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

2. 1 Storyline 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 service 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 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. Answer 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. 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. DiagCor cannot effectively achieve its goal with In-house marketing resources and partnerships with other organizations 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. Price*Set at $450/Test ProductTesting 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 PromotionJoint-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 ModelProfit will be shared by DiagCor and FMCG partners on a 50-50 basis ImplementationTo 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. Recommendations 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 Profit and Loss Analysis – Proposed Marketing Plan Sales* **1,228,050 Cost of Goods Sold238,250 Gross Profit989,800 Expense Marketing100,000 Operating220,000 Total Expense320,000 Operating Profit669,800 Profit Sharing to FMCG Companies (50%)334,900 Net Profit to DiagCor334,900 3 *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) 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% profit sharing to FMCG companies

5. Urgencies of the Project 1. Prevent the lost of first-mover advantage 2. Realize the potential return of this service immediately 3. Ride on the recent marketing campaigns run by HPV vaccine providers 4. Prove that the self-collection diagnostic service model works in Hong Kong so that other tests can be offered via this service model

6. Rationale #1 In-house Marketing and other Partnerships not working 5 1. DiagCor does not have enough in-house marketing resources to carry out new product marketing effectively 2. DiagCor’s corporate strategy does not support marketing a consumer brand. 3. Forming partnerships with other organizations is not feasible at the moment.

7. 200 Rationale #1.1 Not Enough In-house Marketing Resources 6 No. Of Consumer Products Marketing budget 20 ~HKD8,000,000 ~HKD300,000 “Marketing Resource/Product” Ratio of DiagCor is only 37.5% that of FMCG companies (eg. J & J) DiagCor has very limited marketing resources to market new product/service as compared to 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 ResourcesHours Marketing staff2,300 Sales staff4,600 Committed hours – staff running @ 95% capacity(6,555) Available hours345 Estimated Staff Requirements Marketing staff1,600 Sales staff4,600 Total6,200 Staffing Deficit(5,855) *DiagCor has indicated no additional funding for internal resources is available for commitment for the HPV testing project Data obtained from interviews with DiagCor, October 2009.

9. Rationale #1.2 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.” 8 The belief of DiagCor leads to limited marketing activities and resources. It would not be effective if marketing is done in-house.

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

11. Rationale #2 Partnering can help DiagCor achieve Sales Goal 10 1. The number of customers that FMCG companies can reach allows DiagCor to generate $1M revenue from HPV tests 2. The Doctor + TV Ad campaign usually adopted by FMCG companies can effectively convince potential test takers 3. The partnership creates values for FMCG companies so that the win-win situation can be sustainable

12. 2.1 Expected Sales by Partnering with FMCG Companies 11 Partnership with FMCG Companies, eg. J&J, allows DiagCor to reach enough potential customers to generate $1.36M of revenue on self-collection HPV test 1. Government population figure published at Jul 2009. 2. 65.17% calculated based on 2007 census data. 3. Market share data obtained from interview with major retail stores. 4. 25 out of 50 respondents (50%) showed interest in performing the self-HPV test. 5. Marketing efficiency based on interview of J&Js product manager. 7,008,300 1 x 65.17% x 23.7% x 50% x 0.5% = 2,729 (Hong Kong Population) (% of eligible population) (J&J market share) (% of interested respondent) (marketing efficiency) ( Potential Tests) Census 2007 Expected Market Share to be increased by 0.5% $1.23M @$500 / test $1.23M @$500 / test

13. 2.2 Channels affecting Customer Perception 12 *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 Preferences are based on online customer survey, Oct2009 (N=50) “Doctor + TV Ad” combo - an important means in convincing women to use self- HPV testing.

14. 2.3 Value Realized by FMCG Companies 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, etc) 13 Feedbacks from Interviews FMCG Companies Very interesting idea Fits with our corporate values Possibility to differentiate products from competitors Need to further explore product/partnership opportunity. FMCG companies see values in partnering with DiagCor, so are willing to work together Data obtained from interviews with partners, October 2009.

15. 2.3 Benefits of the Partnership to FMCG Companies 14 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 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 FMCG Copanies (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 FMCG Companies, October 2009 Annual Sales

16. Rationale #3 Partnering can lower DiagCor’s Costs and Risks 15 1. DiagCor can leverage FMCG companies’ effective marketing channels that costs more than HK$100k, and that DiagCor cannot afford on its own 2. Product cost of DiagCor HPV Test is a lot lower with FMCG companies as partner 3. Human resource costs of DiagCor is minimized with FMCG companies as partner

17. 16 Effective marketing channels exceeds DiagCor ’ s Marketing Budget of HK$100k Costs are obtained from rate cards offered by the companies. 3.1 Marketing Costs in Hong Kong Sole online advertisement without grass-root advertising method is poor in effect. Customers’ perception on direct mail is poor.

18. 17 Package and Consultation Service costs are costly Product Cost (per 1000 pcs) In HK$ Product Forms 3.2 Product Cost is lowered by Partnering Only feasible when partnering with napkin manufacturer Existing packaging method with poor response

19. 18 3.3 Human Resource Cost is lowered by Partnering Data obtained from interviews with DiagCor and 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. 21 Age 26-33 women strongly prefer buying the test kit from pharmacies Study based on a survey of over 50 women in Hong Kong in October 2009. Customer preference: Distribution (1/2)

23. 22 Customer preference: Distribution (2/2) Age 26-33 women strongly prefer buying the test kit from pharmacies

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 50 women in Hong Kong in October 2009.

26. Costs and Expenses of Self-Collection HPV Test Project Cost of Goods Sold ItemsHKDRemarks Test90Test taking fee Mailing Charges3.3Bulk mail, to/from customers Test Result Handling2 Total per unit cost95.3 Marketing Expense Testing Kit ItemsHKDRemarks Sanitary bag0.42C printed sanitary bags at 50,000 pcs Instructions0.14C printed instructions @ 50,000 pcs Return mail envelop0.32C printed envelops @ 50,000 pcs Wrap0.24C printed PVC bags @ 50,000 pcs Packaging Cost1Including testing kit packaging and bundling, @ 50,000 pcs Total per unit cost2 Operating Expense ItemsHKDRemarks Salary of Test handler120000HKD10000/month, including benefits Website Revamp50000Development and Maintenance of backend test tracking system Overhead50000Transportation, etc Total220000

27. 26 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