News: Analysis & Commentary: MARKETING
You would expect to pay more per ounce for a product in a small package than a large one. But 8, 18, even 24 times more?
Such are the steep markups consumers pay for several brands of contact lens drops. The tiny eye-drop bottles contain the same ingredients as much larger solution bottles sold by the same companies, but are labeled differently and carry astronomical per-ounce prices.
"GRAND SLAM." Take Bausch & Lomb Inc.'s Sensitive Eyes Drops, which retails for about $5.65 per 1-ounce container. The liquid inside is identical to Bausch & Lomb's Sensitive Eyes Saline Solution, which costs half as much ($2.79) for a 12-oz. bottle. Similarly, OptiFree Rewetting Drops made by Nestle S.A.'s Alcon Laboratories Inc. ($6.99 for 2/3 oz.) is identical to Opti-Free Rinsing, Disinfecting & Storage Solution ($6.99 for 12 oz.).
The scale of the differential amazes some marketing experts. "This seems to be the grand slam of finagling," says Jack Trout, a consultant. "It's not only a sneaky way to make money, but it's lousy marketing, the type of thing that backfires...when it's made public."
So far, it's not public at all. A Bausch & Lomb consumer help-line representative told an anonymous caller that Sensitive Eyes saline and drops "are similar, but the levels of concentration vary"--though a B&L spokeswoman later conceded that the two products "share the same chemical formulation." An Alcon consumer representative told a caller that its Opti-Free drops and disinfecting solution are identical.
DROP ZONE. To be sure, manufacturers couldn't market their large-solution bottles as eye drops even if they wanted to. The Food & Drug Administration requires all eye drops to be labeled as such, and sold in small bottles. The FDA is concerned that contact lens wearers might drop the bigger saline bottles in their eyes, or might mix them up with similar-sized bottles of toxic cleanser.
But that doesn't explain why the tiny eye drop bottles cost so much. Part of the reason, says Bausch & Lomb, is that making the drops costs substantially more per ounce because of smaller production runs. But perhaps there's a simpler reason: Profit. Lens solutions carry average operating margins of 32%, says Jill Topkis, analyst at C.J. Lawrence Deutsche Bank Securities. And margins on Eye Drops likely are higher--incentive enough to set eye-popping prices.By Mark Maremont in Boston