1) Choose an appropriate business model and explain why it makes sense for your product…what will be the biggest challenges for your business model to succeed?
The best business model for our product would be the reusable model. Our device has been designed to be very sturdy and reliable and as a result is rated for a shelf life of atleast 36 months. Perhaps the biggest challenge with this model is profiting from our device. Although the device will be offered at a markedly low price, replacing the already low cost (in respect to other medical devices) accepted technology (i.e. stethoscope) will indeed prove to very challenging and would require a strong technical sales force.
2) Propose a retail price for your product, based on what you would pay relative to similar products (explain).
Our device is intended to replace the stethoscope in blood pressure readings. Considering that the cheapest price one can purchase a stethoscope for is 7.50 USD, the suggested retail price for our device must be much lower. However, the retail price assigned should also allow for a profit to be made. The device itself costs 3.07 USD to make (includes labor). If we sell the device for 5.25 USD then we will have a 71% profit or surplus:
(Sell price-Cost price)/Cost Price * 100%
2a) How many middlemen are between the manufacturer and the final consumer (person or insurance payer)?
We are the only middleman between the manufacturer and the final consumer. After we are pleased with our prototype, our client, EWH, will acquire all the rights to mass produce our device and sell it at the suggested retail price (see Q1) directly to the consumers (medical clinics). In return for our efforts, EWH will confer upon us a winning prize.
2b) How much do you estimate it will cost to manufacture your product (parts and labor)?
Diaphragm- 1.67 USD
1-3/4” Display- 0.79 USD
0.5 mm Beads- ~ 0.10 USD/20 beads
Labor- 0.50 USD/device made
Total- 3.07 USD
2c) from 2, 2a, and 2b, and using the 50% rule, what is the manufacturer’s profit margin?
As calculated earlier the profit margin between the manufacturer and the consumer is approximately 71%. Our supply chain from manufacturer to patient is quite different from a lot of other products. As explained the group was contracted by EWH, to design the product, which would be mass produced by them, the product would then be sold to either charitable organization or other non-profit establishments. These organizations are to deliver the product to communities that would need such devices but are not adequately trained on how to use stethoscopes for the procedures.
Unfortunately the reimbursement cost would be non-existent as the products would be bought and taken to the destination of use as such eliminating our known health care system.
3) Estimate your ultimate market size (total gross / year) based on # of customers per year (justify this number) multiplied by price/product. Although this is just a rough estimate, try to be realistic about # of customers per year…not everyone will want a new product, or can afford it.
Unfortunately our market base is a very small one, as were contracted by an organization to design the Blood pressure assist device. The organization, EWH, has specific need for the product and as such they had very tight parameters, which would keep the product in a very specific market. But estimating that there should be atleast 100000 – 500000 pieces sold per year, which would make the market size between $307000 - $1,535,000