Marketing Plan for Robotic Systems - Research Paper Example

? Marketing Plan – Robotic Systems for Medical Purposes across USA Rosalind Franklin Medical School Marketing Healthcare – Online HHCM508 Saharnaz Tavoosi February 2011 1. Executive Summary The Robot System Suppliers (hypothetical) is a US based medium scale distribution firm, currently headquartered in Los Angeles city, which was established in 2009 to purchase and supply robotic systems to hospitals and surgeon clinics. Since USA is a densely populated country of more than 31 million people with average life expectancy rate of 78 years and per capita income of $47,400 (stable purchasing power), there has been enormous business potential of selling computer aided surgical robotic systems. For instance, there are more than 41 million people who are above 65 years and the figure will be considerably higher if we include people who are 55 years and above. Indeed, the probability that a patient (in later years of his / her life) would have a bypass, heart and cancer surgery increases; therefore, the surgeons and health professionals have suggested the use of Da Vinci, ZEUS, AESOP and SAR robotic systems as they facilitate during surgery and enhance the performance. Nevertheless, patients that have robotic surgery are quickly recovered as well as have lesser pain during trauma. The distribution firm has planned that it would open 2 new offices in Washington during June and September 2011 – one each at Union Station and Verizon Center. The expected annual sales are $4 – 5 million with net margin of at least 8%. In case the operations remain successful, the distribution firm will expand its operations to New York by opening 2 new offices during January and June 2010 – one each at Manhattan Mall and Trump Tower. 2. Business Description The Robot Systems Suppliers (hypothetical firm) was inaugurated in 2009 and it is proficient in distribution and maintenance of robotic systems that could be used in heart surgeries and others. Indeed, the technological developments have also facilitated doctors, physicians and surgeons to use modern equipments and robots for heart surgeries, for Prostate Cancer, Gastric Bypass and fatal injuries etc. The company not only focuses on the marketing and distribution on the da Vinci systems initially offered in early 21st century, but also it has been offering ZEUS Surgical System for invasive surgeries. It is worthwhile to mention the fact that use of robot systems has been increasing in US healthcare industry because they help saving time and effort during surgery as well as reduce pain and trauma for patients. For instance, the robotic systems also facilitate in faster recovery that, in turn, reduce financial burden on patients since they have to spend fewer amount on medicines and checkups after surgeries. The Robot Systems Suppliers initially commenced its business operations in Los Angeles City in 2009, and today it has already become an established firm in LA, a city of more than 4 million people. The company enjoys annual revenue of $4.5 million and its net profit (15%) was recorded to be under $0.7 million approximately. The major reason behind success of Robot System Suppliers is the constant focus on differentiation and innovation coupled with top quality after-sales-services. The company also provides useful suggestions to robot producers so that they could innovate their existing robotic systems (that are widely used) and create new systems to achieve cost leadership and efficiency. It should be pointed out that there is immense business potential for suppliers of robotic systems in US healthcare industry because of rising population and number of elderly / senior citizens (aged 55 years and above). The Robot Systems Suppliers is in strong financial position because its gross profit margin is in range of 25 – 35%, whereas the net profit margin remains in the range of 12 – 20% because the producers tend to offer high commissions to robot distributors. In addition, the profitability increases primarily due to offering of after-sales-services (periodic maintenance especially). 2.1 - Mission The mission of The Robot Systems Suppliers is as follows: To acquire premium quality and uniquely designed robotic systems from producers and distribute them to hospitals, physicians, private surgeons and healthcare institutions; thereby facilitating in healthcare activities and services provided to patients. To build long term cordial business relationships through continuous improvement, induction of new products and differentiation that would reduce surgery time and fasten patient recovery after invasive surgeries. To expand business operations to all across USA in order to maximize financial gains for owners and shareholders of the firm. 2.2 - New Opportunity As far as the demographic factors of USA are concerned, it should be pointed out that USA is a highly developed and advance nation of more than 310 million people in 2010. It is, indeed, one of the top ten richest nations on the basis of Per Capita Income. In addition, over 82% of US population resides in urban areas and the literacy rate among males and females is estimated to be 99% in 2003. Around 67% of US people are in the age bracket of 15 – 64 years. For instance, the growth rate of population is 1.3%, whereas the life expectancy estimated in 2010 is 78 years. It should be noted that around 40 million US citizens are above 65 years out of which males are estimated to be nearly 17 million, while females are estimated to be 22.5 million. In addition, per capita income in USA is just under US $47,500, which was ranked as 10th in the world during 2010 .1 As far healthcare industry facts are concerned, it should be highlighted that total National Healthcare Expenditures were estimated to be nearly $2600 billion in 2010 out of which expenses of hospitals were nearly $790 billion whereas expenses of physicians and clinical services were approximately $530 billion respectively. The aforementioned facts and figures reveal the size of US healthcare industry, which is expected to increase to $3700 billion by 2015.2 For instance, USA is an independent society where individualism is valued. Unlike collectivistic society, an individualistic society has relatively weaker family system because people are unwilling to live together in the form of extended or nuclear families. However, the senior citizens are the actual victims within individualistic cultures because they do not receive attention they deserve from their family members. In extreme cases, they are being admitted in old care centers where they have to spend time with other old citizens. In fact, they are being looked after by nurses and staff members, whereas the family members visit weekly / monthly / occasionally. Taking into account the above, I would like to emphasize that the use of robotic systems (with advance features) in invasive surgeries would be quite beneficial for heart, cancer, bypass and seriously injured patients because they could recover from surgeries in relatively smaller period and would not require greater personal attention of their individualistic family members for a long time. ENOT Article mentioned the following: 3 “Robot-assisted surgery is the latest development in the larger movement of endoscopy, a type of minimally invasive surgery — the idea being that less invasive procedures translates into less trauma and pain for patients. Surgery through smaller incisions typically results in less scarring and faster recovery” In the light of above, it is should be argued that higher per capita income across USA would allow health conscious US citizens to opt for relatively expense robot assisted surgeries. Therefore, the US hospitals and surgeons would continue demanding high tech robotic systems so that they could conduct surgeries more efficiently and could enhance their medical performance. The first two robotic surgical systems were Da Vinci and ZEUS Robotic, which had been accredited and approved in 2001. The popularity of above two systems led to development of a new type known as AESOP Robotic System.4 Today, new systems known as Socially Assistive Robotics (SAR) have also been developed and they are largely used for behavioral therapies. For instance, the engineers and scientists have been working on Human-Robot Interaction (HRI) feature of SAR, which is the evidence that the concept of robotic surgical systems has received momentum and it will observe phenomenal growth in near future.5 3. Target Market, Segmentation, Differentiation and Positioning The Robot Systems Suppliers strongly believes in business expansion and thus quite interested to systematically expand its operations in Washington DC and other cities of USA. The company will primarily target hospitals (both private and state owned), physicians, private surgeons with clinics and hospitals etc. for supplying newly developed robotic systems that are more cost effective and efficient in terms of performance than traditionally used Da Vinci and ZEUS systems. For instance, the use of robotic systems would enable medical personnel to provide invasive surgery services to heart patients and others etc. from middle – middle, upper – middle and elite class groups. 3.1.1 - Geographic Segmentation As mentioned before, the group has been targeting its robotic systems and maintenance services to healthcare professionals and institutions in Los Angeles city of California. Nevertheless, the robotic system supplier has planned to geographically segment various potential markets so that it could enter in Washington, New York and other cities. 3.1.2 - Demographic Segmentation The Robot Systems Suppliers strongly convicts in the demographic segmentation by analyzing factors such as age, gender, marital status and education etc. before distributing its systems in chosen markets. The company is aware of the fact that there are over 40 million citizens across USA over 65 years – the figure will increase if we estimate citizens over 55 years. The population of Washington is nearly 6.6 million in 2010 and literacy rate is 99%; therefore, there is immense potential to market robotic systems at various hospitals and clinics. 3.1.3 - Psychographic Segmentation The company has also segmented its customers after analyzing their tastes, living standards, life styles etc. For instance, the company has divided its market into upper class and medium class hospitals and surgeons that attract high income + living standard and medium income + medium living standard citizens respectively. The upper class citizens are highly health conscious; therefore, they approach hospitals that provide top quality surgery services at higher prices. Therefore, the company will offer newly developed robotic systems to these 4- and 5- star hospitals for which high short term investments are not an issue at all. Similarly, the distribution company is aware that hospitals for middle – class gentry have satisfactory financial strength (neither very strong nor poor); therefore, they will be offered medium quality robotic systems with some new features at competitive market prices. 3.1.4 - Behavioral Segmentation Behavior segmentation is quite similar to psychographic segmentation because it also includes consideration of consumer behaviors, life styles, perceptions, attitudes, beliefs etc. Hence, marketers at The Robot System Suppliers will also use behavior segmentation approach by designing robotic systems and maintenance package that could best meet the needs and desires of hospitals and surgeons who have customers from diverse backgrounds and experiences. The Robot System Suppliers has recorded phenomenal growth and success since its very inception in 2009 because it differentiates its products by providing unique after-sales services and maintenance package. For instance, the company also remains in contact with hospital staff and surgeons so that it could listen and resolve the issues end users directly face on robotic systems. Indeed, the weaknesses in designing and functioning followed by customer feedbacks are then forwarded to manufacturers and developers for further improvement. As far as positioning is concerned, it should be pointed out that the term refers to communication of ideas, value proposition and promises made by The Robot System Suppliers to tempt hospital owners and surgeons towards its computer aided systems. Taking into account the specialty nature of products, the marketers focuses on use of Pull (through mass advertising) and Push (through visits to clinics, hospitals and medical personnel) marketing techniques. For instance, the company also create awareness (about positive effects of using robotic system in surgeries) among citizens through aggressive informative, persuasive and reminder advertising campaigns. 4. Situational Analysis 4.1 - SWOT 4.1.1 - Strengths 1) The five different types of robotic systems such as De Vinci, AESOP, ZEUS, RAVEN and SAR are well recognized and accepted among US surgeons and hospitals. 2) The Robot System Suppliers is one of the major distributors in Los Angeles city; therefore, the company has an established supply chain and distribution network. 3) High sales volume and profitability in LA have resulted in extensive financial resources; therefore, the company could assimilate losses if incurred in first few months of expansion in Washington. 4) Focus on innovation and differentiation through provision of maintenance services to end users as well as assistance to producers of robotics systems in improving robotics systems have resulted in creation of excellent reputation and goodwill in the market. 4.1.2 - Weaknesses 1) May face difficulties in establishing business contacts with potential buyers and transporters in Washington markets. 2) Overheads will increase after creation of new offices and sales centers in new interstate markets. 3) HR managers could face problems in finding right IT and sales employees from new cities in Washington State who are aware of on-going trends and changes in their respective cities. 4.1.3 - Opportunities 1) Improvement in global economic conditions and recovery of US economy from recessionary shock will resolve government financial problems. As a result, the health budgets will not longer observe further cuts, thereby enabling hospitals to purchase new machinery and robotic systems. 2) Relatively higher per capita income (above $19,000), 90% urban population and presence of over 29 million above 65 years citizens is the evidence of immense business potential in toys market for elderly. 3) The accomplishment in densely populated Washington will facilitate expansion of distribution business to New York and other cities. 4) Sustainable development is possible because of higher life expectancy rates (national average is 78 years). For instance, the market size will increase due to phenomenal growth in elderly population rate. 5) Technological advancements in near future will result in development of more sophisticated robotic systems with excessive features, tools and applications. Also, this will help reducing existing price levels. 4.1.4 - Threats 1) There biggest menace to the distribution company is high prices of robotic systems coupled with budget cuts in healthcare sector due to post recession shocks. For instance, the cost of doing business has increased due to rise in inflation. 4.2 - Porter’s Five Forces model 4.2.1 - Bargaining Power of Buyers The bargaining power of hospitals and surgeons that cater to middle class is high because of high market prices of robotic systems. For instance, buyers are inclined to pay less while they demand better quality, greater value and extra services from suppliers. In contrast, the bargaining power of elite hospitals is medium because they tend to induct modern machinery and robotic systems to their operating rooms so that they could premium quality treatment and surgery services to the patients. However, these hospitals also demand price discounts due to bleak economic outlook. 4.2.2 - Bargaining Power of Suppliers The bargaining power of suppliers of raw materials and components to producers is medium because their growth is directly related with growth of manufacturers’ and distributors’ business. The recession of 2008 - 2009 did affect the business of robotic systems because hospitals were unable to induct new machinery due to financial problems. However, the situation is now improved due to ease in financial issues. 4.2.3 - Potential New Entrants The threat of entry of new distributors in this field is medium because the robotic industry has been growing at a normal pace. The threat will increase in future when the concept of computer aided robotic surgeries will be applauded by all hospitals and when increase in robot demand attract new investors to initiate distribution business. 4.2.4 - Threats of Substitute Products Obviously, the entrance of new robot producers and developers in industry will ignite competition, thereby resulting in rapid innovation and product development. The threat of substitute products is, thus, high because the healthcare professionals and scientists in advance economies (USA, Japan, UK, France, Germany etc.) have been focusing on greater R&D and robot use for invasive surgeries. 4.2.5 - Rivalry among Competitors Obviously, industrial rivalry will increase because every producer and distributor will opt to increase its sales volume through penetration, competitive and new promotional strategies. Therefore, the threat of price-wars is also high. 5. Marketing Mix 5.1 - Product For instance, the company will offer 4 types of robotic systems namely Da Vinci, ZEUS, AESOP and SAR to different hospitals, clinics and surgeons across Washington DC. The distribution has been planning to offer robotics systems to The George Washington University Hospital, Georgetown University Hospital, Howard University Hospital, National Rehabilitation Hospital, Providence Hospital, Specialty Hospital of Washington - Capitol Hill, St. Elizabeths Hospital and Washington Hospital Center. It is worth mentioning that robotic systems are the computer aided programming instruments that are controlled by surgeons and that enable in having virtual access to small incisions, which is not manually possible. As a result, the probability that the surgery process will remain successful increases as well as the patient’s recovery time reduces. For instance, robotic systems directly benefit patients by enabling surgeons to conduct surgery which is not manually possible in any instance. 5.2 - Price The Robot System Suppliers will launch its products at promotional / introductory prices in Washington in first few months of expansion plan to tempt maximum customers towards company’s robotic systems and maintenance services. Price will be kept 10 – 15% lower than normal market prices to establish a strong customer base in Washington. The prices will eventually be brought to their normal levels after 4 - 5 months. The robotic systems are ranged between prices of $0.5 – 2 million, while special packages will have varying prices. The yearly maintenance packages start from $0.1 up to $0.5 million. 5.3 – Place / Distribution The Robot System Suppliers has plans to open 2 self-owned company offices in Washington City that will be located at commercial areas. The end users could physically approach these offices as well as could send their inquiries online / fax / telephone. The company representatives and maintenance personnel will personally visit hospitals and clinics to meet individuals, install and inspect systems. Consequently, this strategy will ensure Utility of Place and Time. The company has established several business goals and objectives that are as under: 5.3.1 - Washington As mentioned before, the expansion plan will kick off when the distribution company will commence operations in Washington State. The company will inaugurate its first retail outlet in June 2011 at rented premises of 300 square yards, which will also include a separate display area for robotic systems. Indeed, the company has chosen Union Station – Washington DC as the most feasible destination because more than 25 million people visit this shopping center per year. The second office will be opened near Verizon Center in September 2011, which is also one of the busiest places in Washington DC. In addition, Gallery Place is also near Verizon Center; therefore, the company may attract some genuine buyers for its robotic systems. It should be clarified that both offices will provide information, warranty and maintenance services. The company has estimated sales (including maintenance charges) of $2 – 3 million per annum from each of its two new offices. 5.3.2 – New York For instance, the distribution firm will adopt the similar formula as used in Washington to commence operations in New York. The company will open its first office at Manhattan Mall in January 2012 by renting premises of 300 sq. yards for display and sales purposes. The office is expected to generate more than $3 million per annum in sales because New York is a densely populated city of around 8.4 million people; hence, there are more hospitals / clinics compared to Washington. The second office will be opened in Trump Tower in June 2012 after success of first office. The company has estimated that sales in the first year would remain in range of $2.5 – 3.5 million. 5.4 - Promotion The distribution firm will use push marketing by offering incentives to hospitals, private surgeons and clinics so that it could persuade potential buyers to induct these robotic systems for greater patient benefit. For instance, the company will also use print (newspapers, health magazines, brochures, pamphlets etc.), electronic and radio media to reach mass audience. Websites such as www.robotsystems.com and www.roboticblog.com will be used for providing necessary information and endorsing interaction / communication with targeted customers. Billboards will also be used mostly on top of a high-rise building, in front of hospitals, old and elderly care centers, community parks etc. Next, the company will use social media such as You Tube, Twitter, Face Book and health blogs to update customers about promotions, new arrivals, recreational activities and events etc. You Tube is a very important source to update customers as they could watch 20 – 60 minute videos about functioning of different robotic systems. Face Book and Twitter would encourage posts from health specialists regarding use and benefits of robots in surgeries. The promotional budget will be $300,000 per annum that will include the following: Newspaper / Electronic / Radio Advertising = $150,000 Financial / Sales Incentives = $100,000 Miscellaneous (hospital visits etc.) = $50,000 The Robot System Suppliers is a medium size enterprise that currently has monetary sales level of $4.5 million in Los Angeles city. The inauguration of 2 new offices in Washington will result in creation of 20 new jobs. Indeed, each office will include 12 workers out of which 3 employees serve in administration / management, 5 workers in purchases + marketing + sales, 3 workers will serve as maintenance representatives, and 1 worker will work as a finance specialist for bookkeeping and record management. 6. Critical Risks 1) The distribution firm purchases robots from US robot manufacturers. If developers increase prices then the distributor will face difficulties in assimilating price hikes and establishing customer base in Washington. For instance, the importers of robots may also create challenges. Appreciation results in cheaper imports but depreciation may lead to expensive imports due to exchange rate fluctuations, which benefit local robot dealers. 2) For instance, the US economy has still not completely come out of recession; therefore, the government and privately owned hospitals have liquidity issues. In case government announces any unexpected cut in health budgets, the robot distribution (business) to healthcare industry may come to a halt and financial losses will increase. 3) Acquisition of robotic systems for surgeries is still below par primarily due to significantly higher prices of surgical robots. This will create grave issues in tempting hospitals for middle class patients. 4) The distribution company has risked its retained earnings for expansion. Any business failure will, therefore, lead to loss of financial resources. In simple words, liability is unlimited in this case. 7. Competitors The competitors of The Robot System Suppliers are Computer Motion, Integrated Surgical Systems, Armstrong Healthcare Ltd. and Computer Aided Surgery, Inc. These aforementioned companies are not only involved in development and manufacturing of surgical robots for invasive procedures but also they have commercial sales outlets and offices. In addition, these firms also have strong online presence as their websites provide detailed information about robotic systems, benefits, video clips, doctors’ opinions, company contact details etc. (Yahoo Search Directory, 2010). References 1. CIA Fact Book https://www.cia.gov/library/publications/the-world-factbook/geos/us.html Accessed – February 17, 2011 2. PR Statistics. U.S. Health Care Industry Overview. Plunkett Research http://www.plunkettresearch.com/health%20care%20medical%20market%20research/industry%20statistics Updated – 2010 [Online] Accessed – February 17, 2011 3. ENOT Article. Robots Helping Surgeons: The da Vinci and ZEUS Surgical System. Enotalone.com http://www.enotalone.com/article/8839.html Updated - 2010 [Online] Accessed – February 17, 2011 4. STS Article. Robot Surgeons: For Prostate Cancer and Gastric Bypass? Surgical Technology Success http://www.surgicaltechsuccess.com/surgerynewsrobotforprostate.html Updated - February 7, 2006 [Online] Accessed – February 17, 2011 5. Computing Research Association. From Internet to Robotics. US Robotics http://www.us-robotics.us/reports/CCC%20Report.pdf Updated – May 21, 2009 [Online] Accessed – February 17, 2011 6. Berkowotz E. Essentials of Health Care Marketing. Jones & Bartlett Publishers; 2010 7. Forgoros R. Robotic Heart Surgery - a status report. About.com http://heartdisease.about.com/library/weekly/aa060401a.htm Updated - June 2001 [Online] Accessed – February 17, 2011 8. Webb, Lori-Lynne. Learn to code for robotic-assisted surgery, as new technologies become more commonplace. HC Pro http://www.hcpro.com/HOM-252748-3288/Learn-to-code-for-roboticassisted-surgery-as-new-technologies-become-more-commonplace.html Updated - June 23, 2010 [Online] Accessed – February 17, 2011 9. Bonsor K, Strickland J. How Robotic Surgery Will Work. How Stuff Works http://www.howstuffworks.com/robotic-surgery1.htm Updated - no date [Online] Accessed – February 17, 2011 10. Washington http://quickfacts.census.gov/qfd/states/53000.html Accessed – February 17, 2011 11. Yahoo Search Directory http://dir.yahoo.com/Business_and_Economy/Business_to_Business/Health_Care/Equipment_and_Supplies/Surgical/Manufacturers/Robotics/ Accessed – February 21, 2011 Read More