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STRICTLY CONFIDENTIAL
MGMT 650B: Consulting Skills for
Managers
DiagCor Self-collection HPV Test Marketing Plan
October 2009
Executive summary
Our team is delighted to present to you our thoughts on DiagCor’s HPV self collection business model
Situation
•
Challenges
•
DiagCor has limited resources in expanding the market for Self-Collection HPV Test
•
How can DiagCor achieve a sales of HK$ 1M in one year for the Self-Collection HPV
Test with a budget of HK$ 100K?
Question
Answer
DiagCor has developed a new self-collection business model for testing of the HPV
virus in women
• The self-collection model requires women to mail their sample to DiagCor. The sample
is analyzed and results send back to the women
• DiagCor wants to expand the market for Self-Collection HPV Test
•
To leverage the strong marketing capability and established distribution network of
partners rather than relying on the limited in-house marketing resources
• The proposed partners are :
• Johnson & Johnson – a FMCG company producing female sanitary products
• Mannings – a renowned pharmacy chain in Hong Kong with 100 outlets
• Set the Retail Price at HK$ 500
• Package the test into a Testing Kit which includes a sterile napkin, guidelines &
instructions
1
Rationale
The belief of DiagCor leads to limited marketing activities and resources. It would
not be effective if marketing is done in-house.
Quoted from an interview with Diagcor’s COO, Billy Chan, September 29, 2009
“We are a technology company, and we spend most of our
resources in the development of better products/services.
We don’t need to do much marketing because we believe if
our products/services are the best in the market, people will
naturally come to buy from us.”
2
Rationale
Pharmacies and FMCG Companies are the most effective partners to generate
number of tests in one year.
No. of Potential Tests Generated by Different Channels within 1 Year
4000
3500
3000
2500
2000
1500
1000
500
0
Insurance Companies
Government
NGOs
In-house Marketing
Resources
Universities/Schools
FMCG Companies
Pharmacies
3
Section 1
Partner # 1 – Partnership with Johnson & Johnson
Market Size of the Female Sanitary Product Market
The annual consumption of sanitary napkin is only significant enough for forming
strategic partnership to co-market the self-HPV test.
100,000,000
62,000,000
10,000,000
1,426,000
1,000,000
100,000
71,000
55,000
12,000
10,000
Annual Moving SKUs
1,633
1,265
Potential Test Takers
1,000
276
100
10
1
Sanitary Napkin
Tampon
Femina Protective
Washes
Femina Wipes
Annual Monthly SKUs: Data obtained from major retail chains.
Potential Test Takers: Estimated by online customer survey (N=500), which showed 2.3% of respondent s are interested in doing
the HPV test .
5
The Sanitary Napkin Market in Hong Kong
The sanitary napkin market in Hong Kong is dominated by three big players
Others
11.8%
J&J
23.2%
J&J
P&G
Kimberly Clark
29.3%
Kimberly Clark
Others
P&G
35.7%
62,000,000
Data obtained from major retail chains.
6
Feasibility of partnership with the FMCG companies
J&J is the only feasible partner in year 2010
Presented Value Propositions
1
Project a caring image and increase customer satisfaction
2
Differentiate from competitors, promote conversion
3
Benefit from the margin cut
4
Fit with brand equity (healthcare for J&J; innovation for P&G)
Feedbacks from Interviews
P&G
“We’ve already formed partnership with MSD to bundle sanitary napkins with HPV
vaccine. We’re not intended to form another partnership at the moment.”
Kimberly Clark
“Recently, we’ve launched our campaign on cotton soft and variety of products and
the market response is good. We’re not intended mix up the message. We may
consider your program next year.”
J&J
“We like your idea. It exactly fits with J&J’s credo about caring of customers. This is a
win-win suggestion. We’re also losing customers due to fierce competition recently.
We believe this testing service can trigger the noise we want to market our brands.”
7
Proposed terms of agreement
Diagcor needs to offer J&J margin cut and exclusive terms in order to attract J&J to pay
upfront.
Johnson & Johnson
Responsible for all marketing
costs
Sticks HPV testing card on
180,000 SKUs
12 Months
50% profit sharing
Exclusiveness for 1 year
Diagcor
8
Marketing Strategies
Doctors’ Opinion featured in TV Ad is an important means in convincing women to
use self-HPV testing.
Credibility Index
1
1.5
2
2.5
3
3.5
4
4.5
5
Government Campaign
Doctors/Pharmacies
Medical Journals
News report
TV/Radio
Friends
Public transportation advertisements
Newspaper / Magazine Ad
Internet
Direct Mails
Estimated by online customer survey (N=500)
9
Marketing Costs and Time Frame
Newspaper
18%
TV
53%
Roadshow/MTR
29%
Total: $1.4M
4 months
Production of Promotional Materials
8 Months
Tests return
10
Revenue drivers
Average price 300X% of women have a budget less than HKD300
Breakdown by willingness to pay
Average price 300
• P&L of X dollar calculation
• Blah
• X
Luxury
Average price 200
• P&L of X dollar calculation
• Blah
• C
Midscale
Average price 100
• P&L of X dollar calculation
• Blah
• C
Budget
11
Consolidated Profit And Loss Analysis
Consolidated P&L
Sales
5,704,000
Cost of Goods Sold
1,212,100
Gross Profit
4,491,900
200,000
Packing Expense
100,000
2,790,000
Interest Costs
400,000
Pre-tax Profit
2,391,900
Tax
J&J Operating Profit
1,400,000
Website Revamp
Operating Profit
= 1,589,900
= 1,452,000
Operating Expense
Marketing Expense
Diagcor Operating Profit
400.000
After-tax Profit
1,991,900
Number of tests = Annual number of napkin sold x Time frame x Participation rate (Survey) x Promotional Efficiency
= 62,000,000 x 20% x 0.5 x 2.3% x 10% = 14,260
Price of tests (Consumer Survey)
12
Section 2
Partner # 2 – Partnership with Manning
Distribution Network of Major Retail Chains
Pharmacies, Watson’s and Manning are three major distribution channel for OTC tests
4.00%
6%
25%
10%
Manning
Watson's
Pharmacies
Park'n Shop
Wellcome
Others
32%
23%
14
Feasibility of forming Strategic Partnership with Partners
Manning is the only partner that can offer support in marketing campaign and
less margin cut
Pros
Cons
Park’n Shop
Largest Distribution Network
Expensive Shelf Space
No Much Marketing Support
Wellcome
Largest Distribution Network
Expensive Shelf Space
No Much Marketing Support
Watson’s
Consistent with Brand Equity
Large Distribution Network
Less Margin Cut Requested
No Much Marketing Support
Manning
Consistent with Brand Equity
Large Distribution Network
Less Margin Cut Requested
Marketing Support
Pharmacies
Small Distribution Network
No marketing Support
15
Consolidated Profit And Loss Analysis
Consolidated P&L
Sales
5,704,000
Cost of Goods Sold
1,212,100
Gross Profit
4,491,900
200,000
Packing Expense
100,000
2,790,000
Interest Costs
400,000
Pre-tax Profit
2,391,900
Tax
J&J Operating Profit
1,400,000
Website Revamp
Operating Profit
= 1,589,900
= 1,452,000
Operating Expense
Marketing Expense
Diagcor Operating Profit
400.000
After-tax Profit
1,991,900
Number of tests = Annual number of napkin sold x Time frame x Participation rate (Survey) x Promotional Efficiency
= 62,000,000 x 20% x 0.5 x 2.3% x 10% = 14,260
Price of tests (Consumer Survey)
16
Section 3
Conclusion
Review of strategy
We would like to
propose that partnering
with FCMG companies
and pharmacies is the
most viable solution…
Value proposition
 Can leverage on partners’ marketing capabilities and distribution network
 Collaborated marketing effect
 Partners are benefited from co-marketing too.
Revenue/Cost
 Z
 X
 X
 X
Current Trends in health industry
 X
 X
 X
Detailed Review of Strategic Opportunities
 X
 Y
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Section 4
Appendix
Potential partnership
FCMG are retail store are the biggest revenue generator
Interests in partnership
with Diagcor
Value proposition
# of potential
customers generation
Women
Association
•
XXXXXXX
• YYYYYYYY
•
Yes
•
300+
Staff clubs
•
XXXXXXX
• YYYYYYYY
•
No
•
300+
FCMG
•
XXXXXXX
• YYYYYYYY
•
Yes
•
300+
Government
•
XXXXXXX
• YYYYYYYY
•
Yes
•
300+
Insurance
company
•
XXXXXXX
• YYYYYYYY
•
No
•
300+
Medical website
•
XXXXXXX
• YYYYYYYY
•
Yes
•
300+
Retail Stores
•
XXXXXXX
• YYYYYYYY
•
Yes
•
300+
Universities/
School
•
•
Yes
•
300+
XXXXXXX
• YYYYYYYY
Assessment
20
Customer Preference: Price
High-Value Customers would pay $401-600 for take-home HPV test
21
The Rationale: Product
Package the test into a Testing Kit which includes a sterile napkin, guidelines & instructions
Women are less comfortable using any napkin for such an important test
The reliability and quality of the test is perceived to be higher if DiagCor repackages the test as a kit
A testing kit can be distributed through physical distribution channels
22
Customer preference: product
HPV test with doctor’s consultation is most preferred by customers
I would like to receive a one-one doctor's
consultation after the HPV test
89%
I think self testing is convenient and manageable
79%
I am embarassed to go to clinic for cervical cancer
screening
47%
I am somehow embarassed to go to clinic for
cervical cancer screening
36%
I am not embarassed to go to clinic for cervical
cancer screening
I like to receive a diagnosis report without doctor's
consultation
Study based on a survey of over 500 women in Hong Kong in October 2009.
49%
25%
Cost Analysis: Product Forms
Package and Consultation Service costs are costly
90000
80000
70000
Product Cost
(per 1000 pcs)
60000
50000
In HK$
40000
30000
20000
10000
0
Online Only
Coupon on
Napkins
Mini-Kit on
Napkins
Product Forms
Test Kit with
Napkin
Test Kit with
Consultation
Service
24
The Rationale: Promotion
Promote the test via Internet and Magazines
The target customer groups are more receptive to the above channels
The cost-effectiveness of the above channels are the highest
Both internet and magazines can create awareness and induce discussions among the customers
25
Customer preference: Promotion
Internet and Magazines are among the most preferred marketing channels
TV/Radio
98%
Medical Journal
88%
Newspaper
77%
Magazine
66%
Internet
55%
Poster
44%
Billboards
33%
Newletter
22%
Word of mouth
Tele-marketing
11%
5%
Study based on a survey of over 500 women in Hong Kong in October 2009.
Cost-Effect Analysis: Marketing Channels
Internet and Magazines among the most effective marketing channels
27
Study based on a survey of over 500 women in Hong Kong in October 2009.
The Rationale: Distribution
Distribute the testing kit through Diagcor’s website, direct mail, and bundle the kit with other female hygiene products (ex maxipads etc)
The distribution channels above precisely fit the behaviours of potential customers of the test
The costs of deliveries via the above channels are low
The above channels has marketing effect at the same time
28
Customer preference: Distribution
Age 26-33 women strongly prefer buying the test kit from internet
50
45
40
35
30
25
20
15
10
5
0
<18
18-25
26-33
34-41
42-49
>49
store
clinic
groups
online vending
Study based on a survey of over 500 women in Hong Kong in October 2009.
29
Distribution Partners’ Preference
Most effective to partner with sanitary products
easiness of
being
accepted
Attributes
partnering
test kit
ease of use
cost
0
20
40
60
80
No. of Partners
Study based on a survey of over 500 women in Hong Kong in October 2009.
30
Cost Analysis: Distribution Channels
Distribution Cost of 2,000 Test via Different Channels
350000
300000
250000
200000
HK$
150000
100000
50000
0
Direct Mail
Online
Product
Bundling
Clinics
Vending
Stores
Distribution Channels
Fixed Cost
Cost per 2000 Tests
31
Summary: P/L of Recommended Plan
Estimated P/L of the Proposed Marketing Plan
REVENUE
Unit Price
Tests acquired via:
Internet
Magazine
Direct Mail
Product Bundling
Total Tests Acquired
Total Revenue
EXPENSE
500
500
300
400
500
1,700
Marketing
Internet
Magazines
Total Marketing Cost
30,000
60,000
90,000
Distribution
Mail
Product Bundling
Total Distribution Cost
3,600
19,000
22,600
Overhead Cost
50,000
850,000
COST
Total Product Cost
Product Related Costs:
Testing kit
Lab test
Result sent via mail and email
Cost per Test
Total Product Cost
162,600
20
250
3
273
464,100
Profit
ROI (12 months)
223,300
248.11%
32
Implementation Schedule
Product
enhancement &
price changes
implemented
Completion: Nov
2009
Increase
marketing
Completion:
Apr 2010
Add physical
distribution
channels
Completion:
Mar 2010
33
Customer Awareness
Age group 35-45 women are most receptive to HPV screening
Sample Customer Case
Age : 27, Accountant, HKD 40k
Health conscious, sexually active
Conduct body check-up on regular basis
Feel embarrassed going to clinic for HPV screening
Willing to pay extra to run the test anonymously
Would refer to friends if the HPV test kit satisfies her
preference
Study based on a survey of over 500 women in Hong Kong in October 2009.
35
Sample Customer Case
Age : 27, Accountant, HKD 40k
Health conscious, sexually active
Conduct body check-up on regular basis
Feel embarrassed going to clinic for HPV screening
Willing to pay extra to run the test anonymously
Would refer to friends if the HPV test kit satisfies her
preference
Study based on a survey of over 500 women in Hong Kong in October 2009.
36