FormPrint Ortho500

Case Analysis

Submitted By-
Group 15
BBMK Sec-2
Date: 9th September 2015
Overview

The company FormPrint was founded in the year 1998 by an engineer who constructed prototypes
from three dimensional designs using additive manufacturing principles. These principles mainly
involved producing tangible, three dimensional forms and later transformed into physical products
through a printing device. Prices for these devices varied from as low as $10000 or less to as high as
$700000 for large complex systems. FormPrint was an early entrant into the 3D printing industry. It
primarily focused on healthcare industry with products for Dental, Auditory and Orthopaedic usage.
#D printing industry had a worldwide market of about $2.25 Billion in 2012 and would reach $3 Billion
within one year with a y-o-y growth of 33%. The Company has been basing its value proposition and
approach on selling best-in-class product performance at premium prices. Also, FormPrint was known
for selling products with high quality and with technical sophistication at premium prices. The
company had sales of $42.9 million by the year 2013. FormPrint predicted that out of $235 million of
the global 3D printing market $176 million was to be coming from US market which contributed to
75% of the total market in healthcare. Another observation was that non-hospital market and low-
priced medical items would be of prime importance in the days to come.

Problem Statement:

In what ways can Willis weigh options between ISR approach and direct sales approach for the sale of
Ortho500 which would result in favourable sales results and hence profitability for FormPrint in the
short-run.

Situation Analysis:

a) Company
a. Early entrant in the market
b. Technology advancement in prototype manufacturing process
c. High product quality
d. Wide product range
e. 80% of the Ortho sales to Large customers (more than 200 beds)
f. Well trained salesmen

b) 4 P’s:
Product Ortho500
Price $68000
Target Market (Place) Large non-hospital orthopaedic clinics
Promotion Conference Sponsorship/ quarter at 4
orthopaedic conferences, direct email
campaign, a PR campaign, product related
info on the company’s website
c) Competition: For Ortho500

Company Market Share Growth Rate Price Range

Ashokal 25% 73% <$100k
DragonBend 17% 43% $100k-$300K
LoganSatr 12% 42% $100k-$300K
PrintFlex 20% 85% <$100K
FormPrint 22% 74% $68000

It is observed that with PrintFlex at 85% growth year on year and Ashokal growing at 73%
under the price ranges similar to that of FormPrint. Plus there are two PC manufacturers scheduled to
be entering the industry by 2015, 2016 the details aren’t yet known.

d) Buying Process of 3D printers:

Ortho Purchasing
Hospital
Surgeon department
Board Price
Requests evaluates
grants Negotaition
Hospital vendor
approval
Services quotes

e) Timeline of Events:

•FormPrint had
sales of $42.9
FormPrint Focused on million Scheduled
1998 was 2002 healthcare 2013 • Plans to step 2014 to launch
founded apps Ortho500
into low priced
products
Alternatives and Evaluation of alternatives:

1. Sell through Independent Sales Representatives (ISRs)

Pros Cons
 Sales and negotiation experience  Cost of training ISR is high
 Direct product demonstrations  Less technical expertise
 Shorter sales cycle of 2 months.  Short term sales culture
Hence limited risk  Shallow product knowledge
 Lots of experience with lease and
other financing arrangements
 Hiring freeze and hence there is a
need of creating a fragmented
outpatient market through ISR
Breakeven Analysis:

Annual cost to company/salesperson - $400000

o Salary – 70% of salary - $280000

o Commission- 30% of salary - $120000

Medical Device Tax – 2.3% ($1564)

Number of salesmen currently 6

Selling Price/Ortho500 $68000
Total cost of salesmen/ortho product $100000
Total cost to company for salesmen $600000 (One ortho500/salesman)
Devices sold/salesman Ortho1700, Ortho1300, Ortho2000, Ortho500
Number of units to be sold to breakeven 9 ($600000/$68000)

2. Sell through Direct Sales Force

Pros Cons
 Invaluable relationshipwith  Not much experience with the
hospitals financial negotiations
 Take less time to demonstrate due  Not motivating for the price it is
to prior knowledge getting sold
 Follow-up training to the users
 Loyalty is the utmost priority
 An opportunity to develop selling
skills for the non-hospital market
Breakeven Analysis:

Number of ISRs currently 10 ( Assuming)

Selling Price/Ortho500 $68000
Normal Cost 23% sales =68000+15640= $83640
If a manager is included 37% of sales = 68000+ 0.37*68000= $93160
Assuming atleast 10 ISRs the company has = $93160 * 10 = $931600
Number of units to be sold to breakeven= 931600/68000=14

Recommendation:

The US healthcare market had grown by 78% in the year 2013 from $98.5 million to $176.25 million
which could be seen as a very fast growing market. The product in the industry being sold, though not
that technically complicated one, may still need some technical expertise for the sales to happen.

From the analysis above it is clear that the company will have to sell more number of units compared
to that direct sales force. Also there is some amount of risk involved given the shallow product
knowledge and short term sales culture of Independent Sales Representatives, the market data
substantiates

a. Low use of ISR given the product complexity

b. Increased use of Direct sales force for the sale of Ortho500

Hence we, as a group, recommend FormPrint to pursue its sales via its direct Salesforce considering
the potential that the industry has in the coming days for the small printers. This will also be an
opportunity for the company to groom their salesmen to sell these less technically complicated 3D
devices to the smaller hospitals and outpatient clinics.