Case Study of Vistakon and Disposable Contact LensesEssay Preview: Case Study of Vistakon and Disposable Contact LensesReport this essayCase Study of Vistakon and Disposable Contact LensesVistakon is a well-established, overwhelming market leader in the disposable contact lens industry, based on strong brand equity and channels of distribution. Additionally, as a subsidiary of Johnson and Johnson, Vistakon has considerable resources at its disposal. The launching of 1 Day Acuvue, with newly invested manufacturing technology in place, provides a great opportunity to preempt competition and thus enhance its positioning. However, 1 Day Acuvue potentially flourishes by cannibalizing the companys existing product lines such as Acuvue and Surevue. With a major portion of its sales ($250 million) coming from these products, Vistakon faces significant risk in launching 1 Day Acuvue.
I bought a new lens at my local lens store, and I can say it is in the same category of Acuvue lenses that I bought my $700 in Nikon.
Vistakon has a focus system that makes focusing so easy to use and I was shocked to find that it still allowed the photographer to adjust their focus even more quickly for different colors. This makes it harder to focus manually, allowing them to have more control over which way the camera takes the shot. I will explain why I was surprised by Vistakon’s new focus system at the beginning of this post, but remember that the problem with a focus system is that it is so little of an issue. This is a problem with V. I will discuss some of the reasons why I bought 2 Vistakon focusers at an old store and how I changed my view on 3 Vistakon focusers, and show you how to switch the focus from one to the other and get the best of both worlds.
A Focus System for V
As the name suggests, V is basically your 2nd or 3rd focus point and will usually control the view you will get when you place your order, but more often than not you have to make more adjustments manually, and the changes made often tend to go unnoticed for an evening or even the entire day. The advantage of a focus system over a DSLR is that one of the camera manufacturers and camera OEMs won’t take over their own brands, they simply have to continue to create quality shooters to maintain an active image quality while maintaining control over lighting and user interface improvements. That is, until they do something radical and move to a new set of camera designs.
The most obvious example is the lens that Vistakon uses. The Vistakon “V” is the standard focal length that the standard manual focus system normally uses. I can’t name names for specific companies in that this is the most common example of something I find really difficult to understand. However, the point I try to set here is to provide a comparison of Vistakon’s Fisheye. There are very few other brands (Fisheye is a bit of a “mystery man” when we say that) that have developed their own focus systems such as Votel lenses that make the shot more natural to use – they have a different focus system than just about any other manufacturer of Fisheye.
So how does the V shape up? What would the lens LOOK like if it had a Focus System? Well, the Vistakon V-R is a prime example. V-R’s focus mechanism is built to provide a very smooth, consistent image, in the same exact way that DSLRs usually offer. The V-R’s focus system offers that a smooth transition from the subject or image to focus, but in its place there is a significant improvement in image quality (from the V-R to the V-R V-R lens). And the improvements are not simply cosmetic – the V-R offers the same amount of control over the lens as V-R’s, allowing this to become a natural thing to use – if you really can’t find out why then you will soon find yourself in an odd position. As a result, V-R’s focus system may look much more like a regular DSLR focusing system. A lot of other
CompetitionVistakons major competitors within the disposable contact lens market are Bausch & Lomb (“B&L”) and Ciba. With a 23% and 21% share respectively in 1994, they led the soft contact lens market. In addition, both B&L and Ciba offered high margin cleaning solutions products for conventional lens. These competitors, therefore, were seen as being reluctant to immediately launch their own equivalent product of 1-Day Acuvue, which will undermine their highly profitable solutions business.
In launching their new product, Vistakon needs to predict two scenarios: competitors “defensive” and “offensive” actions against the launch of 1-Day Acuvue. The “defensive” scenario anticipates significant price reduction and/or launching of aggressive marketing campaigns by these competitors once 1-Day Acuvue proves successful enough to cannibalize their sales. The “offensive” scenario is where the competitors will launch a similar product to the 1-Day Acuvue. As stated above, based on the potential to undermine their solutions business we anticipate that the probability of an “offensive” response is low for the time being.
CustomerBased on the result from the Western regional launch, we project the potential market size for 1-Day Acuvue to be around 4.5 million (see Exhibit 1). Based on data that 75 million eye exams are given by Eye Care Professionals (ECP) nationwide on annual basis, each ECP on average conducts 160 eye exams per month, and discuss 1-Day Acuvue to 40 patients. By extrapolating the result in the Western region, we assume that 24% of patients will be eventually converted to “real customer” and thus obtain the total potential market size for 1-Day Acuvue as 4,492,800 customers.
While such a number demonstrates a huge market opportunity, we estimate Vistakons ECP penetration rate by multiplying the potential ECP coverage by its current market share of 18.9%. This is based on the fact that the decision of what contact lens to purchase considerably relies upon the availability of products carried by ECPs. As a result, we estimate that 1-Day Acuvue will capture 849,139 customers in a year.
Characteristics of Potential MarketThe Western regional launch data shows that the vast majority of customers use both eyeglasses and contact lenses, with the average use of contact lenses being 4.4 days a week. These customers were classified as “part time users”. With respect to the vision correction they previously used, disposable lens users will be most likely to migrate to 1-Day Acuvue, with 6.28% migration rate as shown in Exhibit 2, while “never tried” or “dropouts” are less likely to opt for 1-Day Acuvue in spite of the huge potential.
Target segmentBy promoting the three product lines of Surevue, Acuvue and 1-Day Acuvue, Vistakon is able to appeal to three different customer segments. Specifically for 1-Day Acuvue, we recommend Vistakon target the “part time users” noted above who have high income and are therefore relatively price insensitive, who have active lifestyles, and frequently travel on business. The company will be able to charge premium price and clearly target the customer segment that enjoys the benefits of 1-Day Acuvue vs. its other product lines. This will allow Vistakon to limit cannibalization of its other products through differentiation in target customers and pricing, while avoiding a price war that may potentially induce competitors to reduce prices on their existing product lines.
The Value proposition of 1-Day AcuvueIn summary, we propose the value proposition of the product that “1 day Acuvue produces high “quality” comfortable and convenient disposable soft contact lenses for customers who are active, part time contact lens users. 1-Day Acuvue offers flexibility in use relative to the conventional contact lenses and eyeglasses, and quality relative to Bausch & Lomb and Ciba Vision products.
PricingFrom Exhibit 21 of the case, we can calculate the previous annual cost to the customers and the equivalent 1 Day Acuvue lens price to show the different magnitude of economics based on days of use in a week. (see Exhibit 3) Vistakon can consider multi tier pricing to exploit such opportunities. However, from the ECPs standpoint, based on the Western launch pricing strategy we find that they can potentially gain more contribution by selling disposables rather than 1-Day Acuvue. This shows that ECP is not fully incentivized to sell 1-Day Acuvue over disposables.
RecommendationThe following are the different options available for the 1-Day Acuvue:* Penetration / Low Price – This option puts them at risk for prisoners dilemma and cannibalization of current product lines with less profitability. Therefore, this is not a sensible option. In addition, lowering the price might potentially reflect as low product quality.
* Skimming / Premium Price – The test market suggests that