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

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.


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


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



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-inlaw, 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 pacemakerdependent 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 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
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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

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


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

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


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

(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

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

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

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


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 &
Education – Long Term impacted activities was just only excessive in the 1st 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



No.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

Hospital

Cho Ray
HCM UMC
Da Nang General
Binh Dan
Hanoi UMC
Hue Central
Vinmec Times City
HCM Heart Institute


MS%

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


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)

this point:
The effectiveness of inviting customers to join 3rd 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

15


obviously, can be enriched. The engaged budget per customer of 3rd 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