1. MGMT 650B: Consulting Skills forManagers DiagCor Self-collection HPV Test Marketing Plan October 2009 STRICTLY CONFIDENTIAL

2. 1 Storyline 1 DiagCor has developed a new Self-Collection HPV Test for the detection of HPV virus in women, which is believed to be the main cause of cervical cancer. DiagCor would like to expand the market for the test in Hong Kong. The self-collection diagnostic test model is new to Hong Kong, and DiagCor has limited resources in expanding the market for the newly developed Self-Collection HPV Test Situation Challenges 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? Question To expand the market via leveraging the strong marketing capability and established distribution networks of a FMCG partner, Johnson & Johnson (J & J), rather than relying on the limited in-house marketing resources. The testing kit will be bundled with J & J’s sanitary napkins and sold to customers via supermarkets and pharmacies during promotion period. Customers will mail in samples and payments, and test results will be mailed back to them. Answer Rationale 1. Diagcor can generate at least $1M revenue in one year by partnering with Johnson & Johnson with mutual benefits 2. Diagcor has much lower costs and risk by partnering with J & J than sticking to in-house marketing program. 1.1 The partnership creates value for J & J 1.2 The number of customers that J & J reaches allows Diagcor to generate $1M revenue for Diagcor. 1.3 Customers have strong preference to purchase new medical service from well-known brands that appears frequently on TV/Radio, such as J & J 2.1 The marketing costs in promoting a new product is >$100K and Diagcor cannot afford the huge sunk costs required for reaching a critical mass in customer base. 2.2 Product cost of DiagCor HPV Test is a lot lower with J & J as partner 2.3 Distribution cost of DiagCor is minimized with J & J as partner 1 3. Diagcor cannot achieve revenue goal by in-house marketing program and formation of other partnerships 3.1 DiagCor does not have enough in-house marketing/sales personnel to administer larger scale marketing activities 3.2 DiagCor’s corporate strategy does not support marketing a consumer brand. 3.3 Forming partnerships with other organizations is not feasible at the moment.

3. Price*Set at $500/Test ProductTesting Kits are bundled with the Sanitary Napkins offered by Johnson & Johnson. Each Testing Kit includes a samplecollection 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 PromotionJoint-promotions with Johnson & Johnson PlaceTesting Kits to be sold together with Sanitary Napkins at supermarkets and pharmacy chains Recommendations 2 * The retail price is set according to the results of Customer Survey October 2009 Other details please refer to Appendix

4. Expected Results Profit and Loss Analysis – Proposed Marketing Plan Sales* **1,250,000 Cost of Goods Sold238,250 Gross Profit1,011,750 Expense Marketing100,000 Operating220,000 Total Expense320,000 Operating Profit691,750 Profit Sharing to J & J (50%)345,875 Net Profit to DiagCor345,875 3 *Number of Test Sold = 2500 (est.) = Potential Customer Reached by J & J x Marketing Efficacy x Response Rate x Penetration **Price of Test = HKD500 (from Customer Survey, Oct 2009) Other details please refer to Appendix DiagCor can reach 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% margin cut to J & J

5. 4 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

6. Rationale #1 Partnering with J & J creates “Win-Win” 5 1. The partnership creates value to J & J 2. The numbers of customers reached by J & J makes DiagCor’s goal of generating $1M revenue for Self-Collection HPV Test in one year feasible 3. Customers have strong preference to purchase new medical service from well-known brands that appears frequently on TV/Radio, such as J & J.

7. 1.1 Value Proposition to J & J Presented Value Propositions 1Project a caring image and increase customer satisfaction 2Differentiate from competitors, promote conversion 3Benefit from the margin cut 4Fit with brand equity (healthcare for J&J; innovation for P&G) 6 Feedbacks from Interviews J&J Very interesting idea Fits with J&J’s corporate values Possibility to differentiate products from competitors Need to further explore product/partnership opportunity. J&J makes sure that their products and partners deliver high quality services. J & J see values in the partnership with DiagCor’s HPV Test Data obtained from interviews with partners, October 2009.

8. 1.1 Benefits of the Partnership to J & J 7 J&J enjoys 50% of the project’s profit plus a potential increase of 0.5% market share via the marketing effort. Proposed P & L Sales1,250,000 Cost of Goods Sold238,250 Gross Profit1,011,750 Expense Marketing100,000 Operating220,000 Total Expense320,000 Operating Profit691,750 Profit Sharing to J & J (50%)345,875 Net Profit to DiagCor345,875 + Details please refer to Appendix Potential Increase in Sales = 62,000,000 x 0.5% x $1 (market size) (market share increase) (unit price) = HK$ 310,000 Data from Interview with J & J, October 2009 Annual Sales

9. 1.2 Female Sanitary Product Market in Hong Kong 8 The annual consumption of Female Sanitary Products, especially Sanitary Napkin, is significant to the number of potential Self-Collection HPV Test to be generated. 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. DUMMY

10. 1.2 The Sanitary Napkin Market in Hong Kong 9 J & J captured an overall 23.2% of the sanitary napkin market in Hong Kong, and can generate a maximum of 330,832 potential tests in 1 year. 62,000,000 x 23.2% x 2.3% = 330,832 Data obtained from major retail chains. DUMMY (annual napkin consumption) (market share) (% of interested respondent) ( Potential Tests) Potential Test Takers: Estimated by online customer survey (N=500), which showed 2.3% of respondent s are interested in doing the HPV test.

11. 1.3 Channels affecting Customer Perception 10 Estimated by online customer survey, Oct2009 (N=50) “Doctor + TV Ad” combo - an important means in convincing women to use self- HPV testing. *Medical Journals are powerful, but general public do not read them often; *Government would not help advertising a commodity

12. Rationale #2 Partnering can lower DiagCor’s Costs and Risks 11 1. DiagCor can minimize the marketing cost of launching the new HPV Test product, which is estimated to be > than HK$ 100k 2. Product cost of DiagCor HPV Test is a lot lower with J & J as partner 3. Distribution cost of DiagCor is minimized with J & J as partner

13. 12 Major marketing channels exceeds DiagCor’s Budget of HK$100k Cost-Effect Analysis: Marketing Channels Study based on a survey of over 500 women in Hong Kong in October 2009. DUMMY 2.1 Marketing Costs/Effects in Hong Kong

14. 13 Package and Consultation Service costs are costly Product Cost (per 1000 pcs) In HK$ Product Forms DUMMY 2.2 Product Cost of HPV Test Kit (With and Without Partner)

15. 14 DUMMY 2.3 Distribution Cost of HPV Test Kit (With and Without Partner)

16. Rationale #3 In-house Marketing and other Partnerships not working 15 1. DiagCor does not have enough in-house marketing/sales personnel to administer larger scale marketing activities 2. DiagCor’s corporate strategy does not support marketing a consumer brand. 3. Forming partnerships with other organizations is not feasible at the moment.

17. 200 Rationale #3.1 Not enough in-house Marketing/Sales Personnel 16 No. Of Consumer Products Marketing budget 20 ~HKD1,000,000 ~HKD50,000 “Marketing resource/product” Ratio is at least 100% more than Diagcor could afford J&J has superior marketing penetration capability for Diagcor *J&J marketing budget is based on estimate what the company has spent in Hong Kong region (advertisements, posters, leaflets & etc)

18. Rationale #3.2 Corporate Strategy does not support marketing 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.” 17 The belief of DiagCor leads to limited marketing activities and resources. It would not be effective if marketing is done in-house.

19. 18 Rationale #3.3 Potential Partnerships FMCG companies are the most suitable partners Value proposition Interests in partnership with Diagcor Potential customers generation Assessment Limited No Very low Staff clubs High Yes Very high FCMG Company High No response High Government Limited No Medium Insurance company Limited No Low Medical website High No response High Retail Stores Limited Yes Low Universities/ School Data obtained from interviews with partners, October 2009.

20. Appendix

21. 20 Over 90% of High Value Customers would pay $401-600 for take-home HPV test Customer Preference: Price * Study based on online survey, Oct2009 (N=50)

22. HPV test with doctor’s consultation is most preferred by customers Study based on a survey of over 500 women in Hong Kong in October 2009. DUMMY Customer Preference: Product

23. 22 Age 26-33 women strongly prefer buying the test kit from pharmacies Study based on a survey of over 500 women in Hong Kong in October 2009. Customer preference: Distribution

24. Poster/Pamphets are among the most preferred marketing channels Customer preference: Promotion Study based on a survey of over 50 women in Hong Kong in October 2009.

25. 24 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 a survey of over 500 women in Hong Kong in October 2009. DUMMY