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Abstract
This report covers the product line of Hart Hospital Equipment Inc., how the products are currently performing as well as what opportunities there are in introducing the Pacer product in the near future. To make recommendation to management, the report will study the different effects of the work required for each segment while assessing the sales force. The marketing strategy will be discussed and how re alignment of the company’s different segments will be affected on the roll out of the Pacer. Recommendations will be made taking into account sales history as well as what can be expected on realignment of resources. Further realignment of the current sales representatives within the organizational structure will be taken into account if necessary. Specific recommendations will be directed towards the Sales force structure and the number of sales representative to come up with the best possible mix to attain the highest revenues and growth rate.
Introduction and Background:
Hart Hospital Equipment Inc. (HHE) as a manufacturer and involved in the sales of medical care equipment . Their product line include defibrillators (consists of delivering a therapeutic dose of electrical energy to the heart during cardiac infractions), EKG machines (cardiac analysis devices) and medical monitors (tracks vital body functions). Although defibrillators and EKG machines were the initial products introduced to market, the monitor’s introduction to market brought about great sales prowess to HHE’s bottom line. Monitors are the biggest sellers as they are the foundation piece of equipment that compliment the EKG and defibrillator. Sales for monitors have started to lag and is becoming prey to competitive pressures.
Sales Analysis:
Currently monitors constitute over 50% of HHE’s Revenue and the remainder is distributed among EKG and debrilators. Sales is achieved by a combination of well trained sales representatives as well as direct mailing, journal articles and seminars. While analyzing the sales data seen in Table 1 below, 2012 saw a healthy increase at 42 % from 2011 but seems to be slowing down as 2013 with defibrillators, EKG and monitors will only be a 15% from prior years. Assuming that Pacers are rolled out and start selling an additional 23% increase in sales is expected at $100.5 million.
While digging deeper into the case it is clear that monitors which was once the bread winner for HHE is seeing signs of slow down due to changing trends in the market i.e. new technology, lower pricing from substitute companies, which is why the introduction of the Pacer is imperative to bring about strong sales for the next couple of years. HHE would be the first company to introduce it to the market and believes it will have a two year head start when compared to its competitors. This two year head start has a number of positive ramifications in terms of positioning the HHE brand in the minds of customers as well as monopolizing the initial demand. To make full use of this advantage it is imperative to structure the sales force to work optimally to adapt to all the features of pacers and learn every intricacy it represents.
Sales force Analysis:
The sales force accounts for 27% of HHE’s marketing budget and is 13% expense on sales which is over 2% lower than other competitors in the marketplace. As per the hierarchal diagram below there are 93 sales representatives in all 29 each for three different geographic regions with their own regional manager.
Apart from this there are 6 national reps which report to a national sales manager. The national sales manager as well as the regional manager all report to the VP of sales. Medical equipment being highly technical and specific in its uses expects that sales representatives be highly knowledgeable and trained. The average training period for a representative to learn defibrillators monitors, and EKG machines it will take an average of 12 months of training before they would be able to present it to a client. Being that the Pacer launch is around the corner it is imperative to start training the representatives ASAP.
HHE’s client base are divided into 2 main categories i.e. Hospital and pre-hospital users. The former is self explanatory, the latter represents paramedics, EMT’s and surgicenters. Pre hospital buyers belong to national account purchasing groups. These are further divided into proprietary or voluntary. The success here is to winning a national contract with a group that handles voluntary hospitals. These groups make recommendations to voluntary hospitals. The job of the national sales rep is to make sure that the groups are picking HHE equipment and adding it to their list of recommended equipment.
Go To Market Strategy:
Answering the following questions in line with the GO TO Market strategy will help us understand the requirement and will feed into our recommendations
WHO will we actively target within the market?
The targets are the Hospital and pre-hospital users. Specific focus will be given to the agents of national contracts which is part pre-hospital users
WHAT will be our product portfolio for target customers?
The target portfolio will be the original foundation equipment such as EXG , defibrillators as well as the top seller i.e. monitors. Pacers will also be actively marketed to the target audience.
HOW MUCH will we charge for our products for different customers?
Marketing representatives will have some leeway to discount on single sales, if it is a packaged order further discounts can be given on permission of the regional manager. For bulk sales discounts to national contracts , the national sales manager will have to approve it.
HOW will we promote our products to target customers?
All four products will be promoted with a combination of dales force, articles, journal advertisements as well as seminars.
WHERE will we promote and sell our products to target customers?
Apart from the national sales rep all others will be designated regional areas to approach local hospitals, EMTs, paramedics and surgicenters.(Padmanabh, 2013)
Sales force number recommendation:
As stated in the case the expense on sales force accounts for 13% of annual sales . In 2012 the annual sales was $710,000,00 ( sales force expense is $92,30,000) based on the representative count of 93 reps, the average $ value in expense for each sales rep is $99,247. As mentioned in the case HHE spends 2% lesser than other industry players. This allows HHE room to make further investment into the sales force representative pool. Extra heads if used efficiently could make a dramatic effect to the bottom line. Conservatively HHE should increase their spending on the sales force to 15%. This would translate to $106,50,000 sales rep expense per year. More spending ability means more sales representatives can be hired .
This potentially means increasing the current sales rep number to 107 or an increase in 14 sales representatives. As per details provided to gain market share HHE has moved sales reps to concentrate more on monitors rather than defibrillators and EKG. There is an opportunity here as all product lines are related. Management should work closer on helping the Sale force use cross selling techniques as more customers want to buy all their equipment from a one stop shop. As mentioned earlier the Monitor is a foundation equipment and compliments the defibrillators and EKG. As an example of cross selling on every site visit if the sales rep must make a check list to see if the customer is missing any of these equipments and should suggest they consider the product in question.
Sales Force Structure recommendation:
Additional knowledgeable sales representatives on the field will result in more advertising for the product line, the 14 new sales reps can be fairly distributed to the three different regions based on the VP’s discretion. Since there will be more man power in the regions the next recommendation would be to move three of the highest performing representatives from the original 87 to the national accounts section.
In this case the national sales team will be able to grow from 6 to 9 which is a 50% boost in man power. We do not have any data on the pay structure of the sales representative so will focus on getting the best out of a representative. These additional sales reps will be the right amount of fire power required to maximize on the purchasing agents for the voluntary groups. Note, selling to voluntary groups is where HHE can maximize its sales volume. (Madhani, 2013)
In the case of HHE it is already a mature organization with a strong background on training and people management. To take it to the next level, a sales configuration model should be used on the team. In a nutshell it focuses on understanding each representative’s strengths, interests, and aptitudes in regards to the product line and in which location he would be better suited. This will translate into a higher sales yield per representative.
References:
Madhani, P.M.(2013).Managing Sales Compensation: A Sales Configuration Approach. Compensation & Benefits Review
Padmanabh.S.(2013). GO-TO-Market Strategy. Business Today, 21(5),138
