Henan Lingrui Pharmaceutical Co., Ltd. (hereinafter referred to as "Lingrui Pharmaceutical") was established in 1992 and listed on Shanghai Stock Exchange in 2000, which is the only public company focusing on medical patch (plaster) products in China. Lingrui Pharmaceutical and other two pharmaceutical companies called Tianhe, Qizheng became the top three in domestic medical patch market. However, Lingrui Pharmaceutical was the first manufacturer awarded with "China Well-known Trade Mark" for medical patch manufacturer in China.
In 2006, it seemed everything was going well for Lingrui Pharmaceutical. But under the smooth surface, the company just went through the risk of losing market by changing brand name of a well known product and fortunately gained successful results finally by taking right decisions.
The cause of Lingrui Pharmaceutical's Crisis
The brand name of the well sold product was called "Fast Effect Patch for Hyperostosis". The company obtained the production License from Henan Provincial Authority under healthy product category. Starting from the 90's, the product sales have been stabilizing at around RMB70 million, and RMB80 million was the highest sales in the market in years. This product had been the key product for Lingrui Pharmaceutical which was the first successfully product which lay a solid financial foundation for the company and contributed greatest profits ever since.
Long before, Lingrui Pharmaceutical had realized its "Healthy Product License" for Fast Effect Patch for Hyperostosis might encounter the risk of government policy change.
The product has approved very positive effect in treating Hyperostosis and achieved satisfactory market shares. Thus Lingrui Pharmaceutical upgraded the product and applied a new license as a medical not a health product. On May 27th, 2000, the official brand name was registered and approved as "Pain-releasing Patch" by the State Drug Administration of China. Lingrui Pharmaceutical launched the new marketing for its renamed Pain-releasing Patch in 2001.
Lingrui Pharmaceutical was aware of the government policy might not allowed Fast Effect Patch for Hyperostosis produced under the license of health product, how to switch the market shares smoothly from the old one to newly registered became the first priority of the company. Lingrui Pharmaceutical conducted a series of marketing activities by employing domestic well-known marketing specialists, setting new marketing promotion plans, and injected RMB40 million in CCTV to advertise the new product. The company announced its new product as" Lingrui Pain-releasing Patch stops hyperosteogeny, arthralgia, and rheumatalgia" and provided more sales discounts for product buyers. Surprisingly, the sales of Pain-releasing Patch only reached RMB40 million at the year, while Fast Effect Patch for Hyperostosis kept its sale of RMB70 million in the market. It clearly approved the consumers of the old product did not buy the story of the newly advertised product.
The failure of Pain-releasing Patch in market stroke the management team and they started to hesitate in advertising the new product. Then, the company chose the marketing model of "strong sales end with small ads", establishing a nationwide sales force of over 1000 sale persons, with 600 face to face promotions specialists, aiming at high sales volume while almost all advertising for the new product in media suspended. However, the company did not gain what they expected from the market. The annual sales of Pain-releasing Patch fell to RMB20 million that year. The management team had exhausted in managing the large sales force for the new product while the annual sales of Fast Effect Patch for Hyperostosis still remained in RMB 70 million without much marketing support from the company.
After all the methods and efforts tried, Lingrui Pharmaceutical still failed to switch RMB70 million of sales from Fast Effect Patch for Hyperostosis to Pain-releasing Patch in the market. At this moment, the government issued its new national policy, under the new regulations, Fast Effect Patch for Hyperostosis had to be suspended its production and would be soon out of the market. Lingrui Pharmaceutical could only sell the Pain-releasing Patch in the future. Thus Lingrui Pharmaceutical would face huge losses in market sales. After repeated discussions and careful consideration, Lingrui Pharmaceutical decided to adjust its marketing strategy by applying special consulting firms. The management team invited Achieve Marketing Consultation Co., Ltd. (hereafter as Achieve Marketing Consultation) as its strategic partner in November, 2005 after careful evaluation.
Reposition the product to retain the market
After the preliminary analysis, Acheieve Marketing Consultation pin pointed the first step was to identify the consumers of Fast Effect Patch For Hyperostosis and their special need to check if the new product can satisfy their requirements. It sounded simple, but it was the key step for switching the RMB70 million sales into the new product for the company.
After interviewing the promotion specialists in different locations, Achieve Marketing Consultation learned, though the advertising for Fast Effect Patch for Hyperostosis stated its function for hyperosteogeny, arthralgia and rheumatalgia, most consumers were suffered by hyperosteogeny. Mr. Trout, the master of Positioning theory clearly stated , "Name is an important component of the strategy", "Fast Effect Patch For Hyperostosis " strictly informed consumers the function of the product, and enabled many consumers with hyperostosis symptoms became loyal consumers while some patients with rheumatism and joint pain symptoms looked for other products.
The consumers of the Pain-releasing Patch were very scattered as the brand name of the product did not clearly specify the scope of application. In advertising the new product, Lingrui Pharmaceutical stated its functions in hyperosteogeny, rheumatalgia, arthralgia and effective in treating all muscle and joint pain. Besides, the sales persons pushed to sell the Pain-releasing Patch as long as someone needed a medical patch and did not identify their special needs due to the sales pressure. And the needs of these consumers actually were verified and different. The feedback from the sales persons of Lingrui Pharmaceutical indicated its RMB20 million sales were not switched from buyers of Fast Effect Patch For Hyperostosis, but came from new consumers in the market. These consumers were very unstable as they might be lost any time when promotions personals were removed.
Now it's not difficult to understand why the company failed to switch its Fast Effect Patch for Hyperostosis buyers to the new and improved product. Fast Effect Patch for Hyperostosis focused its special effect for consumers with hyperostosis symptoms, while Pain-releasing Patch functioned as any other analgesic patches in the market. It was not as strong targeted as Fast Effect Patch for Hyperostosis, so consumers thought they were two totally different products. That's the reason why the loyal consumers refused to accept the new product.
Learning what really consumers concerned, Achieve Marketing Consultation clarified the only way to retained RMB70 million sales of Fast Effect Patch for Hyperostosis was informing consumers that Pain-releasing Patch was the improved product of Fast Effect Patch for Hyperostosis. However, by doing so, it might lose its new gained RMB20 million sales and consumers. Achieve Marketing Consultation had convinced Lingrui Pharmaceutical with comprehensive research data in detail discussions, and the company finally agreed to take the risk to pave the way for new market strategy.
In order to switch RMB70 million sales from Fast Effect Patch for Hyperostosis, Lingrui Pharmaceutical was "forced" to focus on the "hyperostosis" in the market. While some of the management team still hesitated as the move might limit the product to a square market. As they knew the sales of Fast Effect Patch for Hyperostosis never exceed the sales of RMB70 in the last decade, the result would be disastrous if the new market strategy did not work while sacrificing the new gained sales of RMB20 million.
Achieve Marketing Consultation also found out, during these years, not only Fast Effect Patch for Hyperostosis encountered flat sales, the sales of similar product under Qizheng and Tianhe Pharmaceuticals also ceased increase in the market. The industry believed that the market needs of medical patch had been satisfied and only limited growing space available in the market. Based on these reasons, Lingrui Pharmaceutical reduced its advertising expenses for the product.
With these uncertain doubts, Achieve Marketing Consultation conducted a market study on medical patch products in China. The results suggested that Cheezheng Tibetan Medicine Group, Guilin Tianhe Pharmaceutical Co.Ltd and Lingrui Pharmaceutical were the leaders in the market, and Yunnan Baiyao Group strived to catch up with them. However, the combined sales of these three companies took less than 30% of medical patch market share as the market of this type of products contained total RMB2 billion sales. The price of Qizheng reached RMB 13 /patch, Fast Effect Patch for Hyperostosis costed RMB4 /patch, Tianhe sold its product at RMB2/patch, while other products remained in low price less than RMB1. When the researchers fragmented the sales volume, the sales of the "top three" was far below 30 % of total market sales. The study also lay out China's medical patch market in detail, and pin pointed the secondary or third layers in the markets were mostly taken by local products with low prices. At the same time, some special medical pastes such as "Miaolao Die" and "Guizhou Xingyi" brands were nibbling up medical patch market through strong promotion activities.
After a comprehensive analysis, Achieve Marketing Consultation realized that the pattern of medical patch (plaster) market had not finalized in China, the market was un-matured and was still developing. The present "top three" were just like first three runners in the runway of a marathon, while other runners still had a large market space to catch up on the long way to the champion.
Lingrui Pharmaceutical was excited about the large expanding space in medical patch (plaster) market, but it still needed a clear plan for switching Fast Effect Patch for Hyperostosis to its new product. The advertising theme as "apply the product to kill all muscle pain" could cover all similar products of Tianhe, Qizheng or Yunnan Baiyao.
In China, no product was identified its function by clients' symptoms in the market yet. Achieve Marketing Consultation conducted study on pathology, pharmacology and other area in order to clarify the product from other manufacturers. Achieve Marketing Consultation found hyperostosis was a common disease in modern society. The statistics of World Health Organization showed that osteoarthritis (be marked by hyperosteogeny), accounted the fourth place in female morbidity and eighth in male. In present world's population, 25% of people over the age of 60 suffered osteoarthritis. Nowadays younger generation spent more time on computers for working and playing games, they also had to spend long time in driving for living and working in different locations. Hyperostosis symptoms such as cervical spondylosis and lumbar spondylosis soon became a common disease not only for aged group but also for younger ones. From the study, Achieve Marketing Consultation concluded that the product for treating hyperosteogeny had a much larger market than they expected in the past.
The specific market segments could be established as higher hyperosteogeny rate existed in different age groups, and consumers tended to accept special treatment for their symptoms. However, China had a long history in producing traditional medical patch and plaster. Most manufacturers usually stated the products can "stimulate blood circulation to dissolving stasis, to build up anti-inflammatory and kill the muscle pain" applied all consumers when they felt pain and uncomfortable. No medical patch (plaster) manufacturer segmented its product market by consumers' symptoms. Could consumers really buy the idea?
In order to seek right solutions, Achieve Marketing Consultation contracted a domestic special market survey company to obtain consumers feedback in China. The results indicated consumers thought hyperosteogeny caused by bone spurs needed different treatment from rheumatalgia and arthralgia. Consumers believed even the pain feeling was different between hyperosteogeny and others diseases as "the pain caused by hyperosteogeny was like a needle pined in the body and the pain was unbearable, but arthritis mainly caused dull pain." Because the pain of hyperosteogeny was much more unbearable, consumers had stronger motivation to alleviate pain. They were less sensitive to higher price of medical products. Pain-releasing Paste with RMB4 yuan / patch came in right time for these consumers. They not only purchase the medical patches specific to treat hyperosteogeny, but also willing to pay higher price to release the pain effectively.
Based on the information, Achieve Marketing Consultation believed that the segment market of special patch and plaster for hyperosteogeny could be confirmed in China. As the high incidence of hyperostosis in the population, consumers intended to care less about the price for right medical products. This was the golden segment market for medical patch products. Over years, the manufacturers of these products did not provide enough information in their promotions, leading this special segment market for OTC products to treat hyperosteogeny limited and undeveloped.
From a competition point of view, this segment market did not touched by other competitors as the products of Tianhe and Yunnan Baiyao did not provide treatment for hyperosteogeny. One of Qizheng patch product did have the function for hyperosteogeny, but it intended to cover larger market area and did not focus in one special disease of hyperosteogeny. Since the competitors did not have the plan to occupy this segment market, it seemed they would not intend to do so in the near future. It certainly helped Lingrui Pharmaceutical to have enough time to position its product as special medical patch for hyperosteogeny in the market.
It was time to ask if Pain-releasing Patch produced by Lingrui Pharmaceutical had the ability and advantage to take the market of special medical patch for hyperosteogeny (osteoarthritis) in China.
Lingrui Pain-releasing Patch was improved based on Fast Effect Patch for Hyperostosis. It's clearly instructed "for osteoarthritis stasis stagnation, slow blood circulation, e.g. joint tingling or dull pain", which was specific to treat hyperostosis. The product was specially developed for the disease and its fine results proved its effectiveness. In the past ten years, the product built up a large group of loyal consumer strongly convinced by the quality of the product. Realizing the market potential of medicate patch for hyperosteogeny, Lingrui Pharmaceutical actively strived for keeping its original name fast Effect Patch For Hyperostosis printed on the package of Pain-releasing Patch with a statement; "Before the approval from the State authority as an improved product in 2000, Pain-releasing Patch was produced as a Healthy product authorized by Henan Province under the name of Fast Effect Patch For Hyperostosis." By doing so, it helped the original group of loyal consumers to continue their purchase.
After studies, Achieve Marketing Consultation believed it would be realistic for the company to focus on the special medical patch market of hyperosteogeny (osteoarthritis) to enable the switch of market share from its old product go smooth. In the long term, by taking its position in this special medical patch market for hyperosteogeny (osteoarthritis), Lingrui Pharmaceutical would eventually form its own core values to give consumers a unique reason to purchase the product. Thus the company could set up its strong brand positioning for future development. In January 2006, Achieve Marketing Consultation delivered "Branding Strategy Research Report of Lingrui's Pain-releasing Patch". After careful study and consideration, Lingrui Pharmaceutical accepted all the recommendations, and planed its marketing promotions according to the suggested positioning guidelines in the report.
The new positioning strategy became a sharpener
In February 2006, the new targeted commercial was produced for the new product. Before shooting the commercial, Achieve Marketing Consultation and the marketing department of Lingrui Pharmaceutical and communicated worked together with the advertising company which produced the commercial. They chose a famous senior dance team named Qiaoxiyang ( Graceful Sunset Dancers) as its image group for the commercial, who presented their special Chinese local folk dance in China Spring Festival Evening Celebration in CCTV. The creative commercial showed these active senior dancers acclaimed they applied Pain-releasing Patch and enabled their energetic and happy dancing in their life. The commercial successfully targeted the right group of consumers. Knowing the prospect market lay ahead; Lingrui Pharmaceutical immediately agreed to show its new commercial on CCTV that year. The silver-haired dancers were popular in China and through their dances; "Pain release Patch and Fast Effect Patch for Hyperostosis really work for us" in the commercial became mouth spreading words among the targeted consumers around China.
In 2008, the sales volume of Pain-releasing Patch exceeded RMB140 million, increasing RMB70 million, and it greatly helped the sales of other products. The total annual sales of patch and plaster of Lingrui Pharmaceutical reached RMB400 million, ranking No.1 product in China's domestic patch (plaster) market. In the first six months of 2009, the sales of Pain-releasing Patch were over RMB100 million and the company predicted to the annual sale will up to RMB200 million. Mean while, Lingrui Pharmaceutical expected its total annual sales would definitely jump to RMB500 million by the end of the year. By taking right product brand positioning strategy with clearly targeted commercials, the company effectively has pushed the sales in China. As the products become so hot in the market, the company changed its delay payment terms which executed for ten years to zero late payment policy to all its dealers. Now Lingrui Pharmaceutical owns a strong brand in this special market and starts to enjoy the benefit of brand positioning which helps the company in many ways including less financial risk. The company cut 80% of end sales persons since the product did not rely on persons anymore but depend its special brand influence in the market. By doing so, the company greatly dropped its labor costs in the competition.
If we considered market sales as a short-term indicator, then the establishment of a strong brand name sets a long-term target which will ensure the sustainable developments for Lingrui Pharmaceutical. It may be more important than sales increase for Lingrui Pharmaceutical to find out the right way to locate the purchasing incentives of its specific consumers to win the medical patch and plaster market while establishing and enhancing its own unique brand value in China.
The success marketing of Pain release Patch by Lingrui Pharmaceutical reinforced the point: to establish and implement a successful brand strategy is key important for manufacturers to win today's marketing war.
These days, many enterprises still consider goods distribution rate and strong promotions activities as their sharp weapon to gain the market shares. They have to realize these methods will soon become nothing special but common practice to survive in the keen competition. Setting up a right brand positioning strategy for each individual company is the ultimate way to victory. "Positioning has completely changed the marketing operations nowadays", quoted by Mr. Trout.
|
