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Ortho 500 Sales strategy

FormPrint was established in 1998, and designed 3 dimensional


prototypes through patent protected technology. FormPrint mainly
focused on health-care application. By end of 2013, FormPrint had
sales of $42.9 Million.
FormPrint is launching ortho500, a new 3D printing system which
could print custom exoskeleton orthopedic splints, braces and
cast according to the body of each patient. The planned price for
this Ortho 500 product is $68,000 and the target market is
outpatient department across US, which had a market share of
177 million USD.
Ortho 500 Strengths ease of use, overall performance.
Weakness Functionality
But as per the survey for 3D printing the functionality of the
system was not that important.
If ortho500 failed to establish a leading market share in
exoskeletal bracing in 2014, Formprints medical product division
could face layoffs.

Management Dilemma
How to market Formprints new orthopedic 3D printing system?
Should they enter the market through Independent sales
representative or should they go with Formprints sales
representative.
Which will reap them a maximum benefit?

Solution
Since FormPrint is entering into a new market and on tight
budget. In this situation, blended of ISR-Direct sales approach
would result in more favorable results.
Each Formprints sales representative cost about $ 400,000, this
cost to company is not concerned or not with respect to selling
ortho 500.
If we allocate an addition of $ 75,000 to $ 400,000, and
considering the level of expertise of FormPrint sales
representative over period of 12 months if the Sales
representative can achieve target of selling 6 Ortho 500 printing
system. Since the expected sales cycle is 60 days.

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Cost to Sales Person


Ortho 500 Sales target allocation
Sales cycle for Ortho 500
Expected Sales of Machine in a
year
Total revenue generation from
Ortho 500(per sales person)
Tax 2.3%

400,000 USD
75,000 USD
60 days
6
408,000 USD
408,0009384=398,616 USD

From the above table, at 68,000 USD pricing of Ortho 500 the
sales representative cannot achieve their target covering the cost
of selling based on the Sales cycle of 60 days. But if the
allocation of 75000 is considered within the CTC of 400,000 USD,
then this will be a profitable model.
Based on the previous experience employing ISR FormPrint has to
hire to manage these ISR and the cost jumped to 37% of the

sales. But instead of hiring management can assign 2 ISR under


the FormPrint sales representative.
Now let us consider the cost aspect with respect to Independent
sales representative.
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Independent Sales Representative


Cost of Sales (23% of Sales)+Plus
tax
Sales Cycle of ortho 500 60 days
Total revenue generated
Revenue after tax
Cost of Sales on total revenue

17,204 USD
6 units Per Annum
408,000 USD
304,776 USD
103,224

The Benefit in case of ISR is that, FormPrint will have very less
fixed cost factor. With ISR there is no initial risk because FormPrint
will not be responsible for their health and retirement benefits.
Thus FormPrint has to shell out commission of 23% plus 2.3% as
tax.
We can have an agreement with ISR, such that if he fails to
perform his responsibilities they can terminate his contract, if
there is no productivity.
When ISR delivers significant amount of revenue to FormPrint,
then FormPrint can hire him full time with CTC. Wait for the sales
cycle to complete and evaluate the feasibility of continuing with
them.
If the cost to company is less than annual sales done by them, we
can train them further and continue with ISRs; else fall back on in
house sales reps.
The only issue with ISR is
1) There cannot be complete control of independent sales
representative.

2) The training aspect depends on the ability of ISR, which


cannot be measured.