Marketing plan for the new consultation center of Vietnam Century Hospital

1.2 VISION AND OBJECTIVE OF THE PROJECT VCH’s new Consultation Centre is one of the biggest expansion projects undertaken by VCH with the efforts providing world-class and multi-discipl

TR NG I H C M TP HCM UNIVERSITÉ LIBRE DE BRUXELLES

MBAVB4

DECLARATION

I hereby declare that this thesis is my first marketing plan for the private healthcare sector and it has not been submitted anywhere for any degree or qualification It based on the knowledge I gain from the interesting marketing subjects in Master of Business Administration 2010-2012 program of Solvay Brussels School and Ho Chi Minh city Open University and researches in Vietnam healthcare field

I also certify that, to the best of my knowledge, any helps received in preparing this thesis, all sources and information used have been acknowledged in this thesis

February 28th, 2012

TR N HOÀNG BÍCH KHUÊ

ACKNOWLEDGEMENT

From me with all my honestly respect and love:

First and foremost, I would like to deeply thank my family – my beloved mom and dad -

who give me a great encouragement, heartily support and love to complete not only this MBA program but also bravely face with all my difficulties in life

Secondly, I would like to express my grateful thanks to my supervisor, Dr Tr n Hà Minh Quân, who help me a lot in giving the orientation, advices and comments for this final thesis

I would like to send many thank for the help and inspiration from doctors -Tr ng Quang

Huy, Tr n Th Lý – who give me the interesting knowledge and understanding deeply

about the Vietnam Century Hospital, the healthcare field, useful information about their career

I would like to express my deep appreciation to my colleagues, my business team for their supports in long time to help me complete my works and have time to done this thesis; to

my friends for their contributed discussions and opinions

Finally, I would like to thank much to Solvay MBA program, all the professors, the members of programs, the coordinators, my friends in class for useful knowledge, memorial time, valuation debate and exciting study

February 28th, 2012

TR N HOÀNG BÍCH KHUÊ

TABLE OF CONTENT

DECLARATION i

ACKNOWLEDGEMENT ii

TUTOR’S COMMENT iii

TABLE OF CONTENT iv

LIST OF FIGURES vii

LIST OF TABLES viii

LIST OF ABRREVIATIONS ix

EXECUTIVE SUMMARY 1

CHAPTER 1: GENERAL INFORMATION 2

1.1 Statement of the market 2

1.2 Vision and Objective of project 3

1.3 VCH Introduction 4

1.3.1 About VCH 4

1.3.2 The Consultation Center’s introduction 5

1.3.3 Profitability 7

CHAPTER 2: LITERATURE REVIEW 11

2.1 Marketing Strategy 11

2.1.1 The Strategic Planning Context 11

2.1.2 Market Segmentation, Targeting, Positioning, and Competition 14

2.1.3 Blue ocean strategy 17

2.2 Understanding consumer behavior 18

2.2.1 Healthcare consumers – who are they? 19

2.2.2 The buying decision making 20

CHAPTER 3: HEALTHCARE MARKET AND VCH’S CONSULTATION CENTER INTRODUCTION 23

3.1 Healthcare market’s analysis 23

3.1.1 Definition of Healthcare Market 23

3.1.2 Healthcare Market’s overview 23

3.1.3 Environment (SLEPT) analysis 29

3.2 Competitor analysis 35

3.3 Customers analysis - Market research design 38

3.4 SWOT analysis 41

CHAPTER 4: MARKETING STRATEGY 43

4.1 Segmentation and target market 43

4.1.1 Market segmentation and choosing target 43

4.1.2 Target market 43

4.2 Positioning 44

4.2.1 New added values 44

4.2.2 Positioning strategy 48

4.3 Objective of marketing plan 50

CHAPTER 5: MARKETING PLAN 52

5.1 Marketing program 52

5.1.1 Product - Competence 52

5.1.2 Place - Convenience 55

5.1.3 Pricing - Cost 56

5.1.4 Promotion - Communication 57

5.1.5 Patient - Compassion 59

5.2 Budgeting 60

5.3 Implementation and control 61

REFERENCES 69

APPENDIX 1 70

APPENDIX 2 71

APPENDIX 3 72

LIST OF FIGURES

Figure 1.1: Number of Inpatient inn average per day in 2006-2010 8

Figure 1.2: Monthly number of surgeries in 2006-2010 9

Figure 2.1: Four actions framework 18

Figure 3.1: Vietnam’s healthcare spending and international comparison 25

Figure 3.2: Healthcare spending of Vietnam in 2006-2010 25

Figure 3.3: Vietnam hospital beds and doctors, 2010 27

Figure 3.4: Cost comparison for selected surgical 28

Figure 3.5: Population, over-65 age group 29

Figure 3.6: Life expectancy 30

Figure 3.7: BMI short-term political risk value 33

Figure 4.1: Percentage of volume and value 43

Figure 4.2: Value Curve of VCH’s the Consultation Center 45

Figure 4.3: Positioning Strategy 48

Figure 4.4: Objectives of the marketing plan 50

Figure 5.1: Budget allocation for the communication campaign 60

LIST OF TABLES

Table 1.1: Allocation of VCH’s patient 9

Table 2.1: IOM’s standard of healthcare services 12

Table 2.2: IOM model’s criterion 13

Table 2.3: Major segmentation variable for consumer markets 14

Table 2.4: Steps in the segmentation process 15

Table 2.5: Healthcare consumers versus other consumers 19

Table 3.1: Health Indicators 23

Table 3.2: Competitor Pros vs Cons 36

Table 3.3: The qualitative research’s data interpretation 39

Table 3.4 SWOT analysis 41

Table 5.1: VCH’s network process 55

Table 5.2: Communication plan 57

Table 5.3: The implementation plan of VCH’s Consultation Center 62

LIST OF ABBREVIATIONS

BMI – Business Monitor International

CHS – Community Health System

CT – Computerized Tomography

GI – Gastrointestinal

HRH – Human Resources for Health

ICU – Intensive Care Unit

IOM – The Institute of Medicine

JCI – Joint commission International

MRI – Magnetic Resonance Imaging

STP – Segmentation, Targeting, Positioning

VCH – The Viet Nam Century Hospital

WHO – World Health Organization

EXECUTIVE SUMMARY

The Vietnam Century Hospital (VCH), recognizing the significant of demand toward high quality healthcare within Ho Chi Minh city and surrounding areas as well as committing to continually enhancing the quality of the client and patient services and facilities it offers

As part of this ongoing effort, VCH has constructed a new five-star standard Consultation Center with a contemporary look and upscale feel; in addition to the long-term purpose of providing first class benefits management services to its target market

VCH’s new Consultation Centre is one of the biggest expansion projects undertaken by

VCH since its inception Designed by renowned architect Reda Amalou from Paris-based

firm AW², this project is the first in the hospital’s extensive US$ 3.5 million renovation

and expansion plan Construction on the new Consultation Centre began at the end of 2010 Now complete, this facility unifies contemporary architecture, stylish decor and custom-designed interiors that facilitate the functions of a five-star international hospital, while ensuring that staff and patients benefit from a comfortable, safe, high quality environment

The purpose of this project is to aim these following goals:

- To create a higher quality medical services that exceed consumers’ expectations

- To provide quality health care to residents of area

- To create a medical practice that treats the residents’ need about internal and surgical medication as well as general medical services

- To increase the number of patients by 30% per year in first two year through superior performance and marketing activities

The outcome is a marketing strategy proposal cover its component: segmentation, targeting, re-positioning with blue ocean strategy’s elements in next 3 year time

Chapter I: General Introduction

1.1 STATEMENT OF MARKET

For many years, healthcare in Vietnam was closely regulated by the Vietnamese government However, ever since the country opened up to privatization, the healthcare industry has become an area of interest to foreign investors Demand for better healthcare services from a Vietnamese population of increased wealth is driving this foreign health

investment, and there are many challenges to Vietnam’s healthcare sector that foreign

investors hope to address through their involvement

Vietnam has a population of approximately 86 million people, of which the two largest cities are Ho Chi Minh City and Hanoi, with official population estimates of 7.1 million and 6.3 million respectively These two markets also represent 80% of the total private healthcare market in Vietnam

In general, Vietnamese healthcare system is divided into 2 sectors: Public and Private Medicine in terms of ownership or Western and Oriental (traditional) Medicine in terms of approach In addition, the health system is supported by a national health insurance scheme which is compulsory for all public sector employees as well as private enterprises with more than 10 employees

While there has been an increasing demand for international standard healthcare, many of initiatives are concentrated on the provision of secondary and tertiary care Consequently, a number of private ventures are being initiated towards new private hospitals through a perceived lack of international standard secondary and tertiary care in the country

International clinics exists in Ho Chi Minh City, yet are priced beyond the means of most

of the local population and mostly frequented by expatriates who do so for reasons of familiarity, perceived international standards but lack alternatives

To capture market arising demand, VCH – on the way of its development – officially run a

new five-star standard Consultation Centre throughout the inauguration ceremony of this advanced facility on 1st December 2011 Comprising 28 new consultation rooms, the new Consultation Centre will allow VCH to see 500 more patients per day in addition to the 800 outpatients currently received at the main building – essentially increasing the hospital’s

capacity by 60 per cent This final project therefore is to develop this new Consultation

Centre’s marketing strategy to meet targeted consumers’ satisfaction objective and boost

sales

1.2 VISION AND OBJECTIVE OF THE PROJECT

VCH’s new Consultation Centre is one of the biggest expansion projects undertaken by

VCH with the efforts providing world-class and multi-disciplinary healthcare in Vietnam

as well as continually enhancing the quality of the patient services and facilities it offers - designed by renowned architect Reda Amalou from Paris-based firm AW², this project is

the first in the hospital’s extensive US$ 3.5 million renovation and expansion plan

Now, VCH is a Southern area’s leader in private healthcare industry The slogan “World Class Healthcare in Vietnam” is a effort as well as commitment that the hospital wants to

bring to its patients who care about the quality of their health and life This new Consultation Center is one of VCH’s first steps toward achieving that long-term goal With

this, the innovation of technology and improvement of medical examination to meet all the needs of the people as well as eliminate all cases for referral are the key words to develop

of VCH in general and the Consultation Center in particular

Unlike the consumers goods or other industry, as a kind of healthcare products and services, VCH’s new Consultation Center is regulated by the Ministry of Health that makes

limited the marketing activities Therefore, the marketing strategy and marketing plan for this Consultation Center are not only satisfying the objective of VCH but also ensuring not out of the rules to scientific activities like public relation, symposia, seminars, sponsoring

for medical, surgical specialties practice and studiesầ

However, VCH’s new Consultation Center is out of the regular marketing strategy in case

of medical treatment application and innovative technology is the most significant core differentiation of the healthcare services Beside, non-medical services is developed by VCH in order to bring the new values to this new Consultation Center for the increasing demand of patients In addition, the reputation of the hospital are placed in the top as well

as medical ethics always came with your doctor to create long-term trust of patients like VCH’s mission “We provide superior quality and comprehensive patient care, in a

continuous effort to gain your complete trust” These are the keys in marketing strategy and

the platform to build marketing plan in its first operation period By construction this new Center, VCH has an ambition to be recognized as a leader in private healthcare sectors for

medical and surgical treatments not only in Ho Chi Minh City but also in East Southern Asia

In this final thesis, I want to introduce you the marketing plan of VCH’s hospital to

develop its new Consultation Center in period 2011-2015; especially in the launching year

1.3.1 About VCH

Established in 2001, VCH is a Vietnam’s only internationally accredited healthcare facility

It is a wholly foreign-owned general hospital, offering a wide range of medical and surgical services under one roof, equipped to care for you from consultation and diagnosis through

to the completion of your treatment

VCH was the first in Vietnam to be accredited by an international organization: the French Haute Autorité de Santé in 2007 They are presently working to achieve recognition from the global leader for accreditation, the JCI (Joint Commission International) by 2010 Mission

We provide superior quality and comprehensive patient care, in a continuous effort to gain your complete trust

Values

 Our patients are at the heart of the hospital

 We are highly skilled and ethical professionals

 We follow established quality processes and international standards

 We blend the best of Vietnamese and French medical cultures

 We are respectful, dedicated, caring and compassionate

 We consider excellent Customer Service as essential

 We have a high sense of team spirit

 We are ever-striving to improve

 We are reliable and accountable

 We provide an enthusiastic working environment

1.3.2 The Consultation Centre’s introduction:

The renovation and preliminary design

Comprising 28 new consultation rooms, the new Consultation Centre will allow VCH to see 500 more patients per day in addition to the 800 outpatients currently received at the main building – essentially increasing the hospital’s capacity by 60 per cent In addition,

the construction of the new Consultation Centre not only allows VCH to see a greater volume of patients, but also gives the hospital a completely new look and feel The new Centre is linked to the Main Building by the Indochine Walkway, which is made of transparent glass and creates an additional 580 square metres of space The waiting lounges

in this walkway are all elegantly upholstered and richly carpeted

Target on high income group who are working in professional place as well as have lifestyle and looking for careful, trusted and safe healthcare services, this new Consultation Centers was built to adapt its clients with construction as follow:

(1) First floor:

• Emergency center: offers specialized services, such as an ambulance service which

also serves as a mobile Intensive Care Unit (ICU) and is capable of collecting a patient in critical condition in areas far from Ho Chi Minh City

• Medical center: The VCH establishes, manages and operates the Consultation

Centre for the purposes of providing affordable international standard primary healthcare and healthcare consultation services to the Vietnamese and foreign community working and living in Ho Chi Minh City The followings are main healthcare services of the Consultation Centre:

- General Practice & Family Medicine

- Paediatrics & Neonatology

(2) Second floor:

• Lifestyle Clinic: Providing skincare, anti-aging, plastic surgery and dietitian

services, VCH’s Lifestyle Clinic offers a new standard of comprehensive health and

beauty care, available for the first time at a hospital in Vietnam The procedure process here has also been improved to increase efficiency and be more convenient for patients Before their appointment with a doctor, customers will be carefully consulted in order to select the customized services that best satisfy their individual requirements While waiting, they can enjoy complimentary coffee, cake and refreshments and free wifi-internet

• Asian Clinic: Consisting of consultation rooms to accommodate Korean doctors,

Japanese doctors, and Khmer doctors, VCH’s Asian Clinic provides medical

services for patients that wish to see a doctor of a specific nationality and that speaks their mother tongue With this multi-national medical service, VCH can better meet the demands of patients from other countries

(3) Third floor:

• Surgical Centre: This area is dedicated to the Surgical Centre and Orthopaedics

Department (including hand surgery) Anaesthetists are also available here and ready to prepare patients undergoing surgery With the greater number of consultation rooms at this centre, VCH will be ready to welcome more associate doctors, and meet increased patient demand for medical examination and treatment Moreover, this centre also incorporates micro-surgery rooms, offering beds for stitch removals, bandage replacement and on-site micro-operation procedures, which are performed quickly in a safe, custom-designed environment

• The spacious blood collection area will also help to support the surgical services

being provided here

Now that this new Consultation Centre is fully operational, VCH is proud to provide patients with an even more extensive range of world-class healthcare services VCH’s

renovation projects will ensure our patients benefit from greater comfort and convenience when visiting VCH for premium healthcare services

Technology and equipment

The VCH’s Consultation Center intends to institute policies and procedures which ensure

international standard practices The medical equipment for the Clinic all are brand-new

and imported from USA, Japan and Singapore (which account for over 98% total value of medical equipment)

 Equipment:

- Endoscopy: with the most high-tech endoscopy equipment and GI specialist trained in

US, Singapore, the Clinic will provide a comprehensive diagnosis and therapeutic endoscopy for upper and lower GI Endoscopy will be done on outpatient basic with sedation to relieve much uncomfortable for patients All therapeutic endoscopy can be done

as out patient such as polypectomy, varices band ligation, stent placementầ

- GYN Care: we equipped a full world of art set for woman care, mammography for early

diagnosis breast Ca with biopsy needle in the machine so we can take even a small sample accurately; colposcopy for early screening cervical cancer and cone biopsy; ultrasound machine with proper probe for breast exam and pelvic exam will help early and accurate diagnosis

 Technology

- Software: with the advanced development in informatics technique, medicine become

borderless, we can save all medical records with active pictures and connect with some regional university hospitals (i.e National University Hospital of Singapore) or even with

US hospitals for consultation A software will reduce less paper work for doctors and analyze patients' data for further development of the clinic

Besides, the Hospital will hire some other equipment and component from time to time for implementing the projects for meeting the business effectiveness

1.3.3 Profitability

Market share and revenue

In the multi-specialized department hospital segment, VCH has gained a marker share of around more than 33,2% in 2009 and 37% in 2010 With the advantage of indirect competition with other private hospitals – most of private hospital in Ho Chi Minh city is

the specialized hospital – VCH has kept the position as a leader with very strong

competitive advantages The following is VCH’s inpatient and outpatient market share

percentages for 2010

 Inpatient

(1) Direct Care Bed Days – 2,455

(2) Purchased Care Bed Days – 1,945

(3) Market Share – 35.8%

 Outpatient

(1) Direct Outpatient Visits – 29,456

(2) Purchased Outpatient Visits – 79,576

(3) Market Share – 40.5%

According to VCH’s 2010 annual report, the revenue mainly comes from 2 sectors:

medical specialties and surgical specialties

Figure 1.1: Number of inpatients in average per day in 2006-2010

The number of patients has increased significantly over the years Despite the considerable difference in the number of patients per month in which the highest is in the last month of the year, but according to records of the hospital, the average number of patients has

increased nearly 38% from 2006 to 2010

Figure 1.2: Monthly number of surgeries in 2006 – 2010

Although surgical treatment is not the strength of the VCH but in 2010 the hospital opened

in 1063 cases, especially heavy patients increased from 18% in 2009 to 32% in 2010

Coverage:

VCH’s patients are mainly from Ho Chi Minh City and the southern provinces, only

approximately 10% are from other areas Foreign patients are growing in recent years - this segmentation is focused in the future

Table 1.1: Allocation of VCH’s patient

Awareness:

In the end of 2010, according to the AC Nielsen survey, 92% people who live in Ho Chi Minh city know VCH brand name In the northern and southern, the rates are 36% and 19,8% respectively

Image:

In the most telling example, the impact of the wide range of full services VCH has been negligible because it has further stimulated a trend toward a dramatic expansion of the overall market These advantages made chance for VCH has built its brand image as

“World Class Healthcare in Vietnam” Although VCH has a higher price than its local

competitors as well as other foreign-owned hospital, patients and their family choose it based on its guarantee not only on quality but also on ethical with Vietnamese slogan

“Ni m tin vào y đ c” In addition, image of VCH is built as a community health exchange

by international standards such as radiology images and tests can be transmitted on-line and discussed with these doctors, as well as its partner laboratories in France.

Chapter 2: Literature review

2.1 MARKETING STRATEGY

2.1.1 The Four Ps:

The traditional Marketing Mix model has accounted for a balance of the “Four Ps” in the

manner an organization approaches business practices:

1 Product: The service or product provided by the organization

2 Place: The distribution of the product/service to the consumer

3 Price: The cost of the product/service

4 Promotion: The communication of the product/service and its benefits to the

consumer

Unfortunately, this model does not always work well in health care organizations The industry is predominately service oriented, and distribution is limited In addition, price is

nominally “fixed,” with most organizations tying price to one or more national fee

schedules And, until recently, promotion has been minimal The model does not address directly the ultimate consumer: the patient

Studies performed by Marketing at The Institute of Medicine (IOM) have indicated

another model, based on the consumer’s (i.e patient) needs, wants, expectations, and desires The model developed portrays these needs as the “Four Cs” of health care:

1 Competence: The perceived quality of care received and qualifications of the health

care provider

2 Convenience: Location, availability of services; timeliness

3 Communication: Ability of provider to communicate effectively with the

consumers; effective listening

4 Compassion: Friendliness, concern, and dedication of providers and staff

This model does not address directly another factor: cost of health care Of the population sampled, those who are enrolled within the civilian network are not concerned with cost They have become immune to financial implications and demands that influence utilization

due to rising national healthcare costs They pay nominal enrollment costs and few copayments This varies greatly with those not enrolled who primarily obtain their health insurance through employer based policies Cost is extremely important to this population According to those standards, health care must be expressed in the following table:

Table 2.1: IOM’s standard of healthcare services

Aims of the Institute of Medicine (IOM)

Safe Avoiding injuries to patients from the care that is

intended to help them

Effective Providing Services based on scientific knowledge to

all who could benefit and refraining from providing services to those not likely to benefit

Patient-centered Providing care that is respectful of and responsive to

individual patient preferences, needs, and values and ensuring that patient values guide all clinical decisions

Timely Reducing waits and sometimes harmful delays for

both those who receive and those who give care

Efficient Avoiding waste, in particular waste of equipment,

supplies, ideas and energy

Equitable Providing care that does not vary in quality because

of personal characteristics such as gender, ethnicity, geographic location and socioeconomic status

(source: http://www.iom.edu/Reports.aspx)

The challenge presented to all the hospitals were to integrate the three models into a working model, which synthesizes marketing theory, health care expectations, and organizational goals The first step was to reconcile the Four Ps with the Four Cs As mentioned previously, the missing factors (Patient in the Four Ps, Cost in the Four Cs) were placed into those models Therefore, they became the Five Ps and Five Cs

When placed in a matrix, along with the IOM model, it became obvious that they were readily interconnected:

Table 2.2: IOM model’s criterion

1 Product Competence Safe/Effective

2 Place Convenience Timely

3 Price [Cost] Efficient

4 Promotion Communication Equitable

5 [Patient] Compassion Patient-Centered

Criterion 1 relates the product to competence and safety issues, as well as effectiveness The product must be of high quality, defined as a service performed by qualified personnel,

in a safe and effective environment of care

Criterion 2 relates place (distribution) to convenience and timeliness Obviously, for a service to be convenient, it must be available in a timely manner in an efficient distribution area

Criterion 3 relates price to cost to efficiency By definition, these three items are interchangeable, and almost synonymous

Criterion 4 relates promotion to communication and equitable practices including the Navy's Core Values In order to promote any service, effective communications must exist,

in a variety of media, and it must be universal, i.e., and not segmenting markets by ethnographies

Criterion 5 relates the patient to compassion and being patient-centered This is the crux of the model: everything that is said, done, or thought must be oriented about the consumer All of the other four criteria are process-oriented This criterion is results-oriented Unless the patient is satisfied, nothing else will matter

(source: http://www.iom.edu/Reports.aspx)

2.1.2 Market Segmentation, Targeting, Positioning, and Competition

The theory of Strategic Marketing for Health Care Organizations, Philip Kotler, Joel Shalowitz and Robert J.Stevens have argued that a market segment consists of a group of customers who share a similar set of needs and wants Marketers do not create the segments; their task is to identify different benefit segments and decide which to target According to this, marketing strategy is built on segmentation, targeting and positioning (STP) Firstly, an organization discovers different needs and groups in the marketplace Secondly, it targets those needs and groups that it can satisfy in a superior way Then it

positions its offering so that the target market recognizes the organization’s distinctive

offering and image

Segmentation of consumer markets

The key is that the marketing program can be profitable adjusted to recognize customers differences, the researchers form segments by looking at descriptive characteristics: geographic, demographic and psychographic; and examine whether these customers segments exhibit different needs or product responses The major segmentation variables - geographic, demographic, psychographic and behavioral segmentation – are summarized in

Table 2.3

Table 2.3 Major Segmentation Variables for Consumer Markets

Psychographic  Life style: activities, interests,

Table 2.4 Steps in the Segmentation Process

1 Needs-Based Segmentation Group customers into segments based on

similar needs and benefits sought by customer

in solving particular consumption problem

2 Segment Identification For each needs-based segment, determine

which demographics, lifestyle, and usage behavior make the segment distinct and identifiable (actionable)

3 Segment Attractiveness Using predetermined segment attractiveness

criteria (such as market growth, competitive intensity, and market access), determine the

overall attractiveness of each segment

4 Segment Profitability Determine segment profitability

5 Segment Positioning For each segment, create a value proposition

and the product-price positioning strategy

based on that segment’s unique customer need

and characteristics

6 Segment “Acid-Test” Create segment storyboards to test the

attractiveness of each segment’s positioning

strategy

7 Marketing –Mix Strategy Expand segment positioning strategy to include

all aspects of the marketing mix: product, price, promotion and place

(Source: Richard K Thomas – “Marketing Health Services”, 2nd

edition, 2010)

Market positioning

Positioning is the act of designing the organization’s offering and image to occupy a

distinctive place in the mind of the target market The goal is to locate the brand in the minds of consumers to maximize the potential benefit to the organization A good brand positioning helps guide marketing strategy by clarifying the brand’s essence, what goals it

helps the consumer achieve, and how it does so in the unique way The result of positioning is the successful creation of a customer-focused value proposition, a cogent reason why the target market buy the product

Services Differentiation Strategy: When the physical product cannot easily be

differentiated the key to competitive success may lie in adding valued services and improving quality:

 Ordering ease: This benefit refers to how easy it is for the customers to place an

order with the hospital

 Delivery: Attributes of how well the offering is delivered include speed, accuracy,

and care

 Installation: This feature refers to the work done to make a product operational in

its planned location Differentiating at this point in the consumption chain is particularly important for organizations with complex products

 Customer training: Training customer’s employees to use products properly and

efficiently is a key differentiator

 Customer consulting: Customer needs can go beyond the product purchased To

satisfy total customer requirements, the seller needs to offer other products or services or help customers assess how to best solve their problems Many customers are willing to pay a premium for these extra because they anticipate improved profitability

 Maintenance and repair: When something does go wrong, the customer wants to be

able to fix it quickly to restore full functioning

(Source: Richard K Thomas – “Marketing Health Services”, 2nd

edition, 2010)

Healthcare service offerings is changed to be effectively differentiated This approach used

by innovative hospitals has been to differentiate as well as improve their product

2.1.3 Blue Ocean Strategy

Blue oceans are defined by untapped market space, demand creation, and the opportunity for highly profitable growth The creators of blue oceans followed a different strategic logic that called value innovation which is the cornerstone of blue ocean strategy Instead

of focusing on beating the competition, it focus on making the competition irrelevant by creating a leap in value for buyers and the organization, thereby opening up new and uncontested market space

In the study of Blue Oceans Strategy’s authors, W Chan Kim and Renée Mauborgne, value

innovation is a new way of thinking about and executing strategy that results in the creation

of a blue ocean and a break from the competition Importantly, value conventionally believed that an organization can either create greater to customers at a higher cost or create reasonable value at a lower cost Here strategy is seen as making a choice between differentiation and low cost

To reconstruct buyer value elements in crafting a new value curve which is a graphic

depiction of an organization’s relative performance across its industry’s factors of

competition, Blue Oceans Strategy’s authors, W Chan Kim and Renée Mauborgne have

developed the four actions framework As shown in figure 2.1, to break the trade-off

between differentiation and low cost and to create a new value curve, there are four key

questions to challenge an industry’s strategic logic and business model:

Figure 2.1: Four actions framework

(Source: W Chan Kim & Reneé Maubourgne – Blue Ocean Strategy – Harvard Business School

Press, 2005)

It is a supplementary analytic to the four actions framework called the raise-create grid The grid pushes companies not only to ask all four questions in the four actions framework but also to act on all four to create a new value curve

eliminate-reduce-2.2 UNDERSTANDING CONSUMER BEHAVIOR

Consumers is the primary concern of almost every industry as well as key element to a successful business, without their purchasing business cannot exist and survive Therefore,

A New Value Curve

Reduce

Which factors should be reduced well below the industry's standard

Create

Which factors should

be created that the industry has never offered?

Raise

Which factors should be raised well above the industry's standard?

Eliminate

Which of the factors

that the industry takes

for granted should be

eliminated?

healthcare marketers need to gain an in-depth understanding of consumer and business buying behavior Studying potential consumers provides clues for improving or introducing products or services, setting prices, devising channels and developing other marketing activities Then, examining the purchasing dynamics of organizational consumers, marketers understand the factors affected their making decision of using products or services

2.2.1 Healthcare consumers – who are they?

How healthcare consumers are different from other consumers?

Healthcare consumers differ from the consumers of other goods and services in a variety of ways For one, healthcare purchases are largely nondiscretionary in that serious consequences result if no action is taken A health professionally typically orders services for the good of the patient In virtually, no other industry are goods or services prescribes for the consumer and then pressure places on the consumer to comply with the prescription

In addition, healthcare consumers often do not know the price of the services they consume, which reflects the unusual financing arrangement characterizing healthcare and

the patient’s lack of access to pricing information

Further, healthcare consumers have little knowledge about the operation of the healthcare system and may have little or no direct experience with it They have no basic in reality for evaluating the quality of the services they receive Beside, most healthcare involves an emotional component in other consumer transaction and a certain level of anxiety for both the patient and those close to the patient Table 2.5 presents differences between healthcare consumers and other types of consumers

Table 2.5: Healthcare Consumers Versus Other Consumers

Consumers of Health Services Consumers of other Services

 Seldom determine their own need

for service

 Seldom are the ultimate decision

maker

 Often make decisions subjectively

 Seldom have knowledge of the

 Usually make decisions objectively

 Always have knowledge of the

price

 Seldom make decisions based on

 Have limited choices

 Have limited knowledge of service

 Are rarely reimbursed by third party

for most costs

 Usually make discretionary

purchases

 Rarely require a professional

referral

 Have unlimited choices

 Have significant knowledge of

services, who present themselves for treatment at a doctor’s office, clinic, or therapy

center A third party includes consumers who desire elective health services (i.e., products and services that are not considered medically necessary) By which, a number of different terms are applied to the purchasers and end users of healthcare goods and services According to Richard K Thomas in Marketing Health Service, today, the term patient is giving away to other term that more clearly reflect the contemporary healthcare environment Major term is described in summary for reference in Appendix 1

2.2.2 The buying decision making

Unlike other industries, in healthcare the end user of service typically does not make the decision to purchase Instead, a physician is likely to determine what, where, when and how much of service is provided Additionally, the decision maker may be a regular health plan, am employer, or a family member Then, a basic understanding of the decision-making process consumers go through when purchasing goods and services is the challenge of determining where to place the promotional emphasis under these circumstances but also is important for marketing planning purposes

The steps in Consumer decision making are described in the following list It is based on the theory of Berkowitz and Hillestad 2004 and is mentioned in Chapter 6, Healthcare Consumers and Consumers Behavior This approach marketers take depends on the

consumer’s stage in the decision process

 Problem recognition: This first step in the purchase decision process is consumer

recognition of a problem or need The marketer’s task is to identify the

circumstances or stimuli that triggered the need and to use this knowledge to develop marketing strategies

 Information search: At this stage of the decision process, the consumer is interested

enough to search for more information The consumer may exhibit heightened attention to the condition recognized in the first step or initiate an information search

 Initial awareness: Awareness refers to the target population’s initial exposure to the

good or service being marketed Thus, during the information search, the healthcare consumer becomes exposed to the various option that exist for addressing the problem

 Knowledge emergence: Knowledge concerning the options crystallizes as the

healthcare consumer begins to understand the nature of the good or service and to appreciate its potential for addressing the problem

 Alternative evaluation: At this stage, the consumer uses the information he or she

has accumulated to evaluate available options and make a rational purchase decision The consumer may decide to rule out some option at this point

 Contract assessment: This step is unique to healthcare in that many goods and

services will not be considered for purchase if the provisions if the consumer’s

insurance plan do not cover them or the available provider does not accept the type

of insurance carried by the consumer

 Preference assignment: Preferences develop at the point the consumer expressed a

tendency for one good or service or decides between different providers of the same service

 Purchase decision: The healthcare consumer makes a decision at this point with

regard to the good to be purchased or the service to be used Healthcare is different from other consumer contexts in that a variety of players may be involved in the purchase decision

 Product usage: At this point, the healthcare consumer buys the product or uses the

service This step could be as simple as buying adhesive bandages at the neighborhood pharmacy or as complex as undergoing a heart transplant

 Post-purchase behavior: In this last stage, the consumer assesses whether the

outcome of the purchase is satisfactory Family members or other parties also may express their opinions about the purchase If satisfied, the consumer becomes an advocate for the product or service (or a detractor if dissatisfied)

(Source: Richard K Thomas – “Marketing Health Services”, 2nd

edition, 2010, p176-177)

Healthcare consumers generally follow the same steps as other consumers when making decisions; they begin by recognizing a need and end with an assessment of their purchase

Chapter 3: Healthcare Market and VCH ’s Consultation Center

Analysis

3.1.1 Definition of Healthcare Market

According to the World Health Organization (WHO), definition of health is “the state of

complete physical, mental, and social well-being and not merely the absence of disease or

infirmity” They also provides a comprehensive definition of a healthcare system as one that “ầ encompasses all the activities whose primary purpose is to promote, restore, or maintain healthầ and includes patients and their families, health care workers and

caregivers within organization and in the community, and the health policy environment in

which all health related activities occur.”

3.1.2 Healthcare Market’s overview

Market size and growth:

Vietnam’s population is youthful, with nearly two thirds of the country’s 86 million people

under the age of 35 years The country has 1,030 public hospitals with more than 128,000 beds, and 62 private hospitals Ninety-five percent of communes have health stations, with more than 95% having skilled birth attendance Human resources for health (HRH) is limited and imbalanced; there are 34.7 health workers per 10,000 people, among whom 6.5 are medical doctors, 1.2 are pharmacists, and 8 are nurses (which illustrates in Table 3.1) in

2010.According to a 2010 WHO report, HRH in Vietnam is about half the number in other countries in the region

Table 3.1 Health Indicators

1 Life expectancy at birth (years) 73.0 74.0

2 Size of population (million

inhabitants) 86,920 <92

3 Population growth rate reduction % 0.20 0.20

4 Population growth rate (%) 1.04 0.94

5 Sex ratio at birth (boys/100 girls) 111 113

6 Hospital bed per 10,000 inhabitants

(exclude CHS bed) 20.5 23.0

7 Number of doctor/10,000 inhabitants 7 8

8 Number of pharmacian/10,000

inhabitants 1.2 1.8

9 Commune with doctor (%) 70 80

10 Commune with midwife (%) > 95 > 95

11

% of commune achieving new

national benchmark for commune

health

- 60

12 Health insurance coverage (%) 60 80

(Source: Report of Global Health Initiative Strategy - Socialist Republic of Vietnam, http://www.ghi.gov/documents)

In term of healthcare spending it is rising sharply in US dollar in the forecast period, from

an estimated US$8.8bn in 2010 to US$16.3bn in 2016 (which illustrates in Figure 3.1) Compared with a number of other countries in South-east Asia, Vietnam spends a relatively high proportion of its GDP on healthcare, more than the Philippines (4.3%), Malaysia (3.7%), Thailand (3.3%) and Indonesia (2.8%)

Figure 3.1: Vietnam’s healthcare spending and international comparison

Actual e Economist Intelligence Unit estimates f Economist Intelligence Unit forecasts

(Source: Economist Intelligence Unit, www.eiu.com)

Figure 3.2: Healthcare spending of Vietnam in 2006-2010

(Source: Economist Intelligence Unit, www.eiu.com)

Consumers tend to devote greater resources to improving health standards in 2012-16, in line with rising average incomes per head and a growing awareness of medical problems and available treatments

The nation’s health focus is also shifting Statistics from hospital inventories indicate that

communicable diseases accounted for about 55.5% of total diseases in 1976, and declined

to 25.2% in 2008 In contrast, non-communicable diseases have increased over the past 30 years, from 42.7% in 1976 to 63.1% in 2008 Other injuries, accidents, and poisonings remained steady at 10%

The private health sector is growing;yet facilities are generally small in size and located primarily in more populous and/or affluent areas Private facilities are often staffed by the same professionals who work in public facilities The prominence of the private sector is expected to steadily increase, placing a number of legal, regulatory, and policy constraints

on the government of Vietnam

Private Healthcare market trend

Vietnam is the 13th most populous country in the world with per capita income is just around USD 1,200/year Nevertheless, urban areas have been thriving significantly: Ho Chi Minh City has the PCI of USD 3,200/year and Hanoi of USD 1,900/year There has been a dramatic if little heralded increase in the Vietnamese urban middle class; their tastes and buying patterns have become quite international and advanced A limitation to healthcare utilization is poor service A million babies are delivered each year in Vietnam, and with this increase in population, hospital and health system development becomes a necessity For people in this bracket, time is money and is valuable 62% of current Vietnamese users

of international healthcare do so because of excellent service, over twice as much as for any other reason Still, 20% feel the wait time or service is sub par As service becomes more of a focus, the use of international healthcare will also grow In particular, institutions with a high service standard will be more attractive to patients, who will be ever more demanding

Women’s and Children’s Services are underserved The children in these families average

4.69 doctor visits/yr (~1.1 children/household; averages include income earners who are single and childless) Women of child-bearing age log 3.48 visits/yr and comprise just less than 50% of total family visits, from a different data set 41% see the doctor at least quarterly There are over 500,000 children 0-11 years in this demographic 289,000 are under 5 years old, where utilization is highest Thus, it can be calculated that there are at least 1,350,000 visits per year from the children under 5 years old Even with strong entries into the pediatric market, it would be far from saturated Since women make most family decisions on healthcare, marketing messages and services should be targeted to women and children will increase market penetration

Digestive diseases gastrointestinal (GI) complaints bring 46% of these patients to seek care, of which 11% require GI endoscopy 10% of these patients get a surgical procedure Thus, this portion of the population accounts for 1,449,210 doctor visits per year 124,740

will get GI endoscopy and 113,400 will have a surgical procedure

Figure 3.3: Vietnam hospital beds and doctors, 2010

(Source: http://www.eiu.com)

The government announced in mid-2009 that it would spend US$2.7bn in the following four years on improving its network of hospitals It is hoped that by 2015 the number of hospital beds will rise to 2.5 for every 1,000 people, but this goal is difficult to achieve The expectation of the ratio is to remain at around 1.7 beds per 1,000 people throughout the period (Figure 3.3)

In term of disease trends, the proportion of deaths from non-infectious diseases, such as cancer and cardiovascular diseases, is on a long-term rising trend in Vietnam The country lacks educational programs to tackle these problems However, the proportional increase of these diseases also reflects progress in tackling the number of deaths from infectious diseases through immunization schemes and greater awareness

Finally, risk factors in health trend are smoking and alcoholic drink According to the WHO, Vietnam has one of the highest rates of smoking in the world, with 56% of males and 2.5% of females estimated to be smokers Vietnam's domestic consumption of cigarettes will remain high in 2012-16 About the consumption of alcoholic drinks, it has risen sharply in recent years, largely because of growth in disposable incomes and increasing Western cultural influence According to the WHO, alcohol consumption is relatively low, at an annual average of 3.9 litres of pure alcohol per person in 2008

The above analysis affect health trends leads the result of the improving healthcare system

as well as the developing in healthcare industry

Medical tourism trend

Medical tourism – the process of “leaving home” for treatments and care abroad or

elsewhere domestically – is an emerging phenomenon in the health care industry

The rise in medical tourism is also having an impact on healthcare delivery in Southeast Asia A 2008 study by Deloitte Center for Health Solutions predicted that six million Americans alone will seek healthcare abroad by 2010 And from 2001 to 2006, the number

of foreign patients tripled in Malaysia alone, with medical tourism generating US$59 million in revenue In 2009, 1.5 million foreign patients visited Thailand, a 138 percent

increase from 2004, according to Thailand’s Department of Health Service Support This

sector is expected to continue growing significantly in the near future with information readily available on the Internet as well as more affordable and accessible air travel

Medical tourism in Vietnam tend to rising rapidly in recent years – considering both in

abroad and in other cities – with the following reasons (1)The safety and quality of care is higher in abroad like Singapore, United Stated, Thai Land, Koreaầ or even in big cities in

Vietnam like Hanoi, Ho Chi Minh city; (2) treatment cost is high but still acceptable in neighboring countries in comparison with quality and qualification of health workers (figure 3.4) (3) Vietnamese’s psychology preferred using foreign services

Figure 3.4: Cost comparison for selected surgical

(Source: Deloitte – “Private healthcare providers: The prognosis for growth” report, 2010)

In order to position themselves in the forefront of this burgeoning industry, healthcare providers need to equip themselves with innovative facilities and cutting edge technology that are equivalent, if not superior, to the standards of world-class hospitals Beyond procedures and equipment, hospitals also need to expand capacity and seek to optimize the overall experience for the patient, meeting international standards of luxury and comfort DWP, a leading architecture and interior design firm with offices in Southeast Asia, India and the Middle East, saw its healthcare business in Southeast Asia grow by 30 percent in

2009 It has completed numerous redesigns of hospitals in Thailand, India and Vietnam, transforming once dull conventional medical facilities into luxurious centres that also meet the functionality requirements from doctors, patients and nurses

3.1.3 Environment (SLEPT) analysis

Social environment

Vietnam's population is forecast to continue to grow at a steady rate of around 1% a year in the forecast period, and as a result the population will reach 93m by 2016, from an estimated 88.7m in 2011 On average Vietnamese are living longer, boosting the number of people aged 65 years and over to around 6.2% of the total population, from an estimated 5.7% in 2011 (figure 3.5)

Figure 3.5: Population, over-65 age group

(Source: Economist Intelligence Unit, www.eiu.com)

The healthcare system in Vietnam is generally of a low standard and, according to the WHO, more than one-half of Vietnamese are dissatisfied with it Many public healthcare centers struggle to operate effectively because of poor local infrastructure and inadequate equipment

The Ministry of Health provides healthcare services through a system that is divided into several tiers, namely village, commune, district and provincial At the district level (which covers a population of at least 20,000), district health centers and hospitals exist Provincial hospitals provide specialist services

Healthcare provision in Vietnam is respectable in terms of indicators such as life expectancy and infant mortality Average life expectancy was estimated at around 72 years

in 2011, below that in several of Vietnam's more developed neighbours Life expectancy is expected to edge up in the next few years (Figure 3.6)

Figure 3.6: Life expectancy

(Source: Economist Intelligence Unit, www.eiu.com)

The rate of infant mortality is estimated to have fallen to 20.9 per 1,000 live births in 2011, down from 28.6 a decade earlier However, the rate is still above that in China and Thailand (in both of which it is around 16 per 1,000 live births)

Legal framework

Based on the policies of the Party and the Government, orientation for development of Viet

Nam’s health care system in the period 2011-2015 develops in line with the guidelines:

“Reforming and completing the medical system with an orientation towards equity,

efficiency and development, aiming to create advantageous opportunities for the

protection, care and promotion of the people’s health with ever improving quality,

appropriate with the socio-economic development of the country.”

(Source: Annual Health review of Ministry of Health, www.moh.gov.vn)

Moreover, with the permissions and supports of laws relative of medical facilities construction as well as foreign investing in healthcare sector has conditioned for the development, management and differentiation of the hospital in healthcare market at different levels

- The Law on Foreign Investment in Vietnam of 12 November 1996, and its amendment

of 09 June 2000;

- Decree No 24/2000/ND-CP of the Government dated 31 July 2000 providing detailed regulations on the Law on Foreign Investment in Vietnam, as amended by Decree No 27/2003/ND-CP dated 19 March 2003;

- Circular No 12/2000/TT-BKH dated 15 September 2000 of the Ministry of Planning and Investment, guiding the foreign direct investment activities in Vietnam;

- Law on Corporate Income Tax issued on 17 June 2003 by the National Assembly of Vietnam;

- Decree No 164/2003/ND-CP of the Government dated 22 December 2003 providing detailed regulations on the Law on Corporate Income Tax;

- Circular No 128/2003/TT-BTC dated 22 December 2003 of the Ministry of Finance providing guidelines on implementing Decree No 164/2003/ND-CP;

- Decree No 06/2000/ND-CP of the Government dated 06 March 2000 on operation with foreign country in the field of medical examination and treatment, education and science research;

co Ordinance No 07/2003/PLco UBTVQH11 dated 25 February 2003 on Private Medical Practice;

- Circular No 01/2004/TT-BYT dated 06 January 2004 providing guidelines on Private Medical Practice;

- Other relevant laws and regulations

(Source: internal data of VCH)