Ortho 500

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,

Formprint’s medical product division could face layoffs.

Management Dilemma
How to market Formprint’s new orthopedic 3D printing system? Should they enter
the market through Independent sales representative or should they go with
Formprint’s 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 Formprint’s 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.

1 Cost to Sales Person 400,000 USD

2 Ortho 500 Sales target allocation 75,000 USD
3 Sales cycle for Ortho 500 60 days
4 Expected Sales of Machine in a year 6
5 Total revenue generation from Ortho 408,000 USD
500(per sales person)
6 Tax 2.3% 408,000-9384=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.
1 Independent Sales Representative
Cost of Sales (23% of Sales)+Plus tax 17,204 USD
Sales Cycle of ortho 500 60 days 6 units Per Annum
Total revenue generated 408,000 USD
 Revenue after tax 304,776 USD
Cost of Sales on total revenue 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.