Traditional Chinese Medicine Tcm Industry

Published Date: 02 Nov 2017

Section

Assessment

Page

1

Executive Summary

1-2

2

Company Overview

3

3

Market Opportunity

4-7

4

The Target Market

8-9

5

Marketing Mix

10-18

6

Sales Forecast and Market Budget

19-21

7

Conclusion

22

8

References

23-25

Executive Summary

What is marketing? It is the essence of business in society whether it is about the production or marketing of goods and service like a new crop of organically grown vegetables or digital cable service. Marketing’s origin can be found from economics but now it also take in concept from psychology and sociology to better explain how people made purchase decision.

A good marketing plan will help its company to strive in the market. For Eu Yan Sang, it is to always reflect respect for human life and care for its well being by offering products if the highest quality standards in the industry and stay ahead in Traditional Chinese Medicine (TCM) industry.

The marketing plan of Eu Yan Sang is the expansion and diversification of its distribution network. Fortification of Research and Development (R&D) , marketing and Advertising & Promotion (A&P) functions will shorten the "time to market" and maximize market potential of their new products in a appropriately distribution channel.

Other than that, the attention they put on their wholesale channel allows them to list and distribute more their products in all their major chain stores in Hong Kong, Singapore, China and Malaysia in a capital efficient manner. Eu Yan Sang is also seeking strategic location for new stores and increasing the sales in a same store.

Eu yan Sang put a lot of effort on their e-commerce function as well. Being a household name in Asia, they plan to utilize that advantage and enhance their e-commerce function to be more customer-focused and e-shopping friendly for them to exploit the online healthcare market.

Lastly, they believe want to have control on TCM clinic distribution channel will become a major distribution mode as the delivery of Chinese medicine healthcare became more institutionalized. They are currently in negotiation with strategic parties to establish joint venture clinics in Hong Kong, Singapore and Malaysia to establish their control on the channel.

Company Overview

In the 1870s, the founder of Eu Yan Sang, Eu Kong Pai, left his hometown of Foshan, a village in Guangdong State of southern China, to seek his fortune in Malaya. The diligent young man settled down in the small mining town of Gopeng, Perakin1870s. At that time, most people in Gopeng relied on opium to cure their illness. This had inspired Eu Kong Pai to establish his maiden Traditional Chinese Medicine (TCM) shop named "Yan Sang" in 1879.Eu Kong brought in herbal remedies to nurse their health. Unfortunately, Eu Kong died at age 37 in 1890.

In 1898, his son Eu Tong Sen took over his family business and to realize his father's goal. With determination and effort, Eu Tong Sen very quickly expanded the family's traditional Chinese medicine business to other parts of Malaya, Singapore, Hong Kong and Southern China. In 2000, the company was renamed Eu Yan Sang International (EYSI).

In Cantonese dialect, "Yan" means benevolent, kind or humane while the "Sang" represents birth, life or livelihood, put together, the phrase "Yan Sang" means "Caring for Mankind". The mission statement of Eu Yan Sang is "to care for mankind by helping consumers realize good lifelong health". Driven by the vision to help all people around the world, the Group has expanded its expertise into other medicinal sciences. The vision statement of Eu Yan Sang is "To be a global integrative healthcare and wellness company with a strong foundation in traditional Chinese medicine". The objective of Eu Yan Sang is to help its customers enjoy a healthy, long and fulfilling life by providing the best natural healthcare products and services.

Market Opportunity

Opportunity

Eu Yan Sang has created vast amount of growth opportunity by expanding its market not only to Chinese but also to non-Chinese segment of the market. A number of Eu Yan Sang’s products are already certified as halal products (Chin, 2012). Besides, major company such as Nestle Malaysia has successfully launched halal products to non Chinese population, especially through huge exports of their halal certified products to Middle East countries, Thailand and Indonesia. This success has ensured Nestle Malaysia, which is also the largest halal producer in Nestle Group, obtain a turnover of RM1bil in its second quarter ended June 30, 2008, up by RM146.56mil in the same period last year ( Nestle’s halal goods bear fruit, 2008). This introduction of halal product by Eu Yan Sang and success of Nestle Malaysia has become a pioneer for Eu Yan Sang to introduce halal-certified skincare and cosmetic products to attract not only Chinese but also non-Chinese. Therefore, Eu Yan Sang’s skincare and cosmetic products have the opportunity to enter into new market segment which is non-Chinese market if they are being launched to the market.

Eu Yan Sang also has growth opportunity by targeting not only female market segment but also male market segment. Men these days are demanding high-end skin-care products, in spite of economy downturn and high unemployment rate. This is because according to beauty analysts, men nowadays associate healthy-looking and glowing skin with professionalism. Besides, men also feel that in order to be competitive, they need to look presentable (Quenqua, 2011). Therefore, Eu Yan Sang does not only target female segment for its skincare product and cosmetic products but also male segment to enhance its business growth.

Another factor that gives huge opportunities to the introduction of skincare and cosmetic products by Eu Yan Sang is Eu Yan Sang investsheavily in research and development (Chin, 2012).Loreal, a skincare and cosmetic company, has successfully developed over 3000 formulas, which are marketed worldwide (Loreal, n.d.). The success of Loreal has encouraged Eu Yan Sang to direct its research and development department to develop skincare and cosmetic products. Besides, according to a newspaper article, after years of research, Eu Yan Sang has successfully produced its time honored TCM recipes in convenient little sachets, pills and boxes that not require the traditional need for hours of double boiling to extract the herbs’ goodness (Chin, 2012).This success shows Eu Yan Sang’s research and development department has the ability to extract various herbs’ goodness into its skincare products and cosmetic products. Therefore, customers will be attracted to buy these products because their skin can obtain herbs’ nutrients through the usages of these products.

Eu Yan Sang also gets inspiration to develop skin care and cosmetic products from Tongrentang , a company in China that promotes Traditional Chinese Medicine cosmetics products. Tongrentangis the market leader in China and the company can sell nearly 100 boxes of its cosmetic products daily (Cheng, 2010).The success of Tongrentang has reassured Eu Yan Sang there is market opportunities for traditional chinese medicine skin care and cosmetic products.

There is also a market opportunity for Eu Yan Sang’s skin care and cosmetic products because cosmetic industry in the present is directing its focus on producing organic cosmetic products. This is because consumers these days are becoming more concerned about the harmful effects produced by chemicals contained in cosmetics products. Hence, in the future, organic and herbal based products will be market leader of cosmetic industry (McDougall, 2010). The growth of herbal or traditional chinese medicine based cosmetic products have given opportunities for Eu Yan Sang to introduce its range of cosmetic products.

Problems

For cosmetic and skincare product, most probably they will face the customer with lack of scientific knowledge judging the ingredient of the product. There is too many of the fake cosmetic and skincare product in the market now. Some company even used effective ingredient that bring harm to health on processing their product.

In the market nowadays, there is too many of present cosmetic and skincare product competitors. Most of these company present since long time ago in the market. Certain consumer rather spending on those companies’ product also not even wanted to try the new product. They are afraid to try and also lack of trust on the new product.

Not only present companies give threat, but also the new entrant product or companies give threat too. The new entrant company might be a well known makeup artist or beauty expert’s brand company for selling cosmetic and skincare product, such as Naruko by the famous beauty expert in Taiwan, Niu Er.

The market is having too many homogeneous cosmetic and skincare product. Therefore, consumers rather choose the product that more features and function. The new improvement of technologies in cosmetic and skincare product is produce for the new era people that stay in busy lifestyle that give them convenience in taking care their face.

Economy nowadays also gives threat to the skincare and cosmetic market. The inflation, economy down turn happen in the world makes consumers conscious on their purchasing decision. They will compare the product and price. They will ask their self is it worth to spend this amount of money to purchase this product.

Target Market

Market competition nowadays was very great. To prevent Eu Yan Sang become outdated, we plan to launch skincare and cosmetic products that can maintain the characteristic of Eu Yan Sang. The characteristic of Eu Yan Sang is established with Traditional Chinese Medicine. For the purpose of maintain the characteristic of Eu Yan Sang, we plan to launch the products which the ingredients consist of Traditional Chinese Medicine and we believed that this combination would bring an effective effect. Target market is important for a new product because it can let us to focuses on certain type customer and create suitable strategies to reach our sales target. Here are some target market for our skincare and cosmetic products.

Most women especially young lady use skincare and cosmetic products to moisten their skin or make them look better, even make-up already become a polite behavior for community nowadays. Compare with women, we got that less men was using skincare product so the main target for our skincare products are men. We hope we can encourage more men to concern about the importance of look after their skincare problem and based on it to exploit a new customer base.

Our target for skincare and cosmetic products is women starting from the age of 17 because women start to look good on their teenage stage. "The first impression you make on people creates a lasting impression and good appearance can make people have a good impression to you" (Smith, 2013), so first must have a good looks. Once our target under this segment realize about this, they will care more on their looks no matter how busy they are. Traditionally women will start to ignore the importance of make-up after their marriage because they think that make up is not a necessity item anymore and they are busy doing housework thus, there is no time for make-up. Recently, many housewives change their mind and start to dress up themselves. So we aimed for more housewives ranging from 25-50th age. We believed that the market in this segment also will grow bigger.

We have no segmenting by ethnic group for our product because our product is "halal" products. We wish that everyone can use our product regardless skin color, religious and culture (Gonzalez-Mena & Pulido-Tobiassen, 2013). Due to our ingredients that include traditional Chinese medicine, the cost of production will increase and eventually the price of the product will get higher. We expect our target customer to have an average or high income. Based on the expenditure pattern of a person, we target consumer who spend more on cosmetic and facial products.

Finally, and the most important target for skincare and cosmetic products is loyalty customer which support our products and induce them to become advocate, who not only will buy the products of Eu Yan Sang, but also will promote the products to others (Kurtz & Boone, 2010). Only loyalty customer can give and maintain long-term sales and advocate can strengthen it. Otherwise, regardless how good the quality of the products is, without a certain customer base to support and buy the products, it fails to undergo products lifecycle.

Marketing Mix

Product

"Eu Yan Sang" is a brand name inherits from the Chinese words "余仁生". "Eu" is the surname of the founder, Eu Kong Pai. "Yan" is the meaning of compassionate, and "Sang" represents life. "Eu Yan Sang" is categorized as family brand because it identifies its product lines. Eu Yan Sang offer individual product which will be health care product, confinement hamper & package, gift hamper and seminar ticket.

This is the brand mark and trademark of Eu Yan Sang. index.jpg

So product mix length of health care product refers to bee product, bird nest, enzyme, essence, ginseng, health supplement, pills & powders, soup for health, tonic, vinegar and wine. Product mix length of confinement hamper & package refers to brilliant moon, graceful moon, hearty moon, luminous moon, radiant moon, and post-natal care package. Product mix length of gift hamper refers to all seasonal caring, gift of happiness, blissful and gift hamper A. Product mix length of seminar ticket refers to pure body pure beauty seminar ticket.

Eu Yan Sang plans to expand the product line to include skincare and cosmetic products. We are going to introduce the EYS Mei facial soap and EYS Season cosmetic Products. Mei facial soap and Season cosmetic products are made of natural and organic herbs with the combination of floral fragrance. Our products are alcohol free and made without synthetic ingredients. Mei facial soap and Season cosmetic is shopping products. For the facial soap, the Chinese character "Mei" means beautiful. Everyone has different type of skin. There are ten kinds of soap for different type of skincare, such as anti-aging, reducing scar and acne, whitening, removing wrinkles and hydrating skin. For Season cosmetic products, different sets of colors will represent for the four (autumn, winter, summer and spring) seasons.

The new skincare and cosmetic product will fall in introductory stage of the product lifecycle. Those products are a new product entry for Eu Yan Sang Company where they have to do promotional campaign, spend more on advertising and sales promotion.

Attractive design in the packaging captures customers’ attention. Packaging also means to enhance the convenience for buyers. The packaging for Mei facial soap is wrapped by cotton bag, ribbon and company logo, whereas for the Season cosmetic products are designed with red package box. Labeling provides important information of the products, such as weight, ingredient, features and functions, expired date, manufacture date and instructions. Since Eu Yan Sang offers many types of Chinese herbs, it is imperative to state the functions of herbs in labeling for ease of differentiation.

Eu Yan Sang focuses on quality as it is one of its core values. The two are Good Manufacturing Practice (GMP) plants received quality assurance, ISO 9001: Eu Yan Sang Centre, in Hong Kong received ISO 9001: 2008 from Hong Kong Quality Assurance Agency, whereas Weng Li Sdn. Bhd. , located in Malaysia, was granted ISO 9001 international accreditation.

Price

"Price" is a word that known by all consumers because every product consumers buy has price. Most of them hope that they can buy the product with lower price so the only things they need to do is negotiate with the seller and get discount from them. But as a seller, many factors they need to consider when setting a price to a certain product because once made a wrong decision, there will cause many negative consequences. The lightest consequence is loss of sales, but the heaviest consequences maybe will cause the company face bankruptcy.

Eu Yan Sang was a multinational corporation and pricing can critically affect the success of an overall marketing strategy for foreign markets (Kurtz & Boone, 2010) while foresight is very important when decided the price for the price setters. All aspects they should consider include competitive, economic, political, and legal constraints that often limit pricing decisions (Kurtz & Boone, 2010).

From the aspect of competitive, company should clearly know what price the competitors are provided for similar product and make decision about the price level. Eu Yan Sang has launch Eu Yan Sang Mei facial soap and Eu Yan Sang Season cosmetic products. Compare with the competitor in this product line such as Mary Kay’s strategy "don’t have to pay a high price for beauty" (Mary Kay), Eu Yan Sang is mention that "high price, high quality" (Lisa Magloff, 2013) which is more emphasize the quality of the product.

Besides that, Eu Yan Sang will according to current economic trend and set a profitable and justifiable prices (Kurtz & Boone, 2010). For example, current economic is moving forward so the price of the product will set at a higher level because high income will be received by employee in that condition (Case, 2009). Political is a more sensitive issue so Eu Yan Sang should beware of it because it will affect company very well when made a wrong decision. In contrast, if Eu Yan Sang well uses the advantages of the political that bring to company, then the profit of the company will be a considerable huge amount.

The last limit pricing decisions is legal constraints and all of the company should know the related law clearly, if not, a wrong decision will great affect the image of the company even bankruptcy. Eu Yan Sang is a multinational corporation so the rules that should follow by it will also more than others local companies. Although there are many rules that constraints Eu Yan Sang, but once know well about the law related, maybe it will become an advantage for Eu Yan Sang to compete with others.

Based on the above factors, Eu Yan Sang has set a price range for Eu Yan Sang Mei facial soap and Eu Yan Sang Season cosmetic products which is RM25-RM40 and RM20-RM80 respectively as an introductory price. Since the limit pricing decisions will change from time to time, so Eu Yan Sang will change the price according to the conditions when necessary.

Distribution

Eu Yan Sang practices channel using marketing intermediaries in introducing Mei facial soap and Season cosmetic. To distribute Eu Yan Sang(EYS) Mei facial soap and Season cosmetic products, the group takes full control on the supply chain of the product they plan to introduce to the market, from the sourcing of the Mei facial soap and Season cosmetic products’ raw materials to the production and distribution of products to wholesaler and lastly to retailers. Hence, EYS International Limited is a manufacturer, a wholesaler and also a retailer of Mei facial soap and Season cosmetic products. EYS can source its herbs, the ingredients for Mei facial soap and Season cosmetic products from China which are then processed and packaged at two of its manufacturing plants in Hong Kong and Malaysia (Teo, 2011). Lastly, EYS group sells its Mei facial soap and Season cosmetic products at its extensive distribution network comprising of 305 retail outlets in China, Hong Kong, Macau, Malaysia, Singapore and Australia as shown in Table 1 (Annual report, 2012). Its own outlets can sell Mei facial soap and Season cosmetic products as listed in Table 1. Besides, figure 1 is the distribution channels of Eu Yan Sang involving marketing intermediaries in distributing Mei facial soap and Season cosmetic products.

Figure 1

Table 1: The Number of EYS Retail Outlets in Various Regions

Region

Outlet

Australia

88

China

18

Hong Kong

54

Macau

2

Malaysia

93

Singapore

50

Furthermore, the group is not just a plain retailer like some other organizations do. Eu Yan Sang also adopts selective distribution strategy in which its product. EYS also adopted dual distribution strategy in which EYS’s products are delivered to final users not only through physical stores but also through the Internet(Kurtz, 2008). In pace with the advancement of technology, EYS provided eStore that can be found on the group’s website for its customers to make purchases online, with some transportation fees charged for delivery to certain zones. Therefore, Mei facial soap and Season cosmetic products will be sold online through EYS eStore and transportation fees will be charged for delivery of Mei facial soap and Season cosmetic products to certain zones.

Other than that, the mode of transportation EYS uses in transporting herbs from China to manufacturing plants in Hong Kong is by ship. Then, after the Mei facial soap and Season cosmetic products are being manufactured and packaged, they will be transported to ports in Malaysia, Singapore, Australia, China and Macau by ships. Ships are good mode of transportation because the cost incurred via water carrier is lower compared to other mode of transportation(Kurtz, 2008).After Mei facial soap and Season cosmetic products reach their respective ports they will be transported to EYS retail outlets by using motor carriers. Motor carriers are the main mode of transportation in shipping finished products(Kurtz, 2008).

Promotion

Promotion is the communication link between buyers and sellers and the function of informing, persuading, and influencing a consumer’s purchase decision.(Kurtz& Boone, 2012). The objectives of promotion are to provide information to consumers and others, to increase demand, to differentiate a product, to accentuate a product’s value and to stabilize sales(Kurtz & Boone, 2012).We are going to introduce Eu Yan Sang Mei facial soap and Season cosmetic products, so we decided to provide testers and samples for the customers to try our new herbal skincare and cosmetics products. This is because the consumers can know how well the quality of our products is. Besides that, consumers who buy Eu Yan Sang Mei facial soap and Season cosmetic products to a certain amount can get a discount. For an example, consumers can get a 20% discount on the Eu Yan Sang Mei facial soap and Season cosmetic products if they make purchase above RM300 in Eu Yan Sang retail outlet. In addition, they can also apply for membership for the company if they buy more than RM500. By using short term incentives such as giving discounts and membership, we can have loyal consumers.

Secondly, advertising has been adopted as a way to promote Eu Yan Sang Mei facial soap and Season cosmetic products. Advertising is any paid, non-personal communication through various media about a business firm, not-for-profit organization, product, or idea by a sponsor identified in a message that is intended to inform, persuade, or remind members of a particular audience (Kurtz & Boone, 2012). We advertise our Mei facial soap and Season cosmetic products through mass media such as newspapers, television, radio, magazines and movie screens. For instance, we create a Facebook page to promote our Mei facial soap and Season cosmetic products. This is because we can introduce our new herbal products to a huge number of people in a short time. Consumers can purchase the Mei facial soap and Season cosmetic products they want through our Facebook page and delivery fee is excluded. Furthermore, we will have advertisements being showed in televisions and newspapers and flyers being distributed to the people. We also set a booth in the Beauty fairs that are organize every year. Moreover, road shows are organizes to attract consumers’ attention towards our Mei facial soap and Season cosmetic products.

Lastly, we will have seasonal promotion on Season cosmetic products. If the consumers buy a set of cosmetics, they will pay lesser compared to if they buy those cosmetics products individually according to their original prices. So, the demand for the cosmetics products will be higher. Moreover, there are many festivals such as Mothers’ Day, Valentines’ Day and Chinese New Year throughout the whole year. In conjunction with these festivals, we can promote our Mei facial soap and Season cosmetic products by changing their packaging according to the festivals. For example, we will wrap the hampers of Season cosmetic products with red plastics bag and tie a red ribbon on it. During year end and mid-year sales, we will be providing discounts to the consumers. Our products will be discounted for about 20% to 70% based on the products the consumers buy. This will encourage consumers to purchase our products more.

Sales Forecast and Marketing Budget

Marketing expense budget forecast

We forecast that the marketing expense budget of RM 5,000,000 should be enough for both products. We will spend RM 1,000,000 from the budget to focus on the research and development for each product. The R&D of the products started in year 2009 and finished in year 2011. We have extracted the essence of traditional Chinese medicine that has a positive effect on our skin to the products. After that, we sent our product to International Organization for Standardization (ISO) for evaluation. They are certified by ISO to be safe, reliable and in good quality.

After getting the qualification from ISO, we will evenly distribute the amount of RM3, 000,000 to sales promotion and advertising. We will focus on advertising and promoting the facial product to young men and women, and cosmetic product to women. We will advertise about our products at advertisement on internet, social network, our own website and also in 30 seconds advertisement on TV during golden hour like 7-9pm. The promotion will be held on show floor of EYS product and discount voucher will be given for second purchase of the new products.

Sales volume forecast

From the existing products of Eu Yan Sang, they have a sales volume as shown in the figure below.

That is an increase in sales volume from the year 2008-2011 and there was a sudden drop of sales volume in the year of 2012. Profit is assumed to be sales volume because profit is generated from the sales activities.

In the first year, we expect the EYS Mei facial soap and EYS Season cosmetic products will have a sales volume of RM 1,000,000 for the EYS Mei facial soap, and RM 2,000,000 for the EYS Season cosmetic products. This might seems like a good start but we estimate that we will suffer some loss because it is both new products and the chance of high early adoption rate among our customer is unlikely.

In the second year, the sales will pick up its speed and the sales volume will rise up to RM 2,500,000 and RM 3,500,000 for the products because of the time put on shelf and the recommendations from the early adopters to their friends and families. This will cover up the loss we suffered from last year and some profit along with it. Both products will have become mature in the market in the third year, and we expect the sales volume will rise carrying the momentum from the second year, which we estimate at RM 5,000,000 and RM 7,000,000. The profit from it will have cover up the expense of the marketing plan and become another revenue generating source for the company.

Conclusion

Eu Yan Sang is an established company in the traditional Chinese medicine industry. In order to successfully launch the new product of Eu Yan Sang, Mei facial soap and Season cosmetic product, we need do marketing research and come out with a marketing plan. We study the opportunity and the problem will face by the product when launch in the market. We also targeted the consumers of the product so that from the internal to the external of the product is creating based on the need and the favors of the targeted consumers.

Based on the opportunities and problems that we found, we creating marketing mix to match the opportunities of the product and apply on the problems face by the product. Marketing mix include of pricing strategy, distribution strategy, promotion strategy and product strategy.

We also forecast the market budget and sales volume in the future of the new launch products. The forecast is based on the previous years of Eu Yan Sang annual report. We can conclude that, the new product can successfully launching in the market after all the study and planning we have made.