Group members: Yue Wenchao, Tom
Qian Fang, Tracy
Lam Chi Fai,Benson
Mak, Edward
Chan Waileung, Jonavon
 SK-II
.a Procter & Gamble Beauty brand
.over 25 years ago in Japan
.four years ago in the United States

Unique raw- material : Pitera
. the 'Secret Key' to beautiful skin
. Pitera is a single blend of
. Vitamins
. Amino acids
. Minerals
. Organic acids
Products
. Skin care products :
Purifying , Renewing, Brightening, Nourishing, Anti-Ageing ,
Finishing


Price
. Average consumption around 700 RMB
- It belongs to luxury skin care products in mainland Chinese
 Place
-- SK II’s counters are located in each big shopping mall in
mainland China

Promotion
-- Advertising
--image representative
--super movie stars
http://www.56.com/u12/v_MzU4NDY1Mzc.html
 SK
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II Quality problem
Happened In 2005 in Nanjing
Happened in 2006 in Shanghai
SK-II products with heavy metals of chromium and
neodymium in Mainland China
It injured consumer’s facial skin, after used this
product, and consumer complainted SK II
http://www.youtube.com/watch?v=-n35bCnivM0
-- Response from consumer and government



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The products with quality problem have to be
recalled by company
Chinese customers attempted to refund the money
on fake SK-II
Those products are banned from import to China
Consumer very care about the quality of
product in mainland, especial the product
which close or relate their bodies and healthy
After use the quality-milk
products ,baby was
silken—kidney calculi
Chinese quality-milk powder
--the
milk powder contaminated with
melamine sickens 1253 babies
Response from consumer and government
--the milk companies stop all production, recall and detection

all milk products, destroy all quality products
-- injury compensation, the babies who used products
--Government will impose the product quality control
Consumer response: http://www.youtube.com/watch?v=n35bCnivM0
Destroy the
quality milk
powder--Sanlu
Other Foreign Production Quality scandal In
China:
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Kraft’s GM Incident
Johnson&Johnson Baby Care Probe
Lipton Tea Fluotin incident
Fenbid Bad for Hearts
1.
Why Chinese consumers are increasingly
more demanding about product quality and
services from both domestic and
multinational firms?



Global competitions among MNC more choices
provided to consumers
Increase in information flows enable consumers to
know more about the standard of products and
services
Different kinds of consumer may vary in demand
on quality, service or other factors  force
companies to improve their products to increase
their competitive advantages


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Consumers demand not only a greater
quantity of food, but also higher quality
performance
Frugal consumption diminishes as income
rises, the majority of consumers are not
only satisfied on cost-effective, but value
added on the product
Price Quality
Consumers with higher incomes tend to
purchase more expensive products with
higher quality
Mix of western culture

◦
◦
The introduction of western quality standards
Increases awareness of product quality
E.g. ISO9000
Perception of domestic and multinational
firms

◦
◦
China made products should not be bad in
quality because of “FACE”
Imports should be good in quality because
customer paid a higher price on it

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Customer became more and more impatient
on quality issue after a series of quality
accidents.
These incidents began as early as 2004

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2004
2005
2006
2007
2008
-
Soy sauce made from human hair
Sudan I Red Dye(蘇丹紅)
Fake drugs & Poisonous mushrooms
Potential carcinogen used in frying oil
Baby formula & egg products with
melamine(三聚氰胺)

Ans: Yes!

The rising fear due to a lot of quality problem
e.g.: Mengniu


Mengniu daily regional sales volume is
decreased 98% after tainted milk was
disclosed
The executive director of Mengniu drank the
milk themselves to save the customer
confidence of Mengniu

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The uncertain rumors stimulate customer
overreaction
E.g: Mandarin orange in Shantung


There are rumors of warms inside the
mandarin orange in Shantung
The demand of mandarin orange downturn
rapidly
- 300 tons a day dropped to 60 tons a day
- Price dropped 70% to $0.8 per kg


Ans: It is possible
The conspiracy theory is unconfirmed but
caused some speculation


China took advantage of consumer response
to the quality problem of foreign company in
an attempt to retaliate some unfriendly
country
E.g.: SK-II from Japan
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The relationship between China and Japan is
poor at that period
At the same time, P&G halts sale of SK-II in
China due to the harmful elements was
found in the product
SK-II deny such issue and assure that their
product meet the standard of quality and
safety
Is there any conspiracy?
Customers wait in line to return SK-II
skincare products in Shanghai



Ans: Yes!
As mentioned above (the SK-II case)
We are suspicious that…
China Government perceived that:
Foreign Company, who makes profit by using
Chinese resources, is needed to take more
responsibility than local company


Some local company is protected by local
government.
E.g.: Sanlu


Sanlu food scandal is covered by Shijiazhuang
Government over several months
It is discovered that there were the collusion
between the government and Sanlu to conceal
the issue

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Chinese customer give more support to local
enterprise due to nationalistic ties
E.g: Coca Cola buy HuiYuan juice group Limited

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Huiyuan is consider as the national brand of
China
Coca Cola plan to use 17.92 billion dollar to
buy Huiyuan
79.8% of people disagree and
prefer drink water instead of
Coca Cola

Customers:
- lost confidence to our products
- are more demanding about product
quality
Objectives of the IMC strategies:
-Ease Consumers’ anxiety
-Rebuild the brand image
-Rebuild customers’ confidence to our
products

After the crisis or scandal
 go back to the Prepurchase stage
IMC strategies:

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Advertising
Sales promotion
Public relations
Personal selling
Direct marketing
Use the strategy: Celebrity Endorsements
Celebrity: Chinese celebrity (黃聖依 Huang Shengyi)

On television
- reach large audience
- to let Chinese consumers know ‘we will take the
responsibility”.

On magazine
- reach our target customers
-Invite media to visit our production plant
- increase the transparency of the production
procedures
E.g. Foreign press is invited to visit to Mengniu
dairy production line
-Third party endorsement
e.g. government endorsement on new nonmelamine product

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Sale at discount price
Samples
- give free sample to customers
- reduce customers’ risk
- may also cooperate with magazine

With a label on the package
- safe
- only available after passing the safety test
- White rabbit change package to clean the
image of its tainted food

Enhance product quality and safety
-
strengthen the quality control on production and quality
assurance on sourcing
Meet the international
standard
Get the third party
certification
ISO

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Involve more charity
- donation to some charities or Sichuan earthquake
Improve the transparency of the company’s
responsive action
- showing social responsibility to calm annoying customers
- more emphasis on problem solving than the problem itself
China consumers is vulnerable
Quality problem could ruin the whole business
of MNC
Key solutions:
Short-term: the use of IMC to calm customer
Long-term: Quality control
Charitable events
Crisis management:
Short-term: the Use of IMC
Long-term:
quality control
establish a responsible image
The End
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Mengniu:
Sanlu: http://hk.news.yahoo.com/article/080915/4/889q.html
SK-II: http://www.chinadaily.com.cn/china/200609/22/content_694757.htm
Orange:
http://news.sohu.com/20081026/n260247361.shtml
Huiyuan:
http://www.chinareviewagency.net/doc/1007/4/5/0/100745
040.html?coluid=5&kindid=110&docid=100745040&mdate=
0914001817