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					SK-II Damage Control

    Katherine Allred
     Ashley Aronson
      Rachel Starr
     Yana Nemecek
                          Andrea Blythe

                Final Public Relations Plan

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

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

                              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
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 re-launch the SK-II line in China.

                             Goals and Objectives

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.

1. To increase SK-II sales in China from 7 percent to 10 percent by Jan. 1,
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 re-launch 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.

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.

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 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

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 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. These two points are crucial
because these consumers have the tendency to make only a one initial tester
purchase and do not build long term relationships with products. Most
importantly, this audience wants a product that looks chic but is scientifically
proven to work effectively and flawlessly.

Influential: Chinese Government, friends, media, advertisements, AQSIQ, and
competitors such as Shiseido, Revlon, Dior, Estée Lauder and Maybelline.

Chinese Government
The Chinese Government is very important for any business venture in China.
China is under Communist rule and, therefore, the government is involved in
every aspect of Chinese economics, media and culture. After testing the SK-II
products, the Chinese government became worried when many of the
products contained banned chemicals and they ultimately shut down the SK-II
counters. P&G must repair the strained relationship with the government in
order to rejoin the cosmetics market once again.

The Chinese economy is the third largest in the world after the US and Japan.
China has the largest population in the world with around 1.336 billion people
and therefore has a huge domestic market. The government’s approval is
critical for P&G because without it they are not allowed to enter the
consumer market.

Current Relationship: Poor. The relationship between P&G and Chinese
Government continued to decline after AQSIQ found illegal chemicals,
neodymium and chromium, in the SK-II products.

Self- Interest: To ensure that SK-II is adhering to laws and regulations in the
Republic of China and ensure the safety of the Chinese people.

Influential: P&G, other cosmetics companies and Chinese citizens.

                              Primary Messages

SK-II Counter Personnel

Primary Message
1. SK-II is a safe product to be representing and selling.

Secondary Messages
      SK-II products were retested after initial reports were taken by the
       AQSIQ. Testing continued in Japan, Hong Kong, Singapore, Taiwan and
       South Korea, both by P&G and by national quality assurance
      Different regions have different standards to abide by. On September
       26, the Health Sciences Authority of Singapore announced that SK-II
       products did not pose any safety concerns.
      The Hygienic Standard for Cosmetics of the National Standard of the
       Peoples Republic of China and the Cosmetic Directive of the European
       Commission said:

“The directive provides that the presence of traces of chromium
or neodymium is allowed provided that such substances are
technically unavoidable in the goods manufacturing process. The
cosmetic product concerned must not cause damage to human
health under normal use.”
      Original testing in China and secondary testing in Hong
       Kong had acceptable levels of chromium and neodymium.
       Trained health officials and laboratory technicians would
       conclude that--under normal usage--there was a low to no
       health hazard from SK-II products.

Primary Message
2. P&G values its personnel and will strive to maintain positive relations with
China and work to rebuild the image of SK-II to ensure that it stays on the
market and personnel will keep their jobs.

Secondary Messages
      P&G offered to fully cooperate with the AQSIQ to enable SK-II to be
       allowed back on the shelves for sale.
      P&G discontinued returns of SK-II caused riots and picketing by
       consumers. By rewriting return policies, P&G employees will no longer
       be a target of animosity.

Primary Message
3. P&G ensures job security for SK-II counter personnel.

Secondary Messages
      SK-II was unexpectedly pulled from the market; therefore, jobs were
       unexpectedly lost.
      P&G values personnel loyalty and wants to provide job security for its
      P&G will do whatever is in its power to ensure jobs for currently
       unemployed personnel.

Primary Message
1. P&G is planning to remove SK-II from the market for one year.

Secondary Message
      P&G will inform its investors that its pulling the product from the
      Pulling the product should not dramatically influence stock price, as the
       company has many other products in the market.

P&G Customers

Primary Message
1. The SK-II product line is a scientifically tested and AQSIQ approved product
line that works effectively and flawlessly on skin.

Secondary Messages
      P&G will research Chinese law and work with the government to
       reformulate a product that is healthy for its citizens.
      The SK-II product line has amazing items that can purify, renew,
       brighten and nourish skin to prevent it from aging.
      P&G is not trying to forget or ignore its past mishaps, but to embrace,
       learn and move on from it for the benefits of the customers.

Primary Message
2. P&G cares about the well being of its consumers.

Secondary Messages
      P&G values the support of their loyal customers.
      P&G wants to build and maintain long-term beneficial relationships
       with their consumers.
      P&G wants to hear customer feedback, comments and opinions in
       order to sell the best product to fit their wants and needs.
      P&G will create a return policy that benefits consumers’ needs.

Chinese Government

Primary Message
1. P&G values its relationship with the Chinese government and will follow
and respect the regulations set up by them.

Secondary Messages
      P&G wants to build a relationship with the Chinese government.
      P&G can’t sell their product if they don’t pass through the
       government-run testing centers.
      The Chinese took this opportunity to show the Japanese government
       that their laws and standards are respected, therefore, it’s important to
       show the government the respect they want.

Primary Message
2. P&G needs to alter its staff and review cultural customs before starting to
repair its relationship with Chinese government.

Secondary Message
      The Chinese government has many important customs and it’s
       necessary that the P&G team learn these customs to make a good
      The Chinese hold seniority and hierarchy to a higher level. It’s
       important than for P&G to fill its staff with older, experienced team

                           Strategies and Tactics
SK-II Counter Personnel
Strategy 1:
Rebuild positive relationships between counter personnel and customers to
re-establish customer loyalty to SK-II products.

      Create the new return policy that will keep SK-II counters open for two
       months to take returns on any SK-II product without any stipulations or
           o SK-II will be taken off the market in October 2006, but the
              counters will remain open until December 2006 to take returns
              only; they will not sell any products. Products will re-enter the
              market in September 2007 after P&G rebrands SK-II products.
           o The return policy will take any SK-II product back for a full
           o Customers will not sign any documents deferring blame.
      All 400 personnel will remain in work for two months while personnel
       counters remain open to take returns.

Strategy 2:
Educate SK-II counter personnel about the SK-II product so they will become
experts on the products they are selling.

      Fly 400 counter personnel to the Japanese factory to tour the factory
       and learn about the SK-II product. Trip will include:
           o Fly 10 personnel out at one time twice a week beginning the
              first week of January 2007 to the middle of May 2007.
                     The trips will be Monday to Wednesday and Wednesday
                      to Friday.
           o All expense-paid flight from China to Japan.
           o All expense-paid two night stay.
           o All expense-paid meals during two night stay.
      Provide a training session for counter personnel to learn important
       messages and information about SK-II products.
           o SK-II toxicologists will speak to counter personnel about health
              and safety measures concerning SK-II products.
           o Teach proper application process of products.
           o Teach safety concerns and risks.
           o Teach proper instructions.
           o Inform counter personnel of ingredients in SK-II products.
      Provide counter personnel with free samples and communicate with
       them about the key messages of each product.

Strategy 3:
Build employee relations and create benefits.
      China’s minimum monthly wage is $160 US per month. Give counter
       personnel severance pay for temporary unemployment at 75 percent
       minimum wage for nine months[1].
      When SK-II re-launches and sales counters are reopened, give former
       employees first priority in hiring.
      Provide counter personnel with $500 worth of SK-II products when
       counters reopen as a “thank you” for personnel loyalty.


Strategy 1:
To inform shareholders immediately that P&G is pulling SK-II from the market.

      Create 8K which will inform shareholders that P&G is removing the
       product from the shelves.
      Create news release which will be sent to all financial media outlets.
           o Contact: Dow Jones, Bloomberg, Associated Press, Market Watch
              and Reuters.
           o News release should inform: What happened, why it happened
              and what is the company going to do going forward.
Strategy 2:
To create talking points filtered through the legal department.
      Talking points should be set for investor relations department,
       executives and employees to answer any media questions.

P&G Customers
Strategy 1:
Rebuild long-term beneficial customer relations to create and maintain brand

      Set up a 24-hour international live chat on the SK-II website Aug.6,
       2007, a month before the relaunch, where customer’s can receive
       premium service by talking to a SK-II consultant for questions or
           o Consultants will also have an email account to give to each
              participant after each live chat session to continue building a
              long-term relationship with consumers.
      Send out an information kit on August 1, 2007, to all past consumer’s
       that include:
           o A relaunch of the SK-II product announcement.
           o An explanation of past incidents and how SK-II has worked with
              AQSIQ guidelines to improve its product and make it more
              effective and better overall.
           o An explanation of the new live chat feature on the website,
              where customers can talk to a SK-II personnel members for any
              inquiries about the product.
           o An explanation of the return policy.
           o A “thank you” to customers for their support.
      Highlight P&G’s high priority with customer relations and the
       importance of customer feedback.
           o A 20 percent off coupon for the customer’s first purchase of SK-
              II products.
           o An informative pamphlet to educate consumers about the new
              SK-II product line.
           o An invitation to sign up for the exclusive customer rewards
      The customer rewards program will include:
           o An annual birthday coupon for 50 percent off any SK-II product.
           o An exclusive card to calculate purchases, where every $500 spent
              results in $50 dollars off with next purchase.
           o As a customer rewards member, every purchase includes 10
              percent off of the sale.
                      Every purchase made by a customer in the rewards
                       program will be sent a thank you card for their purchase.
Strategy 2:
Educate consumers about the new SK-II product line.

      Send out a press release Sept. 3, 2007, seven days before the product
       relaunch, to inform all potential consumers that the new SK-II product
       line adheres to AQSIQ regulations.
           o Note that the new line has amazing items that can purify, renew,
              brighten and nourish skin and explain how it prevents it from
           o Mention new customer rewards program.
      With every purchase, include an informative pamphlet about the SK-II
       product line.
           o This pamphlet will also feature information on SK-II’s 24-hour
              international live chat.
      Use Social Media to spread the word about the new SK-II product line.
           o Make an informative SK-II profile on RenRen, 51 and Chinaren
              on Sept. 10, 2007.
      Note that RenRen and 51 are social networks for college students, and
       Chinaren is a social networking site for college alumni[2].

Strategy 3:
Make customers feel connected to the brand SK-II, while still maintaining a
foreign elegance.

      Change Sk-II’s color scheme from red, white and silver to the Chinese
       color qing (青花瓷)[3], and gold.
           o Maintain the porcelain look of qing in layout, with accents of
      Change spokes model for SK-II to a new famous endorser.
           o A female, age 25-40, who is classy, well-liked in the Chinese
              culture, down to earth and can relate to our customers on a
              personal level.
      Set up an international customer story page on the SK-II website where
       all customers can submit their success stories with the SK-II product
       line for other consumers to view.

Chinese Government

Strategy 1:
Create positive government relations to ensure that SK-II can re-enter the
cosmetics market in China.

      Research a different way of processing the SK-II products, to minimize
       the amount of chromium and neodymium that results in the
       fermentation process, make sure they adhere to the government
           o Extensive research into common allergies within China in order
              to prevent any allergic reactions from SK-II products.
           o Aim for the SK-II products to be as planet based as possible.
      Transport government officials to factories and show them the
       production of SK-II.
           o Fly out two people from divisions of the AQSIQ including the
              Department of Quality Management, Department of Supervision
              on Inspection, Department of Supervision on Product Quality,
              Department of International Co-operation[5].
           o Work closely with the government research facilities to come to
              a product compromise.

Strategy 2:
Establish a Guanxi.

      Research Chinese companies in the cosmetics market and establish a
       joint venture.
           o Plan monthly business lunch with top Chinese companies on first
              Wednesday of every month beginning in January.
           o Lunch meetings will adhere to Chinese customs
                   Present business cards during first meeting
                   Only discuss business face-to-face
                   Older P&G employees will be present to discuss business
                   Plan and execute monthly banquets with Chinese
                    businesses including food and ballroom rental.
Strategy 3:
Build a reliable American SK-II team based in China to adhere to Chinese

      Place senior P&G employees at the head of the SK-II team.
      Hire new employees fluent in both Chinese and English to lessen the
       translation gap between the government and P&G.
      Produce new business cards with English and Chinese.
                      Evaluation Criteria and Tools

Objective 1
Increase SK-II sales in China from 7 percent to 10 percent by Jan. 1, 2009.

Sales will be calculated from revenue made in China from the SK-II product
line. These calculations will begin Sept 11, 2007 and will end after business
hours on December 31, 2008.

Objective 2
To increase long-term customer relations by 25 percent by Jan. 1, 2009.

We will measure the usage of coupons redeemed that were given to repeat
customers. We will also track the sales of each product with repeat customers.

Objective 3
Maintain a 90 percent employee retention rate by the relaunch day, Sept 11,

On Sept. 11, 2007, calculate the amount of returning employees and compare
this number to total employees working with the SK-II line on Sept. 10, 2007.

Objective 4
To build and maintain relationships with ten Chinese government officials by
May 1, 2007.

P&G will meet with 10 Chinese government members every month to build
friendly relationships and gain approval for the SK-II product line, until 6
months after the product is relaunched.

Objective 5
To inform shareholders that P&G is removing SK-II from the market for one
year by Oct. 5, 2006.

P&G will watch stock market prices for the year and will measure how much
the stock price has dropped since releasing information about the recall of
the product.


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