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B2B Marketing The Ring Medical Case

Group 3 M. Avinash Rao Ashish Dhamija Gaurav Mittal Abhishek Khare Jitender Singh Naruka Sumit Bhupal

The Facts of the Case

Scanvest Ring, Ring Group, Ring Medical and the HCS-100

Ring Medical
Its a division of Ring Group, a subsidiary of Scandinavian information technology giant Scanvest Ring.
Main product was HCS-100, an in-house hospital intercom system with automated response system and call tracking. The company was facing problem of consistency in product policy, pricing and customer support along with channel distribution.

Ring Group
Ring Group, a wholly owned subsidiary of Scanvest Ring a.s., Norway established in 1971.
Its aim was to develop U.S. markets for Scanvest Rings selected products in intercom systems. 20% of market was captured by Ring Group, with the major customer being hospitals. A latest intercom system with technology advantage, TRIDEX, was their main product strategy. Original Equipment Manufacturers (OEM) were the final members of this channel who mostly procured from Ring and sold under a private label. Automatic Call Distributors (ACD)was also sold by Ring Group, a customized version specialized for reporting emergencies.

The HCS-100

HCS-100 was an inter-connected intercom system specifically targeted for cost reduction in hospital internal communications. It employed a Digital Call Distributor (DCD) known as DCD-601in assembly with a telephone system, computer hardware and a software. The DCD was manufactured by a Scanvest Ring Subsidiary, Kitron while the computer microprocessor was manufactured by Convergent Technologies. It comprised of six modules namely Directory, Telephone Automated Answering, Messaging, Alarm/Security, Registry and Paging. It was offered as individual modules or in any combination according to the demand specifications.

A prime strategic importance product that was both, compatible and economical for use. Only two U.S. firms manufactured this switch, Redcom and Suma-Four, the rest were European manufacturers and their products were not compatible for usage in U.S. telephone systems. Ring Group targeted and acquired small manufacturers to manufacture this customized specialized switch for them.

The HCS-100 TAS

The Telephone Answering System (TAS) was competitively priced and considered to be more efficient in combination with HCS-100. Customized physician messages and automated response systems were included in the package, The company offered flexibility in screen design with customizable screens available at minimal cost on demand. It was positioned as a more professionalized service for hospitals and physicians.

The Market
Target Market, Competition, Marketing Channels, Product Policies and Strategies

Target Markets
Main market was composed of medium and large sized hospitals. New governmental norms and Health maintenance Organizations (HMOs) had increased competition for the hospitals. Hospitals faced an immediate necessity of reducing costs. As per current pricing, the hospital market represented a market of $260 million. Half of these hospitals were to be upgraded in near future to provide an automated TAS service. Hospital buying was composed of a multi0hospital buying group and decisions were centralized.

Principal competitor was A.I.S., who focused exclusively on hospital market.

Efforts in marketing the HCS-100

First phase involved sorting out any legal obligations in formation of the new company.

The second phase focused on product development and establishing itself in the market.
Within 6 months, the first system was sold to Yale University Medical Center. Research and Development (R&D) was considered to be a prime issue.

As the company was low on internal capital that was needed for product development, the company decided to have medical representatives as marketing networks as it accounted for no fixed costs.
In addition to the first system, other four units were also sold in the launch phase.

Product Policy
Confusion regarding the positioning of the product Cost efficient of Quality enhancement system. HCS-100 positioned as a method of generating revenue for hospitals as hospitals can charge physicians for using the service. The company CEO wanted the product to be positioned as a high-end internal communications system for medium and ;large sized hospitals. The product had the largest number of available modules and also had the technologically competitive hardware. The current fundamental was to promote the product as being high end with relative cost efficiency.

Distribution Channels
The first approach was the aggressive deployment of manufacturers representatives according to the National Sales manager, Charles Witteck. The Head of Ring Medical, Ed Owens saw a direct sales force composed of bright and young professionals as the key for sales efforts. The main concern was loss of momentum, lack of co-ordination and if sales effort was not administered from the local Ring Medical office, morale will fall down of employees. The CEO of Ring Group wanted the sales effort to be administered form Ring Groups New York Center. He felt hospital was a concentrated market and product can be sold to other institutions like Corporate Business centers.

Issues, Questions and Solutions

Issues of the Case

An average of two to three units a month are expected to sold which would yield a total revenue of $150,000 per month at average gross margin of nearly 50%. As of April 1988, only 5 systems where sold versus a budgeted sales of over 30 annually. Revenues totaled about 15% of the targeted annual amount of over $1.7 billion. The company appointed 8 manufacturers rep with 20% commission on sales however the sales through them was only one system. The reason was highlighted as lack of consistency in the product policy, pricing and customer support in the region. Scanvest Ring had spent an excess of $700,000 on the HCS-100 effort and the board of members are hesitant to invest any further in this as there is no good result with the investments made as of now. The price of Ring ACD (Automatic Call Distributors) which was priced 50% - 80% above the US competition. Management unwillingness to allow Ring Group to make revision in Scanvest Ring products or to customize it. Disagreement in the most appropriate distribution channel wherein three thoughts prevailed in them. Disagreement amongst the heads of Ring Group and Ring Medical regarding the administration center for sales force.

Q.1 How should HCS-100 be positioned and Why?

HCS-100 is a competitively low priced product with pricing 10-20 % below competition. HCS-100 is a technologically advanced, highly customized system that is also compatible with upgrades in the near future. It is a cost-saving and revenue generating system, a combination of cost efficiency as well as a technological advantage in providing a high-end automated response service. However, positioning must be done for other markets instead of limiting it to the hospital business only. This will make the image of the product as suited only for hospitals making it ineffective in targeting other markets. It must be positioned as a system integrating cost efficiency and technological advantage at a low price with automated call distribution support suitable for all businesses.

Q.2 What are your recommendations for channel selection and Why?
The channel currently involves a network of manufacturer representatives combined with national distributors and OEMs. The best possible option would be to have a Vertically managed system designed with in-house distributors and representatives acting over a dedicated sales force spread in every target territory.

Manufacturer Representatives must be owned by company itself and made a part of the Distribution channel with decentralized approach towards marketing decision-making.
This will involve considerable investment but at the same time, promote expansion and deeper penetration into markets while gaining customer loyalty and support simultaneously. Each sales office will have units ready for installation as inventory and a dedicated service center with a service helpline.

Q.3 How will positioning strategy and channel selection affect the selling process?
The positioning of HCS-100 as a product suited for various businesses will broaden the current target market and create awareness. This awareness will be taken a step further as it will be coupled with the efforts of the sales force with deeper penetration into markets. The sales force can provide demonstrations to create awareness and can install units in a very short time period. Local knowledge of the area by sales professionals will help locate any pricing irregularities and make the HCS-100 a favorable product. No need for waiting to procure from the Ney York division, it will save time and improve customer feedback Increased popularity will create a brand image and selling process will fasten saving time for faster customer delivery.

Thank You.