This case is a B2B domain case where Willis weigh has to decide between ISR approach and direct sales approach for the sale of Ortho500 which would re...
Submitted ByGroup 15 BBMK Sec-2 Date: 9th September 2015
Overview The company FormPrint was founded in the year 1998 by an engineer who constructed prototypes from three dimensional designs using additive manufacturing principles. These principles mainly involved producing tangible, three dimensional forms and later transformed into physical products through a printing device. Prices for these devices varied from as low as $10000 or less to as high as $700000 for large complex systems. FormPrint was an early entrant into the 3D printing industry. It primarily focused on healthcare industry with products for Dental, Auditory and Orthopaedic usage. #D printing industry had a worldwide market of about $2.25 Billion in 2012 and would reach $3 Billion within one year with a y-o-y growth of 33%. The Company has been basing its value proposition and approach on selling best-in-class product performance at premium prices. Also, FormPrint was known for selling products with high quality and with technical sophistication at premium prices. The company had sales of $42.9 million by the year 2013. FormPrint predicted that out of $235 million of the global 3D printing market $176 million was to be coming from US market which contributed to 75% of the total market in healthcare. Another observation was that non-hospital market and lowpriced medical items would be of prime importance in the days to come. Problem Statement: In what ways can Willis weigh options between ISR approach and direct sales approach for the sale of Ortho500 which would result in favourable sales results and hence profitability for FormPrint in the short-run. Situation Analysis: a) Company a. Early entrant in the market b. Technology advancement in prototype manufacturing process c. High product quality d. Wide product range e. 80% of the Ortho sales to Large customers (more than 200 beds) f. Well trained salesmen b) 4 P’s: Product Price Target Market (Place) Promotion
Ortho500 $68000 Large non-hospital orthopaedic clinics Conference Sponsorship/ quarter at 4 orthopaedic conferences, direct email campaign, a PR campaign, product related info on the company’s website
c) Competition: For Ortho500 Company Ashokal DragonBend LoganSatr PrintFlex FormPrint
Market Share 25% 17% 12% 20% 22%
Growth Rate 73% 43% 42% 85% 74%
Price Range <$100k $100k-$300K $100k-$300K <$100K $68000
It is observed that with PrintFlex at 85% growth year on year and Ashokal growing at 73% under the price ranges similar to that of FormPrint. Plus there are two PC manufacturers scheduled to be entering the industry by 2015, 2016 the details aren’t yet known. d) Buying Process of 3D printers:
Ortho Surgeon Requests Hospital Services
Hospital Board grants approval
Purchasing department evaluates vendor quotes
Price Negotaition
e) Timeline of Events:
1998
FormPrint was founded
2002
Focused on healthcare apps
2013
•FormPrint had sales of $42.9 million • Plans to step into low priced products
2014
Scheduled to launch Ortho500
Alternatives and Evaluation of alternatives: 1. Sell through Independent Sales Representatives (ISRs) Pros
Cons Sales and negotiation experience Direct product demonstrations Shorter sales cycle of 2 months. Hence limited risk Lots of experience with lease and other financing arrangements Hiring freeze and hence there is a need of creating a fragmented outpatient market through ISR Breakeven Analysis:
Cost of training ISR is high Less technical expertise Short term sales culture Shallow product knowledge
Annual cost to company/salesperson - $400000 o o
Salary – 70% of salary - $280000 Commission- 30% of salary - $120000
Medical Device Tax – 2.3% ($1564) Number of salesmen currently Selling Price/Ortho500 Total cost of salesmen/ortho product Total cost to company for salesmen Devices sold/salesman Number of units to be sold to breakeven
Invaluable relationship hospitals Take less time to demonstrate due to prior knowledge Follow-up training to the users Loyalty is the utmost priority An opportunity to develop selling skills for the non-hospital market
Not much experience with the financial negotiations Not motivating for the price it is getting sold
Breakeven Analysis: Number of ISRs currently 10 ( Assuming) Selling Price/Ortho500 $68000 Normal Cost 23% sales =68000+15640= $83640 If a manager is included 37% of sales = 68000+ 0.37*68000= $93160 Assuming atleast 10 ISRs the company has = $93160 * 10 = $931600 Number of units to be sold to breakeven= 931600/68000=14 Recommendation: The US healthcare market had grown by 78% in the year 2013 from $98.5 million to $176.25 million which could be seen as a very fast growing market. The product in the industry being sold, though not that technically complicated one, may still need some technical expertise for the sales to happen. From the analysis above it is clear that the company will have to sell more number of units compared to that direct sales force. Also there is some amount of risk involved given the shallow product knowledge and short term sales culture of Independent Sales Representatives, the market data substantiates a. Low use of ISR given the product complexity b. Increased use of Direct sales force for the sale of Ortho500 Hence we, as a group, recommend FormPrint to pursue its sales via its direct Salesforce considering the potential that the industry has in the coming days for the small printers. This will also be an opportunity for the company to groom their salesmen to sell these less technically complicated 3D devices to the smaller hospitals and outpatient clinics.
