Improving marketing cost effectiveness a study of medtronic company in ho chi minh city vietnam

UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Luc Tuan Tu

IMPROVING MARKETING
COST-EFFECTIVENESS
A STUDY OF MEDTRONIC COMPANY IN HO CHI
MINH CITY - VIETNAM

MASTER OF BUSINESS ADMINISTRATION
Ho Chi Minh City – Year 2020

1


UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Luc Tuan Tu

IMPROVING MARKETING
COST-EFFECTIVENESS
A STUDY OF MEDTRONIC COMPANY IN HO CHI
MINH CITY - VIETNAM

MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR: Assoc. Prof. Dr. NGUYEN THI MAI TRANG

Ho Chi Minh City – Year 2020


EXECUTIVE SUMMARY
Recently, the profit and loss of Medtronic has experienced a decrease versus its target.
This circumstance is mostly impacted by increased number and amount of marketing
activites. The main problems belong to the low efficiency of current marketing
activities, reflecting through the low number of customer coverage while the spent
marketing budget exceed it limit. In order to discover the issue that Medtronic facing
with, meeting with two sales managers of the Business Unit as well as relevant sales
representative has been implemented
Through interviewing relevent subjest, using data provided by the company and using
related theory, main problem was identified as low-cost effectiveness of marketing
activities . Towards main problem, three potential causes have been found are Lack or
Low frequency of following up activities, Low competencies of sales team in order to
cascade the impacts of the marketing events or Focus on wrong types of promotion
activities. After analysis, main cause that chosen to solve is Focus on wrong types of
promotion activities. This study will focus on solutions to address the cause in order to
help the company to improve their Profits and Loss.


ACKNOWLEDGMENT
Without the encouragement, guidance and support of Prof. Nguyen Thi Mai Trang and
other teachers, the entire master-level project would not be possible. I would like to
send my appreciation to my advisors. It has been a pleasure working with you on this
project.
I would like to thank my friends and family for greatly supporting me while I was working on my research. Your
Patience, understanding and respect were greatly appreciated.

TABLE OF CONTENTS
1. INTRODUCTION .................................................................................................... 1
1.1. GLOBAL MEDTRONIC CORPORATION ..................................................... 1
1.2. VIETNAMESE MEDTRONIC CORPORATION ............................................ 2
1.3. PINNACLE HEALTH EQUIPMENT CORPORATION .................................. 3
2. SYMPTOMS ............................................................................................................ 4
3. PROBLEM IDENTIFICATION .............................................................................. 5
3.1. POTENTIAL PROBLEMS ................................................................................ 5
3.1.1 OVER-FOCUS ON LONG-TERM ACTIVITIES ...................................... 8
3.1.2 NOT SATISFY THE CUSTOMERS ACADEMIC REQUIREMENTS. ... 9
3.1.3 INSUFFICIENT KEY HOSPITAL MANAGEMENT ............................. 10
3.1.4 LOW COST-EFFECTIVENESS OF REGULAR MARKETING
ACTIVITIES ....................................................................................................... 12
3.2.

PROBLEM VALIDATION ............................................................................. 15

4. POTENTIAL CAUSES .......................................................................................... 17
4.1. SALES REPRESENTATIVES LOW COMPETENCIES, UNABLE TO
CASCADE THE IMPACTS OF EVENTS ................................................................ 18
4.1.1. TRAINING ARE NOT PRACTICAL ......................................................... 18
4.1.2. LACK OF CONTENT-CASCADING MATERIALS ................................. 19
4.2. LACK OR LOW FREQUENCY OF FOLLOWING ACTIVITIES –
INSUFFICIENT SALES REPS TO COVER ............................................................. 21
4.3. FOCUS ON WRONG TYPES OF PROMOTIONAL ACTIVITIES .................. 22
4.3.1. FOCUS ON WRONG CUSTOMER SEGMENTATION ........................... 22
4.3.2 NOT CLEAR INTERPRETATION ABOUT CUSTOMERS INSIGHTS ... 24
4.4. CAUSE VALIDATION ...................................................................................... 25
5.

ALTERNATIVE SOLUTIONS ............................................................................. 26
5.1 ALTERNATIVE SOLUTION 1: RE-ALLOCATE EXPENDITURE TO OTHER
CUSTOMERS’ GROUP BY DIFFERENT APPROACH ......................................... 26
5.2 ALTERNATIVE SOLUTION 2: CONDUCT A SURVEY WITH DOCTORS TO
UNDERSTAND DEEPLY CUSTOMERS’ INSIGHTS ........................................... 28


5.3 SOLUTION JUSTIFICATION ............................................................................ 29
6. CHANGE PLAN DESIGN ..................................................................................... 31
6.1

OBJECTIVES .................................................................................................. 31

6.2

TARGETED OUTCOMES .............................................................................. 31

6.3

ACTION PLAN IMPLEMENTATION........................................................... 31

7. CONCLUSION ....................................................................................................... 34
8. SUPPORTING INFORMATION ........................................................................... 35
8.1

METHODOLOGY .......................................................................................... 35

8.2. INTERVIEW GUIDE ...................................................................................... 35
8.3

TRANSCRIPTS ............................................................................................... 37

REFERENCES .............................................................................................................. 45


ABBREVIATION
APV

Aortic, Peripheral and Venous

CRHF

Cardiac Rhythm and Heart Failure

CS

Cardiac Surgery

CVG

Cardiac Vascular Group

EBIT

Earning before Interest and Tax

FY

Fiscal Year

HCP

Healthcare Professionals

KOL

Key Opinion Leaders

KPIs

Key performance index

MITG

Minimally Invasive Therapies Group

MedEVAR

Medtronic Endovascular Aneurysm Repair

MedTEVAR

Medtronic Thoracic Endovascular Aneurysm Repair

PnL

Profits and Loss

Q3

Quarter 3

RTD

Round Table Discussion

RTG

Restorative Therapies Group

T&E

Training & Education

YTD

Year to Date


LIST OF TABLES
Table 1: APV Profit & Loss (PnL) – Actual vs Target
Table 2: APV Profit & Loss (PnL) – Gap
Table 3: APV FY20 P&L - Marketing report
Table 4: Pinnacle Performance Report
Table 5: Quota Tender Report
Table 6: Financial Report – Spent Budget YTD Q3 FY20
Table 7. Training programs in 2019
Table 8. Quantity of customers and KOLs by portfolio
Table 9: Quantity of engaged implanters by sales rep
Table 10. Cost & benefits for alternative solution 1

Table 11. Cost & benefits for alternative solution 2
Table 12. Action plan (Author synthesis)
Table 13. Detailed description & objectives for specific tasks
LIST OF FIGURES
Figure 1: APV Organization Structure
Figure 2: Pinnacle Organization Structure
Figure 3: Training & Education Survey Report
Figure 4: Cause-and-Effect map
Figure 5. Fish bone diagram of main problems and potential causes
Figure 6. Medtronic marketing materials
Figure 7. Cause-and-Effect map
Figure 8. Gantt-chart for action plan (Author synthesis)


1.

INTRODUCTION

1.1. Global Medtronic Corporation
Medtronic PLC is a medical device company that generates the majority of its sales
and profits from the U.S. healthcare system but is headquartered in the Republic of
Ireland for tax purposes. Medtronic has an operational and executive headquarters in
Fridley, Minnesota in the U.S. In 2015, Medtronic acquired Irish–tax registered
Covidien (a U.S. tax inversion to Ireland from 2007), in the largest U.S. corporate tax
inversion in history, which enabled Medtronic to move its legal registration from the
U.S. to Ireland. Medtronic operates in 140 countries and employs over 86,000 people.
Medtronic was founded in 1949 in Minneapolis by Earl Bakken and his brother-in-law,
Palmer Hermundslie, as a medical equipment repair shop. Through his repair business,
Bakken came to know C. Walton Lillehei, a doctor of heart surgery at the University of
Minnesota Medical School. The deficiencies of the pacemakers of the day were made

painfully obvious following a power outage over Halloween in 1957, which affected
large sections of Minnesota and western Wisconsin. A pacemaker-dependent pediatric
patient of Lillehei died because of the blackout. The next day, Lillehei spoke with
Bakken about developing some form of battery-powered pacemaker. Bakken modified
a design for a transistorized metronome and created the first battery-powered external
artificial pacemaker.
The company expanded through the 1950s, selling equipment built by other companies
but also developing custom-made devices. Bakken built a small pacemaker that could
be strapped to the body and powered by batteries. Work in the new field later produced
an implanTable pacemaker in 1960. The company-built headquarters in the
Minneapolis suburb of St. Anthony, Minnesota, in 1960 and the company moved to
Fridley in the 1970s. Medtronic's main competitors in the cardiac rhythm field include
Boston Scientific and St. Jude Medical. In 1998, Medtronic acquired Physio-Control
for $538 million.
According to a press release, the fiscal year 2019 revenue increased by 2% to $30.557
billion. The net earnings in the fiscal year were $4.631 billion or $3.41 per diluted
share. The non-generally accepted accounting principles (non-GAAP) earnings were
1


$7.089 billion or $5.22 in diluted earnings per share. The cash flow from operations
was $7.007 billion. The free cash flow was $5.873 billion compared with $3.616
billion from the year prior, a 62% increase. And Medtronic, currently, is the largest
Medical Device Company in the world.
1.2. Vietnamese Medtronic Corporation
Vietnamese Medtronic Corporation was established in 2016 and a subsidy of Global
Medtronic. Like global company, Vietnamese Medtronic Corporation focus on 4
therapeutic Areas: Cardiovascular Group (CVG), Diabetes, Restorative Therapies
Group (RTG) and Minimally Invasive Therapies Group (MITG). In each Group, it will
be divided into small sub-groups based on Therapeutic Treatment. In CVG, Medtronic

has 4 sub-groups as: Aortic, Peripheral & Venous (APV), Cardiac Rhythm and Heart
Failure (CRHF), Cardiac Surgery (CS) and Coronary In this thesis, we only focus on
Aortic, Peripheral & Venous Group (APV).

Figure 1: APV Organization Structure
(Source: Medtronic internal structure)
For the current group, as above figure, Medtronic has 12 salespeople, including 02
sales managers and 01 national sales manager (Mr. Jason Dang). Total other 9 sales
representative will cover national wide but mainly focus on Hanoi, Ho Chi Minh, Da
Nang and Can Tho.
2


1.3. Pinnacle Health Equipment Corporation
According to Pharmaceutical & Medical Device Regulation, a foreign company is not
allowed to join in Supply & Distributing sectors in Pharmaceutical Industry. Only a
Vietnamese Corporation with 100% Vietnamese Capital can participate and conduct
customer’s selling. Therefore, the potential market for Vietnamese Distributor is
annually growing.
Pinnacle Health Equipment Corporation is a young distributor established in 2013 and
work in pharmaceuticals and medical device. Although the time length of
establishment has been a short time but the leadership teams has had over 20 years of
experience in Pharmaceutical Business Operations. Pinnacle Strategy for 2020-2025
and the vision to 2030 is to continue to develop as a distributor for multi-national
companies and develop on two areas: Trading and Services (To supply and distribute
high-quality products with reasonable price to all Vietnamese Customers) and Imports
& Exports (Exclusive import and distribution of World-class medical equipment and
Supplies)

Figure 2: Pinnacle Organization Structure

(Source: Pinnacle internal structure)

For the collaboration with Medtronic Vietnam, currently, Pinnacle is the distributors
dedicated to managing the Medical Device Business in the Middle (18 Provinces) &
The South (17 Provinces) of Vietnam. The total workforce is 13 labors which sales
team have 8 staff, focusing mainly in the South of Vietnam
3


2.

SYMPTOMS

To explore the possibilities of this FPS project. We conduct Intake and External
exploration. Base on theory, the intake meeting needs to be prepared by a
comprehensive external exploration. According to the internal data, the total target for
this Fiscal Year (FY) 2020 is 4.3 MUSD, Growth rate at 7.4% and the Profit and Loss
(PnL) or Earnings Before Interest and Tax (EBIT) is 2.2MUSD. The objectives from
the company will have two Key Performance Indexes (KPIs) that includes The Ratio
between actual Revenue versus Target (Performance) and the ratio between the actual
Profit and Loss (PnL) versus the targeted one. Based on the Figure 1, the result of
Revenue Performance seems to be on-track where the running rate is 117% (Quarter 1
& Quarter 2). For the second KPI, we see the reduction between the actual figures and
the targeted one.
The profits and loss is the most paramout importance for Medtronic APV Vietnam.
Since Vietnam Company is a independent branch of Medtronic Global, Vietnamese
Leaders are allowed to control budget spending as well as the revenue, but the PnL
have to meet the target, especially the Operationg Profit with Allocations. Therefore,
althought Vietnamse Medtronic Branch achieved its target in terms of Revenue, they
actually did not get incentives due to the negative gap of Profits. which reflected

through the Budget overruns in the analyzed Fiscal Year (FY2020).
Actual

Vietnam
$K @ Y19 AOP FX
Aortic and Peripheral Vascular (APV)
Revenue
Net Trade Std. COS
Standard Margin
Total OPC
Gross Margin
R&D
Marketing
Direct Distribution
Direct Overhead
Operating Income without Allocations
Total Other Operating (Inc)/Exp
Operating Profit without Allocations
Indirect Distribution
Operating Profit with Allocations

Target

Q1

Q2

Q3

Q4

FY

1,043.4
291.0
752.4

1,157.8
282.1
875.7

1,238.4
288.0
950.5

1,146.9
281.8
865.1

4,586.6
1,142.8
3,443.7

752.4
3.8
183.3
176.0
363.1
289.3
6.0

283.3
30.8
252.5

875.7
4.1
65.0
193.9
263.0
612.8
2.0
610.7
19.2
591.6

950.5
3.3
110.7
157.0
270.9
649.5
3.0
649.5
39.5
610.1

865.1
4.8
187.8
172.4

365.0
500.1
4.0
496.1
40.8
455.3

3,443.7
15.9
546.9
699.3
1,262.0
2,051.7
15.0
2,039.6
130.3
1,909.4

Q1

Q2

Q3

Q4

FY

842.4
212.8

629.6

1,031.4
268.5
762.9

1,240.6
330.2
910.4

1,199.7
318.1
881.6

4,314.0
1,129.6
3,184.5

629.6
5.0
46.2
156.4
207.6
421.9

762.9
5.0
90.4
162.3
257.7

505.2

910.4
5.0
82.2
166.2
253.4
657.0

881.6
5.0
74.8
165.2
245.0
636.6

3,184.5
20.0
293.7
650.0
963.7
2,220.8

421.9
38.5
383.4

505.2
35.9
469.2

657.0
35.9
621.1

636.6
38.3
598.3

2,220.8
148.7
2,072.1

Table 1: APV Profit & Loss (PnL) – Actual vs Target
(Source: Medtronic internal structure)

4


GAP-Y2019

Vietnam
$K @ Y19 AOP FX

Q1

Aortic and Peripheral Vascular (APV)
Revenue
Net Trade Std. COS
Standard Margin

Total OPC
Gross Margin
R&D
Marketing
Direct Distribution
Direct Overhead
Operating Income without Allocations
Total Other Operating (Inc)/Exp
Operating Profit without Allocations
Indirect Distribution
Operating Profit with Allocations

Q2

Q3

Q4

FY

201.0
78.1
122.9

126.5
13.6
112.9

(2.1)
(42.2)

40.1

(52.8)
(36.3)
(16.5)

272.5
13.3
259.3

122.9
1.2
(137.1)
(19.6)
(155.5)
(132.6)
6.0
(138.6)
(7.7)
(131.0)

112.9
0.9
25.4
(31.7)
(5.3)
107.6
2.0
105.5
(16.8)

122.3

40.1
1.7
(28.5)
9.2
(17.5)
(7.5)
3.0
(7.5)
3.5
(11.0)

(16.5)
0.2
(113.0)
(7.2)
(120.0)
(136.5)
4.0
(140.5)
2.5
(143.0)

259.3
4.1
(253.2)
(49.3)
(298.4)
(169.1)

15.0
(181.1)
(18.4)
(162.7)

Table 2: APV Profit & Loss (PnL) – Gap
(Source: Medtronic internal structure)
The number of this table belongs to FY20 (Feb 2019-Jan2020), therefore, the data was
not impacted by COVID 19 situation.
3.

PROBLEM IDENTIFICATION

3.1. Potential problems
In order to deeply analyze, the internal data is used to calculated the gaps, so, as you
can see in the above Table, the Profit and Loss or the Operating profit with allocations
is lower than target in the first quarter (-131.0KUSD), which followed by a positive
number in the second quarter (+122.3KUSD) but cannot fulfill the gap. Total Quarter 1
and Quarter 2, the Profit and Loss is still miss 8.7K USD.
Table 1 shows the data in Q3 &Q4 when the Operating Profit with Allocations still
went down to minus 11K and minus 143K respectively. Therefore, the total PnL landed
at minus 162.7KUSD.
If we deep dive into the analysis, the minus figures come mostly from Marketing
expenses, such as Marketing – Training & Education and Marketing – Product related
expenses. For other number as Direct Overhead (Staff-related expense like Salaries,
Incentives, Travelling and working expenses), it is not significant minus and does not
impact critically in the PnL. Therefore, this is one of some points we need to analyze
to find out what can Medtronic do to improve this KPI.
5

After that, we want to identify the reason why those cost is excessive than planned
number, therefore, we conducted an Interview with two sales Managers of APV
portfolio to identify the potential problems. According to Mr. Thao Pham – the
northern sales manager of Medtronic APV, the reason why his team spend huge
expenditure on Marketing activities:
We need have many aspects to concentrate in order to drive the APV
performance in Hanoi, especially Aortic Franchise, currently, we have only 1015 Key Opinion Leaders in Aortic Therapy and most of them required
continuously update of knowledge. For short-term activities, we mostly engage
them by conducting series Educating Activities for Thoracic Endovascular
Aneurysm Repair (TEVAR) or Endovascular Abdominal Aneurysm Repair
(EVAR) and in those activities, those KOLs will share their experience as
speakers, which help to enhance their reputation. The cost of engaging those
KOLs are significant.
For the southern part of Vietnam, Mr. Khai – Sales managers have a similar idea but
adding more point for the excessive expense of operating
The reason why we need to spend lots of budget into marketing activities is
about Peripheral & Venous therapy, in those activities, since most of doctors are
newbie with the techniques, and in Vietnam, we do not have any proctors who
can train back Vietnamese Doctors, therefore, we need to send them to other
foreign centers in Singapore, Malaysia or Thailand, which enhance and burden
the cost of Marketing.
Based on two sales managers, there are 02 potential problems that APV could bear at
this moment, and one of them is “Over-focus on Long-Term activities as Training &
Education” because training new doctors at this moment but cannot give sales returns
in some upcoming quarters. In order to become an implanter to support Medtronic
performance, those doctors will need to be trained at least 6-12 months to get enough
implanted cases and acquire license from Ministry of Health. The same picture will be
seen in Aortic Therapy since new doctors will need to take at least 6 months to become
a licensed implanter. Another potential problem is “Low cost-effectiveness of regular

6


Marketing activities” that reflex in the excessive amount of allocated budget per
engaged customer. With those current activities, to average money for each engaged
customer will exceed $3000 per time.
Besides, according to Sharma A (1), there has been considerable research on success of
key account management which correlates to the success and cost-effectiveness of
Marketing activities, As example, Homburg et al. (4) and Workman (5) show that firms
that implement effective key account programs demonstrate better performance in
pharmaceutical industry. Key accounts are defined as big customers, such as HighDemand Hospitals or Clinics, where their myriad of patients come to get treatment.
Low management in Key accounts reflexes through low Quota in Insurance, low
number of advocated doctors in those accounts. For example, when comparing
Medtronic versus competitors (Boston Diagnostic or Cook), if the number of
advocated implanters in Bach Mai hospital is lower than Cook, as a result, the Market
Share in Bach Mai hospital will suffer a decrease in short-term period. Moreover, John
(2) discuss a potential problem could be Not satisfy the customers academic
requirements. It could be ubiquitous in International Marketing since Marketers seems
to be misled by many other concerns instead of deep diving customers’ insight. This
means that all marketing activities will address wrong client’s needs, which lead to a
waste of budget.
Initially, It seems to have conflicts between those above problems. However, when we
conducts in-dept interviews with sales leaders and sales rep, the gaps between those
problems are obvious. For example, between “Over-Focus on long-term activities” and
“Low cost-effectiveness of Marketing activities”. The Long-term activities are crucial
with Medtronic Vietnam and they are totally aligned with Vietnamese Strategies,
which support Medtronic to develop long-term relationships with Hospitals, Doctors in
order to retain the sustanable development for Medtronic down the road. However, the
question was raised is How many expenditure can Medtronic spend on the type of
activities? Are they excessively spending on the activities?. For the another problem as

“Low cost-effectiveness of Marketing activities”, we will discuss and review about the

7


comtemporary approaches of Medtronic, are those approaches proper? Do they focus
on right target customers? Or do they deliver right key messages?
In conclusion, after doing all research and explore the reality though in-dept interview,
there are some key problems leading to the phenomenon, including: Over-focus on
Long-Term activities as Training & Education, Low cost-effectiveness of regular
Marketing activities, Low management in Key accounts, Not satisfy the customers
academic requirements.
3.1.1 Over-focus on long-term activities
Obviously, the Long-term activities (according to the KPI of the company) are of
paramount importance for the sustainability of the company since their objectives is to
remain the momentum of revenue in the long term. The two main sources that we can
refer is from the Empirical analysis of the business problem and the Literature review.
In terms of Empirical analysis, we analyze the ratio between the Long-Term and ShortTerm Impact Activities.
Long-Term activities is defined as educational activities, in Medtronic, Educational
activities include Medtronic Endovascular Aneurysm Repair (MedEVAR), Medtronic
Thoracic Endovascular Aneurysm Repair (MedTEVAR), Medtronic Peripheral Artery
Disease (MedPAD), Medtronic EndoVenous (MedVenous) which focus on specific
therapy of treatment. By attending those Training & Educating Program (T&E
Program), newcomers will have chance to learn from basic anatomy, physiology to
current guideline and current treatment methods of those disorders. New doctors will
also be trained to know about the product knowledges and have chances to practice the
products in Simulator System. For example, for a stent graft, newcomers will use the
simulator systems to simulate the patient vascular systems, and they will have demo
products – which is in the real size of the real products to use in the simulators. By
doing and attending those workshops, new commers will get the certificates or licenses

and are allowed to do the procedures in your hospitals.
Short-term activities are defined as activities that address an urgent objections or
requirements from sales team or customers, for example Round Table Discussion
where a representative can introduce a new therapy for customers or Expert sharing
8


symposium where proctors can share experiences for others. In those activities, live
cases with Medtronic products can be utilized to enhance the experiences of doctors
with Medtronic’s products.
Actual

Vietnam
$K @ Y19 AOP FX
Aortic and Peripheral Vascular (APV)
Marketing
Marketing - T&E Program
Marketing - Product related programs

Q1
183.3
55.0
128.3

Q2
65.0
20.8
44.2

Q3

110.7
38.8
72.0

Target
Q4
187.8
67.6
120.2

FY

Q1

546.9
182.2
364.7

46.2
14.3
31.9

Q2
90.4
28.0
62.4

Q3

Q4

82.2
25.5
56.7

FY

74.8
23.2
51.6

293.7
91.0
202.6

Table 3: APV FY20 P&L - Marketing report
(Source: Medtronic internal data)
So as you can see, total planned budget spending to Training & Education contributes
31% in total Marketing Budget. Besides, the actual spent budgets for Training &
st

Education – Long Term impacted activities was just only excessive in the 1 quarter.
In the Second Quarter, the number is reduced significantly because in some top
hospitals, they prefer to conduct those activities from Apr to Jun.

3.1.2 Not satisfy the customers academic requirements.

Figure 3: Training & Education Survey Report
(Source: Medtronic internal data)
Another resource that we can check is the feedback from the customers for the

Training & Education programs. In every program, thanks to the electronic feedback
9


form in which we scale from 1-5 (Very Bad, Bad, AccepTable, Good, Very Good). By
doing this, we can have another view of how the Customers behave/observe and assess
the program. Hence, as you can see in the above graphs, the feedback from Customers
mostly are at Level 4, and 5. So, it also proves that those marketing activities bring
benefits for Medtronic, get a high level of satisfaction from target doctors, which fulfill
those insights about being educated (for new doctors) and enhance the reputation (for
speakers), therefore, they are required to be continued.
On the interview of two sales managers, they all have a belief that T&E programs play
a vital role for the success of Medtronic in this market:
I think that the foremost difference between Medtronic and its rivals is about
T&E programs and Doctors are well aware about that. Whenever they want to
learn new things or want to travel to other nations to attend necessary
conferences, the first option that they have in their minds will be Medtronic since
they are all acknowledged that Medtronic will sponsor for them to help them to
enhance their knowledge and skills. Undoubtedly, it is of paramount importance
for us.
According to Mr, Quang – Sales representative, that is clear that for most of survey or
the result from interviews, the marketing activities has been received good feedback
from key customers in terms of giving them benefits for short and long terms.
3.1.3 Insufficient key hospital management
Regarding the Key Hospital Management, since doctors, including hospital principals,
contribute to Medtronic revenue through decision making processes in terms of using
medical products or bidding. With a good hospital management, Medtronic can utilize
the cost and gain better PnL. Moreover, Medtronic is a Business-to-Business firm.
Because of Vietnamese regulations, Medtronic cannot directly sell products to
Hospitals or Patients and is required to go with a local distributor. In a medical device

industry, a distributor plays a crucial role because they have a separate sales team to
promote those APV products. Therefore, if Medtronic cannot well manage the
Distributors, Marketing activities will be in vein if there is no following up people.
According to the internal data where Medtronic follow up with the distributor. The
10


total sales in and Sales out for Pinnacle seems to be on-track at this moment for whole
APV portfolio. They have recruited more 2 staffs for APV portfolio to cover Da Nang
& Khanh Hoa (two new territories). Medtronic has no more data to show but the
customers seem to have high satisfactions for distributor generally.

Table 4: Pinnacle Performance Report
(Source: Medtronic internal data)
When going in the main figure, the total quota number in Tender of some big
accounts, which indicates how effectiveness the distributor’s work is? And it is the key
KPI that we are working with all distributors.

11


No.

1
2
3
4
5
6
7

8
9
10
11
12
13
14
15

Hospital

Potential (USD)-2019

Medtronic Quota (USD)
2019

MS%

877,960
334,400
164,730
151,110
120,160
102,060
80,180
68,790
38,260
16,440
16,440
15,020

8,250
8,250
6,450
2,008,500

618,150
330,000
91,050
85,350
35,850
57,000
40,500
52,350
6,450
8,250

70%
99%
55%
56%
30%
56%
51%
76%
17%
50%

8,250
8,250
6,450

1,347,900

100%
100%
100%
67%

Cho Ray
HCM UMC
Da Nang General
Binh Dan
Hanoi UMC
Hue Central
Vinmec Times City
HCM Heart Institute
Vinmec Tan Cang
Hoan MY CL
Can Tho City
FV
175
Da Nang C
115
Total

Internal Data - Distributor Analysis FY19

Table 5: Quota Tender Report
As the result, for main key southern accounts in Ho Chi Minh, Danang, Hue, Can Tho,
the total quota of Medtronic contributes around 60% to 70% of all market, including
other competitors in Aortic, Peripheral & Venous market. Only in Hoan My CL and

Can Tho City, Pinnacle has not worked well but the contribution of two hospitals is
quite small comparing to total number. In summary, Pinnacle has been successful to
list APV products into tender list and get market share of quota being around 67% that
is accepTable number for Medtronic.
3.1.4 Low cost-effectiveness of regular marketing activities
It goes without saying that the role of effectiveness impacts both the Revenue and PnL
of the company. Coming to the regular short-term marketing activities, according to
the internal data, currently, Medtronic APV team conducted series activities with the
KPI as below Table:

12


No.

Activity

Spent budget

Quantity of engaged
customers

$ per customer

1 3rd party congress

241,938

29

8,351

2 Proctorship (Honorium for Speaker)

130,117

66

1,984

3 Product workshop

127,068

127

1,004

4 Referal program (Market Access)

21,347

23

933

5 Round Table Discussion

26,430

189

140

546,900
Internal Data - Budget report Dec 2019

Table 6: Financial Report – Spent Budget YTD Q3 FY20
(Source: Medtronic internal data)
As you can see, the current structure for Marketing Activities is allocated mostly for
rd

rd

3 party congress. The 3 party congresses are events organized by a governmental
congress in Vietnam or South East Asia in which Medtronic will invite doctors to join
and sponsor for all event-related expenses such as Accommodation, Transportation,
Honorarium, ect. In Q2 &Q3, Medtronic spent 158K for this type of event and
engaged only 20 doctors to join, the average fee for each doctor is the highest at 8.2K.
For proctorship, Medtronic spent 85K to engage 43 proctors who are speakers in local
or regional activities, followed by other types as Workshops, Referral programs and
Round Table Discussion.
We interviewed and seek opinions from Mr. Quang Vien (Sales representative) about
this point:
The effectiveness of inviting customers to join 3

rd

party congresses is extremely

good in terms of educating them about new therapy and sharing experience.
However, I think that some of those benefits could be achieved through local
congresses instead of regional ones. For example, for Aortic, since we have
developed the therapy in Vietnam for almost 10 years, some Vietnamese proctors,
currently, have sufficient experience and knowledge to teach others. As a result,
some events can be replaced by other local ones to reduce cost but still achieve
the objectives.
The effects of those activities, currently, is good, which reflects in the good
momentum of sales revenue. However, there are some potential activities that we can
13


do to reduce the cost but increase the Reach rate of customers as well as the Frequency
of engagement.
Based on (5), the low-cast marketing strategies have unique benefits in terms of Return
of Investment. And there are myriad methods being able to maintain the effectiveness
of business without burdening the budgets. The key point is to satisfy the customers
academic requirements and improve the cost-effectiveness of marketing mix in
Pharmaceutical industry. By managing the budget with an eye on what the competition
is doing. Budgeting must be push-pull, with the aim allocating or reallocating
resources based on knowledge of which plans ware working and which aren’t. More
important, the partnership with clients is crucial to maintain in order to reduce the
engagement.
By (6), most of enterprises’ current revenues comes from existing customers instead of
new ones. Focusing budget on predisposed prospective clients is a effective way to
develop new business without overfunding, therefore in order to increase the
productivity, company need to concentrate on predisposed customers with appropriate
strategies to shooting in the dark with costly mass marketing. Another ideas, according
to (7), increase selling skills for sales team in order to increase the effectiveness of
each call could be considered. By facilitating internal training program for associates

and presents contact information for great many external resources available for
purchase, which perfectly can be used in Medtronic since the current allocated budget
for Round Table Discussion is still low. But in case that the company can increase the
number of Round Table Discussion, Medtronic, certainly, engage more customers with
lower engaging costs.

14


In summary, the Cause and Effect map is below:

Figure 4. Cause-and-Effect map
After idenfifying possible problems as mentioned above such as Over-focused on long
term activities; Not satisfy the customers academic requirements, Poor key hospital
management or Low cost-effectiveness of regular marketing activities. The next
interview with Mr. Khai & Mr. Thao was organized in order to check whether the
literatures applied in the case of Medtronic and deeply explored for further detail about
potential problems which were found in the first interview. Based on literatures,
previous researches have mentionsed the impact of Low cost-effectveness of
marketing activities since the low concentration on some key Key Opinion Leaders.
New part will support to validate the problems.
3.2. Problem validation
As a matter of fact, one of the main of marketing objectives is to achieve the Profit and
Loss. And currently, as showne in Table 6, there are many kinds of sponsorship to
various practice groups, which can brings more of the firm’s resources to reach clients
while still offering strong returns, setting aside marketing funds for specific practice
groups and target on key segmentation can be considered as a effective way (13).
Moreover, according to Table 6, the coverage rate of doctor in Medtronic is,
15

rd

obviously, can be enriched. The engaged budget per customer of 3 party congresses
and Proctorships are extremely higher than other activities, which raise a question
about the real effectiveness of those activities compared to others. Therefore, it is
acutally one factor that we can change to rectify the issue and improve profits.
Moreover, beside literature, based on inteviews, the sale representative and two sales
managers all concur on the low cost-effectiveness of current engaging activities,
reflecting in the high amount of spent money but low reachable number of doctors.
This means that the problem as “Low cost – effectiveness of marketing activities” has
a high of potential chance to improve and would be considered to be the main one.
For other problem like “Over-focused on long term activities, according to Table 3, It’s
clear that the total allocated budgets for T&E activites has accounted for only around
25% of total markeing expenditure. Moreover, considering the impact of Training &
Education activities in terms of Market Access, it should still be beneficial for APV
portfolio at this moment, especially to enhance the reputation of current implanters as
well as expanding market to new accounts. In fact, long-term activities, especially in
developing new customers, are crucial for any business as the long-term results of
marketing activities is invaluable chain, which facilitates companies to maintain
customers’ engagement. Over focusing on short-term ones potentially become negative
later on. Any marketing campaing, regardless of its timing, develops in a certain
pattern need to be drived toward sustainable results that means long-term views (08).
Besides, T&E activities are solely ones that can create harmany between long-term
strategies and Short-term objectives, they mostly can satisfy the short-term demands
(achieve sales performance) as well as long-term development (young doctors
development). This means that they will help to avoid being disrupted, give more
effective innovations and enhance branding of Medtronic, embrace change for
medtronic in ther future (09). Therfore, this problem cannot be the main one.
Moving to “Not satisfy the customers academic requirements”, the total results of

customers’s feedback are excellent on all assessed programs. It is obvious that the
feedbacks of customer are of paramount importance (10). And measuring customer
satisfaction is very challenging. Their overall satisfaction of the product, the likelihood
16


of repeat business and recommending their business to other customers. The review
and testimonials received are always positive telling that the overall quality of the
product, reliability and fulfilling my customer’s needs are all met (11). With about
points, this seems to be a good field that Medtronic need to maintain the result.
Looking at Insufficient key hospital management, the tender quota and the
performance by hospitals from Pinnacle are the strongest evidence for the
contemporary situation. Certainly, positioning the key hospital management role in the
organization will broaden its boundary-spanning role and the need for a fast reporting
route to top management. In practice, while it may ne argued that the origins of Key
Hospital Management lie in the sales function, there is mounting evidence to question
whether the Management activities should be retained under sales or set up as a
separate entity at general management level (12). Briefully, the exellent hospital
management relects through sale-related relationships and results.
In conclusion, the main problem is identified as “Low cost-effectiveness of
marketing activities”
4.

POTENTIAL CAUSES

Based on the information collected from inteview, the main problem as “Low costeffectiveness of marketing activities”, main ideas from literature are summarized in
the following fish bone diagram

Figure 5. Fish bone diagram of main problems and potential causes
17