BMK 501 Marketing Management

Tutor-marked Assignment 2

MARKETING PLAN

I. Executive Summary

Introduction

Due to the increase of health awareness among Malaysian and the development in
the field of audiology, the number of individuals diagnosed with hearing impairment
has increased tremendously. This hearing impaired population are looking for a
solution to help them in their daily life communication. The existing hearing aids in the
market are cosmetically unappealing and fail to deliver the sound quality that meet
users’ expectation.

Problem statement

Oticon, a Denmark based hearing aid manufacturer, believes in the potential of

hearing aid industry in Malaysia. Oticon would like to bring in the Denmark hearing
instrument technology to the hearing impaired population in Malaysia. However, the
hearing aid industry in Malaysia is dominated by Siemens, a Germany company over
the past decades.

Objective

Oticon aims to increase its market share in Malaysia from 3% to 20% in one year.
Oticon targeted retail sales of RM2, 074 000 from its three hearing aid centres
(outlets) located in Penang and Kuala Lumpur. Secondly, Oticon aims to achieve
gross sales figure of RM1, 476 000 through the supply of hearing aids to the 30 existing
hearing aid centres in Malaysia. The projected net profit is RM1, 584 400. Third
objective is to give a good profit margin of 55-60% to the dealers (hearing aid
centres). Fourth objective is to keep the hearing aid price compatible with other
brands while up keeping the quality of its hearing aids.

Strategy

The product being introduced is Delta, a unique hearing aid with premium sound
quality. The target market is the upper middle and upper class. There are three prices

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(RM4000, RM4800 & RM8200) depending on the features (frequency channels) and
microchip. Delta is available in Oticon’s retail outlets (two in Kuala Lumpur and one
in Penang). Another distribution strategy is through the existing hearing aid centres in
Malaysia which is currently prescribing Siemens hearing aids.

Action plan

The first step is to introduce Oticon’s product to the audiologists (a healthcare

professional who diagnoses hearing impairment and prescribes hearing aids to patients) in
government hospital and private hearing aid centres through a workshop or seminar.
Then demo set of the hearing aids are given to the audiologists on loan basis so that
they can try it on the patients. Advertisement in the newspaper and distribution of
printing material such as brochures and banners are effective tools to promote and
introduce Oticon to the public. Next, Oticon will give promotion in order to attract
customer. The promotion chosen is the extension of warranty period from one year to
5 years.

Conclusion

The marketing plan ought to be monitored and the outcome has to be measured for
the company’s continuous improvement. If the plan fails to meet the objectives set,
Oticon has to identified the root cause and modify its marketing plan accordingly.
Apart from this, Oticon has to continuously develop innovative and effective
solutions to provide the highest possible satisfaction to the hearing impaired
population.

II. Current marketing situation

Product

The product chosen is hearing aid. Hearing aid is an electronic device that amplifies
sound so that it is audible to the individual with hearing loss. The first transistor hearing
aid was introduced in 1953. With the development of the transistor, the aids were
able to become smaller and more powerful. The use of microchips for programming
hearing aids was introduced in 1985.

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Today's modern electronic hearing aids convert sound pressure waves into electricity
by a microphone. The electric impulses are then amplified through controlled
electronic circuitry. The amplified electric impulses are then reconverted by a
receiver to pressure waves at a much more intense level to be presented to the
impaired ear.

Different styles of hearing aids:

Previously, hearing aid was rejected by many due to its size and cosmetically
unappealing design and poor sound quality (amplify lots of background noises).
Now, there is a new breakthrough in hearing aid technology. This new product is
called Delta. Delta is the product of Oticon, a hearing aid manufacturer based in
Denmark. Oticon was founded in 1904 by Hans Demant, with the desire to help his
hard-of-hearing wife and others with similar problems lead a better life. Inspired by
this humanistic philosophy, the people of Oticon continue to focus on developing
practical solutions that make living with a hearing loss so much easier. Delta propels
hearing devices into the 21st century and sets a new standard for aesthetics. Delta’s
“high-tech” triangular design and nearly invisible sound wire make the whole device
as discreet as you want it to be.

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How healthy is the company?

Oticon is a healthy and prospering company with the establishment of 24

headquarters across the globe and about 60 distributors. Oticon was founded in
1904 when Hans Demant began importing hearing aids to Denmark. Hans died in
1910 and his son (William) took over the business. In the 1920s, William acquired
exclusive distribution for Acoustician hearing aids for the Nordic Region. In the 1940s,
World War II made it difficult to locate and acquire supplies. Therefore, William
began producing his own hearing instruments. In 1946, the “Oticon TA” was the first
Danish hearing aid produced.

In the 1960s and 1970s, Oticon experienced significant growth and subsequently
moved its offices to a larger location in Copenhagen, while opening a production
facility in Thisted, Denmark. Also during that time, sister companies were established
in Holland, the USA, Norway, Switzerland, Germany, Italy, Japan, the UK, France and
New Zealand. Oticon opened its own independent research centre, Eriksholm, in
Denmark at the end of the 1970s (Oticon 2009).

Technological advances during the last two decades have enabled Oticon to
introduce a number of groundbreaking products. MultiFocus was released in 1991 as
the world’s first fully automatic hearing aid. In 1997, DigiFocus made its entrance as
the first digital ear-level hearing instrument. This revolutionary device won a European
design prize. The next technical milestone was the introduction of Adapto in 2001,
followed by the introduction of Syncro in 2004, incorporating Artificial Intelligence
into a hearing aid. Syncro earned the European Information Society Technology 1st
Grand Prize (Oticon 2009).

Delta made its debut in 2007, with a revolutionary concept and design that
changed the face of hearing aid design. In 2008, Epoq, Oticon’s most sophisticated
product ever – was introduced, allowing true binaural hearing aid fittings, and
multiple benefits via Streamer.

Oticon was awarded recently with The BrandLaureate Award in the Corporate
Branding Category - Best Brands in Healthcare Category – Hearing Aid. This award
was presented during the BrandLaureate Awards 2008-2009, organized by the Asia

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Pacific Brands Foundation (APBF) at Shangri-La Hotel, Kuala Lumpur on 31st March
2009 (The Brand Laureate Awards, Asia Pacific Brands Foundation 2009).

What is the product market share?

The product market share is about 15-17% worldwide. Delta, Oticon is very popular in
the European country where cosmetic is an important issue. However, the market
share of Oticon in Malaysia is rather low at about 3% only. This is due to the late entry
of Oticon hearing aid into Malaysia market. The hearing aid industry in Malaysia is
mostly dominated by Siemens hearing instrument. About 70% of the hearing aids sold
in Malaysia are Siemens hearing aids.

Market for hearing aids

Hearing loss is the second highest registered disability in Malaysia. Statistics from the
Welfare Society Department of Malaysia reported 26,294 such disabilities among
children in 2005. This number increases every year and thousands go unrecorded.
The prevalence of hearing loss among adult is even greater. One out of every three
adults who are 65 years old and above is expected to develop certain degree of
hearing impairment. According to the country’s statistic, there was 4.5% of Malaysian
age 65 years old and above out of 27.73 million. This means there are about 0.416
million of hearing impaired senior citizens in 2008. There are 15-18% of Malaysian
adults 20 to 60 years old have a hearing impairment. Therefore, total number of
hearing impaired individuals in Malaysia is higher than shown in the statistic.
(Department of Statistics Malaysia 2009).

In a research done, only 10% of the hearing impaired individual owns a hearing aid.
Reasons for not being fitted with hearing aid were social stigma of being seen as old
for wearing hearing aid, cosmetic appearance of hearing aid, the cost, the limited
benefit of hearing aid and the lack of awareness on the availability of hearing aid
(Saravanan 2003).

Hearing aid is needed by individual with hearing loss. Delta is a hearing aid with
special features to cater for those which high pitch hearing loss. This is unique
because a basic hearing aid will amplify all sound including the background noise
and environmental sound. Delta has digital signal processing which filter the

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background sound and produces crystal clear amplified sound to the user. Those
with high pitch hearing loss buy Delta in order to help them to hear better.

Competition

Delta’s design looks nothing like a traditional hearing aid. Its triangular shape makes it
more discrete from the most visible angle. However, there are a few products in the
market which is compatible to Delta in terms of the size. Among those are Centra Life
from Siemens (Germany), Widex Passion from Denmark as well as Audeo and Savia
Art from Phonak, Switzerland. Widex and Phonak have only one outlet in Kuala
Lumpur and therefore they are not Delta’s main competitor. Siemens on the other
hand has more than 50 outlets in Malaysia and the brand is also well known to the
consumer as compared to Oticon. Hence, Delta’s greatest competitor is Centra Life
from Siemens which has almost the same features as Delta.

Centra Life, SIEMENS Delta, OTICON Savia Art, PHONAK

(Germany) (Denmark) (Switzerland)

In terms of brand and market share, SIEMENS is the leader in hearing aid industry in
Malaysia. There are more than 50 hearing aid centres prescribe SIEMENS hearing aids
exclusively (exclusive means 90% of the hearing aids sold are Siemens hearing aids).
Oticon is still relatively new in Malaysia and it only has two outlets in Kuala Lumpur
and one in Penang.

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III. Opportunity and issue analysis

Strengths in Delta, OTICON

The unique and fantastic design of Delta is an attraction for the hearing impaired
individual who often reject hearing aid due to its big and ugly design. But the
triangular shape of Delta makes it looked like a Bluetooth or any other sophisticate
gadget. Delta is as small as 10 cents coin.

Delta offers wide range of colours for the casing (17 colours). Other brands of
hearing aids only have the conventional hearing colours which are beige, black and
silver.

Usually, a hearing aid could not be made as small and invisible as possible due to
the power of amplification needed by a patient. The smaller the hearing aid, the less
power it will be. However, Delta is designed to be small and has the fitting range up

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to moderate hearing loss. On the other hand, Centra Life from SIEMENS and Savia Art
from Phonak can fit up to mild hearing loss only.

Wider frequency amplification is also the strength of Delta. Delta covers up to 8000
kHz while Centra Life covers up to 5500 kHz and Savia Art up to 4000 kHz only.

Delta also has 3 price points. It is sold at RM8200, RM4800 and RM4000 depending on
the series and quality. This price range is catered for upper middle to higher income
group.

Strength of Delta is the reliability. Delta is splash proof. The housing is nano coated.
This means sweat or water vapour will not enter the hearing aid compartment easily.
This is important as most of the hearing aids repair cases are due to corroded
microphone or amplifier.

Recently, Oticon received The BrandLaureate Award in the Corporate Branding

Category - Best Brands in Healthcare Category – Hearing Aid. This award will give
confidence to the users on Oticon hearing aids reliability (The Brand Laureate
Awards, Asia Pacific Brands Foundation 2009).

Weaknesses

Oticon is rather new in Malaysia. The brand entered Malaysia barely 3-4 years ago.
As late comer, the brand is relatively unknown to many hearing impaired population
as compared to Siemens.

Hearing aids are being prescribe and fitted by audiologist, a hearing healthcare
professional. The audiologist will usually prescribe hearing aid that he/ she is familiar
and comfortable with. Since Oticon hearing aids and Delta is very new, audiologist is
still not familiar with the setting and features. Therefore, the probability of audiologist
recommending Delta to his/her patient is relatively lower than to recommend Centra
Life from Siemens.

There are only 3 outlets in Malaysia selling Oticon hearing aids. So it is rather hard to
promote Delta throughout the country. Limited access by audiologists and users is
the weakness of Oticon.

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Opportunity

Since there are so many outlets selling Siemens hearing aids, there is no way that
Oticon can fight the sales figure by doubling the number of Oticon hearing aid
centre in Malaysia. Therefore, Oticon should take this opportunity to introduce its
hearing aids to existing outlets. Since theses outlet already has the patient pool,
Oticon can spare a few sets of DEMO unit and let the outlet try its product, Delta.
Good feedback from patients will enable Delta, Oticon enters the hearing aid
market slowly.

As making the audiologist familiar with the product will increase the prescription then
training should be carried out for the audiologists in the hospital or private hearing
aid centres. The training is also a way to introduce Oticon brand and its new product
Delta to the healthcare professionals.

Threat

There are many hearing aid manufacturers in this healthcare industry. However, the
prominent manufacturers or the main competitors are Siemens (Germany), Phonak
(Switzerland) and Starkey (USA). In Malaysia, the main competitor is Siemens hearing
instruments. The brand, Siemens, has already established in our country. Siemens is
involved in the medical equipment industry, handphone industry and hearing aid
industry. The name Siemens of Germany is being seen as Sony of Japan. There are
more than 50 outlets selling Siemens hearing aid exclusively. There are many loyal
Siemens hearing aid users and loyal audiologist prescribing Siemens hearing aids in
Malaysia every day. Therefore, it is rather hard to make those people change and try
something else such as Delta from Oticon.

Siemens has the capital and they are very aggressive in the advertisement and
marketing project. Siemens advertised in the newspaper, billboard and sponsored
community projects frequently. Siemens also has its promotional sales annually such
as 50% off the second piece of hearing aids; free gift of TV for every purchase of
hearing aid and now the latest is free lap top for audiologist who prescribed a total
of SGD10k of hearing aids during the promotional period.

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IV. Objectives

Oticon aims to increase its market share from 3% to 20 % in one year. This means 1 in
every 5 pieces of hearings prescribed is Oticon. The sales of Oticon hearing aids
need to be increased. For the first year, Oticon targeted retail sales of RM2, 074
000 from its three hearing aid centres located in Penang and Kuala Lumpur. This
value is through the retail sales at the outlets.

Secondly, Oticon has identified 30 existing outlets or hearing aid centres in Malaysia
that has potential to prescribe Oticon hearing aids. Those hearing aids centres are
mostly prescribing Siemens hearing aids currently. Oticon aims to achieve sales figure
of RM1, 476 000 through the supply of hearing aids to those hearing aid centre.

Third objective is to give a good profit margin to the dealers (hearing aid centres).
The dealers will enjoy a profit margin of 55-60% for every piece of hearing aid sold.
This profit margin is very attractive as Siemens is offering 15-20% lower.

Fourth objective is to keep the hearing aid price compatible to others. Due to the
high profit margin offered to dealers and also the technology involved, the Oticon
hearing aids are relatively more expensive than the Siemens hearing aids. Therefore,
Oticon did a comparison chart with Siemens and drafted a new price list which is
compatible to the different hearing aid models in Siemens. For example Delta of
Oticon (RM4000, RM4800 & RM8200) matched with Cielo Life (RM3900), Artis Life
(RM5100) and Centra Life (RM9000) of Siemens.

V. Marketing Strategy

Target market

Hearing aid is a medical supply. Therefore, the target market will be in the health
industry. Delta’s target group is individual with high pitched hearing loss. This type of
hearing loss is very common among the elderly people, those acquired noise-
induced hearing loss such as policemen, army, factor workers and construction site
workers. More than 50% of the total hearing impaired population has high pitched
hearing loss and most of the traditional hearing aids available in the market do not
address the problem of this special group with high frequency hearing loss. Delta

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targets upper middle and the upper class group. The price range for Delta is from
RM4000 to RM8200 .

Positioning

When Hans Demant founded Oticon in 1904, he was driven by a profound desire to
help his hard-of-hearing wife and others with similar problems lead a better life.
Inspired by this humanistic philosophy, the people of Oticon continue to focus on
developing practical solutions that make living with a hearing loss so much easier.
Hence, the philosophy of Oticon, “We put people first” goes a long way from
audiological aspects to hearing aid fitting technology (Oticon 2009).

The easiest way of getting into someone’s mind is to be first because it is very easy to
remember who is first than to remember who is second. However, products that are
not first can still be successful (QuickMBA 2007). By being the first to claim a unique
position in the mind of customer, Oticon can cut through the noise level of its
competitor, Siemens.

The marketing department make sure that the voice of the market is heard in every
aspect of the development process. The market demands and trends are being
modified closely. Oticon focuses on ensuring that service and production activities
are carried out effectively and in full compliance with established methods in order
to keep the quality of the end product consistently high. Customers feel their needs
and concerns are being addressed properly with the tagline of “We put people first”.

Product

Hearing loss is diagnosed by an audiologist in a private or government hospital

though a hearing test called Pure Tone Audiometry. The type of hearing aids and
urgency to get one depends on the severity of the hearing impairment and impact
of it on the person’s daily communication activities. The counselling session done by
an audiologist and motivational level of the patient is important to determine the
success of hearing aid fitting.

Oticon has many range or types of hearing aids. For a start, Oticon will introduce
Delta as its primary product to enter the hearing aid market. Delta is unique in the
sense that it does not look like a hearing aid at all. Oticon aims to create a market

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differentiation for Delta which has a fantastic design. Delta is also able to create a
unique market position. If a product is perceived to be exactly like others on the
market, consumers would have no reason to buy it (Kotler & Armstrong 2008). It is
predicted that the market acceptance would be very high and the audiologist
could easily close sale if Delta is being introduced to the hearing impaired person as
compared to other cosmetically unappealing traditional hearing aid which has
been rejected for decades.

Price

In general, a piece of digital hearing aid ranges from RM850 to RM13 000. The
average sale of a piece of hearing aid in Malaysia is about RM2000 – 3000
depending on the location of the hearing aid centre. A hearing aid centre located
in shopping malls in a city (such as Soundtex in Island Plaza and Clarisound in Gurney
Plaze) would usually able to sell higher end product as compared to a small clinic
(such as Gnosis Audiology at Bukit Mertajam).

In order to target for middle and higher income group, Delta has three prices. The
differences are on the microchips, features, channels, frequency bands and sound
quality. Oticon set three prices for Delta which is RM4000, RM4800 and RM8200.
Oticon expected Delta RM4800 to hit the market and make the most sales. Delta
RM8200 is solely for higher end market. Oticon does not intend to sell a lot of Delta
RM4000 which has fewer features and lower sound quality. Therefore, Oticon
purposely put the second series Delta at RM4800 which is very close to the basic
model (Delta RM4000) in terms of price but vast different in features and quality.

This price range is compatible to Siemens hearing aids. Delta RM4000 is compatible
to Cielo Life RM3900, Delta RM4800 is compatible to Artis Life RM5100 and Centra Life
RM9000 of Siemens. Oticon aims to take over the sales of Artis Life (Siemens) in the
hearing aid market.

Promotion

Besides the price and special design of Delta, Oticon needs to do a lot more
publicity to bring in its hearing aids into Malaysian market which has been
dominated by Siemens for many years. As mentioned before, Siemens has been very
aggressive in its marketing, advertisement and promotion. Although its strategy of

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giving free TV, vacuum cleaner and microwave received numerous comments or in
fact, a laughing stock in the healthcare industry, bottom line is that, the sales did
increase for Siemens during those promotional periods.

Oticon needs to know what the hearing aid users actually want. Do they need those
free gifts or they are looking for something else. Due to the high humidity in Malaysia,
the microphone inside a hearing aids get corroded very fast especially for those who
sweat a lot. The repair charge of a hearing aid is about RM180-RM300 (minor repair)
and RM540 for major repair. The warranty for Siemens hearing aid is one year upon
fitting date.

By looking at this Oticon would not want to compete with Siemens in terms of free
gift but a promotion that deemed beneficial to the audiologists and the users, that is
the extended warranty promotion. Oticon will launch an extended warranty
promotion where the warranty is extended up to 10 years depending on the models
of hearing instrument without extra charge imposed on buyers. There are three
categories of extended warranty depending on the price of hearing aids. Those
hearing aids below RM3000 are entitled for 3 years warranty. Hearing aids which cost
RM4000 or more will get 5 years warranty. Epoq, a high end hearing aid, which cost
about RM13, 000 a piece would receive an extended warranty of 10 years.

This extended warranty promotion is new and never been done by Siemens or other
hearing aid manufacturer. It is expected to receive good feedback from users and
dealers. This also creates an image of high reliability within the Oticon hearing aids.
Extended warranty promotion also challenge Siemens because Siemens has
reliability issues especially in Malaysia due to our high humidity weather. Siemens will
never afford to give such an extended promotion for any of its models.

The three series of Delta will received 5 years warranty. This promotion needs to be
announced as loud as possible to the users and the audiologists who play an
important role in prescribing hearing aids. The best place to advertise Delta is local
newspaper. This is to target those elderly people who read newspaper. Another way
is the banner along the public area. Banner will catch the attention of those moving
around. Billboard is also a good way to advertise Delta. Another way which has
never been used by any hearing aid outlet in Malaysia is advertising on the

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television. Television is one of the best places to advertise and introduce Delta to the
community.

Place

As discussed above, the three outlets of Oticon in Penang and Kuala Lumpur are not
enough to reach out to the market and to achieve the targeted sales volume.
Oticon needs to expand its distribution. In such a short time, it is impossible to
establish another 50 hearing aids centre to compete with Siemens.

Therefore, Oticon has identified another strategy to channel its Delta to the market.
Oticon identified 30 out of the 50 existing hearing aids centre in Malaysia and
introduce Delta to them. Demo set was given and the dealers were asked to try out
Oticon on the patient. It is predicted that the customer will like Delta due to its
appearance and size. In this way, there will be another 30 dealers or channels
prescribing Oticon hearing aids. Once the dealers are more familiar with Delta and
have confidence in Oticon hearing aids, Oticon will introduce other models to them.

VI. Action Programs

1. Training for audiologists

The first line of customer is the audiologists, who are going to prescribe or introduce
Oticon hearing aids to the patients. Therefore, the first action to be taken by Oticon
is to organise a training session or workshop for the audiologists who are in
government hospital and private hearing aid centre. The audiologists in the
government hospital do not sell hearing aids but they do counsel their patients on
which type of hearing aids to purchase. The government audiologists often gave
prescription for the patient to purchase the hearing aids outside. So both
government and the dealers are to be invited for this launching of new product and
training workshop. Total audiologists and dealers targeted to attend the workshop
would be 40 people.

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Budget for one day workshop at Corus Hotel, Kuala Lumpur.

Activity Quantity Expenses (RM)

Conference Room inclusive of 2 tea breaks and a 40 pax 4200

lunch

Presentation facilities 8 hours 800

Speakers (Product Specialists) from Denmark (food and 2 person 3000

accommodation fee only. Other expenses is supported by the Denmark
headquarter).

Free Flow coffee & tea 8 hours 200

Transportation for outstation participants (flights) 12 9600

Accommodation for outstation participants (1 night) 12 4800

Printing material - 2000

Door gift 50 1500

Miscellaneous - 500

Total 26600

2. Demo set

After the training, the audiologists need some demo sets to be kept in their clinic so
that they can try it on the patients. Oticon should provide the demo sets free of
charge and on loan basis to the 30 center. Each audiologist or centre would be
given two demo sets of Delta RM4800 & Delta RM8200 each. The Oticon
headquarter in Denmark will provide the DEMO set of Delta RM4800 & Delta RM8200
free for the first 20 units each series and the subsequent unit at a special price of
RM500 per piece for Delta RM4800 and RM800 for a piece of Delta RM8200.

Budget for the distribution of demo set.

Activity Quantity Expenses (RM)

Delta RM4800 40 20000

Delta RM8200 40 32000

Total 52000

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3. Advertisement

The cost for advertising in the newspaper depends on the size, frequency of insertion,
type of page, colour versus black and white and type of newspaper. The
disadvantage of newspaper advertising is that it might not meet the target group as
some people do not read daily papers. The advertisement on the radio is more
expensive and it will not create good response because hearing impaired people
will have difficulty in hearing the information mentioned due to their poor hearing.
Advertisement on television is about RM20, 000 – RM35, 000 depending on the type
and duration of the advertisement. The price also varies depending on the
broadcasting time. Although advertising in the television is expensive, it is one of the
effective ways to create awareness on hearing impairment and to introduce Delta.

At the initial stage, Oticon will choose newspaper as the advertisement tool. Oticon
will introduce its product through local newspaper and also printed brochure which
will be placed in the audiology clinics and hearing aid centres. Banners will be
distributed to the dealers and to be hung up for those who does not read
newspaper.

Budget for advertisement and printing materials

Activity Quantity Expenses (RM)

Artwork and design - 1500

Newspapers 4 20000

Brochures 5000 2000

Banners 40 3500

Total 27000

4. Promotion

Product positioning statement, along with an analysis of its strongest competitive

features and consumer benefits, are basic starting points in developing advertising
and other promotional plans (BusinessTown 2003). Oticon put people first and
therefore the promotion needs to be something special that take the customers’
need or concern into consideration.

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Oticon will have a different type of promotion than Siemens. There will be no
discount on the hearing aids. The promotion offers extension of warranty period, free
of charge. This means if a hearing aid is spoilt within the warranty period, the repair is
free of charge. Any parts in the hearing aids that need to be changed will be
replaced with a new component without any charges to the patient. In other words,
the repair cost will be bear by Oticon during the 5 years warranty period. The Oticon
headquarter in Denmark offers warranty of three years for every Oticon hearing aids
and RM100 per year for an extended warranty. This means there is a reduced in
profit margin by RM200 in every piece of Delta sold.

VII. Projected profit-and-loss statement

Delta RM4800 Delta RM8200

Retail Revenue (3 outlets) Quantity Price Amount Quantity Price Amount Total
(RM) (RM)
Retail in Penang 60 4800 288000 30 8200 246000
Retail in KL (2 outlets) 150 4800 720000 100 8200 820000
Total Retail Revenue 210 4800 100800 130 8200 106600 2074000
0 0
Cost of hearing aids 210 1500 315000 130 3000 390000
Cost of extended warranty 210 200 42000 130 200 26000
Gross profit of Retail outlets 651000 650000 1301000

Supply Revenue (30 300 2400 720000 180 4200 756000 1476000
dealers)
Cost of hearing aids 300 1500 450000 180 3000 540000
Cost of extended warranty 300 200 60000 180 200 36000
Gross profit of supply 210000 180000 390000

Expenses
Training 26600
Demo set 52000
Advertisement 27000
Total expenses 105600

Net profit 1584400

The total retail revenue is RM2, 074 000 and the cost of hearing aids including the
extended warranty is RM 773 000. Hence the gross profit of retail outlets is RM1, 301
000. It is estimated that each dealers will commit to a minimum amount of 10 pieces
of Delta RM4800 and 6 pieces of Delta RM8200. The gross profit of supply to dealers is
RM390 000. Total expenses for introducing Delta through various activities such as
workshop for audiologist, advertisement and demo set amounted to RM105 600. The
projected net profit before taxation is RM1, 585 400.

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VIII. Controls

The sales of retail outlets and the supply to the dealers will be monitored closely in
order to achieve the targeted sales volume. The marketing tools used also will be
monitored on its effectiveness and implementation of backup plan if the initial
marketing plans fail to kick off Oticon hearing aids in the hearing aid market.

Visitation

After the initial workshop, the marketing personnel should pay visit to all the
government audiologists and 30 dealers. The visitation should be made in 2 phases
within a year. The first trip is the follow up session with the dealers after the training
workshop being held. This round is the one-to-one training. Demo set will be given to
the dealers during the visit and hands on programming of Delta will be shown to the
dealers. The retail price list and dealer’s price list will be given to the dealers as well.
Dealers were also brief on how to make orders and the terms and conditions. The
marketing personnel should also get feedback from the dealers on the training done
previously and comment on Delta.

Direct mailing

After the first trip, the marketing personnel should follow up with direct mailing of
more information about Oticon hearing aids. Poster and brochure also being send to
the dealers so that they can display those printed materials in their centre. This is also
perceived as sending the dealers a “reminder call” to prescribe Oticon hearing aids.

Newsletter should be sent to the dealers and also those audiologists in the
government hospitals. Quarterly information, testimonials and wellness tips should be
an integral part of the newsletter (Practice Marketer 2005).

The retail outlets should send the brochures and newsletter directly to their existing
client. Some of them might want to change new hearing aids. The retail outlets can
create a ‘frequent referral programme’ by building a good rapport with their referral
source which is the doctors and audiologist in the government hospital.

Once the dealers get all the information and tools needed to prescribe Delta, the
extended warranty promotion will be advertised in the local newspaper. This is to

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create public awareness on the Oticon hearing aids and encourage public calls for
enquiry.

The sales volume will be monitored every month. After the first quarter, the sales
volume will be monitored. If the sales volume is picking up, then Oticon should
proceed with the second phase of advertisement. If the sales are not picking up,
then the second phase of advertisement need to be revised and be more
aggressive. The marketing personnel should analyse the dealers account and see
the trend in their orders.

Getting feedbacks

In the second quarter, the marketing personnel should make another trip to the 30
dealers. The purpose of the trip is to remind the dealers on Oticon hearing aids, help
to troubleshoot problems faced by dealers, if any, and get feedback from dealers
on Oticon hearing aids and the effectiveness of the marketing activities carried out.

Evaluate and modify the marketing activities

The feedback received from the dealers should be analysed carefully in planning
the next step for the third quarter. The marketing activities that is effective should be
continued and suggestion from the dealers should be taken seriously For example
the dealers in Penang might require Oticon to place advertisement in our local
Guang Ming & Kwong Wah Yit Poh newspaper rather than just Sin Chew Daily
because majority of the target users read these two newspapers in Penang. If the
dealers feel that the extended warranty campaign is very beneficial in boosting their
sales then Oticon might consider of extending the promotion.

In the last quarter, Oticon will focus on the dealers who still fail to commit to the sales
volume. Oticon personnel would ask the dealers their problems and their need in
order to prescribe Delta. The marketing activities will focus on those dealers.

The project will also be monitored in terms of overwhelming response and good
sales. The sales target will be revised in the third quarter if the sales volume is very
high for the first and second quarters.

Sometimes it is discovered during the development of a sales forecast that the

product’s price is too low to clear a good profit. Oticon will need to decide, whether

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the market would be receptive to a higher-priced product or a product with fewer
features and benefits. Or, sometimes, the product makeup and price can remain the
same and expense cuts can be made in the advertising or promotional budgets
without affecting sales potential (BusinessTown 2003).

IX. Recommendations and conclusions

In order to accomplish Oticon’s mission, the company assure that the hearing
solutions provide the highest possible satisfaction to the customers by developing
innovative and effective solutions; establishing strong partnerships and sharing
knowledge with professionals and hearing aid users (Oticon 2009).

Once the dealers started to prescribe Delta to the hearing impaired patient, Oticon
should try to introduce other models of hearing aid to the dealers. At the same time,
there should be new research and development in the hearing aid industry. By the
end of fourth quarter, there should be another workshop for audiologist to introduce
Oticon’s new breakthrough or new hearing aid.

The workshop should also update on the current development of Delta. The future
plan for Delta is to have more colour choice so that user can choose the hearing aid
colour according to their preference. Delta can also have different casing instead,
where the user can change the casing themselves. Another innovative plan is to
have a remote control for Delta. So the user can use the remote control to increase
or reduce the volume of the hearing aid. Delta can also have build-in hearing aids in
the spectacles. This “2-in-1” concept is very convenient for those with visual and
hearing problem.

The marketing strategy of introducing Delta to capture the attention of the dealers
and to introduce Oticon hearing aid to the hearing aid market is very effective.
Once the audiologists and the hearing impaired population know the brand Oticon,
it can slowly introduce its other models into the market.

Oticon also should be prepared for the competitive reaction. If the marketing plans
result in sharply declining market share for the competitors, then there is a need to
be prepared for their reaction. For example, Siemens which will be affected most by
the introduction of Delta from Oticon might react by giving great price discount for
its Centra Life. This will trigger a price war which ends up making everyone a loser.

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Therefore, Oticon should not compete on price. Instead, try targeting a small niche
within the marketplace (such as paediatric population with hearing impairment) that
is not directly targeted by the competitors (BusinessTown 2003).

Certificate of Authenticity

I certify that the following is entirely my own work, except where credited. I
understand that if my work is found to be plagiarized or is the result of collusion,
then the marks will be severely reduced. Further action may be taken by the
University as appropriate.

Poh Boon Fong 30/04/09

Signature & Date

Student ID: 041080534

References

1) Centres for Disease Control & Prevention. 1999. Surveillance for Sensory
Impairment, Activity Limitation, and Health-Related Quality of Life Among
Older Adults -- United States, 1993-1997
http://www.cdc.gov/mmwr/preview/mmwrhtml/ss4808a6.htm (accessed 10th
April 2009).

2) Department of Statistic Malaysia. 2009.

http://www.statistics.gov.my/eng/index.php?option=com_content&view=arti
cle&id=314:population-by-age-group-malaysia-1963-
2008&catid=84:population-by-age-group-malaysia-1963-2008&Itemid=12
(accessed 10th April 2009).

3) Saravanan, S. 2003. Why hearing aid is being rejected? Unpublished paper

done in University Kebangsaan Malaysia.

4) http://www.hear-it.org/page.dsp?page=1880

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5) The Brand Laureate Awards, Asia Pacific Brands Foundation .2009.
http://www.thebrandlaureate.com/winners-tbl0809.asp (accessed 15th April
2009).

6) Practice Marketer. 2005. Writing your own audiology practice marketing plan.
www.practicemarketer.com/marketing/article.php?id=011 (accessed 15th
April 2009).

7) Kotler, P. & Armstrong, G. 2008. Principles of Marketing. 12th ed. New Jersey:
Pearson Prentice Hall.

8) Oticon. 2009.
http://www.oticon.com/com/AboutOticon/CorporateCulture/index.htm
(accessed 10th April 2009).

9) Siemens. 2009. https://hearing.siemens.com/sg/03-home/index-sg.jsp

(accessed 10th April 2009).

10) QuickMBA. 2007. Positioning. http://www.quickmba.com/marketing/ries-

trout/positioning/ (accessed 2nd April 2009).

11) BusinessTown. 2003. Developing a Marketing Plan.

http://www.businesstown.com/marketing/plans-plan.asp (accessed 5th April
2009).

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