The Apollo Clinic

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Executive Summary Apollo Hospitals group, the largest and most reputed healthcare provider in South Asia,

identified a significant market opportunity in the day-to-day healthcare segment. Size of

the business (around two-thirds of the overall healthcare industry), extremely fragmented

provider network, and increasingly demanding consumer were some of the key facets of

the prevailing market scenario. Apollo’s enviable brand equity and its domain knowledge

created a uniquely advantageous position to enable the group to exploit this market

opportunity.

The Apollo Clinic was conceived to offer specialists’ consultation, diagnostics,

preventive health checks and pharmacy services under-one-roof. Convenience, coupled

with trust associated with the brand, was the bedrock of the product strategy. Suitable

technology, value-for-money pricing and intent to create an overall experience were the

other key attributes of the product. Development of the business model and assessment of

the market potential resulted in adoption of franchising as business format. The blue-print

was further developed in association with some of the most well-known firms in their

respective fields, be it architecture, information technology or training.

A suitable communication strategy, including branding, was developed followed by a

phased launch. Today, 29 of these clinics dot the length and breadth of the country. The

concept has been extremely successful with over 2,00,00 customers in about two years

and a business of over Rs 250 million. Customer satisfaction, as evidenced by ongoing

audit, has been extremely high. The viability of the business model is now proven and its

impact on the image and also the bottom-line of the parent organization has been equally

encouraging. The Apollo Clinic being awarded the Franchisor of the Year for two

consecutive years is a testimony to our focus on consistency and superior quality.

Greater investment in communication and even more stringent selection process for the

prospective franchisee have been some of the major learning. The early success has

resulted in the need for accelerated scaling up and development of product derivatives.

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Organization Background The Apollo Hospitals Group is recognized as the ‘Architect of Healthcare’ in India.

Apollo today has over 30 owned/ managed hospitals across the country in cities such as

Chennai, Delhi, Kolkata, Hyderabad, Ahmedabad, Pune and Bilaspur. Internationally, the

Group finds presence in Sri Lanka, UK, UAE, Bangladesh, Nepal, Saudi Arabia, Ghana

and Nigeria.

With over 6,000 super specialty beds, in over 50 medical and surgical disciplines, the

group has treated over 10 million patients, completed over 3 lakh major surgeries with

enviable success rates. In the last 5 years, more than 60,000 foreign patients from 55

countries have been treated at the various Group hospitals.

The Week magazine, in a recent 19-city survey, rated the Apollo Hospital, Chennai

hospital as the best private hospital in India. Other than a large network of hospitals, the

group is also a major player in hospital management consultancy services, medical BPO,

telemedicine, education, third party insurance administration and pharmacy retailing.

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Market Opportunity Larger slice in the business pie

According to a KSA Technopak study on Healthcare Expenditure Trends in India, based

on around 10,000 SEC A and B respondents in 20 cities, only 32% of the average

household expenditure on healthcare is on account of hospitalization, the rest being

accounted for by domiciliary healthcare. A recent report by CII-McKinsey, Healthcare in

India, further corroborates it by indicating that 61% of private spending in India on

outpatient care. It clearly establishes that this segment represents the larger slice of the

healthcare business.

Fragmented provider network

This day-to-day healthcare segment comprises of three major constituents: consultations

(with family physicians, specialists or super-specialists), diagnostics (ranging from

routine lab tests to ultrasound) and pharmacy (for medicines). Currently, the provider

network for such services, even in large cities, is extremely fragmented, unorganized and

unbranded. Absence of accreditation norms or quality regulations resulted in a poorly

regulated cottage industry-like environment.

The empowered consumer

However, with rise in literacy rates, greater exposure to the media and higher levels of

income, consumerism is on the rise. Consumers are becoming more discerning; and are

demanding better quality, consistent and standardized services. Unprecedented

transformation in some of the other service sectors such as banking retaining and

entertainment have further fuelled the need for overall improvement in experience.

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Role of a brand

In healthcare, where the average consumer has no rational framework to make an

informed decision, trust plays an important role. “When we are considering a doctor or a

medical facility, most of us unconsciously turn detective, looking for evidence of

competence, caring and integrity – processing what we can see and understand to

decipher what we cannot.” (Clueing in Customers, Harvard Business Review, Feb 2003).

It is precisely in this context that branding offers significant potential. In fact, a global

study Healthcast 2010 by PricewaterhouseCoopers indicated that healthcare providers,

who believe in branding, shall emerge as the clear winners.

Apollo’s uniquely advantageous position

As the only Superbrand in the healthcare category in India, Apollo’s brand equity (not

just in India, but also in a number of overseas markets), and its phenomenal

understanding of the healthcare business, offers an uniquely advantageous position to

address this significant, yet unexploited market opportunity: the day to day healthcare

segment.

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The Marketing Initiative Strategic imperatives

To get a more accurate understanding of the dynamics of the market place largely in the

day-to-day healthcare segment, PQR, the qualitative research arm of IMRB, was engaged

to conduct a study on our behalf in early 2001. The study clearly indicated that the

healthcare system as a whole (with the doctor at the centre) is increasingly being viewed

with suspicion and misgiving by the average consumer.

The study also mentioned, in its bid to remove this cloud of suspicion and disrespect, the

Apollo group will play the role of a strategic facilitator through The Apollo Clinics. In

order for this to happen, the clinic model would need to encompass wide geographical

reach, standardized service and trust.

The Product

Given below is a brief description of some of the major components of the product

design:

Range of services

To offer convenience, The Apollo Clinic was conceived to offer specialists’ consultation,

comprehensive diagnostic services, pharmacy and preventive health check up packages

under-one-roof. Keeping in view the role played by family physicians, their sheer

numbers and also Apollo’s high-end image, it was decided that the clinic will confine

itself to consultations by specialists and super-specialists only. It would also help in

leveraging general physicians’ role as influencers for other services being offered by the

clinic.

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Technology

To improve viability of the business model, without compromising on the quality of

services, it was decided that the clinic would have medical equipment with state-of-the-

art, but proven, technology. Adequate focus on information technology, with a

comprehensive clinic management software solution, was envisaged to allow integration

across clinics at a later stage, and also to improve accuracy, speed of service and staff

productivity.

Creating the experience

To reinforce the unique positioning in relation to a hospital or other stand-alone clinics

and diagnostic centres, it was decided that the interior design of the clinic should provide

a warm, soothing and non-hospital like ambience. While the clinical outcome would be

extremely vital, the importance of non-clinical aspects of service delivery, to be able to

offer a different experience, was well understood. It meant a rigorous selection procedure

for employees (including psychometric testing), well-developed training programmes and

ongoing quality audits.

Pricing

Given the relevance of services being offered across different segments, it was decided

that the volumes, not margins, would drive a clinic’s profitability. Though the clinic

would offer significantly superior services, it would follow a value-for-money pricing

strategy, with specifics getting guided by the local market conditions for each of the

clinics. Since majority of the corporate hospitals including Apollo suffer from them being

perceived as elitist and 5-star facilities, it was understood that aggressive communication

would be vital to correct the perception in the clinic context.

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Development Phase

Business Model

A detailed financial blue-print resulted in a project cost, for each of the clinics, in the

region of about Rs 17 million, with interiors and medical equipment being the major cost

components. Detailed space programme indicated a requirement of about 4,000 sq ft,

which was expected to be leased. Based on our understanding of the anticipated revenue

streams, it meant an IRR of over 20%. A further study of population, income profile and

demand-supply gap of top 200 cities/towns in India led to the scope to establish about

250 clinics in the country in 110 cities.

Franchising as a business format

In line with our objective to leverage our brand equity and the domain knowledge, rather

than get into the management of ‘smaller’ outlets across a vast geographical region (in

relation to the large and mid-sized Apollo Hospitals), it was decided to adopt franchising

as the business format. It was also understood that the in-depth knowledge of local

market conditions and also the entrepreneurial drive of the franchisee would be the key

drivers of the success. As a franchisor, we also leveraged our role as an ‘aggregator’ to

offer economies of scale in virtually every facet of our offering, ranging from equipment

procurement to clinic stationery. It was also understood that the selection of the right

franchisee would be the single-most important factor. Qualification as per a well-

formulated selection criteria including stringent due diligence exercise was mandatory for

each of the prospective franchisees.

Alliances with industry leaders

For each of the major components of the Apollo Clinic model, the best professionals /

firms in their respective categories were engaged after a careful screening exercise.

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Alfaz Miller, one of the most reputed architectural firms, was chosen as the architects for

the project. Amarchand Mangaldas helped in preparation of the Franchise Agreement,

which stipulated an agreement period of 7 years, a one-time license fee of Rs 2 million

and an operating license fee of 5% of gross revenue.

Wipro Healthcare IT was engaged to develop the comprehensive clinic management

software. NIS Sparta provided the Service Quality training and Ravi Bajaj designed the

employee uniforms. We also engaged IIM, Bangalore to develop a 2-week management

programme for each of the franchisees. Standard Operating Procedures, both for clinical

and non-clinical functions, were developed by the Apollo’s in-house team.

Communication

Branding

The nomenclature and the visual identity had to convey a facility, the lineage and ‘for the

family’ feel. The Apollo Clinic brand with a simple visual mnemonic for the family in

warm orange colour was developed accordingly. A nurse with a child was adopted as the

visual for all backdrops.

Positioning

The initial communication strategy for The Apollo Clinic focused on three key

propositions : ambience, convenience and value-for-money pricing. Subsequently, it was

decided that the communication should focus on the integrated services available under-

one-roof as the key message, since warmth could be conveyed through execution and

pricing should be more of a supportive proposition. Thus, the visual mnemonic of ‘Brings

life back to normal’ was developed. (Exhibits 1-3 : a typical brand ad, ‘price’ ad, and

‘reaching the 25 clinic milestone’ ad).

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Media

Given the sensitivities and the likely risk of being perceived as overly commercialized

business proposition, it was agreed to have limited focus on ‘paid’ advertising and

conserve advertising spends. Instead, word-of-mouth advertising, public relations and

local promotional initiatives have played a greater role. The corporate segment has been

targeted in a focused manner for promoting regular health checkups for their employees

and also pre-employment check-ups for new recruits through personal selling. Our

Clinics are in regular contact with existing customers through newsletters ( Exhibit 4) and

direct mailers.

Launch and further roll-out

On completion of the development phase, we released our first advertisement inviting

applications from prospective franchisees. It resulted in over 200 enquiries in the North,

which after various stages of the selling cycle, resulted in finalization of franchisees for 6

locations. The first Apollo Clinic was launched in April 2001 in Janakpuri, New Delhi.

Today, 29 Apollo Clinics dot the length and breadth of India - from metros like Delhi,

Bangalore, Kolkata, Chennai and Ahmedabad to smaller cities such as Jamshedpur,

Guwahati, Siliguri, Salem and Kannur. To add to that, atleast 20 more clinics are

expected to open over the next couple of months, in Gorakhpur, Jaipur (the second in the

city), Mumbai, Thane, Surat and Varanasi, among others. .

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Analysis of results and impact on organization The success of our strategy has been captured in terms of the following parameters :

Consumer response

The Clinic has had excellent response from various customers. Warm ambience,

comprehensive services, and staff responsiveness have been some of the most appreciated

aspects. A summary of performance analysis (Exhibit 5) clearly establishes the success of

the model. Over the last two years, the clinics have captured almost 220,000 customers

and a total business of over Rs 250 million. Comprehensive service quality audits across

clinics in existence for more than six months have indicated an average of over 94%

customers being satisfied or more than satisfied, which gets further proven by extremely

high incidence of repeats for their further healthcare requirements.

Impact on Apollo’s image

Being at the ‘retailing’ end of the healthcare delivery spectrum, The Apollo Clinic aims

to provide a friendlier and more regular consumer interface for the overall Apollo brand.

A study conducted by ACNielsen based a total of 1390 interviews across 3 cities

highlights the impact of The Apollo Clinic on the overall image, even at such an early

phase of the brand existence. While certain differences in perceptions between Apollo

hospitals and clinics, such as availability of high-end medical equipment or more

competent doctors, are reflection on category differences, there is a marked correction

after the visit to the Apollo Clinic in terms of ‘price perception’ and ‘not for everyone’

image of the Apollo brand. (Exhibit 6)

Impact on Apollo’s financial health

Being a wholly owned subsidiary of Apollo Hospitals Enterprise Ltd with a paid-up

equity share capital of Rs 15 million, Apollo Health and Lifestyle Ltd, which so far had

The Apollo Clinic as the key product, has contributed Rs 3.3 million and Rs 5.9 million

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of PAT during the last two financial years, with a projected contribution of Rs 9 million

during the current financial year.

The clinic viability

Quite a few clinics have achieved the cash break-even points in about a year of their

existence and have clearly established the trend for impressive returns on the investment.

This is further corroborated by the emerging phenomenon that quite a few of our existing

franchisees have signed on for more number of clinics and have expressed interest in

moving up the value chain in healthcare.

Industry recognition

Given the fact that The Apollo Clinic franchise was conceptualized and set up from

scratch only 3 years back, it is encouraging to note that The Apollo Clinic was adjudged

Franchisor of the Year, amongst over 130 entries, for two consecutive years. As the panel

of judges mentioned, The award is in recognition of our commitment to the franchisees’

interest and our utmost focus on standardization and service quality.

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Major learnings

Some of the major learning so far have been :

Selection of franchisee

We have witnessed in quite a few cases that the franchisees expect that the brand should

generate ‘automatic’ returns on their investment. It is a manifestation of the larger Indian

reality, which is characterized, more often than not, by the owner’s reluctance to get his

hands dirty and the proverbial rent seeking behaviour.

We are now moving towards an even more rigorous selection process, with a two week

cooling period, where we expect the prospective franchisee to understand the demands of

the business model and generate adequate comfort with us, both in terms of his

knowledge and also entrepreneurial drive.

Greater investments in the brand and category familiarization

Given the fact that The Apollo Clinic aimed to create an altogether different category as

‘comprehensive day-to-day healthcare services provider’, we believe that we need to

increase our mass media spend to promote The Apollo Clinic brand, as well as create

greater, and more effective, awareness about the need for preventive health checks.

Future directions

Overseas markets

The first international clinic at Doha, Qatar is scheduled to get formally launched on Jan

26, 2005. In the next few months, we plan to expand a lot more aggressively in South

Asia, Middle-East and North Africa region. In the past few weeks, there has been

extremely encouraging response to the concept from countries such as UK and Singapore

as well.

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Accelerated scaling up

Given the cumulative learning across various phases of project development and launch,

we plan to scale up a rapid pace with an aim to set up almost 50 clinics in the next

calendar year and another 100 the following year. Ever increasing network and the

resultant impact in terms of visibility shall also facilitate quicker growth in clinic

revenues.

Inner circle of franchisees

Like any other leading franchise brand in the world, we believe that our franchisee

community is poised to play a significant role in shaping the future of the brand and

generating even more avenues for quality enhancement and business growth. We propose

to form an Inner Circle with a select panel of 12 franchisees based on their performance,

potential and progressive outlook.

Product derivatives

We plan to augment our product portfolio by newer initiatives such as Disease

Management Programmes (for chronic ailments such as asthma and diabetes) at the

clinics and also a new variant like The Apollo Women’s Clinic, which has had

encouraging response from some of the franchisees.

The Apollo Clinic, Shakespeare Saranicrosses 8000 customers mark in less than one year

Shakespeare Sarani is healthier Prevention is better than cure that's why the Clinic has successfully than ever. As of today, 8000 organized a number of innovative health promotion activities people have accessed good including Express Heart Check and Oral Cancer Detection Camp. health at The Apollo Clinic. It is currently exploring opportunities to associate with Rotary

Club and like-minded associations to promote good health to their The Clinic's location has made a members.lot of difference to this figure. Conveniently located almost Notably, the Shakespeare Sarani Clinic was the very first clinic to opposite Kala Mandir on sign with Apollo Health and Lifestyle Ltd. in the country. Shakespeare Sarani, The Apollo "The Shakespeare Sarani Clinic will always have a special corner Clinic is within reach of in the heart of the Apollo group. I am sure that the Clinic will bring everyone in the neighbourhood. thousands more lives back to normal in the future”, said

Mr. Ratan Jalan, CEO, AHLL.What's more, it ensures that you don't have to go anywhere else Visit The Apollo Clinic and touch good health. 8000 othersto access day-to-day healthcare. already have.The Clinic offers everything one

needs under the same roof - consultation with specialists and super specialists, diagnostic test services, a 24-hour pharmacy that door delivers medicines, and a range of health checks for all.

Walk into the warm, affectionate and welcoming ambience of The Apollo Clinic, and you will already start feeling better. Then the courteous staff, the state-of-the-art equipment and focus on service quality are all brought together to bring your life backto normal. The Clinic boasts of some of the leading specialists and super-specialists in Kolkata like Dr. Debal Sen, Dr. S Islam, Dr. Lakshmi Narayanan, Dr. Ronen Roy and Dr. Santosh Agarwal.

Among the thousands of clients are also several leading corporates including Reliance Industries, ITC, Tata Steel, Hutch, Coke, HDFC Bank and ICICI Prudential. The Clinic has already completed more than 1600 health checks so far.

Dear Neighbour,

The Apollo Clinic has been in your neighbourhood for some time now and has brought world-class healthcare within your reach. As you would expect from Apollo, we have state-of-the-art equipment, some of the most qualified and well-trained doctors and technicians and rigorous quality control measures.

The clinic offers multiple services like Consultation with leading Specialists and Super Specialists, accurate, yet affordable Diagnostic services and a 24-hour Pharmacy that stocks only genuine medicine and personal care products, all under the same roof. With the ever-emerging dominance of life-style diseases, we believe that prevention is the best cure. That's why the Clinic has also been offering a comprehensive range of Preventive Health Checks, which have been customised for every member of your family.

It will be our constant endeavour to offer services, which more than meet your expectations. And this newsletter, The Capsule, is our way of communicating directly with you. In this newsletter, we will update you on the different happenings related to the Clinic. What's more, we will also inform you about simple ways to good health. So, kindly treat this as a communiqué from your friendly neighbour, and read on.

Wishing you good health,

Yours Sincerely

Mrs. Anjali SaraogiDirectorThe Apollo Clinic Shakespeare Sarani2283 7407/9

TheApolloClinic

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August 2004capsuletheIN

AUGURAL

SISUE

h ke e e Sar niS a sp ra a

L to R: Mr. Ratan Jalan , Mr. Sanjiv Goenka, Dr. Prathap C. Reddy and Mr. Arvind Saraogi

The Apollo Clinic Summary of Performance till 30 Nov 2004

Sl No Clinics Launch Date Total Customers*Avg.new customers

per month Total Clinic sales

EAST

1 S Sarani, Kolkata 21-Nov-03 12,212 1,018 16,561,766

2 Howrah 27-Jul-04 4,193 1,048 2,435,253

3 Saltlake 16-Sep-04 1,818 909 1,076,649

4 Jamshedpur 7-Mar-04 9,543 477 8,943,683

5 Siliguri 4-Jan-04 11,062 1,106 7,733,470

6 Guwahati 18-Sep-04 1,008 504 732,810

Total 39,836 5,062 37,483,631

WEST

7 Gathlodia, Ahmedabad 20-Sep-02 12,155 468 16,247,147

8 Satellite, Ahmedabad 21-Mar-04 5,785 723 8,065,872

Total 17,940 1,191 24,313,019

NORTH

9 Azadpur, Delhi 6-Jun-03 6,646 391 4,509,401

10 Gurgaon 16-Nov-02 21,252 590 30,453,839

11 EOK, Delhi 22-Dec-02 22,818 992 37,567,809

12 Ghaziabad 19-Oct-03 7,542 580 7,668,250

13 Noida 18-Oct-03 8,756 674 10,450,785

14 Pitampura, Delhi 9-Aug-03 14,713 981 13,140,201

15 Rajouri Garden, Delhi 2-Feb-04 4,956 551 3,999,340

16 Faridabad 23-Dec-02 13,137 571 16,933,419

17 Janakpuri, Delhi 26-Apr-02 20,759 670 31,400,109

18 Chandigarh 30-Jan-04 3,826 383 3,473,966

19 Ludhiana 31-Jan-04 3,554 395 3,479,540

20 Jaipur 3-Nov-03 5,105 425 4,392,057

21 Allahabad 10-Jul-04 1,071 214 1,967,295

22 Agra 4-Jul-04 2,793 559 1,928,090

Total 136,928 7,975 171,364,101

SOUTH

23 Central Bangalore 11-Sep-03 11,145 796 12,383,998

24 Malleshwaram, Bangalore 7-Apr-04 4,441 634 4,298,139

25 Koramangala, Bangalore 25-Jun-04 4,818 964 3,674,950

26 Salem 23-Sep-04 1,326 442 1,320,043

27 Kannur 4-Oct-04 1,171 586 555,652

Total 22,901 3,422 22,232,782

Grand Total 217,605 17,650 255,393,533

* since each new customer is given a unique ID at the time of first registration.