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

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.


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


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

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

(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


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

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

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

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)

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)


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

“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

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

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

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

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

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


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


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