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Why did FluMist fail? In June, 2003, MedImmune, a biotechnology company based in Maryland, received FDA approval to sell a flu vaccine administered as a nasal spray, rather than as a shot. MedImmune partnered with Wyeth Vaccines and called their product FluMist.
MedImmune and Wyeth planned for a significant new product In July 2003, MedImmune thought that it could sell 4 to 6 million doses of FluMist, which was the most it could make. Because somewhere between 60 and 90 million people receive a flu vaccine each year in the US, this would have given it about 6 percent of the total market for flu vaccines in the US. MedImmune and Wyeth spent $25 million in marketing and advertising the new product. On 7 November 2003, Popular Science Magazine awarded FluMist a prize for being one of the best new healthcare products of 2003. On 18 November 2003, MedImmune’s CEO, David Mott, announced that FluMist’s sales were well below expectations. Rather than selling 4 to 6 million doses, MedImmune acknowledged that the number of consumers who actually pay for FluMist could be as low as 80,000 in 2003. MedImmune’s stock price, which had hit a recent high of $42 a share in June when the FDA approved FluMist, hit a 52-week low of $23.40. The failure of FluMist is so startling because of the mismatch between management expectations and market reality. The company fulfilled less than two percent of its sales projections for the product. How could the management of this well-established company be so far off the mark? Applying the four factor model of product success can provide some clues into both MedImmune’s reasoning and the reasons for the product’s failure. The four factor model maintains that a product can be guaranteed successful if it delivers higher performance than existing offerings while simultaneously lowering barriers to usage. The four factors are divided into motivators to purchase and barriers to change. Specifically: High Motivators: Low Barriers: The standard flu vaccine represents a case of high motivators with high barriers.
The Flu Vaccine – High Motivators and High Barriers The standard flu vaccine provides a high benefit at a very low price. It is administered in the US for free or at a nominal cost, and significantly reduces the risk of getting the flu during the year. While motivators are high, the barriers are high as well. It’s painful to get the shot, and it has to be administered by a nurse. Thus, it’s not easy to use. While there are a number of clinics that administer the vaccine, it is not an impulse purchase -- you have to plan to receive it at a certain time in a certain location. So it is also not easy to purchase. MedImmune’s FluMist product addressed these two barriers directly. It made the flu vaccine readily available for purchase -- you could buy it at a pharmacy, and it could be administered by a range of healthcare professionals, including pharmacists. It also reduced the pain from the vaccine – instead of getting a shot, the vaccine was administered with a nasal spray. The problem was that, in designing the product, the company reduced its motivators as well. FluMist was positioned as a premium product with a retail price of $70. This high price sparked "more resistance than our market research led us to believe,'' said Armando Anido, Senior VP of sales and Marketing at MedImmune. The product itself had a few features which were less attractive than the flu shot. FluMist used a live virus, which raised the possibility that some people could get the flu from the vaccine. The administration of the nasal spray itself was reported to be messy and unpleasant. In a telephone survey, Lazard Freres, the investment bank, contacted 353 physician's offices and pharmacies listed on the FluMist Web site as carrying the vaccine. Most of the comments Lazard received were negative, citing lack of consumer demand, the high price, the perceived lack of insurance reimbursement and possible side effects. Within the four factor model, the characterization of the FluMist product is almost the inverse of the flu shot – while the product lowers barriers to purchase, it also lowers the motivators.
FluMist 2003 – lower barriers, lower motivators
Will FluMist survive into 2004? MedImmune doesn’t know. As CEO David Mott noted in a recent conference call, "Nothing is off the table." If MedImmune were to relaunch the product next year, it would need to address an array of problems with the product and its positioning. One lesson from this venture: it is easy to fail when facing an established competitor that is giving its product away. In a recent survey of 50 new consumer innovations we did with the Doblin Group, we found that many new products and services tended to combine higher prices with improved performance or ease of use. Marketers often reason that consumers will be willing to pay more for a product, like FluMist, which reduces some of the drawbacks to existing offerings. MedImmune’s experience with FluMist provides a case example of the dangers of this assumption. |
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