VIEW
~zIz
3IDE VILW
tND
D
VIFW
b3oMF-TJZ2C
Vir-W
I
h
I-
--
APPEIDIX D
P14EN~OL.LHITEALEITh
Phenolphthalein is derived from the basis of carbolio
acid as all other phenol compounds.
Its chemical structure
is shown in the following figure.
G6H 4 - OH
CIDh., -ON
(The above figur is taken from the German Chemical Encyclopedia.)
APPENDIX E
Price
15 oent size
Cost
.80/dozen
(Total: inolddes depreciation
overhead
cost of .manufacture
etc. )
Jobber
$1.02/ dozen
Druggist
41.20/ dozen
25 cent size
Cost
(as above)
61.34/ dozen
Jobber
01.70/ dozen
Druggist
$2.00/ dozen
I1.00 size (in bottles)
Cost
(as above)
,4.76/ dozen
Jobber
$6.80/ dozen
Druggist
w8.00/
dozen
370
Profit per Dozen
on basis of figures of previous page
Manufacturers
15 cent size
22 cents
27.3%o
25 cent size
36 cents
27. 1%
41.00 size
"2.04
43. 3 ;-
15 cent size
18 cents
17.6%o
25 cent size
30 cents
17.6%
Jobbers
r1.0o
size
1.20
17.6%
Druggs
15 cent size
60 cents
25 cent size
I.1.00
C1.00 size
44.00
33.3o
31
APPENDIX F
32
Density and Distribution of 1?opulation by States
St at e
Population
per square mile
Populat ion
by state
Per oent
OfI U. 5.
ulation-
Rhode Island
566.4
604,397
Massachusetts
479.2
3,852,356
New Jersey
420.0
3,155,900
3.0
Connecticut
286.4
1,380,631
1.3
New York
217.9
10.385.227
9.8
Pennsylvania
194.5
8,720,017
8.3
Maryland
145.8
1,449,661
1.4
Ohio
141.4
5,759,394
5.4
Illinois
115.7
6,485,280
6.1
Delaware
113.5
Indiana
81.3
2,930,390
2.8
Michigan
63.8
3,668,412
3.5
West Virginia
60.9
1,463,701
1.4
Kentucky
60.1
2,416,630
2.3
Virginia
57.4
2,309,1877
2.2
Tennesse
56.1
2,339,885
2 2
South Carolina
55.2
1,683,724
1.6
North Carolina
52.5
2,559,123
2.4
Uissouri
49.5
3,404,055
3.2
Georgia
49.3
2,895,832
2.7
New Hampshire
49.1
443,083
.4
Wisconsin
47.6
2,632,067
2.5
Alabama
45.8
2,348,174
2.2
Iowa
43.2
2,404,021
2.3
223,003
.6
.2
ope
Population
per square mile
State
Population
by state
Po eoentwof U. b-zupulat ion
--------------------------------------------------Louisiana
39.6
1, 798,509
1.7
Mississippi
38.6
1,790,618
1.7
Vermont
38.6
352,248
Arkansas
33.4
1,752,204
1.7
Minnesota
29.5
2,387,125
2.3
Oklahoma
29.2
2,028,283
1.9
Maine
25.7
768,014
California
22.0
3,426,861
3.2
Kansas
21.6
1,769,257
1.7
Washington
20.3
1,356,621
1.3
Texas
17.8
4,663,228
4.4
Florida
17.7
968,470
9
Nebraska
16.9
1,296,372
1.2
North Dakota
9.2
646,878
.6
Colorado
9.1
939,629
.9
South Dakota
8.3
639,547
.6
Oregon
8.2
783,389
.7
Utah
5.5
449,396
.4
Idaho
5.2
431,866
.4
Montana
3.8
548,889
.3
Arizona
2.9
334,162
.3
New Mexico
2.9
360,350
.3
Wyoming
2.0
194,402
.2
Nevada
0.7
77,407
Distriot of
Columbia
---
.3
.1
437,571
--------------------------------------------------
Facta About Population
Urban
51.4>
Small cities (under 2500)
and on farms
48.6
100.-0(;
Percentage of Urban and Rural Population by States
State
Urban
Rural
Rhode Island
97.5
2.5
7Hassachusetts
94.8
5.2
New York
82.7
17.3
New Jersey
78.4
21.6
California
68.0
32.0
Illinois
67.9
32.1
Connecticut
67.8
s2.2
Pennsylvania
64.3
35.7
Ohio
63.8
36.2
New Haqpshire
63.1
36.9
Michigan
61.1
38.9
Maryland
aO%0
40.0
Washington
55.2
44.8
Delaware
54.2
45.8
Indiana
50.6
49.4
St ate
Urban
Rural
Oregon
49.9
50.1
Colorado
48.3
51.7
Utah
48.0
52.0
Wisconsin
47.3
52.7
Missouri
46.7
53.3
Minnesota
44.1
55.9
.Iaine
39.0
61.0
florida
36.8
63.2
Iowa
36.4
63.6
Arizona
35.2
64.8
iansas
34.9
65.1
Lcuisiana
34.9
65.1
Texas
32.4
67.6
Montana
31.3
68*7
Nebraska
31.2
68.8
Vermont
31.2
68.8
yming0
29.5
7Q.5
Virginia
29.2
70.8
idaho
27.6
72.4
Oklahoma
26.6
73.4
entuc-y
26.2
73.8
Tennesse
26.1
73.9
West Virginia
25.2
74.8
Georgia
25.1
74.9
Alabama
21.7.
78.3
ieveda
19.7
80.3
'North Carolina
17.5
82.5
36
St at e
Urban
Rural
Uew Mexico
18.0
82.0
South Carolina
17.5
82.5
16.6
83.4
South Dek ota
16.0
84.0
North Dakota
13.6
86.4
Mississippi
13.4
86.6
rkansas
I~r
Map of the United States with each
state represented in proportion to
its population.
39
APPENDIX G
3
Retail Number of Dealers in
Drugs in the United States
Alabama
Arizona
Arkansas
California
750
75
900
1075
Colorado
600
Conneotiout
550
Delaware
100
District of Columbia
200
F1oriAa.
490
Qeorgia
1000
Idaho
240
Illinois
2900
Indiana
1825
Iowa
1700
Kansas
1000
Kentuoky
875
Louisiana
600
Maine
Maryland
.400
415
Massachusetts
1525
Michigan
1500
Minnesota
860
lisissippi
675
Miss our i
Montana
2500
220
900
Nebraska
50
Nevada
230
New Hampshire
New Jersey
1000
New Mexico
100
3950
New York
North Carolina
700
North Dakota
450
Ohio
1475
Oklahoma
1275
400
Oregon
Pennsylvania
3200
Rho&e Island
250
South
475
ar'olina
South Dakota
450
Tennesse
675
Texas
2300
Utah
150
Vermont
175
Virginia
600
Washingt on
600
West Virginia
325
Wisconsin
975
80
Wyoming
T otal:
43790
41
APPENDIX H
owl
ii
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-
Il
1;'
I
1kb
17
'I'll If'
I
4
[
Front Patrt of Center Part of Window Display.
L0
t7
k.
Delicious Mint Flavor
10)licidus Mint Flavor
A Scientc Laxadve
in the Ideal Foo
L
A Scientific Laxative
k
in the Ideal Form
FOI-CeGn um
LAXATIVE
Delicious Mint Flavor
Delicious Mint Flavor
sIOWA
r
AMWOW.
Lh6
A Scinti$c Laxative
a th. ideal Form
60
Dummy Container.
-w
Wings to Wintow Display.
S
2
-1
Wing te Window Display.
LAAA&
ata
L
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titde TC mopuTia !tv
Qw
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C4
1-b
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(A
Each tablet contains 1% Gr. Phenolphthalein
Manufactured under U. S. Patents by
Newark, N. J
Health Products Corporation
qCr~ewa-enq Gum
LAXA7IVE
DELICIOUS
MINT FLAVOR
Package contains 8 tablets. Chew it like any
other chewing gu,
Adults I to 3 tablets.
preferably
at bed time.
Children Y2 to I tabiet
A Mild Harmless Tonic Laxative
The ideal way to take a laxative, because
chewing stimulates the digestive juices to
action, assuring thorough assimilation with
the saliva before entering the stomach.
2aakage 15 cent size
6-3.
Package 25 cent size
6~I
APPENDIX I
Advertising Letter
Dear Sir:
Within a few days our representative will call
on you to submit our introductory pr'position for FEEN4
A-MINT,
the Chewing Gum Laxative,
a consumer's free sample
of which is enclosed.
FEEN-A-MINT is now being used in some of the
largest and best known hospitals in New Tork City and by
well-known physicians, who have pronounced it one of the
best laxatives that has ever been put out.
Add to this the .tyelty
and effectiveness
of a
laxative in chewing gum form- Appealing to a National
Ailment through a National Habit- and you will appreciate
the reasons why FEN - A-(INT selia readily and repeats
freely in the localities where we already havd distribution.
We are now conducting a distributing campaign
in the Metropolitan District and have started our advertising campaign in the "New York American" and other New
York Papers. Our advertisements also appear in the Hudson
Ttbes and New York Subway.
We are advising you in advance of our call,
beleiving that because of the entirely now features
of this
product, you will wish to give it your personal consideration.
Cery truly yours,
6,6
Second Advertising Letter
Dear Sir:
Not long ago we wrote ;Vou,
offering you
our introductory proposition on FEED-A-MINT,
the Chewing
Gum Laxative.
You will be interested to know that although we received no reply from, we did receive orders from a large number
of druggists from your territory and over 20% of these who
ordered at that time have reordered since then in larger
quantitisa, showingthe excellent repeat value of IEBN-AMINT. Some of them have reordered threeand four times in
one month, totalling v25 to $30 worth, at the dealer's
prices.
We are going to extend this introductory propositinn
to you once more because we feel sure that realizing its
repeat value,
you will want to take advantage of it,*
A consumer's free sample of our product, a sup- ly of
which will be mailed with your order, withour cost, is enclosed for your information. Try it and be convinced.
An order blank covering our introductory offer (with
our Money Back Guarantee) is also enclosed herewith. Be sire
to read it
carefully, then sign it
and mail it.
You cannot
possibly lose and you will be making a profit of 150o on
your first
sales and proportionately large profits on
subsequent sales.
Very truly yours,
Acknowledgement of Order
"We
are in receipt of the above order for
FEEN-A-MINT,
which we are shipping today by Parcels
Post, prepaid.
As we are rapidly extending our distribution
throughout the United States, your local druggist
will soon be stocking FEEN-A-MINT, if he is not already
doing so.
In the meantime,
we shall be glad to take
care of any orders from you or your friends direct.
Thanking you for your interest in our product
and assuring you of our desire to serve you in every
possible way, we are
Very truly "Yours,
APPENDIX J
Reference Books
1)
Market Analysis
by
Percival White
2)
iarketing Practice
by
Hayward and
White
3)
The Handbook of Sales JIanagement
by
4)
S. Roland Hall
The Advertising Handbook
by S. Roland Hall
5) Retail Advertising and Selling
6)
by
S. Roland Hall
by
Daniel Starch
Principles of Advertising
Other Sources of Information.
1)
Votes taken in General Study 22.
2)
Various libraries were consulted in the effort
to determine the factors in the manufacture and use of
phenolpht hale in.