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MGMT 650B: Consulting Skills for Managers

STRICTLY CONFIDENTIAL. MGMT 650B: Consulting Skills for Managers. DiagCor Self-collection HPV Test Marketing Plan. Team E Yuun Lam (09903803) Richard Ma (08935005) Victor Tsang (08936073) Chris Tsui (08936542) Elizabeth Siu (08935615). October 2009. Storyline. Situation.

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MGMT 650B: Consulting Skills for Managers

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  1. STRICTLY CONFIDENTIAL MGMT 650B: Consulting Skills for Managers DiagCor Self-collection HPV Test Marketing Plan Team E Yuun Lam (09903803) Richard Ma (08935005) Victor Tsang (08936073) Chris Tsui (08936542) Elizabeth Siu (08935615) October 2009

  2. Storyline Situation • DiagCor has developed a new Self-Collection HPV Test for the detection of human papillomaviruses (HPV) in women, which is the main cause of cervical cancer. DiagCor would like to expand the market for the test in Hong Kong. • The self-collection diagnostic service model is new to Hong Kong, and DiagCor has limited resources in expanding the market for the newly developed Self-Collection HPV Test. Challenges Question • How can DiagCor achieve a sales of HK$ 1M in one year for the Self-Collection HPV Test with a limited budget of HK$ 100K? Answer • To license the Self-Collection HPV Test technology to FMCG companies such that testing kits will be bundled with female sanitary products offered by the FMCG companies and sold to customers via supermarkets and pharmacies. Rationale 2. DiagCor can generate at least $1M revenue in one year by partnering with FMCG companies with mutual benefits 3. DiagCor has much lower costs and risk by partnering with FMCG companies than sticking to in-house marketing program. • DiagCor cannot effectively achieve its goal with In-house marketing resources and partnerships with other organizations 2.1 The number of customers that FMCG companies can reach allows DiagCor to generate $1M revenue from HPV tests 2.2 The Doctor + TV Ad campaign usually adopted by FMCG companies can effectively convince potential test takers 2.3 The partnership creates value for FMCG companies so the win-win situation can be sustainable 3.1 DiagCor can leverage FMCG companies’ effective marketing channels that costs more than HK$100k, and that DiagCor cannot afford on its own 3.2 Product cost of DiagCor HPV Test is a lot lower with FMCG companies as partner 3.3 Human resource cost of DiagCor is minimized with FMCG companies as partner 1.1 DiagCor does not have enough in-house budget to carry out new product marketing 1.2 DiagCor’s corporate strategy does not support marketing a consumer brand. 1.3 Forming partnerships with other organizations is not feasible at the moment.

  3. Recommendations Price* • Set at $450/Test • Testing Kits are bundled with female sanitary products offered by FMCG companies, such as sanitary napkins. Each Testing Kit includes a sample collection bag, test instructions, and a return mail envelop. Customers will send in samples and payments via mail. Test results would then be mailed back to customers Product Promotion • Joint-promotions with FMCG companies, and a portion of marketing budget supported by DiagCor Place • Testing Kits to be sold together with female sanitary products at supermarkets and pharmacy chains that the partnering FMCG companies have already established relationship with. Profit Model • Profit will be shared by DiagCor and FMCG partners on a 50-50 basis Implementation • To dedicate an in-house marketing manager to implement the project. If not, appoint an agent of testing services to implement the project on a profit sharing basis. 2 * The retail price is set according to the results of Online Customer Survey October 2009 Other details please refer to Appendix

  4. Expected Results DiagCor can achieve a revenue of over HK$ 1MM with profit Includes the cost of sample collection, examination, and result notification Includes producing 50,000 testing kits for bundling Includes cost of test administrator, website revamp and overhead 50% profit sharing to FMCG companies *Number of Test Sold = 2729 (est.) = Potential Customer Reached x Marketing Efficiency x Response Rate x Penetration **Price of Test = HKD450 (from Online Customer Survey, Oct 2009) For detailed costing information, please refer to Appendix

  5. Why Take This Project Seriously? • Prevent the lost of first-mover advantage • Realize the potential return of this service immediately • Ride on the recent marketing campaigns run by HPV vaccine providers • If the self-collection diagnostic service model becomes a success – DiagCor could replicate this success model to other current diagnostic products

  6. Rationale #1 In-house Marketing and other Partnerships not working • DiagCor does not have enough in-house marketing resources to carry out new product marketing effectively • DiagCor’s corporate strategy does not support marketing a consumer brand. • Forming partnerships with other organizations is not feasible at the moment. 5

  7. Rationale #1.1 Not Enough In-house Marketing Resources DiagCor has very limited marketing resources to market new product/service as compared to FMCG companies (eg. J & J) No. Of Consumer Products Marketing budget • 20 • ~HKD300,000 • ~HKD8,000,000 • 200 “Marketing Resource/Product” Ratio of DiagCor is only 37.5% that of FMCG companies (eg. J & J) *Data Source: Interviews with DiagCor and Partners, October 2009

  8. Rationale #1.1 Not enough in-house Marketing/Sales Personnel *DiagCor has indicated no additional funding for internal resources is available for commitment for the HPV testing project Data Source: interview with DiagCor, October 2009.

  9. Rationale #1.2 Corporate Strategy does not support marketing The agenda of DiagCor leads to limited marketing activities and resources in marketing diagnostic services in Hong Kong. It would not be effective if marketing is done in-house. • Quoted from an interview with Diagcor’s COO, Billy Chan, September 29, 2009 • “Our goal is to become a leading biotechnology company providing diagnostic products and service in the Asia-Pac region. To become a technology leader, we invest more than 20% of our resources in R&D and we have 5 PhD in the research team.” • “Previously, we didn’t have much resource to invest in marketing and I’m responsible for marketing myself. This year, we employ a marketing staff to handle the marketing stuff. Now, I plan to allocate 10% of budget to marketing. Since we want to sell our CE-marked in vitro diagnostic kits, most of the marketing budgets would be allocated to big events like Medica, Eurogin and other medical conferences where we can meet up with distributors.” Data Source: interview with DiagCor, October 2009.

  10. Rationale #1.3 Potential Partnerships FMCG companies are the most suitable partners Potential customers generation Interests in partnership with DiagCor Assessment Value proposition Staff clubs • Moderate • Willing to explore more • Low FCMG Company • High • Yes • Very high Government • High • No response • High • Moderate Insurance company • Limited • No response Medical website • Moderate • No • Low Retail Stores • Moderate • No response • High Universities/ School • Limited • Willing to explore more • Low 9 Data Source: Interviews with partners, October 2009.

  11. Rationale #2 Partnering can help DiagCor achieve Sales Goal • The number of customers that FMCG companies can reach allows DiagCor to generate $1M revenue from HPV tests • The Doctor + TV Ad campaign usually adopted by FMCG companies can effectively convince potential test takers • The partnership creates values for FMCG companies so that the win-win situation can be sustainable

  12. 2.1 DiagCor can reach over 1 Million Customers via Partnership FMCG companies distribution channel cover > 80% of potential HPV test takers and sanitary napkins allowing DiagCor to reach out to 1,822,500 women. Department of Health recommends every women who have ever had sexual experiences from 25 to 64 should screen for cervical cancer routinely (every 1 to 3 years).2 2,321,000 Women of age 12-55 routinely purchase feminine sanitary products from FMCG companies.23 4 1,875,000 97.20%5 2,416,960 1,822,500 Essential Sanitary Products • Data Sources: • Demographic data from census and statistics department. • Cervical cancer screening program, department of health website • NIH Medline information about female menstrual cycle. Indian consumption study data (HLFPPT). • US statistics showed that each woman consumes 300 pcs of napkins / year. The most common SKU = 10 pcs. Total number of essential sanitary product consumption is 72,508,800. • Sales ratio for napkin and tampons is based on the annual sales data of one local retail store.

  13. 2.1 Expected Sales by Partnering with FMCG Companies Partnership with FMCG Companies, e.g. J&J, allows DiagCor to reach enough potential customers to generate $1.23M of revenue on self-collection HPV test Hong Kong Sanitary Napkin Market Share Distribution, 2009 Assume Sales Growth by 0.5% due to bundle sales with HPV test $1.23M @$450 Take J&J as an example: 1,822,500 x 29.95%1 x 50%2 x 1%3 = 2,729 (Hong Kong Population) (J&J market share) (% of Interested Respondent) (Marketing Efficiency) ( Number of Tests) • Data Sources: • Market share is based on the annual sales data of one local retail store. • % of interested respondent is based on survey data (N=50). • Marketing efficiency is based on the past performance of similar-size marketing campaign (interview of FMCG product manager).

  14. 2.2 Channels affecting Customer Perception “Doctor + TV Ad” combo - an important means in convincing women to use self-HPV testing. Data Source: Online Customer Survey, Oct2009 (N=50) *Medical Journals are powerful, but general public do NOT read them often; *Government would not help advertising a commodity; *News report is not as far reaching as TV/Radio 13

  15. 2.3 Value Realized by FMCG Companies FMCG companies see values in partnering with DiagCor, so are willing to work together 14 Data Sources: Interviews with partners, October 2009.

  16. 2.3 Benefits of the Partnership to FMCG Companies FMCG companies can enjoy 50% of the project’s profit plus a potential increase of 0.5% market share via the marketing effort. So the partnership is sustainable + Annual Sales Potential Increase in Sales (FMCG Company) = 70,478,554 x 0.5% x $14.2 (market size) (market share increase) (unit price) = HK$ 5,003,977 Details please refer to Appendix Data Sources: Interview with partners, October 2009 SKU size = 10pcs, average SKU price = $14.2

  17. Rationale #3 Partnering can lower DiagCor’s Costs and Risks • DiagCor can leverage FMCG companies’ effective marketing channels that costs more than HK$100k, and that DiagCor cannot afford on its own • Product cost of DiagCor HPV Test is a lot lower with FMCG companies as partner • Human resource costs of DiagCor is minimized with FMCG companies as partner

  18. 3.1 Marketing Costs Effective marketing channels exceeds DiagCor’s Marketing Budget of HK$100k Effectiveness of the Marketing Channel in Ascending Order* Data Sources: Effectiveness of different marketing channels are based on the interview with the product manager of a FMCG company. Costs are obtained from rate cards offered by the companies.

  19. 3.2 Product and Distribution costs Forming partnership reduces the up-front product and distribution costs. Partnership Estimated Inventory Data Source: Cost data from quoting of design houses, vending machine lease company, a retail chain, and clinic. Logistics data is calculated by the salary of one more staff & transport fee.

  20. 3.3 Human Resource Cost is lowered by Partnering Forming partnership reduces DiagCor’s HR costs by 76.5% Data Sources: Interviews with DiagCor and partners, October 2009.

  21. Appendix

  22. Customer Preference: Price Over 90% of High Value Customers would pay $401-600 for take-home HPV test * Study based on Online Customer Survey, Oct2009 (N=50)

  23. Customer preference: Distribution (1/2) Age 26-33 women strongly prefer buying the test kit from pharmacies * Study based on Online Customer Survey, Oct2009 (N=50)

  24. Customer preference: Distribution (2/2) Age 26-33 women strongly prefer buying the test kit from pharmacies * Study based on Online Customer Survey, Oct2009 (N=50)

  25. Customer preference: Promotion Poster/Pamphlets are among the most preferred marketing channels * Study based on Online Customer Survey, Oct2009 (N=50)

  26. Sample Customer Case Age : 26-33, Accountant Conduct body check-up on regular basis Feel embarrassed going to clinic for HPV screening Willing to pay equal price to run the test anonymously Would like to get the testing kit from pharmaceutical stores * Study based on Online Customer Survey, Oct2009 (N=50)

  27. Costs and Expenses of Self-Collection HPV Test Project * Study based on Interview with DiagCor, Oct2009, and market research

  28. Proposed Implementation Schedule After the promotion campaign is designed, the bundled testing kit will be distributed to Customers in 4 phases, each phase’s duration is 1 quarter

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