Johnson & Johnson has embarked on a million-dollar gamble to resurrect Tylenol as one of America's top money-making drugs, an action company Chairman James E. Burke called "a moral imperative as well as good business."
The company will run the first of a series of advertisements in Sunday newspapers containing a coupon worth $2.50 toward the purchase of any kind of Tylenol, one of Johnson & Johnson's most profitable products until seven people in Chicago died from cyanide-tainted Extra-Strength Tylenol capsules.
The company has been absolved of any blame in the poisonings and won national acclaim for its forthright handling of the episode. In the process, however, Tylenol plummeted from its commanding position holding a full 37 percent of the nation's billion-dollar painkiller market to its present place, estimated by some Wall Street analysts at a lowly 7 percent.
Although Johnson & Johnson is being extremely close-mouthed about its total strategy to rejuvenate Tylenol, the coupons in the newspaper ads appear to be a major element, aimed largely at luring old customers back into the fold. The advertisement will be run the following Sunday in different parts of the country and both ads will be repeated in December.
The results of a companion campaign asking former users to telephone Johnson & Johnson for the $2.50 coupon has generated some optimism in the company's New Brunswick, N.J., headquarters. The 24-hour, 800-number phone line drew 110,000 calls during its first week of operation.
Furthermore, a company survey shows that a growing number of former users -- 88 percent at the last count, up 11 percentage points in less than two weeks -- expressed a willingness to repurchase Tylenol if the capsules were contained in tamper-resistant packages.
Johnson & Johnson will be the first drug company to have its products on the shelves in the new type of packaging now mandated by the federal government. Some Tylenol packages already are in the distribution chain and are expected to reach the large chain stores first, then spread across the country by early January, when the company will start a massive television advertising campaign.
It already is distributing samples of Tylenol tablets to doctors to give to their patients -- a mainstay of the original marketing plan -- and once the capsules are in stores, Johnson & Johnson will begin distributing samples of them. The sampling is likely to involve more than 50 million capsules and is aimed at getting health professionals to lure patients back to Tylenol.
One especially knowledgable Wall Street analyst, Larry N. Feinberg of Dean Witter Reynolds, believes Tylenol will not regain any major share of the market until its credibility is re-established with doctors and pharmacists, who referred close to 80 percent of users to the product in the first place. He said sales of Tylenol, the fourth most-prescribed drug in the country last year, dropped 30 percent in October, indicating a falloff in professional confidence.
He estimated it will take until 1985 for Tylenol to reach the $435 million in sales expected this year if the Chicago deaths hadn't severely cut last-quarter sales, which Feinberg said would fall to $30 million from the $115 million he originally had projected.
No one will say how much the campaign will cost. Johnson & Johnson already has spent $100 million withdrawing and destroying capsules and expects to pay between $40 million and $80 million on the coupon and telephone campaigns. That's just the beginning, but Johnson & Johnson declined yesterday to estimate the anticipated costs of future promotions and advertising.
Boosted by a textbook-perfect marketing campaign seven years ago, Tylenol had been a major money-maker for Johnson & Johnson. Feinberg estimated it alone was responsible for nearly 19 percent of corporate profits during the first three-fourths of the year, before the poisonings. Furthermore, Feinberg said, Tylenol accounted for 13 percent of Johnson & Johnson's year-to-year sales growth and "a whopping" 33 percent of the company's year-to-year profit growth.
"If Tylenol were a separate company, its profits before this incident would place it in the top half of the Fortune 500 list of companies," Burke said.
American Home Product's Anacin 3 and Bristol Myers' Datril, essentially the same chemical formulation as Tylenol, are expected to intensify their advertising campaigns.