Pharmalodiagnosticon, an up and coming pharmaceutical company, is thinking of introducing a new product, Sweet Relief, into the crowded OTC market for pain relievers. Its average retail price is set to be about ten dollars for a bottle of 250 caplets. The retailer's margin is 30%. It will cost Pharmalodiagnosticon $1 a bottle for the key ingredient (aspirin), another $0.50 a bottle for the sugar coating, and another $0.50 for packaging.

After the initial run, Pharmalodiagnosticon decides to reduce the price of the drug to retailers in order to increase sales. Sales for the upcoming quarter were projected to be 900,000 with the existing product price. Therefore, the target retail price for next quarter is 30% lower than the initial run. Retailers will not carry the drug unless they can get a gross margin of at least $2 per unit.

For the next quarter, Pharmalodiagnosticon plans to spend $2,000,000 on TV advertising during ""The Price is Right,"" and ""Wheel of Fortune"", $500,000 in several newspaper ads and $900,000 on bus stop posters. The sales force expense allocated to Sweet Relief will be $500,000.