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SK-II: Damage Control China

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SK-II: Damage Control China SK-II: Damage Control China Katherine Allred Ashley Aronson Rachel Starr Yana Nemecek Andrea Blythe November 2, 2011 1 Table of Contents Background 3 Situation Analysis 3 Core Problem and Opportunity 4 Goals and Objectives 4 Key Public 4 Primary and Secondary Messages 7 Strategies and Tactics 9 Budget 14 Calendar 16 Communication Confirmation Table 28 Evaluation 28 Sources 29 2 Background Proctor and Gamble (P&G) entered the Chinese marketplace in 1988 through the Guangzhou province. With the cosmetics industry on the rise, China racked up US $8.6 billion in cosmetic sales alone in 2005. P&G has four large headquarters around the world and it serves customers in more than 180 countries. As an international company, P&G must constantly stay up to date with cultural dynamics for each country it has a business presence. A product line called SK-II was created in 1980 by Max Factor Japan. This product was made by the fermentation process of sake in attempt to rejuvenate skin. SK-II was primarily sold in Japan, until P&G decided to bring it into the Chinese market in 1999. On Sept. 14 2006, Chinese authorities banned nine products from the SK-II line in the Chinese sales market. These products contained trace amounts of chromium and neodymium, which were a byproduct of the production. These chemicals had been banned by AQSIQ regulations. Chinese government officials reported numerous incidences of allergic reactions. That same day, P&G denied accusations that SK-II was harmful. P&G offered refunds to customers of SK-II products. To obtain a refund, the customers needed to: bring back the product that was two-thirds full, provide a doctor’s note proving an allergic reaction to the product and sign a contract relieving P&G’s liability. After completing this criteria, customers were informed they would not receive a refund for at least another month. P&G opened its doors to refunds and saw little movement. With a low response rate, the company loosened the guidelines for customer returns. The change in guidelines resulted in an influx of returns, the sales personnel could no longer handle the amount of returns. Due to security concerns, P&G held its returns in a hotel banquet hall. Angry mobs of customers rushed through the doors, causing hectic chaos. As a result, P&G was left with a mass amount of displeased customers who were no longer satisfied with the SK-II product line. Now, SK-II has no presence on the Chinese market because SK-II product’s have been pulled and its sales counters have closed. The company needs to work on relationships with the Chinese government and customers while rebuilding SK-II’s brand reputation and demonstrating its qualitative importance. Situation Analysis Due to the SK-II line, P&G has lost the trust of its customers, Chinese government officials and shareholders. P&G faces a challenge of keeping the SK-II line in the cosmetics market, while under suspension. Not only does P&G feel pressure from its customers to restore its relationship by providing better alternatives for refunds, but P&G also needs to reassure shareholders that the product is still profitable and beneficial to the company. P&G must 3 restore its relationship with its key publics to continue participating in the Chinese cosmetic industry. In order to relaunch SK-II into the Chinese marketplace, P&G must get the approval of Chinese government officials. Rebuilding the relationship with previous customers will also be a challenge. In order to stay competitive within the Chinese cosmetic market, P&G needs innovative and creative ways to rebuild the SK-II product line. Core Problem and Opportunity To rebuild P&G’s reputation and relationship with customers and Chinese government officials in order to successfully relaunch the SK-II line in China. Goals and Objectives Goal: For SK-II’s image, reputation and relationship to be repaired with customers and Chinese government officials by rebranding SK-II and following laws and guidelines set by the government. Objectives: 1. To increase SK-II sales in China from 7 percent to 10 percent by Jan. 1, 2009. 2. To increase long-term customer relations by 25 percent by Jan. 1, 2009. 3. To maintain a 90 percent employee retention rate by the relaunch day, Sept. 11, 2007. 4. To build and maintain relationships with Chinese government workers by May 1, 2007. 5. To inform shareholders that P&G is removing the product from the Chinese market for one year by October 6, 2006. Overview: Our team recognizes the crisis of SK-II’s current situation. We suggest that P&G remove SK-II products from the Chinese market for a year. During this time period, we suggest a rebranding of the products, which would adhere to Chinese law and regulations. Key Public SK-II Counter Personnel By 2005, P&G’s sales represented 18 percent of China’s cosmetics and toiletries market. By 2006, SK-II had 97 sales counters in China with more than 400 sales personnel in all one tier, and most two tier cities in China. Counter personnel are females between the ages of 18 and 35 years old. SK-II became the number two premium skin care brand and sales in China accounted for approximately 7 percent of the brand’s global sales. 4 After SK-II was pulled from the market, every SK-II sales counter shut down after the company stopped taking returns, leaving some personnel without jobs. Counter personnel are worried about the status of their employment. P&G needs to focus on maintaining positive relationships with the SK-II counter personnel and guarantee that after the SK-II re-launch, the employees will return without any negative feelings toward P&G. Counter personnel serve as ambassadors between the SK-II product and the consumers. P&G will need to educate the personnel about SK-II products because they are dealing with the customer first hand and will need to know all the safety measures and product ingredients to inform the customer. Taking these measures will benefit the company because it will keep the personnel happy and ready to return to work after the relaunch. Current Relationship: The relationship with SK-II counter personnel is very poor right now. SK-II has been banned in the Chinese market putting stress on SK-II counter personnel who may lose their jobs due to lack of customers at SK-II counters. P&G continually changed the return policies, which created hardships for the counter personnel. P&G also shut down the SK-II counters, which left 400 personnel without jobs. The counter personnel do not trust P&G and they are unhappy about potentially losing their jobs. Self-Interest: Personnel are worried about their jobs, especially with the downfall of the SK-II brand. 400 personnel employees could lose their jobs, and they are worried that the relationship between their employer and their country is in jeopardy. Influential: Chinese customers, P&G, Chinese government, competitors, friends, family and peers. Shareholders Shareholders are a large piece of what helps P&G succeed. Employees and investors are interested in the future of the company and the each products success is detrimental to the entire company. A product’s failure in the Chinese market might create a panic in the minds of investors. Shareholders are mainly in the United States but employees are also shareholders, who are worldwide and Chinese employees are in the middle of the crisis. The well being of the product is a concern for both job security and potential dividends. Current Relationship: Shareholders are worried about the product and possibly resulting in a loss of money, equaling in fewer dividends. The image of the brand and possibility of the brand not relaunching would result in a loss of money for shareholders. Because finances are involved shareholders would possibly become overbearing and trying to become involved with the situation. P&G would need to inform the public of the future of the product. Since the crisis has begun, stock prices have not dropped significant amounts, small changes within one dollar. Self-Interest: The motivation for shareholders would be dividends that they receive from the brand. Influential: P&G, Stock Market, Chinese Government and customers. P&G Consumers SK-II customers are working females, age 20-50, who care about their personal appearance and have the disposable income to afford foreign cosmetics. This group represents five percent to seven percent of the population, bringing 65 to 90 million potential customers. These ladies 5 can afford luxury foreign items and tend to purchase such products for social and personal reasons. The second target audience for consumers are educated females, including spouses of white collar workers, those who have travelled outside of China, or business executives. After losing such a high percentage of this select population, it is necessary to not only rebuild beneficial relationships with SK-II customers, but to maintain these relationships so purchasers will return for more products which will ultimately increase sales. Current Relationship: The relationship between customers and SK-II is very weak. Customers have lost trust with the product SK-II and do not believe the brand is reliable anymore. Consumers are also livid with customer relations within the company from past experiences with the return policy and therefore are now hesitant about purchasing the product. Self-Interest: Consumer will not readily purchase SK-II skin products because of the recall. This target audience wants the best AQSIQ-approved product in the market that is also linked to a reliable brand.
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