TYLENOL

Margaret L. Friedman
University of Wisconsin-Whitewater

Pain relievers are a lucrative, $1.2 -billion-a-year industry. Until recently, there were no
chemical or medicinal differences among brands of nonaspirin pain relievers, and so aggressive
marketing was the key to gain market share. For example, in a recent year $130 million was
spent on advertising for pain relievers. Johnson & Johnson, producer of Tylenol analgesic,
developed very successful marketing strategies and obtained the largest share of the pain
reliever market, 37 percent, in a matter of a few years. Then tragedy threatened their strong
position.

In 1959, Johnson & Johnson acquired Mc Neil Laboratories which had introduced the Tylenol
brand in 1955 in the form of an elixir for children as an alternative to aspirin and its irritating
side effects. Traditionally, Tylenol was sold “ethically,” through physicians and pharmacists
who, in turn recommended it to patients.

In 1975, Bristol Myers introduced Daytril, a nonaspirin pain reliever, and successfully marketed
it directly to end users. Daytril’s success forced Johnson & Johnson to expand its marketing
efforts to end users. The company cut prices, formed a sales force, and spent $8 million on
advertising in which Tylenol was represented as an alternative to aspirn. Tylenol’s solid
reputation among pharmacists and physicians gave it definite competitive advantage with end -
use- consumers as it was perceived to be a safe product endorsed by health professionals. In fact,
two of every three Tylenol consumers started using the product because it was recommended by
their doctors.

In 1976, Extra Strength Tylenol was introduced and was the first product to contain 500
milligrams of painkiller per tablet. Market research had indicated that many consumers believed
that Tylenol was to gentle to be effective. Extra-Strength Tylenol was advertised as the most
“potent pain reliever available without a prescription.” Tylenol’s market share rose from 4
percent to 25 percent in 1979, due largely to the extra-strength version of the brand. In 1982,
Tylenol had 32 percent market share as shown in Exhibit 1.

Competitors frantically tried to defend their brands against Tylenol, Excedrin, Anacin, and
Bayer each introduced extra-strength versions of their brands with little success. Daytril turned
out to be a noncontender in the fought for market share because of failure to build a favorable
reputation among physicians and pharmacists. Tylenol seemed unbeatable. The product became
the largest selling health and beauty aid, breaking the 18 year dominance of Procter & Gamble’s
Crest toothpaste.

Tylenol employed very aggressive competitive tactics in order to dominate the industry. For
example, court litigation was a very important competitive strategy since Johnson & Johnson
took several competitors to court with claims of infringement on tylenol’s trademark and name.
Tylenol found that through the use of litigation, competitors could be barred from active
competition for up to two years. After that tie the competition was in a weakened market
position and seldom recovered. This strategy was effective against Anacin, Tylenol sued Anacin
four times once for trademark infringement and three times for false advertising and won each
suit. One marketing expert went so far as to credit Johnson & Johnson with inventing the fifth
“P” of marketing—Plaintiff.

In the early fall of 1982, eight Chicago-area consumers of Extra-Strength Tylenol died tragically.
These consumers had taken Tylenol capsules that had been tampered with and laced with
cyanide. The coupling of the Tylenol name with the eight deaths caused Tylenol’s market share
to drop from 37 percent to 7 percent overnight.

Research indicated that many consumers had misconceptions about the poisoning incidents. For
example, many consumers were not aware that (1) the company was absolved of all the
responsibilities by the investigating authorities, (2) Tylenol’s production process conformed to
all safety standards, (3) only Tylenol capsules were involved not tablets and, (4) the tragic deaths
were confined to the Chicago area.

Tylenol’s competitors benefited greatly from the tragedy. Anacin won about 25 percent of
Tylenol’s lost business, mainly aggressively advertising Anacin-3 and Bufferin and Bayer each
took 20 percent of Tylenol’s business. Most experts predicted that the Tylenol brand would
never recover. The situation was described as a consumer goods marketer’s darkest nightmare.

Very soon after the crisis, Johnson & Johnson made a strategic decision to attempt to save the
brand that had been so successful and profitable. The company had built up a reservoir of
consumer trust and loyalty which management felt would play a key role in the Tylenol brand’s
recovery. The company had always tried to live up to the credo set for it in the 1940s by its
leaders, General Robert Wood Johnson.” We believe our first responsibility is to the doctors,
nurses, and patients, to mothers and all others who use our products and services. In meeting
their needs, everything we do must be of high quality. Company management interpreted the
crisis as a monumental challenge to live up to this credo against overwhelming odds.

This case was prepared by MArgareth L. Friedman, Assistant Professor, School of Business,
University of Wisconsin-Whitewater. Used by permission. Based on Tylenol, the Painkiller,
Gives Rivals Headache in Stores and in Courts,” The Wall Street Journal, September 2, 1982, “A
Death Blow for Tylenol,” Business Week, October 18, 1982, p. 151, The Fight To Save
Tylenol” Fortune, November 29, 1982, p. 44-49, “Rivals Go After Tylenol’s Market, But Gains
May Only Be Temporary.” The Wall Street Journal, December 2, 1982, p. 250.