Written Report Final

MKT 1003 Group Case Assignment #5: Neptunus

Group 6

Introduction Neptunus was established in 1989 with its headquarters in Shenzhen, China. It expanded rapidly and by December 2006, the company had nine subsidiaries and five pharmaceutical manufacturing bases. Its total assets amount to over 7 billion Yuan (USD 1.025 billion). The company produces approximately 400 types of pharmaceuticals, traditional Chinese medicines (TCM) and healthcare products. It has strong R&D and manufacturing systems, efficient marketing and logistics networks as well as rich social resources. As a result, Neptunus is the leading company in China‟s pharmaceutical industry1. In the beginning, the company placed an emphasis on technological innovation and product development, creating many new products and winning various awards for their products. For example, their Golden Oyster Extract product launched in 1989 was awarded the Gold in the China Excellent Product award in 19912. Neptunus went on to produce countless award winning products such as the Neptunus KingDrink and the Neptunus Ginkgo Tablet. Change in Marketing Strategy Despite the success of Neptunus‟ products, sales and revenue figures did not reflect this success3. Neptunus believed that economic success was affected by their ability to establish effective advertising, marketing and promotional programs, responding to competitive pressures as well as driving demand from the target market. In 2000, the company undertook an intensive objective diagnosis of the brand and introduced the “21st Century Neptunus Branding Strategy Implementation Plan”. Under this plan, they developed the core brand value of “health creates the future”. They also established the strategic aim of developing Neptunus into the leading brand in China‟s healthcare market. In early 2001, Neptunus started a large scale TV commercial campaign promoting their products. This included the top 4 products, as well as products such as the Neptunus Oyster extract. Although each of these commercials promoted a different product, they all carried the central theme of “Neptunus – Health Creates the Future”. This was the value that Neptunus hoped to bring across to the consumers in order to boost their brand name. Therefore, it can be interpreted that Neptunus‟ communication objective in 2000 was to promote their brand name to all segments of the market, hoping that a strong brand name will boost sales of all their products. There was an obvious shift away from product development to branding. 1

th

Neptunus News, http://www.neptunus.com/news.php?nid=370 [25 October 2009] Neptunus, About us, http://demo.lonvin.com/hw/web/AboutUs_03.asp [25th October 2009] 3 In April 15, 2003, the Neptunus Annual Report revealed Neptunus’ lacklustre performance, with net income per share in 2001 falling from 0.36 Yuan to 0.13 Yuan. Sales also fell nearly 64%. th " Difficulties facing Neptunus” (2004), http://guide.ppsj.com.cn/art/307/ [26 October 2009] 2

1

MKT 1003 Group Case Assignment #5: Neptunus

Group 6

Neptunus strength and core lies in its prescription drugs as they have strong research and development capabilities. However, the heavy regulation of advertising for prescription drugs prevented Neptunus from fully exploiting this potential. To overcome this problem, Neptunus started to get more involved with the healthcare sector, manufacturing products like the KingDrink and the Colostrum Nutrient. Such products did not require any prescription and could enjoy a greater demand. Neptunus hoped that when customers fell sick and required any over the counter drugs or prescription drugs, they will turn to Neptunus. Total Health Marketing Strategy By shifting their focus to “total health”, Neptunus was able to broaden their consumer base and reach out to a greater market, ultimately increasing awareness of their brand. They wanted to help individuals remain healthy in all stages of their life. Their brand value of “health creates the future” is also in line with this focus of total health. Products for all ages This was reflected in their product line. For example, they have the Xiao Er Zhike Tangjiang, which is a cough syrup targeted at young children. There is also the Jianbaoling Pian, which is a health supplement for children. For growing children, there is the Neptunus Colostrum Nutrient which is an enriched milk powder. Neptunus also has products catered for adults such as Xiyangshen, a ginseng based health supplement to boost the immune system, or the popular KingDrink, targeted at adults who suffer from the effects of alcohol intoxication. For the elderly segment of the market, Neptunus has the Ginkgo Tablets to improve blood flow, as well as the Yanzhibao tablet which helps improve vision in the elderly. Promotion of “Total Health” strategy through advertising In order to convince consumers to use their products and adopt the concept of “total health”, Neptunus invested heavily in advertising, spending as much as 3.2 billion Yuan in 2001 to 20024. The bulk of the advertising expenditure was spent on television commercials to promote their products. They had two main types of commercials, humorous and factual. The humorous commercials were used to advertise healthcare products whereas the factual commercials were used to advertise their over the counter medicine. Humour in the advertisements made it easier for the customers to remember the products. However, Neptunus was largely criticised as these advertisements were not well done5. Customers were able to

4

Yun Sheng, Huang. "Brand and Sales” (2005), http://www.emkt.com.cn/article/198/19811.html [25th October 2009] Yun Sheng, Huang. "Neptunus, what is your positioning?” (2004), http://esoftbank.com.cn/wz/46_7868.html [25th October 2009] 5

2

MKT 1003 Group Case Assignment #5: Neptunus

Group 6

remember the novelty of the commercial, but the real message was lost. As a result, Neptunus was unable to use this marketing tool effectively. In the case of the informative and explanatory commercials, the customers were able to see the supposed benefits that the medicine will bring to them. As a result, they were able to make a more informed decision to buy the product. As such, these informative commercials were more successful than the humorous commercials. Analysis of Commercials For the Neptunus Endophy advertisement, it carried the tagline of “Suffering from a cold? Use Neptunus Endophy”. This tagline was repeated 5 times within a short span of 30 seconds. The element of repetition was used to drive home the message that consumers should use Neptunus Endophy when they catch a cold. This is particularly effective in reminding the consumers of the product. However, what the commercial failed to do was to distinguish itself from the other OTC anti-cold drugs. For the Neptunus Ginkgo Tablet advertisement, it carried the message of "a 30 year old person with a 60year-old heart; or a 60 year old person, with a 30 year old heart. Health depends on your decision". This brings up the rhetorical question, which will you want to be? Audiences will choose to have a young heart and may be inclined to buy the Ginkgo Tablet. The advertisement then goes on to list the various benefits of the Ginkgo Tablet. Thus, the factual nature of this advertisement appeals to the rational side of consumers. These two commercials show the two different types of advertisements Neptunus employ. Most of their advertisements lean towards the style of the Endophy advertisement which has high humour content. Commercials by Neptunus were among the “top 10 most enjoyable advertisements” in 2001 and 20026. Although Neptunus‟ advertisements were very creative and funny, they were not effective. The commercials failed to emphasise the product‟s effectiveness and its related benefits, key factors that consumers look for when deciding which healthcare product to purchase. In terms of placement of the commercials, Neptunus chose to advertise on CCTV and other local TV stations which had the biggest say in the China media. In addition, she did not buy up the prime time slots blindly but chose to advertise for different products at different time slots. For example, they advertised for the Ginkgo Tablets during the non-prime time slots when air time was cheaper. This allowed Neptunus to maximise their advertising budget. Apart from television commercials, Neptunus‟ online website also provides a valuable source of information for the consumer.

6

Yun Sheng, Huang. "Can commercials create a brand?” (2006), http://www.cnbm.net.cn/article/ea72543177_1.html [25th October, 2009]

3

MKT 1003 Group Case Assignment #5: Neptunus

Group 6

The Neptunus Website Design Generally, Neptunus‟ website is well-organized and relevant. Corporate and product information are also displayed neatly using tables and headings to attract the user‟s attention. In addition, Neptunus‟ corporate culture is captured by the flash animation delivering the message of “Health Creates the Future/Health Creates Bright Future”. For easy navigation, a search engine is also implemented on most pages. However, Neptunus‟ website also suffers from several design inconsistencies. The presence of unresponsive links leaves a bad impression as it is unprofessional for a large corporation to have such inconsistencies. Furthermore, certain links direct users to the incorrect webpage. For example, clicking the „Healthcare FAQs‟ hyperlink will bring us to the „Product Page‟. In addition, there is no feedback page for consumers to express their views. Content Neptunus‟ website is targeted at the people in search of information regarding the company and its products. Its web content adopts a formal approach in conveying its message .This serves to enhance its brand image as a professional market leader. This formal tone is consistent across all webpages. There is also a section about the social activities that they have been involved in. This may serve as a form of public relations undertaken by the company, showing the compassionate side of the company. However, lack of publicity makes this ineffective. Structure Neptunus uses a „one-sided‟ presentation of their overall communication efforts to gain favourable publicity as a trusted healthcare brand. The structure of the website is very systematic and intuitive. This makes it easy for the user to navigate the website. From another point of view, this also means that the website lacks creativity and uniqueness. However, these 2 features are not important as the objective of this website is to provide information. Format Neptunus‟ web information is presented through the utilization of basic inbuilt-tools like web browsers and „plug-ins‟ which allows the display of HTML documents, images and videos. Their corporate content is illustrated in a simple and formal manner, with graphics and animations to support the text content. The site is user-friendly and intuitive. With organized content management complementing each other, Neptunus‟ website will evoke a positive web surfing experience as they are able to scan the text quickly to look for their desired content.

4

MKT 1003 Group Case Assignment #5: Neptunus

Group 6

Conclusion Web users are mainly concerned with the ease of navigating through websites to search for information. Neptunus‟ website serves its purpose of educating consumers on its various corporate contents, with the integration of well-balanced features and net infrastructure in place. However, minor technical flaws and design inconsistencies as mentioned in the previous sections should be improved upon in order to deliver a „flawless‟ web experience to the users. An online shop will be appreciated also if the customer were to decide to buy the product directly. Ultimately, the website is effective in presenting information in an organised manner, allowing consumers to search for it quickly. Other Elements of the Marketing Strategy Neptunus‟ main marketing strategy is advertising, especially television advertising. As a result, Neptunus neglected other promotional strategies such as public relations, sales promotion, direct marketing, and personal selling. For a brand to be created successfully, advertisement only forms a small part of the company's strategy. This is because advertising only contributes to a “pull” strategy. Without the help of a “push” strategy, Neptunus will not be able to achieve strong sales. Public Relations In the early 1990s, Neptunus sponsored programmes and events such as the "CI Show" and the "Golden Oyster Show”. This helped the company improve its public relations by increasing the exposure of the brand to the media. These are also relatively cheaper alternatives as compared to creating a new advertising campaign. However, after it turned its focus to health care and OTC products in 2000, Neptunus stopped sponsoring such events. Although Neptunus provides medical assistance when crisis strikes, we feel that this is part of their social responsibility and not a result of their marketing strategy. Sales Promotion In addition, sales promotion was another marketing strategy that was not evident in Neptunus‟ promotion mix. In sales promotion, a company normally gives samples, coupons, or discounts on the product. This will make the products more appealing to the customers, giving them an incentive to try the product. Sales promotion will thus be able to attract a large number of consumers in a short period of time. Neptunus' competitors Giant Group (Melatonin) used this marketing tool effectively to attract consumers. Giant Group had a marketing campaign where customers had the chance of winning a gold bar with the purchase of their product Melatonin. This attracted a large number of consumers7. We feel that Neptunus should use such a marketing tool to help them boost sales.

7

Melatonin’s consumer promotion challenge, http://shipin.people.com.cn/GB/5952813.html [26th October 2009]

5

MKT 1003 Group Case Assignment #5: Neptunus

Group 6

Direct Marketing Neptunus should also invest in direct marketing which can “push” the customers to buy their products. This could simply be telemarketing, email marketing or through coupon mailers. Apart from “pushing” the products to the consumers, direct marketing also allows Neptunus to reach out to a larger audience. For example, for consumers who prefer online shopping, internet marketing will be the most effective way of attracting them. Personal Selling Lastly, the lack of in-store sales promoters made it difficult for consumers to get help with their product. Studies have shown that when consumers wish to buy milk powder at the distribution outlets, they end up buying a competitor‟s brand instead of Neptunus‟ Colostrum Nutrient. The lack of emphasis of sales promoters may be due to Neptunus‟ over-confidence on the brand. For health products, brand loyalty has to be established at an early stage as purchase is usually done out of habit. Hence, sales promoters play a vital role in ensuring the success of a product. Recommendations for the integration of Neptunus’ promotion mix Advertising Neptunus should focus on a specific target audience or segment their market. At the moment, there is no distinction in terms of marketing approach. High potential customers and low potential customers are treated equally. This will lead to inefficiency in the marketing and promotion mix of the company. Since healthcare products are usually considered expensive, Neptunus should concentrate on the affluent and educated people and align their commercials to appeal to the rational side of these customers. The advertisements should therefore show the consumers logically, how using Neptunus‟ products will be beneficial to them in the future, in line with the company‟s branding of “Health Creates the Future”. Public Relations Neptunus should be more involved in maintaining good public relations. This can be done by organising campaigns and events, in line with Neptunus‟ communication objective. For example, Neptunus should consider organising or sponsoring major sports events. This is in line with their motto of “Health Creates the Future” as frequent exercise will promote good health. Thus, it will send out a message to the consumers that Neptunus truly believes that maintaining good health will benefit the consumers in the long run. Such events generate media coverage and hype and indirectly bring out the brand name. Organising charity events is also an effective method of raising the company's profile in the public‟s eye. In the case of Neptunus, they

6

MKT 1003 Group Case Assignment #5: Neptunus

Group 6

can build hospitals or provide free medicine and vaccines to poorer rural areas. This provides a future to these rural areas as they will finally be able to get access to basic healthcare. Sales Promotion Neptunus should also consider offering coupons, rebates, premiums to stimulate immediate sales. Also, with purchase of their products, Neptunus can consider giving out products such as sport T-shirts, caps, rain coats, etc which carry Neptunus‟ logo and message (Health Creates the Future). This creates integration between sales promotion and advertising. Direct Marketing Neptunus should maximise the use of its online website and incorporate more features in it to exploit direct marketing. For example, Neptunus can start an online shop, blogs and competitions to attract customers to the website. Once the customers are at the website, they will be able to see the different products offered by Neptunus and hopefully be attracted to purchase these products. This is naturally integrated with the rest of the promotion mix as the website serves as a supplement to the other advertising tools. Personal Selling Frontline staff dealing with consumers directly should be given training to educate them on the benefits and features of the different products. They should share the vision of Neptunus and while providing assistance to the customers. This can be done by organising workshops for frontline staff and placing the emphasis of “Health Creates the Future” during these workshops. With the company‟s values deeply ingrained in the staff, the customers that interact with them will be able to feel the synergy between all the different marketing tools. Lastly, Neptunus should appoint a director responsible for integrating the promotion mix and persuasive communications of company. This will result in the efficient performance of the marketing mix and planning, preventing waste in the company‟s budget and human resources. Conclusion Neptunus has experienced rapid growth over the years largely due to the high quality of their products. This is evidenced by how foreign companies choose Neptunus when looking to partner with a local Chinese firm. However, the lack of proper marketing has prevented the company from realising its full potential. Thus, Neptunus should reallocate their resources to using different marketing tools so as to achieve a greater market reach and effectiveness. Also, Neptunus must ensure the proper integration of these marketing tools to fully maximise their advertising budget and not confuse the consumers. 7

MKT 1003 Group Case Assignment #5: Neptunus

Group 6

Bibliography Analysis on Neptunus' branding strategy. http://club.ev123.com/article/3_6965.html. Chen Qi Rui, Bo Ce Hua. Analysis on Neptunus' promotional difficulties. May 30, 2003. http://www.emkt.com.cn/article/106/10623.html (accessed October 25, 2009). GSK and Neptunus sign cooperation agreement to form joint venture for the co-development of flu vaccines in China, Hong Kong and Macau. http://www.gsk.com/media/pressreleases/2008/2008_pressrelease_10133.htm. KingDrink misleading of consumers. http://www.chinapharm.com.cn/html/hyyw/200235131140.html. Ming, Lin Jun. A problem with Zhang Simin's concept? March 06, 2006. http://www.kington8.com/a/brand/200603/06-1896.html (accessed October 25, 2009). Neptunus Brand Strategy Diagnosis. http://club.ev123.com/article/3_6965.html. Neptunus Group. www.neptunus.com. Neptunus KingDrink - success or failure? http://guide.ppsj.com.cn/art/308/. Neptunus News. http://www.neptunus.com/news.php?nid=370 (accessed October 25, 2009). Neptunus Vortex. http://www.emkt.com.cn/article/95/9571.html. Neptunus, can health create the future? http://www.emkt.com.cn/article/109/10964.html. PPA event comparison. http://www.39.net/HotSpecial/xishiminshijian/wdyo/35618.html. Shen, Huang Yun. Can advertisement create a brand. November 29, 2006. http://www.cnbm.net.cn/article/ea72543177_1.html (accessed October 25, 2009). Philip Kotler, Gary Armstrong, Swee Hoon Ang, Siew Meng Leong, Chin Tiong Tan, Oliver Yau Hon-Ming, . Principles of Marketing: A Global Perspective. 1st edition Prentice Hall, 2009. Print.

8