Case Study Portable Heat Pad

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Case Study Portable Heat Pad
Business 2201 Marketing

• ROWing Consultants
• Mark Wells
• Darrell Osborne
• Heather Rogers
• February 11th, 2004

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Background
Tanner Company, owned by Mark Tanner, operates
three businesses in western Canada - a
peat-moss company - a mini-warehouse
operation - and a landfill site
Mark Tanner met the inventor of the Portable Heat
Pad and - paid 250,000 for the Canadian
manufacturing and distribution rights for the
product - obtained a 17 year patent on the
product in Canada
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Product Profile
The Portable Heat Pad - consists of two parts
(a vinyl bag with a sodium acetate solution and
a small stainless steel
trigger) - is available in two temperature
settings (47 and 54 degrees Celsius) - initial
temperature lasts 20 minutes but sufficient
therapeutic heat could last up to three
hours - product could be marketed in various
sizes with rectangle, square or mitt
shapes - product could be made in less than
three weeks and could be done in
the mini-warehouse
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Issue
There are several issues facing the Tanner
company with respect to the Portable Heat
Pad - whether or not to introduce the
product - which market to target if the product
is introduced (home/consumer or
institutional)
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Goals Objectives

• The Tanner Company has both business and
  marketing goals in mind. They
• are as follows
• Business
• conduct a financial analysis to determine the
  break even point
• increase earning potential of company
• Marketing
• develop a marketing strategy for the consumer
  market
• develop a marketing strategy for the
  institutional market
• enhance the company profile to show that the
  Tanner Company is
• a new player in the medical supply business
• 4) explore other areas of possible expansion if
  product is successful

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Environmental Situation Analysis
These types of analyses are the basis for
planning decisions and are critical. They are
normally costly, time-consuming and frustrating.
Part of this process involves conducting a SWOT
assessment (Strengths, Weaknesses,
Opportunities and Threats). Internal Analysis
Tanner Company
Portable Heat Pad ?
Peat-moss company
Mini-warehouse operation
Landfill Site
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Environmental Situation Analysis
Internal Analysis The Tanner Company need to
become aware of how different the Portable
Heat Pad is from its current types of
businesses specifically relating to - how the
product is produced - how the product is
distributed or sold - the legal implications of
product failure - possible compliance with
various of health agencies within provincial
and federal governments
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Environmental Situation Analysis
Marketing Mix Product - portable -
controlled heat - flat product -
reusable - product is flexible - long lasting
- safe
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Environmental Situation Analysis
Marketing Mix Price - Suggested retail
price of 40 - Institutional (less 15 for
distribution 34) - Home/consumer (less 25
for margin 30)
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Environmental Situation Analysis
Marketing Mix Promotion - sponsors dealing
with competitions - arthritis society -
having doctors recommend the product - direct
selling with medical reps - infomercial -
web site
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Environmental Situation Analysis
Marketing Mix Distribution Home/Consumer
market - chain stores - drug stores -
home shopping network - sporting outlets
Institutional market - direct selling to
distributors - Canadian Hospital
Products - Northern Medical
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Environmental Situation Analysis
External Analysis Demographic - 25 and
older (very broad because a majority of people
can benefit from the product)
Economic - monitor the income levels of our
target population - aging population -
families
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Environmental Situation Analysis
External Analysis Socio-cultural - our
culture has a high emphasis on quality of life
- many people focus on being healthy -
being active is very important for families
Competitive - there are already well known
products out there so this product would be
entering a very competitive market - the
companies that exist already have strong
reputations in the market
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Environmental Situation Analysis
External Analysis Technology - our product
is the most innovative to date - non toxic
chemicals - controlled heat
Political and legal - need to label product
in certain ways - indicate a caution that the
product may get hot - list the chemical
solution inside - product should not come in
contact with small children
(because they have sensitive skin)
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Environmental Situation Analysis
Positioning map
Portability
Portable Heat Pad
Safety
Heat Retention
Sunbeam Moist/Dry pad
Price
Sunbeam Form Fixed Heating
Life Therabag
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Environmental Situation Analysis
SWOT analysis Strengths - portable, flexible,
long lasting, reusable, safe product Weakness -
the Company does not have an established
reputation in the health care
business - The cost of the product 40
(10 higher than most other brands) Opportunities
- Aging population - Increase
health awareness - Nature of the
product itself Threats - Existing competitors
- Market hasnt changed in years
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Environmental Situation Analysis
Financial Analysis Step 1) establish Unit
Variable Costs (per heat pad)
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Environmental Situation Analysis
Financial Analysis Step 2) establish Overhead
(Total Fixed Costs)
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Environmental Situation Analysis
Financial Analysis Step 3) estimate break-even
points (Quebec home market excluded as
single salary of 60,000/year would have to
be paid to a single distributor for Quebec)
Notes Unit Price for Institutional (40
selling price less 15 for distribution cost
34) Unit Price for Home/Consumer (40 selling
price less 25 for margin 30) Projected
Profit for Institutional (29,322 units
16,461 units) X 34 Projected Profit for
Home/Consumer (189,000 units 19,454 units) X 30
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Environmental Situation Analysis
Financial Analysis Step 3) estimate break-even
points (Quebec home market excluded as
single salary of 60,000/year would have to
be paid to a single distributor for Quebec)
Oops !! Yet another example of a Don Cherry
remark !
(note the effect of a 7 second delay)
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Alternatives

• There are several alternatives facing the Tanner
  Company. They include
• do not introduce the Portable Heat Pad at this
  point in time and
• stick with what the company currently does
• 2) target only the institutional market
• 3) target only the home/consumer market
• 4) target both markets

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Analysis of the alternatives
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Selected alternative
Alternative 4) Target both markets
(institutional and home/consumer) would be the
selected alternative. The break-even analysis
shows a potential for significant revenue and
profit. Further research would be conducted for
the Quebec market to determine if there were
sufficient numbers of hospitals and consumers
that would warrant an additional distributor
expense of 60,000 salary per year.

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Implementation Plan

• This plan would focus on the following items
• creating an intensive distribution campaign to
  target the medical distribution
• groups and supply them with samples
• establishing relationships with a number of
  doctors to assist with the
• promotion of the product to the
  home/consumer market
• 3) conducting additional research to understand
  the possible legal implications
• of a user being burned or product failure
• 4) determining a reasonable warranty period
• 5) setting up booths at various medical
  conferences to showcase the product
• 6) conducting a 1 year post-implementation plan
  to review the volume of actual
• sales versus projected sales

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Case Study Portable Heat Pad
Questions ?
Business 2201 Marketing

• Mark Wells
• Darrell Osbourne
• Heather Rogers
• February 11th, 2004