Hart Hospital Equipment - Ways to Break Out into the Market Leader - Case Study Example

Hart Hospital Equipment, Inc. (HHE) This research tries to identify various strategies that companies use to gain the upper hand in the market over its competitors. It looks at market strategy, selling force assessment, territory alignment, customer segmentation, and account strategy development. The paper uses these strategies to argue the best strategy for Hart Hospitals Equipment, Inc. (HHE), manufacturer and seller of medical equipments. Towards the end of the paper, three strategies for the pre-hospitals, voluntary groups, and proprietary arrangements are given. The paper then suggests the best number of salespersons and recommends the best Sales Force Structure for HHE. The Case Hart’s pacer is a high-potential product. Plans are underway to launch the product in January 2016. The pacer keeps cardiac functions for up to twenty minutes. It thus gives healthcare providers enough time to establish appropriate treatment for a cardiac arrest victim. Hart’s pacer is the first in the industry. Therefore, Hart expects a high volume of sales in the first two years before the introduction of other similar products by other companies. The high sales depend on physician’s acceptance and awareness. The Sales Force’s ability to develop acceptance and recognition of the pacer is thus of paramount importance. Hart’s philosophy of creating innovative products, marketing products through skilled sales representatives, and offering excellent services has enabled the company to gain the upper hand in the market. Hart’s sales force provides key information that has enabled the company to attract and keep customers. The field force’s expenditure is about 75 percent the marketing budget of the company. The remaining 25 percent of the disbursement consists of journal advertisements, conventions, and direct mails. In total, sale force costs are about 13 percent of the total sales; this is lower by two percent to the industry average. The HHE’s field force is made up of 93 sales representatives. Sales representatives are grouped into geographically based representatives and national account representatives. Geographically based representatives are 87 while national account representatives are six. Geographically based representatives, report to the district managers who then report to regional managers. There are three regions, each with 3 districts and 29 representatives. The national account representatives report to national account sales manager who with regional sales managers report to the Vice President of sales. Territory-based representatives have doubled as Hart’s sales go up. However, the number of national account representatives has not changed in the past three years. Hart’s sales representatives are well trained in the company and within the industry. Market Strategy Marketing strategy is the objective of achieving sustainable competitive advantage in order to increasing sales of the company. HHE’s marketing strategy involves long-term and basic activities in the area of marketing. It involves the analysis of the company and business environment to formulate, evaluate, and select market-oriented strategies that contribute to the achievement of the market objectives and goal of the company. The strategy involves precise and careful scanning of the external and internal environments. Internal environmental elements involve marketing mix modeling, marketing mix, strategic constraints, and performance analysis. The company uses marketing mix modeling to establish marketing budget. It also uses it to allocate spending across marketing mix and spending across brands. HHE’s external environmental elements include competitor analysis, customer analysis, target market analysis, and elements of economic, technological, political/legal, or cultural environment that can affect the success. Marketing strategies are the fundamental foundation of marketing plans created to offer market needs and achieve marketing objectives. Objectives and plans are usually tested for measurable results. Usually, marketing strategies are designed as multi-year plans with tactical plans, which specific actions that must be completed in the current year. Time horizons of marketing plans differ by industry, by nation, and by company. However, like all companies, HHE’s time horizon relates to the rate of change in a business environment. Marketing strategies are interactive and dynamic. They partly planned and partly unplanned. Alterations affect the course of application of the approach. Types of Strategies Marketing strategies differ due to the uniqueness of the situation. However, there are several of ways of classifying generic strategies. According to market dominance strategies, there are strategies like challenger, leader, and challenger strategies. There are three generic strategies according to Porter generic strategies. They are cost leadership, differentiation, and focus approach. HHE is leading in the industry. However, it needs to focus on cost leadership and differentiation. The company is already a unique company in the manufacture and sale of medical equipments. Nonetheless, its competitors are catching up with the company. Therefore, the company ought to ensure that its products and services are unique, best, and of high quality when compared those of its competitors. By so doing, HHE would attract permanent customers, as there would be no company offering the same quality of products and services. Differentiation would help HHE attract customers and maintain its existing customers and consequently leads the company enjoys high profits as it customer would not have a reason to buy from other companies. Again, it is because it would be attracting prospective customers. Combine with low cost of products and services through cost leadership, HHE would widen its market share and thus ensuring for itself big profits. Market Segmentation Market segmentation is a marketing strategy, which divide a wide target market into groups of consumers having common priorities and needs. It then creates implementing strategies to implement them. Market segmentation approaches identify target customers and give supporting data for positioning marketing plan goals. A company may create product differentiation approach or an undifferentiated strategy that involve specific products lines or products. The approach is determined by specific attributes and demands of the target segment (Gu, Reed, & University of Canterbury, 2012). Through market segmentation, HHE would be able to understand its customers and thus able to meet unique demands of each segment. Criteria for Segmenting A perfect market segment must be big to generate profit, potential to measure, stable enough, internally homogeneous, and constantly respond to a specified market stimulus. It also includes a cost-effective market intervention, identified target customers, and supporting data for sales approach. HHE must thus conduct an extensive evaluation of its customers before grouping them. Methods for Segmenting Markets Geographic Segmentation Markets can be segmented according to geographical approach like regions, nations, states, cities, postal codes, neighborhoods, countries, and languages. The Geo-cluster method merges geographic data and demographic data to develop specific or accurate profile. With reference to the region in rainy regions, merchants can sell umbrellas, raincoats, and gumboots. A merchant can sell summer clothing in hot regions. A large store can target a huge number of customers while small business targets only customers from the local neighborhood. Through applying, geographical segmentation, HHE would be reducing the cost of operations as it services and products are taken close to customers. Psychographic Segmentation Psychographic segmentation is also known as lifestyle. The approach looks at opinions, activities, and interest of customers. It considers the way people use leisure and external influences that can influence them. Psychographic approach targets personal lifestyle and activities in target subjects. Mass media influence psychographic segmentation. Lifestyle products can relate to high purchase decisions and connection products. Psychographic segmentation would allow HHE focus on meeting unique demands of each group and the demands of patients who are their indirect customers. Cultural Segmentation Cultural segmentation is based on cultural origin. Cultural influence consumer behavior and thus can improve customer insight giving a foundation of the predictive model. Cultural segmentation allows suitable communication according to cultural communities, which is significant for message engagement in businesses, organizations, community groups, and government. Cultural segmentation uses existing customer data to estimate market penetration in major cultural divisions by brand, product, and channel(Kruger, 2011). Cultural segmentation may use to map according to region, state, neighborhood, and suburb. Segmentation of markets can also be used for behavior, benefits, and multi-variable account. Cultural segmentation requires HHE to manufacture, distribute, and offer services according customers’ behaviors. It makes the company focus on predictive demands of customers and thus ensure the availability of the market for its products. Segments for Hart’s Market There are three segments in Hart’s market. Segmentations are based on purchase, post-purchase, and pre-purchase. Based on pre-purchase practice, HHH has Pre-hospitals that involve Emergency Medical Technicians (EMTs), paramedics, and surgicenter. Pre-purchase is a decision-making process, where a consumer perceives a need and then seeks to meet the need. Proprietary arrangements are those, which apply purchase. Hospitals in proprietary are members of accounting purchasing groups. Voluntary groups are those, which apply post-purchase practice. Post-purchase behaviors or practice is the last stage in the process of decision making by a consumer, where he/she assess whether a product is satisfying or dissatisfying. Sales Force Assessment Sales persons should be assessed very well because they determine the success of company’s sales. Suitable sales persons promote the success of the company in sales. A company ought to determine an individual is suitable for a particular situation. Potentials should also be identified so that they can be solved. Furthermore, an individual’s sales temperament should be described. Sales Temperament Assessment is utilized in the identification of a person’s temperament. An individual’s temperament is necessary as it help in the determination of the suitability of an individual. Assessment of sales persons is important for HHE as good sales person ensure the success of the company. Sales Force Strategy Salesforce strategy calls for clear decisions on the means of using personal selling to generate sales, sales products, and build customers, which is necessary for the completion of the firm’s sales goals. Personal selling actions differ significantly across companies based on the way personal selling leads to marketing positioning approach and promotion strategy. For instance, pharmaceutical salespersons maintain regular contact with healthcare personnel, but real purchases are done at retail outlets. Nevertheless, salespersons are important for the marketing strategy for a pharmaceutical company. Salespersons give out information on new products, disperse, and develop long-term relationships. HHE’s sales persons ought to act as connections between the company and customers. For instance, they should ensure that their customers are well aware of new products. Salesforce strategy consists of six key initiatives. The first is the promotion strategy. Promotion strategy requires decisions on personal selling contributes to marketing program. Second, the process of selling ought to indicate the means of accomplishing selling with targeted customers. Third, the contribution of sale channels, key account management, Internet, and telemarketing on selling the process. Fourth, assessment and evaluation of a company’s sales strategy ought to be done regularly. Fifth, salespersons ought to be recruited, educated, and trained. Lastly, the outcomes of a selling strategy ought to be evaluated and adjusted regularly to reduce or eliminated the gap between genuine and desired results. HHE ought to ensure that it conducts the six initiatives so that it can ensure its selling process becomes a success. Every one of them is important. For instance, through evaluation, HHE’s management and selling personnel will develop better means of selling. Salesforce Productivity Drivers The cost of selling a product had risen significantly in the last decades. A recent report gave the average selling cost to be around 131 U.S dollars in industries while the total selling cost to be 751 U.S dollars at 5.5 calls per a completed sale. The costs rose by 81 percent from 1980. The high cost of selling has cause companies to engage methods that reduce cost like direct mail, demonstration centers, and telemarketing. However, contact of salespersons with customers is the most effective way of marketing. Therefore, improvement of a salesperson’s effectiveness when in contact with a customer is paramount to HHE as would lead to more sales. In order to build effective salespersons, HHE’s salespersons should possess knowledge of their customers. They also need repertoire of selling approaches and the knowledge of the best strategy that suits a particular situation. In addition, salespersons ought to be able to categorize customers appropriately. Furthermore, they should also be motivated through various ways like being given commissions so that they can dedicate themselves to their works. Measuring Productivity Drivers Productivity refers to the ratio of a volume measure of output to a measured in volume of input use. Measurement of productivity includes technology, efficiency, real cost saving, living standards, and benchmarking production process. Technology is currently known to means conversion of resources or materials into outputs that are desired. The link between technical changes with implicit or explicit productivity measures is not clear. Nonetheless, HHE ought to measure efficiency, real cost saving, technology, and successes. It ought also to benchmark production process. HHE’s measure of productivity drivers allows the company to identify its strengths, weaknesses, and opportunities and accordingly develop effective measures that will drive the company to success. Efficiency Identification of efficiency changes is ideally dissimilar to means of identifying technical change. In engineering sense, full efficiency is the production process that has achieved utmost amount physically achievable with the modern technology when a fixed amount of inputs is used. Achievement of technical efficiency means the elimination of organizational or technical inefficiencies or towards best practice. When the measurement of productivity concern an industry level, efficiency that is achieved is due to increased efficiency in individual establishments up the industry. It can also be due to shifting of production to more efficient establishment. HHE ought to evaluate regularly whether its various processes are working efficiency and effectively as expected. In the case there is inefficiency, the company ought to make amendments. Real Cost Saving Measurement is residual and captures the efficiency, technology, changes in learning-by-doing, measurement of errors, and capacity utilization. There are several factors behind productivity growth. Through real cost saving, productivity is focus is on real cost savings in production. Cost saving is part of cost leadership strategy. When a company lowest the cost of operation, it can lowest the cost of its services or products and still mark profits. Due to the adoption of a cost leadership strategy, HHE ought to put up measures that can lead to cost saving. Benchmarking Production Processes Inefficiencies can be identified when production measures of certain production processes are compared. Relevant productivity measures are usually presented in physical units like cars per day and passenger-miles per every person. Benchmarking production processes fulfills factory-to-factor comparison. However, measures can be hard to aggregate or combine. Nonetheless, HHE ought to benchmark so that it can develop better ways of manufacturing, distributing and offering services. Territory Alignment Territory alignment is also known as sales territory alignment, territory design, territory re-alignment, or sales force alignment. Territory alignment is the goal of overall territory preparation process. It is a part of sale operations that consist of call planning, sale force planning, sales force size, and customer planning. Geographical boundaries are created the alignment process to assign work to sales representatives (Clay, 2012). In an efficient territory alignment, territories are developed using quantitative processes and data-driven processes, which help sales management obtain their goals. Territory optimization objectives consist of balancing workload, increasing sales, reducing travel time, improved customer service, increased motivation of sale representatives, and grouping customers according to the abilities of sales representatives. Territory alignment maximizes profits, increase revenues, improves satisfaction of customers, motivated sales representatives, and reduces or eliminated travel expenses. Therefore, HHE should develop efficient territory alignment. Determination of the Necessity of Territory Alignment There is no right wrong or right territory alignment as the approach is not an exact science. An alignment can be suitable for a particular company and not to another even if they have similar businesses. Territory alignment balances procedure and concept. A territory set for minimum travel time may not work in a highly skewed market. Likewise, a territory alignment balanced concerning sales across territories may not be applicable to all territories as each has unique features. In alignment, several objectives or criteria must be considered in the process. The objective should equalize sales potentials, and balance workload. Balancing of workload is important, as it would increase sales opportunities in areas with too many customers. In places where customers are few, a salesperson is wasted. Combination of selling time that is wasted and the missed sales opportunities increase selling costs. HHE should thus design an alignment to suit the objectives and the needs of a particular situation and business. Territory size and overlap determines the need for an alignment. Eliminating or reducing territory overlap and minimizing travel require territory alignment. Territories are poorly defined increase travel and consequently lead to reduced selling time. An effective territory alignment ensures minimal territory overlap, excellent travel access, and placement of right representatives. Steps to take to Maintain Effective Alignment Alignment Criteria The final goal for an alignment is a working system. The development of a functioning alignment requires deep analysis on vertical alignment, policy elements with programs, purpose, practices, and salespersons activities. Alignment is strengthened by utilizing specific criteria to evaluate the agreement among assessments and expectations. HHE can strengthen its alignment through balancing of representation, utilization of material, technology, and system applicability, and reduction of cost (McDonald & Dunbar, 2012). Auditing Alignments An effective and efficient approach for successful realignment typically consists of developing a centrally derived alignment operates as a benchmark, trailed by local adjustments. HHE should develop a centrally derived benchmark alignment by a person with a broad perspective utilizing objective business criteria. He/she use logic to determine staffs across a region, district, and country, and give quantifiable criteria that alignment can be based local adjustments require that local conditions are taken into account. Including local input facilitates recognition of realignment by the sales organization. It is important to determine good salespersons locations before designing territories. HHE’s national and regional managers audit and finalize territory centers before directing them to the national or vice president manager (Kaplan, Norton, &Harvard Business School Press, 2006). The Importance of Planning and Expertise Planning is the main purpose of management. It is required at every part of the management. Absence of planning in an organization makes all activities of an organization meaningless. With increasing size and complexities of organizations and companies, planning importance has increased. Again, the high uncertainties and continuously in a changing business environment have increased the importance of planning. Planning provides direction, reduces uncertainties and risks associated with them, and reduces wasteful activities and overlapping. Again, it promotes innovative ideas, facilitates decision-making, and creates standards for controlling organizations (Butt, 2006). Planning Provides Direction Planning defines the mission, vision, and purpose of in clear and simple words. The noticeable outcome is the clear directions for all employees of the organization. Planning provide a way for the attainment of the goals and objectives of the organization. For example, in case an organization or a company sets a sales target, all departments, personnel, finance, purchase will form objectives based on the sales target. Attention of every manager will be on the achievement of the objective. The achievement of the sales target will thus achieve because of the common goal. Absence of goals disables an organization, as staffs would not have anything to target (Leedy & Ormrod, 2013). Planning Reduces Uncertainties and Associated Risks Planning is usually done for the future, which is uncertain. Planning can help HHE identify changes and risks in the future, which ensure that it creates ways to tackle the projected changes and risks in the future. The risks of the future are minimized. For instance, it can undertake a survey to determine the possible number of new companies that are possible to enter the market in the future. Planning Reduces Wasteful Activities and Overlapping Due to planning, future activities are strategies to achieve objectives. Consequently, planning eliminates the problems of where, why, where, and when. It removes suspicion and disorder. Coordination is created between different departments and activities by planning. Therefore, puts an end to wasteful activities and overlapping. Through planning, HHE eliminates wastages. It increases efficiency. For instance, when it decides to invest a certain amount of money, the finance manager will arrange in advance for the money thus eliminating delays. In the absence of planning, the company may fail to invest the capital due to the lack caused by not planning. Planning Promotes Innovative Idea Through planning, the best alternative from several available ways is chosen. Alternatives are discovered at the course of developing a plan. Many novel ideas are discovered when building a plan. Planning imparts thinking power on managers. Therefore, planning leads to creativeness and innovation in HHE. Planning Facilitates Decision Making Planning provide various alternatives that become the foundation of decision-making. Planning locates target for decision-making. Furthermore, planning lay down the criteria for evaluating and assessing the cause of actions. Planning thus facilitates decision-making in HHE. Planning Create Standards for Controlling Due to planning, the objectives of the organization are stated clearly and simply for everyone. It informs them about what, how, and when of doing things. It gives a standard that laid down the cost, time, and work. Through comparison of the actual work and standards, HHE can identify deviations. For instance, if a worker does eight units of work instead of 10, he/she would have deviated by two units. Planning can thus help HHP identify worker’s deviation and consequently dealt with the problem. Importance of Expertise A worker with expertise knowledge does quality work. He/she provide high-quality services and thus ensure that the company offers quality services or product. Again, an expert can solve and adapt to a difficult situation. Apart from the importance, which an expert offers to the company, he/she require little training unlike the one with no training. Therefore, HHE ought to recruit expertise that can drive the company forward. Customer Segmentation Customer segmentation is the act and practice of grouping customers based on relevant marketing factors like interest, spending habits, gender, and age. It is a great way of identifying unmet customer demands or needs. The strategy helps a company to outperform its competitors by developing products or services that target specific sections of the markets. When based on behavior, the company creates a group of customers who have similar behaviors. For instance, the group could involve people who like a particular product. Customer segmentation that is based on behavior enables a company to develop based on the specific needs of people in that group. It is also able to notify the group members of new products in the line of the behavior. Similar, the use of needs involves the use of customers’ demands to classify customers while in the use of profile; it involves the use of profile information. HHE should develop a customer segmentation based on needs, as its customers are healthcare providers. Customers based on needs would make HHE’s management direct the company’s processes towards fulfillment of customers’ needs. Account Strategy Development Sales Strategy 1. Pre-hospitals Target Customer Profile: Paramedics, Surgicenters and Emergency Medical Technicians (EMTs) Prospect Segmentation: Northeast (PA, NY, NJ), Midwest (OH, MI, IL) and Northwest (OR, Northern CA, WA) Distribution Model: Three sales representatives who are answerable to the national account manager. Two representatives would serve each region. Sales Cycle: Contact prospective customer account, Establish Customer’s Interest, Sending initial sales materials, Qualify the lead, and Product demo. It also includes Product trial, Overcome objections, Negotiate pricing, Formal proposal, Close sale, Receive payment and Receiving invoice. Sales Funnel Calculation 2. Proprietary Arrangements Target Customer Profile: Hospitals under proprietary arrangements. Prospect Segmentation: North America, Canada, Mexico, France, England, and Germany Distribution Model: A national account manager assisted by three-sale representatives would serve each country. Sales Cycle: Each country has an office, which would serve hospitals. Everything from contact with a customer to payment of the product would be done within Hart’s premise. Product demo will be done within the premise but for more demos, a customer is given a video and verbal demo clip but he/she is free to request for assistance with extra charge. Sales Funnels Calculation 3. Voluntary Groups Target Customer profile: Hospitals under voluntary groups. Prospect Segmentation: Hospitals under voluntary groups would be served by the same national offices serving proprietary arrangements. The Hospitals under voluntary groups would be served under the same process as proprietary arrangements. In the national levels, there would be 24 people while, in the regional levels, there would be six workers offering services. Therefore, 30 individuals would serve HHE. Inc. Therefore, Hart would spend only 4% in payment for it sales representatives as it has been spending 13% of the total sales for 93 persons. Recommendations With six salespersons serving the regional levels and 24 people serving the national level, Hart ought to have 30 sales representatives. The Sale Force Structure would consist of six regional sale persons, 18 national sales representatives, and six national account managers who would be directly answerable to Company’s Sales president. The other national and regional representatives would be answerable to the national account managers. Clients would be encouraged to visit Hart offices whether regional or national in order to discourage movement cost and the need for more employees. The company would use various marketing strategies to attract customers. It will also ensure that it continues with its high quality and innovative products in order to hold and increase the size of its market share. Sale Force Structure Conclusion Hart is current served by 93 sales representatives. However, it can restructure its Sales Force Structure to involve 30 staffs. Six would be regional staff, but 24 would serve in the national offices. Due to the reduced number of staffs, Hart’s sales force costs, which are currently approximately 13% of total sales, would reduce to 4 percent in the future. Hart customers are divisible into three groups. They are pre-hospitals, voluntary groups, and proprietary arrangements. References Butt, G. (2006).Lesson planning. London: Continuum. Clay, J. (2012). Sales strategy for the business owner. London: Thorogood. Gu, L., Reed, W. R., & University of Canterbury. (2012). Information asymmetry, market segmentation and cross-listing: Implications for event study methodology. Christchurch, N.Z: Dept. of Economics and Finance, University of Canterbury. Kruger, E. R. (2011). Top market strategy: Applying the 80/20 rule. New York, N.Y.] (222 East 46th Street, New York, NY 10017: Business Expert Press. Kaplan, R. S., Norton, D. P., & Harvard Business School Press. (2006). Alignment. Barcelona: Gestión 2000. Leedy, P. D., &Ormrod, J. E. (2013). Practical research: Planning and design. Boston: Pearson. McDonald, M., & Dunbar, I. (2012).Market segmentation: How to do it and how to profit from it. Chichester: John Wiley & Sons. Read More