Aesthetic Clinics in Thailand: Growth, Competition, and Key to Success

Presented by Panchita Wattanasittisin Student ID: 578 56144 29

Submitted to Professor Richard Fowles

Advanced Economic Theory I

Master of Arts in Labor Economics and Human Resource Management Chulalongkorn University September 2014

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Abstract

Nowadays people are taking care of their health and beauty more than before. This is especially for the younger generation who spends a lot of time on social networks and meets a lot of people. Regardless of economic conditions, beauty industry is still growing and has been ranked first in the Top 10 Business in Thailand lists from 2012 to 2014. This study will explore how aesthetic clinics have gain popularity in Thailand, factors that influence consumers' choices as well as strategies of some major brands. The method used in the study is Literature Review and Questionnaire analysis. The findings show that aesthetic clinics now not only offer dermatological treatments but also other services such as “Beauty Rush” and “Korean beauty style" This has occurred since 2008 and they tend to promote by advertising through social networks more. Beauty businesses are growing continuously. Due to more intense competition, aesthetic clinics must create their selling points through differentiation. A survey asking 50 people in Bangkok about factors that influence their choice of products revealed that the leading factor is quality, followed by referral, familiarity, good service and price. It proves that firms should compete on product differentiation rather than on price. Four leading brands in the aesthetic clinic industry including Wuttisak Clinic, Nitipon Clinic, Rajdhevee Clinic, and Pornkasem Clinic employ product differentiation. Three of them focus on advertising to create familiarity while the other focus on product quality and have their products endorsed by dermatologists. This can be useful for those who are thinking of starting an aesthetic clinic or researchers who want to look deeper into this topic about the beauty business.

Keywords: Aesthetic clinic, Beauty clinic, Market competition, Strategy

Panchita Wattanasittisin September 2014 Chulalongkorn University Bangkok, Thailand

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Aesthetic Clinics in Thailand: Growth, Competition, and Key to Success Panchita Wattanasittisin Student ID: 578 56144 29

Introduction Nowadays first impressions are especially important in business world and the social network. How you look can give you an advantage and bring you to a lot of great opportunities and economic benefits. According to “The Economics of Beauty”1, better-looking people generally earn more money and marry similarly attractive people with higher salaries. Another underlying factor that may drive consumers to aesthetic clinics is that looking good makes us feel good too. A study conducted by Daniel S. Hamermesh and Jason Abrevaya at the University of Texas at Austin in March 2011, "Beauty is the Promise of Happiness" 2 concludes that more attractive people are happier than the less one. In Thailand, it is prosperous time for aesthetic clinics as so many of them are located stand alone as well as in the department stores in last few years. In spite of economic growth or recession, Beauty business is still growing and has been ranked in the first of Top 10 business in Thailand from 2012 to 2014 consecutively.3 Especially in 2013, the market was worth 149 Billion Baht and has grown more than 7%.4 These numbers make beauty business become such a promising sector that calls for attention of new players to come in. One of subpart of beauty business that is also playing an important role is Aesthetic clinics (Non-Plastic surgery), which current leading brands are promoting themselves so heavily on television and trying to make themselves different from others to level up their cost of products. This reflects and, in the same time, changes consumers attitude and behaviors. Therefore, it is very interesting to study how the aesthetic clinics has been grown up in Thailand, what are the important factors that influence how consumer choose their clinics as

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“The Economics of Beauty”, Princeton University Press; Source http://press.princeton.edu/chapters/s9516.pdf

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“Beauty is the Promise of Happiness”?.The National Bureau of Economic Research; Source http://www.nber.org/papers/w17327.pdf 3

เผยธุรกิ จดาวเด่ นปี 57 เสริ มความงามอันดับ1 ตามด้ วยสื่ อสารทีวีดิจิตอล, Manager online iBiz Channel; Source http://www.manager.co.th/iBizChannel/ViewNews.aspx?NewsID=9560000155849 4

สาว'ไม่ หยุด'สวย'โตสวนกระแสเศรษฐกิจ,Than Online; Source http://www.thanonline.com/index.php?option=com_content&view=article&id=235792:2014-06-20-09-0131&catid=107:2009-02-08-11-34-25&Itemid=456#.VAwLxfnV_0c_

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well as what are the strategies of current leading brands. This study will try to answer these questions, using Literature Review and Questionnaire analysis method.

Literature Review Aesthetic Clinics Evolution

In early years, clinics were launched for dermatological treatments. The first famous dermatological clinic, Dr.Somchai Skin Clinic, started at Bangkok in 1971. In 1977, Rajdhevee Clinic (Formerly name: Rajdhevee Polyclinic) was started for dermatological treatments and acne care by using Modern Medical Program. Then Meko Clinic, Pan Clinic, and Pornkasem Clinic were started respectively. Economic was strongly growing so consumers were more interested in taking care of their health and beauty. Moreover, the Government issued “Golden ticket” and “Social Security” providing consumers free dermatological treatment fee except acne and blemish treatment. This government policy made the clinics adjust themselves from dermatological clinic to medical skin clinic. Some of them invested in the laser equipment which helps creating awareness to the consumers. From 2002 onwards, the clinics have adjusted their services from medical skin clinic to aesthetic clinic and began expanding their branches into modern trade channel in accordance with the retail growth. In those periods, many dermatologists and new graduate physicians had started their own clinics and offer products and services to the consumers at the lower price obviously.

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The latest generation from 2008 onwards, consumer behavior has changed. The consumer demanded for “Beauty Rush” and “Korean beauty style”. Many clinics have promoted and advertised their clinics dramatically. In 2008, Wuttisak Clinic changed and launched new logo and firstly TV commercial advertising. Then other clinics followed and advertised themselves. At present, most of the brands have used social media like Facebook, website and other social media to promote themselves, some are using these social media doing the CRM5. The total market sizes of the aesthetic clinics in Thailand are estimated of more than 20,000 Million Baht in 2014 and are still aggressively growing at 10-15% annually until today6. The market trend is still very positive and attractive for new players especially in the next two years after AEC implementation. There are four leading aesthetic clinics; Wuttisak Clinic, Nitipon Clinic, Rajdhevee Clinic, and Pornkasem Clinic and the rest of 35% are from others aesthetics clinics in Thailand as in Figure 1.

Aesthetic clinic market share 2011

Other 35%

Pornkasem Clinic Nitipon Clinic 10% 8%

Wuttisak Clinic 35% Rajdhevee Clinic 12%

Figure 1: Aesthetic Clinic market share 2011

Source: DBD

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30 ปี เส้ นทางคลินิกความงามในไทย, Positioningmag; Source

http://www.positioningmag.com/content/30-ปี -เส้ นทางคลินิกความงามในไทย 6

คลินิกความงามกราศึกเร่ งสปี ด ชิ งเค้ ก 2 หมื่นล้ าน, Siamturakij; Source

http://www.siamturakij.com/main/news_content.php?nt=4&nid=6434

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Characteristics of Aesthetic Clinics Competition Before discussing in details about influence factors of consumer’s choice and the strategies of current leading brands, understanding characteristics of this competition could be a good way to set a perspective. Different from Monopoly, where a sole seller has full power to set prices, aesthetic clinics are rather in Monopolistic competition, which combines elements of monopoly and competitive markets. Essentially, a monopolistic competitive market is one with freedom of entry and exit, but firms are able to differentiate their products. Therefore, they have an inelastic demand curve and so they can set prices. However, because there is freedom of entry, supernormal profits will encourage more firms to enter the market leading to normal profits in the long term. Therefore, as mentioned, the aesthetic clinic market in Thailand is considered to be Monopolistic competition as there are key important features as follows. 1. Existence of large number of firms: The first important feature of monopolistic competition is that there are a large number of firms satisfying the market demand for the product. According to Siamturakij News, there are more than 3,000 registered aesthetic clinics in Thailand in 2014 which increased from 2,000 registered aesthetic clinics five years ago6. 2. Product differentiations: The various firms under monopolistic competition bring out differentiated products which are relatively close substitutes for each other. So their prices cannot be very much different from each other. Various firms under monopolistic competitors compete with each other as the products are similar and close substitutes of each other. Differentiation of the product may be real or fancied. The aesthetic clinic is also the same case. The products and offering packages are not different from one to the others. More or less, most of these clinics will offer to consumers for the facial treatment, body treatment and health care products. Hence, consumers have the choices to choose which one they would like to use or get the services, depending on various factors including the marketing strategies of each brands using to attract the consumers. 3. Influences over the price: As the products are close substitutes of other brands, the more brands can reduce the price, the more opportunities they can attract consumers of others. In the case of Wuttisak Clinic and Nitipon Clinic, they are using the large number of branches which will benefit on the economy of scales, hence they have taking the opportunity to influence the price. 4. Absence of firm's interdependence: Under monopolistic competition each firm acts more or less independently, in addition to each firm formulates its own price-output policy upon its own demand cost. In the aesthetic clinics, even though each brand has the freedom to set their own price, but in practice, they are trying to be in the same range as others’ brands. Just an exception for Pornkasem Clinic whose its positioning is all cases are treated by Dermatologists

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and this differentiates from other brands, and let the rooms for Pornkasem Clinic to set the higher price. 5. Non-price competition: Advertisement using the famous presenters is a prominent example of non-price competition. The advertisement and other selling costs by firms change the consumer’s demand for their products and attract more consumers. Besides, the aesthetic clinics also use Public Relation and sales promotion. 6. Freedom of entry and exit: In a monopolistic competition it is easy for new firms to enter into an existing firm or to leave the industry. Lured by the profit of the existing firms, new firms enter the industry which leads to the expansion of output. These characteristics make competition between aesthetic clinics challenging and enable a lot of firms to grow rapidly, stimulating them to improve their attractions which include many factors. However, which factors most consumers look for is another interesting point to explore. Influence Factors of Consumers’ Choices According to THE STUDY SATISFACTION OF SERVICE BEAUTY CLINIC IN BANGKOK AREA7 has been conducted to identify what factors influencing the consumers to go to the beauty clinics and use their products and services, the factor of price is not significantly mentioned in the research. This could be implied that the price of this Aesthetic Clinic market is not the first factor to influence the consumers to use the Aesthetic clinics. To prove in this assumption, I have conducted the set of questionnaires which getting the results from a survey group of 50 people in Bangkok revealed that the first factor to sample was good quality, then referral, familiarity, good service, and price consecutively as in Figure 2. This proves that the firms compete more on product differentiation than on price.

Factor analysis Service, 4

Price, 2

Familiarity, 9

Quality, 20

Referral, 15

Figure 2: Factor analysis

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THE STUDY SATISFACTION OFSERVICE BEAUTY CLINIC IN BANGKOK AREA, thaiejournal; Source

http://www.thaiejournal.com/journal/2555volumes2/Witsinee.pdf

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Competitive strategies Nowadays there are four key players in Thai aesthetic clinic market; Wuttisak Clinic, Nitipon Clinic, Rajdhevee Clinic, and Pornkasem Clinic. Due to the fact that aesthetic clinics are in monopolistic competition like mentioned before, they produce similar goods, offer similar services and new clinics entry easily. Therefore, they try to make themselves different and memorable by using presenters, slogans, campaigns and promotion.

Beauty changes life

Take care and All beauty is possible

By Dermatologists Keep beautiful

Figure 3: Yayaying

Figure 4: Davika

Figure 5: Nuttaporn

Figure 6: Ordinary people

Wuttisak Clinic, Nitipon Clinic, and Rajdhevee Clinic are advertised and promoted their brands by using famous Thai actors, actresses, and celebrities. Davika, Channel 7 Thai actress, is the presenter for Nitipon Clinic as in Figure 4, while Taew Nuttaporn, Channel 3 Thai actress, is the presenter for Rajdhevee Clinic as in Figure 5. Wuttisak Clinic has not only Yayaying as a presenter as in Figure 3, but has other 5 presenters also to attract all target groups; teenagers, working women, men, and elderly people as in Figure 7.

Figure 7: Wuttisak Clinic presenters

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On the other hand, Pornkasem Clinic is presented by ordinary people, not actors and celebrities as in Figure 6. The clinic focuses on strong point “by Dermatologists” so consumers rely on their good quality and have brand loyalty on the clinic. The strong point could be the limitation for Pornkasem Clinic also. This market follower cannot expand many branches different from the other 3 clinics because the small number of dermatologists in Thailand. Nevertheless, Pornkasem Clinic persists in the selling point. The product is our dermatologists and the dermatologists are the heart of the clinic. Pornkasem Clinic aims to grow gradually and steadily for the long term8. In terms of branches, Wuttisak Clinic is the market leader in the aesthetic clinic (NonPlastic surgery) market. The clinic expands much more branches over than other clinics to increase all target groups. In 2013, the clinic would expand branched to 130 branches in Thailand, and expand more 20 branches in Burma, Laos, Vietnam, and Cambodia9. While important market challenger, Nitipon Clinic, keeps expanding their branches also as in Figure 8.

Branches 2014 199 200 119

150 100

49

50

28

0 Wuttisak Clinic

Nitipon Clinic

Rajdhevee Clinic

Pornkasem Clinic

Figure 8: Numbers of branches of 4 leading aesthetic clinics 2014

Source: Wuttisak Clinic, Nitipon Clinic, Rajdhevee Clinic, Pornkasem Clinic ________________________ 8

พรเกษม คลินิก โตช้ าๆ ขอชัวร์ ดีกว่ า , Positioningmag; Source

http://www.positioningmag.com/content/พรเกษม-คลิ นิก-โตช้าๆ-ขอชัวร์ ดีกว่า 9

ASTVผู้จัดการรายวัน, วุฒิ-ศักดิ์ บุกตลาดศัลยกรรม, ASTV Weekend; Source

http://www.manager.co.th/AstvWeekend/ViewNews.aspx?NewsID=9560000131042&Html=1&TabID=1&

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Nitipon Clinic is also build “Reason to Believe” to the consumers that “All beauty is possible.” The clinic is competing head to head with Wuttisak Clinic by using similar market strategies such as expanding more branches to serve consumer needs, managing the cost effectiveness, and etc. Pornkasem Clinic makes the outstanding point by launching new campaign “Face for Sale” in order to look for new three presenters as in Figure 9. Applicant must between the ages of 15 to 35 years old. The rewards for the three presenters are full course facial care treatments and to be the new presenters for Pornkasem Clinic. This campaign attracts lots of applicants.

Figure 9: Face for Sale

Conclusion In a monopolistic market, there is the opportunity for new players to come in, especially for the aesthetic clinics market having the significant market size with high growing rate and the most important, it is ranked the first top 10 Business in Thailand. Although the market is very attractive, it is very challenging for the new players to be successful. In addition, since the prices of aesthetic products and services do not necessarily reflect their costs, beauty businesses often rely on marketing campaigns that can get consumers' attention. There is no interdependence between major brands. Those leading brands usually use marketing strategies such as offering special treatment packages, expanding more branches locating in the department stores, promoting interesting advertising and promotional campaign. The powerful strategies are to use the celebrities as presenters. From the survey of this study, people don't choose the aesthetic clinics because of the prices but rather on quality, referral, familiarity, and service. Therefore, in order to get into the market, it is very important to think about how to make themselves different from the competitors.

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