Exploring Internet-Based Health Management (Part III): Internet-Driven Growth for Traditional Chain Pharmacies

1. Apply Scenario-Based Thinking to Health Management
My first foray into internet-based business model innovation involved expanding my previously developed standalone meal-planning software into a comprehensive health management website. In the process, I referenced a wide variety of existing websites and took the opportunity to analyze their respective business models.

What distinguishes a KTV room from your living room? The answer lies in room configuration and scenario design. Based on users’ functional needs, we can transform an empty space into a specific usage scenario through tailored room configurations. By defining these scenarios, an empty room can be designed as a KTV, a pharmacy, or an offline health management service hub.

Chain supermarkets and chain pharmacies have inherently different functional attributes, yet their customer relationship management (CRM) approaches are nearly identical. I believe this itself is a matter that urgently warrants reflection. Customers visit supermarkets to purchase daily necessities, whereas they go to pharmacies to address health-related needs.

Homogenized competition among chain pharmacies of different brands is also severe, as there is little differentiation in their store formats. Most feature similar storefronts, staff, drug shelves, and ubiquitous yellow-and-red promotional point-of-purchase (POP) displays. Pharmacies are actively exploring new business models to seek incremental growth, such as integrating traditional Chinese medicine clinics, direct-to-consumer (DTC) services, and health wellness centers.

Chain pharmacies also face conflicts between their offline and online management. I believe every branded pharmacy chain aspires to become a platform, unwilling to remain merely a small e-commerce player on Tmall’s Health Channel. However, many chain pharmacies have yet to integrate their internal CRM (Customer Relationship Management) systems. A user may be an offline member of a certain merchant, but if they wish to make purchases in that merchant’s online store, they are required to register again. This is hardly imaginable for internet companies, as users are likely to abandon the merchant’s online services due to the hassle of registration. More importantly, the inability to synchronize online and offline consumption data and health needs data for the same user makes it impossible to provide continuous and effective health management services. Ultimately, what should have been a multi-dimensional collaborative effort has devolved into internal resource conflicts.

Chain pharmacies, with their locations spanning residential communities and commercial districts, are able to provide products or services that address specific health issues, making them a natural offline scenario for Online-to-Offline (O2O) integration. Group-buying websites help us find high-quality and affordable KTV venues, while KTV song-selection software enhances our singing experience. Could we, therefore, develop an internet-based product that not only helps users meet their health needs but also assists chain pharmacies in transitioning online and achieving incremental growth?

"This is the first internet product I have developed, focusing on pharmacies as a scenario for addressing health needs by providing O2O internet-based health management services."

In February 2014, the outsourcing company delivered the product. Regrettably, the website I designed never went live. The boss’s demands were simple, clear, and emphatic: short-term profitability was paramount; whether it was an internet-based business was irrelevant.

2. Health Manager: An Exploration of Mobile Internet O2O Health Management
If a company lacks strategic and tactical direction for an extended period, it will devolve into a state of neglect. Those who have lost confidence either resign or are preparing to do so, while the [administrative director who is hypocritical and incompetent yet boasts extensive experience in the medical affairs department] and the [amiable phlebotomist] exit the scene. However, this lenient environment also afforded me the opportunity to help the company navigate out of chaos and predicament according to my own approach. I then designed a product that reignited everyone’s hope, motivating them to work overtime with renewed vigor every day. Leading my small team in developing this product was the happiest period of my tenure at my previous company.

At the time, I gave considerable thought to what kind of internet product could persuade users to pay. One day, while browsing online news, I came across a photo of Amazon’s Jeff Bezos holding the Kindle Fire e-reader, and I immediately thought, “That’s it.” After checking Alibaba for wholesale quotes on tablet PCs (RMB 200–300), I became even more confident in its feasibility.

The success of Xiaomi phones created and validated a new path for smartphone development: naturally transitioning from crafting an excellent ROM to producing a high-quality phone. However, as a small team with limited resources, we were unable to tackle the development of a full-scale ROM. Instead, I chose the Launcher as our product vehicle. This represented an exploration into an entirely new domain, yet we completed the development of both the Launcher and the companion app in just three months, successfully conducting trial sales on a 7-inch tablet manufactured by an OEM partner.

From a sales perspective, this project represents a relatively successful recombination of internet and traditional industry DNA. Although the product may not be groundbreaking enough to elicit overwhelming excitement, users still find it simple, user-friendly, and pleasantly surprising. Priced reasonably, it presents no cognitive barriers for users familiar with such products. Without the need for customer education, users can easily describe it to friends as a large-screen smartphone capable of managing health. Ideally, however, we would prefer them to view it as a health manager that can also make phone calls.

In the health services industry, establishing a connection with users is merely the initial step. The aspect truly worthy of consideration is how to transition user relationships from weak to strong. No matter how many points-redemption promotions are conducted, the relationship built with users remains weak; users will not develop brand recognition and will instead shift their attention to competitors offering greater discounts. Merchants who fail to create incremental value for users will only become trapped in a vicious cycle of price wars. After the frenzy of this year’s Double 11 shopping festival, which generated RMB 57.1 billion in sales, it is highly worthwhile to analyze how much user data small merchants have been able to consolidate and how many returning customers they have secured.

By analyzing users’ shipping address data, we can gain insights into their geographic distribution, the commercial districts they reside in, and even pinpoint specific companies and residential communities. When combined with the attributes of products sold by stores, this data allows us to infer users’ likely age and income levels. However, many Taobao merchants neglect data analytics and fail to create incremental value for customers, resorting instead to mass SMS campaigns urging them to “buy, buy, buy.” In terms of customer relationship management, these e-commerce businesses are not significantly more advanced than traditional enterprises.

In a specific scenario, understanding and addressing the needs of target users is essential to creating value for them. This lies at the core of customer relationship management. As we continuously deliver value to users, the bond between them and us becomes increasingly resilient, and the incremental profits we seek will naturally follow.

However, from the perspective of final market strategy execution, this was yet another failed attempt to integrate internet DNA with traditional industry DNA. Whenever the boss perceived a profit opportunity, a small family-workshop mindset resurfaced, hindering external collaboration and business development. Upon official market launch, the company still relied on the familiar pharmaceutical channel sales model. As the product moved through multiple layers of distribution channels, it became necessary to craft narratives and educate users to create and amplify information asymmetry, thereby convincing consumers that RMB 1,899 was not expensive. Since the product itself could not achieve excellence, the art of persuasion was pushed to its extreme instead.

People in traditional industries are fond of discussing a particular question: how to “educate” our users. This is a typical mindset rooted in traditional commodity thinking. In my view, the essence of this so-called “education” is not to address user needs, but rather to create and exacerbate information asymmetry, thereby maximizing commercial profits. Consequently, in such traditional business companies, the sales team is the core unit, and its most critical capability is deception. Many petty individual entrepreneurs hold even more vulgar and straightforward views: it does not matter if the product is shoddy, as long as every person in China is duped once, they will strike it rich.

In population genetics, there is a phenomenon known as the genetic bottleneck effect. When the environment undergoes drastic changes, a previously dominant gene may see its frequency plummet because it fails to adapt to the new conditions. The very genes that once conferred advantage have made many traditional enterprises stubborn and arrogant. As the internet evolves from being confined to virtual chat and gaming into a tangible reality, certain formerly advantageous traits of traditional businesses can reverse into liabilities. New advantageous traits will surge through the bottleneck, while the old, now-disadvantageous ones will be left behind at the bottom. While overturning an entire industry overnight may be unrealistic, disrupting a large wave of traditional enterprises can happen in a matter of minutes.

"Your strategic vision dictates your approach; your destruction has nothing to do with you."

(This article is exclusively published on VCBeat with authorization from Tuo Ying. Please cite the source and VCBeat’s WeChat ID: VCBEAT when reprinting.)