Hart Hospital Equipment

HART HOSPITAL EQUIPMENT, INC PROJECT 1

Hart Hospital Equipment, Inc Project

Patricia Orea

Nova Southeastern University


Table of Contents

Abstract……………………………………….…………………………………….…..3

Introduction…………………………...………………………………………….…….4

Go-To-Market Strategy………………….…………………………………………..…6

Sales Force Assessment………………………………………………………….….….9

Territory Alignment……………………………………………………………….…..12

Customer Segmentation…………………………………………………………….…14

Account Strategy Development………………………………………………….……15

Recommendations…………………………………………………………………......16

Conclusions……………………………………………..………………………..…....17

List of Reference………………………………………………………………………18


Abstract

This paper will explore Hart Hospital Equipment, Inc. current sales force structure and

organization. In addition, this case will explore the organization’s Go-To-Market strategy, sales

force assessment, territory alignments, customer segmentation, and account development through

latest information based journals and with the assistance from “The complete guide to

accelerating sales force performance” textbook from authors Zoltners, Sihna, and Zoltners.

Recommendations and conclusions will be provided at the end this paper in order to understand

effectively on why Hart Hospital Equipment Inc. should make certain changes regarding current

total number of sales representatives, current market share conditions, and alignments in order to

improve performance, profits, and efficiency to be ahead of the game.


Introduction

Hart Hospital Equipment, Inc. (HHE) is a medical company that manufactures and sells

medical care equipment to hospitals, outpatient centers, surgical centers and emergency rescue

teams locally and nationwide. In the past, major revenue of the organization came from the sales

of defibrillators, and EKG machines. Two years ago, Hart Hospital Equipment, Inc. released its

first lines of monitors in which sales have grown so rapidly that they constitute fifty percent of

the company’s revenue. Recently, HHE is creating a high-potential product for its portfolio and

pipeline, a pacer which maintains cardiac functions for up to twenty minutes so physicians and

paramedics have the amount of necessary time to provide the correct treatment for cardiac arrest

victims. The released is expected to be in June 2012 which is very ahead from the current year

from now. Its philosophy of creating innovative products, marketing them correctly through well

trained sales representatives and managers in addition of providing excellent service to its

customers has led to be on the top companies in the defibrillator and monitor markets.

According to the company’s records, sales in 2009 has reached $71 million which is

around forty-two percent increase compared to 2008 and the current year sales is expected to

increase fifteen percent more due to monitor performance even though the competition growth

rate is slowing. Since HHE will be the first company introducing the pacer in the industry, sales

volume will rely on the sale’s force ability to create awareness and acceptance from physicians,

surgeons, patients, and paramedics. In addition, with the awareness for the new product, sales

should be expected to grow an additional twenty-two percent in which stockholders will be very

satisfied on the boost of the dividends.

The sales force of HHE has proven to be one of the best in the industry because of the

high capacity of communicating customers regarding product awareness and acceptance, and the


excellent quality of service which keep customer retention rate high. In addition, HHE invest a

great deal of capital which is thirteen percent of the budget and two points lower than average

industry rate on training the sales force properly because it requires complex skills and

knowledge in which can take between six and twelve months to be fully grasped in the material

in order to sell effectively defibrillators, EKG machines and monitors and because of this, the

sales force has a high visibility within the industry.

Currently, HHE field force consists of 93 sales representatives of which 87 are

geographically located and six calls on national accounts. National accounts representative work

closely with local sales representatives who make sure voluntary hospitals follow the centrally-

made recommendations. The geographically-based sales force report to district managers who

report to regional managers in which the division is distributed in three regions with three district

managers and 29 representatives. In the case of national accounts representatives, they report

directly to the national account sales managers. In addition, national account managers and

regional sales managers report to Vice President of Sales. Territory sales representatives have

increased as the company’s sales have multiplied in a fast pace, but the national account

representatives have not changed for the last three years. In the competitive field, Hart has

slowed down regarding EKG machines and defibrillators sales because of the initiative of

growing more market share on the monitors, but, monitors sales are beginning to flatten because

hospitals and pre-hospitals are acquiring the same product from other vendors at a lower price.

Therefore, HHE believes with the introduction of pacers and a forecast of $12 million, sales will

expect to be a success with an advantage other vendors have not come up with this product for

the last two years, and it will be a great opportunity to lock in the market before competitors

comes with pacers at lower price.


Go-To-Market-Strategy

In order for HHE to be successful in the launch of the pacer, the first task must do

is to Segment the Market. According to Zoltners, Sinha, and Zoltners in their book “The

Complete Guide to Accelerating Sales Force Performance” (2001), “it needs to be narrowed by

customer size, behavior, geography, application, benefits, customer capabilities, usage, and

profitability”(p. 10). Not all customers are going to purchase pacer even though the product is

target in the medical industry. Zoltners, Sinha, and Zoltners (2001) stated “Segmentation

provides companies with opportunities to increase their effectiveness” (p. 9). During the

segmentation, the firm needs to identify group of customers based on their needs and

requirements.

In this case, the best customers for segmentation are not only public and private hospitals,

rescue teams, and surgical centers. It needs to be more than institution as a whole. For instance,

in the case of public and private hospitals, pacers should be targeted in the cardiology division

where heart surgeons and specialized medical assistants are because they are more involved in

the field than a primary doctor. In addition, product should also be targeted in the emergency

department. A primary doctor may be prepared to save a victim from a heart attack, but a

cardiologist, heart surgeon, or a specialized medical assistance has more deep knowledge in the

subject and language. Besides to target health institutions, patients who are senior citizens, baby-

boomers, and children who were born with heart defects, are also the best target for the pacer

because they tend to have different levels of heart conditions and they need to be educated from

their doctors on how to use the product when they do not have medical assistance available in

case of an emergency or they do not have a urgent care close to their homes. Another step to

follow is during segmentation is to identify the key buying decisions centers. Zoltners, Sinha,


and Zoltners (2001) stated “When interacting with a customer, a selling company may become

involved with different people who have different roles” (p.16). In the case of hospitals, surgical,

and rescue teams, HHE must be first an approved vendor or part of a Group Purchasing

Organization, better known as GPO, before presenting the product to the buying center locally

or nationally with special pricing if institutions use private or state funding. If the company is

not an approved vendor, chances of success for the sale of the pacer are very slim. After the

product approval, sales representatives can target cardiologists and specialized medical assistants

in order to have pacer available to their hands.

The next task during Go-To-Market Strategy for Hart Hospital Equipment, Inc is to

prepare the required essential work. Zoltners, Sinha, and Zoltners (2001) stated “Essential work

consists of all activities required to serve customer properly. Every contact the customer has with

a company and its products is a chance for the company’s offering to shine” The first most

important activity for the essential work is to create interest. This is not only consists of

prospecting, identifying potential customers, generating leads or inbound calls, but also the sales

representatives create awareness of the product before the launching, better known as pre-sales,

to current ones in which this case cardiologists. In addition, these current customers get the

motivation in knowing more about the pacer by getting the right information through marketing

materials, trade shows, or advertising, so the approval process can be as smooth and fast as

possible without interferences.

The next activity to follow is the pre-purchase stage in which consists of customers

evaluating and considering the product. Because HHE is the first company in the industry on

introducing the pacer two years ahead the competition, this activity should not be as challenging

as selling other products that competitors provide such as monitors. In this case, HHE sales


representatives should be very involved by demonstrations; explaining the features and benefits

on why the cardiologist or paramedics should purchase the pacer and reiterate Hart Hospital

Equipment Inc. is the first company on launching the pacer in which no competitors have.

Another important point during the pre-purchasing stage activity is pricing because if there is an

introductory price, there are more chances the product can be approved very quickly.

In the purchase activity stage in which is “the final flurry of activity culminating in a

purchase” (p. 13). This is a very common activity on salespeople that involves bidding,

persuading, negotiations, finalizing terms and conditions, asking for business, getting orders and

reorders. For the case of the pacer, the reorder should not be part of the process because the

product is new and customers want to see the result first even though the product does not have

competition yet. During the purchase activity stage, pricing should be reasonable for

introduction. This includes special pricing and discounts based on types of funds and contracts

health institutions have. If the product becomes successful and established in the market, HHE

can make changes with the price.

Finally, the last stage of the activity is the post-purchase which “does not end with the

purchase” (p.13). In this case, sales representative must be sure the product is delivered and

priced properly. The most important part of the post-purchase is training the customer on the

product. For instance, the representative must know on showing the doctor on how to use the

pacer properly; making sure the doctor is well trained in order to make the product a success

because the company can be liable of litigations and losses. This stage helps HHE and customer

build stronger relationship because it creates stronger partnerships and more revenues and greater

ratings from customers.


Sales Force Assessment

Hart Hospital Equipment Inc. sales force strategy should be analyzed before the launch of

the pacer. First, the company must focus on the results in which consists of profit sales, market

share, and customer satisfaction (p. 37). In this case, it can be seen HHE has a strong market

share, strong profits, and outstanding customer service, but monitor market share needs

improvement because of the competition even though customer satisfaction is above the

standards. Second, for activities and behaviors statements, it seems sales force is very ahead of

the game regarding on making more calls, servicing customers, and creating partnerships. But

there is a new product on the way; this statement should be more invested for the company

because sales representatives need to remind customers about the new product when they are

making the calls or when they are servicing the accounts. Customers tend to forget about new

products company provides even though there is solid relationship or partnerships. Simply

customers need to take care of their own business. Next, in the field of people and culture, HHE

shows sales force is trained very well, and they are excellent communicators on presenting

current products knowing the skills requirements are very complex and it takes at least one year

to be fully grasped on the material depending on the person. In addition, they are very well

compensated which there are no signs of turnovers. I would recommend HHE to create the pacer

training program for at least six to nine months for seasoned sales representatives and twelve to

eighteen months for novice or newly hired sales representatives. This includes not only on

lecturing on how the pacer works, features and benefits, but it also must be hands on training not

in the organization, but also in the field. For instance, novice sales representatives should go to a

hospital or a rescue facilities to experience on the usage before the product goes to the market.

On the sales force investments and decision field, I would recommend HHE to invest more not


only in training initiative for the new product, but also on recruiting more sales representatives in

order to keep up EKG machines, monitors, and defibrillators sales, but specially monitors. That

market share cannot be neglected while investing on training, research and marketing for the

pacer because, as mentioned in the introduction, monitor sales is almost fifty percent of the

company’s revenue. On the sales force structure point of view, I would recommend the increase

of more sales representatives for monitor sales in hospitals and pre-hospitals. In addition, there

should be an additional sales team in which consists of one Regional Manager for Government

accounts with three district manager and additional 29 sales representatives because ninety

percent of the rescue team clientele rely on government funds and contracts and bids pricing are

very the opposite regarding public and private hospitals. For instance, Davie Fire Rescue is part

of Broward County which is part of the government, so the county needs funds approval from

the State of Florida. The reason for the addition of a government team is because the dynamic

between calling on a hospital and a rescue team are very different. In the case of National

Account team, I would increase three more national account representatives because the

communication between the sales representatives and the national account representative would

improve specially when sales representatives are calling on national accounts, they need extra

assistance on making sure the national accounts are in compliance or not and it can be

challenging. Most of the time, national accounts do not want to follow compliances.

In the Sales Force Productivity Drivers, Hart Hospital Equipment, Inc. should

focus not only on the market research, segmentation, and assessment for the introduction of the

pacer, but also should focus more on the people and culture making sure they are well rounded

on the material and language, especially there will be conceptual issues cardiologists have never

used before regarding the utilization of the pacer in which requires extensive training and


preparation for the cardiologists, paramedics and emergency care specialists. Recruitment should

be also a priority of this driver because this is the highest expense for the company and the

selection must be carefully well done. In addition, the compensation package should be slightly

modified. For instance, there should a kicker bonus for introducing the pacer in the account like

extra percentage for the bonuses. When the sales force productivity drivers are well solid, the

results of pacer revenue should not be challenging and the forecast should be made without any

problems and to be ahead from the competition for being the first company in launching the

pacer.

When measuring productivity drivers, they should be measured in qualitative and

quantitative. From qualitative point of view, it measures how competent the sales representative

is and how much impact causes when presenting a new product to the customer. This can be a

very constructive criticism for the sales force because the idea is the company wants to make the

launch is a success. In addition, it can tell what are the strengths and weaknesses so they can be

improved every time the sales representative is working with the district manager.

In quantitative analysis, this method should also be included for the measurement

because “Managers feel more confident in their decision if the data are objective and free of

bias” (p.47). In addition, this helps to determine the competency of the sales force drivers. For

instance, how many calls the rep is doing or how much brand awareness the representative is

doing to the customers when calling on. When the data is solid, there will be no chance the sales

representative is not making up any excuses on why he or she is not doing the job. Overall,

qualitative and quantitative should be the balance for the sales force driver measurement in

which include on checking the alignments, targeting, and compensations in order to have the

launch ready and to be a success.


Territory Alignment

Currently, Hart Hospital Equipment, Inc. sales force is organized geographically which is

the most economical method in order to create efficiency and productivity. It seems the structure

has not made any changes for the last three years. There were no signs of workload imbalances

regarding on how the sales representatives are running their territories. In this case, territory

alignment should HHE considered for the next two years because with the introduction of the

pacer in which this will reduce work imbalances and saves traveling time for the sales force

organization. The first task the company must do is to revise the territories. Right now, sales

representatives are calling on hospitals, pre-surgical centers and rescue teams at the same time.

So far, it seems there were no issues, but the problem will be when the new product comes to the

market, the workload will imbalance and the travelling time and costs will increase for the sales

representatives in which customer service will decline and more complaints will be more

difficult to handle. I would definitely recommend necessary alignments for the sales force

structure before the launch of the pacer. The reason for the recommendation is because the sales

representative can make more calls for current and new customer, provide better service and

reduce travelling costs. In addition, the market shifts and demographics change drastically every

five years; HHE needs to make sure when the five year cycle arrives, alignments and changes

needs to be done. It may affect the sales representatives, but will be beneficial at the end.

In order for Hart Hospital Equipment Inc. to maintain an effective alignment for its sales

force, the following steps must be taken: First, the goal for the alignment is to make sure the

workload is properly balanced in which maximizes the coverage for the territory and improves

the responsiveness to customers (p.147). It also improves sales results and reduces span of

control. Second, alignment helps balances sales potential in which gives salespeople equal


earning opportunities, so the sales representative will be more motivated and sales results will

increase. In addition, this will minimize disruption for the current territory alignments that have

solid customer relationships and eliminates uncertainty for current and new sales people and the

motivation of selling the new product will increase. Another point to consider during alignment

is to make sure territories are compacted properly in which improves the productivity of the sales

representatives and reduces travel costs. Finally, with the alignment not only will help the

success for the pacer sales, but also to make sure the return of the investment on equalizing

marginal return across territories should be greater than expected even though this can be

challenging.

Next step after completing the alignment criteria is the auditing. Even though territorial

alignments should be made every three to five years, I highly recommend for HHE annual

auditing before the cycle change. This is so important because market can change drastically or

not every year. In addition, this will provide a feedback for the new product such as if the

product is working well or there are any inconsistencies on the territories. In addition, annual

auditing helps the company to make small adjustments in order to balance the sales force

productivity. Accurate data is also very important during the annual auditing because it shows a

snapshot of the results of the alignment and more research is required in order to decide if the

alignment worked or not. Planning and expertise for HHE is so important before the launching of

the pacer because there is a $12 million forecasted in the pipeline in which needs to be achieved

and because the investment on training the sales force on the new product is very high. So this

planning should be done ahead before the launching. If there is not planning ahead of the game,

chances will be the competition will take the market share of the pacer for a lower price and the

forecast will go to the drain.


Customer Segmentation

Customer Segmentation is one of the key drivers Hart Hospital Equipment, Inc.

must do in order to identify sales potential and receive higher return of investment and for the

success of the pacer launch. As Zoltners, Sihna, and Zoltners (2001) stated, “Customization takes

advantage of the fact that customers and prospects differ many ways. They have different

product and service needs; different sales, sales potential, buying influences and buying

processes; and different attitudes toward innovation, cost, and service.” The best approach to

identify sales potential for the pacer is to identify customers and prospects is with the help of SIC

codes. This system can help narrow the right customers even though they are in the same

industry. For instance, 8060 is the code for hospitals which is the main target, but in the case for

rescue teams and home care facilities have different codes. In the case for the rescue teams

market, there should be a different code because they are government accounts. This strategy

helps the company narrow the right customer in order to target the pacer correctly. I would

recommend using the codes for identifying the customer because it saves so much time and

money. In addition, this helps to market the product properly by using different approach. For

instance, if I want to target the pacer for patients, I would have to change the approach by using a

simple language on how to use the product; patients cannot understand medical codes and

jargons like cardiologists or paramedics. In the case of cardiologists or paramedics, jargons can

be used but it may require more than an explanation; it requires deep skill knowledge and

communication flow if they have never used pacers before. Customer segmentation is the most

powerful tool to narrow the customer depending on the behaviors and needs. In addition, it also

helps to determine customer size and profitability which provides better work balance and

productivity.


Account Strategy Development

Account Strategy Development is a very important layout for HHE, Inc. for the

introduction of the pacer. The idea of the strategy development consists of developing more than

one sales action or coverage strategies for the segmentation. In addition, it helps to assess the

costs and benefits for the coverage of the customer’s needs and profits. Beside, the strategy helps

selecting for each segment most beneficial strategy with the capacity of the sales force. For the

case of Hart Hospital Equipment, Inc, I would recommend narrowing the accounts by the

customer size. For instance, if I were a Sales Manager, I would start on focusing on bigger

accounts for servicing and coverage because they control eighty percent on the company’s

revenue, so sales representatives can give more service and better attention than small accounts

does not require sales representative. Instead, those small accounts only require telesales or

direct mail, so the workload for the sales representatives will be less intense, and they will have

more time on focusing on prospecting and qualifying potential customers. In addition, this helps

identify the status of the buying cycle. For instance, are they in the market? Are they having the

budget approved on time? Do they have the need for the pacer?

Finally, I would recommend Hart Hospital Equipment, Inc. to have the sales

representative not only qualifying more than customer who makes the decisions, but also to find

out if there is only more than person who makes the decision. For example: when qualifying the

customer, the representative needs to ask if he or she makes the only decision for the purchase

like if the controller is involved or there is a board. For the case of hospitals, there is more than

one decision maker in which requires more than a single appointment. For the case of

government, there will be more than the purchasing director; there are directors and a board

including a process for putting bids, but must be a registered vendor in the state or the nation.


Recommendations

In order for Hart Hospital Equipment, Inc. to have the introduction of the pacer a success,

I believe the company should add extra 29 sales representatives for Hospitals and pre-hospital

accounts for Monitors, defibrillators and KGB machines sales because this will maintain the base

revenue for the organization in which is 50% and this area cannot be neglected. It may require

incurring extra investment for training the sales on the products and recruiting, but the return on

investment will pay off. Other recommendations I would suggest is to create an additional sales

team that calls on rescue teams accounts with a district manager and an additional regional

manager. The reason for the recommendation is because I considered paramedics, rescue teams

or firefighters are government accounts and any business is related with government requires not

only experience, but also on learning on how to work with their system. For instance, pricings on

government tends to be lower than pricing for hospitals and government contracts has many

specifications and requirements in order to win the bid besides with the bureaucracy the team

needs to deal with.

Another recommendation for the sales force structure would be to add additional three

more national accounts sales representatives. This will help the communication with the sales

representatives in order to follow up the compliances, so the extra 29 sales representatives will

be in the same page. In addition, territory alignments should be made every three to five years

because market changes and demographics with an annual auditing as a follow up after the

changes. If those changes are not made in the five year peak, the chances of losing market share

and profits are higher, especially when a new product is coming to the market and with $12

million forecast revenue.


Conclusion

In order to have Hart Hospital Equipment, Inc. the launch of the pacer a success, I would

suggest to increase the sales representatives for hospitals and pre-hospitals for the monitor and

current other devices sales because since they represent almost fifty percent of the revenue while

focusing on the new product. In addition, the company should invest more on recruiting and

training for the new hired reps to keep up the revenue base. In addition, HHE should create an

additional sales team with a regional manager who calls on government account. In this case,

rescue teams accounts because there are many procedures on selling a product such as approvals

and requirements. Another recommendation would be on investing additional capital for the

pacer training. This should be from six to nine months for seasoned reps and at least 12 months

for newly hired ones with experience, but for representatives are new in the industry, the training

should be assigned when they turn a year in service while they are focusing on the monitor sales.

In addition, territory alignments must be done every five years because of market changes with

annual auditing to make sure to make adjustments and proper data. Hart Hospital Equipment,

Inc. is a company high standard of excellent sales force and outstanding customer service. It

seems the organization is very aggressive to be ahead of the game from competition when

launching a new product and being innovative. If the company follows those recommendations

as I mentioned in this paper such as the increase of the sales reps and national accounts

representatives or the addition of the new sales team for the government accounts, sales growth

will be higher, the forecast will be reached and more dividends for the stockholders without

neglecting the current monitor and other devices sales. Overall, the launch of the pacer will be a

success.


Reference

Zoltners, A. A., Sinha, P., & Zoltners, C. (2001). The Complete Guide to Accelerating Sales Force Performance: How to Get More Sales from Your Sales Force. New York, NY: American Management Association.

http://en.wikipedia.org/wiki/Standard_Industrial_Classification

http://www.jstor.org/stable/1249525






Hart Hospital Equipment

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