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QHO424 Digital Future

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MKTG 3p24 Marketing Management

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Udo, Alan Bartsch’s golden retriever puppy, scampered up to Bartsch and looked up expectantly. Bartsch absent-mindedly gave Udo a treat without turning his attention away from his laptop screen. As director of marketing for Helix Replication, Bartsch had been under a lot of stress ever since the RePet announcement two weeks earlier. Helix Replication, a company that cloned household pets, had served a niche market of wealthy pet owners for several years; after all, a procedure that cost tens of thousands of dollars would not have been adopted on a large scale. But on November 1st, 2021, CEO Carrie Theroux had sent a message to the whole company, informing them of a new direction for the animal cloning technology company. Within three
months, instead of charging clients $50,000 to clone their pet dog or $35,000 to clone the family cat, the same products would be sold for approximately $5,000 and $3,500, respectively. Theroux planned to brand the lower-priced offering “RePet.” Bartsch was sure that everyone in the company was scrambling; a repositioning like this would have implications for all departments. “As director of marketing,” he said, “I feel most responsible for making this change in strategic direction work.” The new offering was to roll out by the end of January 2022, and his plan would need locked in by the end of November. He had outlined the decisions he needed to make since Theroux’s announcement, including generating and managing demand, creating marketing communications, establishing partnerships and channels, planning new product development, and pricing. Essentially, he had realized, he would have to come up with an entirely new marketing plan for Helix Replication, and only had about two weeks to put it all together.

Animal Cloning

In 1996, Scottish scientists produced the first successful clone of a mammal when Dolly the sheep was born. Since that time scientists had cloned many other animals, including cows, goats, rabbits, and cats. In 2005 in South Korea, the first clones of dogs were produced, with several of these cloned dogs living up to ten years (in North America, the average lifespan of a dog is 7-15 years, and the average lifespan of a cat is 10-15 years). Between 2005 and 2021 it was believed that hundreds of cloned dogs had been born. To produce a clone of a mammal, an oocyte (egg) would be extracted from a female of the species and the nucleus of the cell removed, either by extracting it manually or subjecting it to UV light, which destroyed the DNA. This process eliminated any genetic material from the female whose oocyte was extracted; essentially, the egg was then an empty cell ready to receive new genetic material. A cell from the animal to be cloned was inserted into the oocyte, and then hit with a mild electric shock to bond the cell to the oocyte. This produced an embryo. The cloned embryo was then inserted into a surrogate animal (another female), who, once impregnated, would carry the cloned animal to term before delivering it. Early attempts at this were challenging: the first three cloned dogs were the result of 1,000 embryos inserted into over 120 surrogate-mother dogs, (success rate of 0.3%). In the fifteen years following the first cloned dog, the success rate improved but the process was still very expensive. Numerous animals were

1 Copyright November 2021, Eric Dolansky. Not for reproduction or distribution. required to provide oocytes and to serve as surrogates; cells and embryos needed to be extracted, cultured, and stored; laboratory equipment was required and needed maintenance and updating. The Company – Helix Replication In 2011, Carrie Theroux founded Helix Replication (Helix) to take advantage of the research and technology that existed. A research scientist by training, she did most of the early hands-on work herself, building the company up despite no revenue coming in for the first two years of the company’s existence. She gradually built a small team, including Alan Bartsch. He recalled, “I had previously worked as a marketing consultant on political campaigns; because of the ethical questions around cloning, Carrie believed that a background in politics would be an asset.”

Theroux and Bartsch worked closely and found their first customers in 2013. The price for the procedure had remained the same since those days, despite inflation. Because of advances in the science and technology involved, the company could slowly lower variable costs, and therefore increase contribution margin even if revenue remained relatively stable. Helix became profitable in 2019 (see exhibit one for selected financial information).
Between 2013 and 2021, Helix cloned thirty dogs and seventy cats for customers, with a relatively constant demand. Revenue also came from ‘extraction and storage’ (ES) of embryos.

Customers needed to store their pets’ genetic material before the pet died, as cellular information deteriorated quickly after death. Helix’s clients had cells harvested while the pet was young (extraction), a procedure that cost $200, and stored the cells at company premises (storage), at a price of $250 per year. Both of these charges were separate from the cloning fee, and ultimately only about one quarter of those who paid for ES opted to buy a clone. “Because of the lifespan of their pets, customers engaged in ES years before cloning, leading to small, consistent revenues for several years before the opportunity for a big sale,” Bartsch explained. As a small company, Helix had not received very much media attention, though the concept of cloning household pets was occasionally addressed in major newspapers and other media outlets. For example, CNN ran a story in 2020 commenting on a couple in California who cloned their pet dog. Numerous stories about the topic had appeared in 2018 when celebrity Barbra Streisand told Variety magazine that she had purchased two clones of her beloved pet dog, and Simon Cowell reportedly considered cloning his pet as well. Whenever a story like this emerged,Bartsch had to answer questions from the press, as there were many activists opposed to cloning.

Marketing Strategies

Alan Bartsch had very little experience in marketing consumer products prior to arriving at Helix. He had been hired for his political expertise, not his consumer marketing skills. Even so, because of the small target market for this product (leading up to 2021), he was able to succeed. He developed a positioning that attempted to pull focus away from the ethical and moral questions around cloning; “I sell the product as one that is, fundamentally, about love,” Bartsch claimed. For many pet owners, the household dog or cat was a member of the family. For those who could afford it, Helix offered a way for that family member to always be there.

Using a network of highly regarded veterinarians and ethical pet breeders near major cities like Toronto, New York, and Los Angeles, Bartsch worked to generate awareness about Helix. The company did no traditional advertising and clients would need to bring the pet to their offices in Seattle, Washington, for the cell extraction and, when ready, the cloned animal. This created extra costs for the client, but as far as Bartsch knew this did not cost Helix any potential revenue.
The RePet Announcement Carrie Theroux had, for years, talked about a time when Helix would be able to broaden its customer base. Though serving high net worth clients had worked for the company, it also put a limit on how quickly it could grow. The main stumbling block had been the cost involved, in variable and fixed costs, in cloning pets. Prior to 2020 this cost had been reduced significantly but was still high because of the 10% success rate; this meant that to ensure a happy customer, Helix Replication had to attempt to create many clones (usually between 30 and 50 embryos were implanted in surrogates) to ensure at least one success,2 making a mass market unreachable. In 2021, however, scientific breakthroughs brought the overall success rate to 30%. This meant that only seven or eight embryos would need to be implanted to have a high likelihood (95%) of at least one successful birth. This, coupled with ov rall declining costs and economies of scale, meant that bringing pet cloning to everyone was possible. Theroux immediately started planning for a new direction for the company, which she branded RePet. On November 1st, 2021, she made the announcement to the company, and expected action to begin on this initiative by the end of January 2022. Bartsch had misgivings, though he mainly kept them to himself. It was not about the amount of work involved; it had much more to do with the additional attention the company would be receiving. “I could imagine the headlines: ‘The Company That Wants to Clone Fluffy,’ or ‘Is this Seattle Company Going too far?’” he said. “There’s just so many angles to this.” There would be no hiding from the activists, according to Bartsch, because the company would be doing exactly what those activists had been warning about. Controlling the message and making sure that this was a safe, tested, and valuable service was of the utmost importance.

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