Sasktel Case Study

7/21/2019 Sasktel Case Study

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Executive SummaryRising healthcare costs have presented great challenges and opportunities in countries with socialized or

private healthcare. In Canada, provincial governments are grappling with ways to fulfill their obligationto provide medical services to the citizenry and maintain a healthy fiscal state. Approaching this problemfrom a prevention perspective has given rise to business opportunity.In the following, a one year marketing plan for SaskTel’s LifeStat service has been conducted toconclude that the firm first ought to target a niche market within the Province. That is, Saskatchewanians

who suffer from diabetes. These citizens are often rurally located and without the correct level of caregiver monitoring, they may end up in emergency rooms with complications that are not only

personally dangerous, but costly to the Province.The fast growing medical IT market, in which SaskTel wants to compete, has drawn the attention of telemedicine and technology giants. In order to survive, SaskTel must focus its resources on establishingitself firmly in the target market so the firm may compete in the long term.SaskTel should distribute its LifeStat system through Shoppers Drug Mart, London Drug, and Safeway

pharmacies. It is vital that marketing dollars be spent wisely to not only make those with diabetes awareof the system, but also their doctors, nurses, friends, and family as well.With a goal of 6500 unit sales, SaskTel can maintain or slightly improve overall profit margins of 7.2%in the first year - even while expanding into a new technology field. Once established, SaskTel can

continue to leverage partnerships with the Province and the Canadian Diabetes Association to further expand into market segments with good product fit.

Marketing Situation Analysis

CompanySaskTel is a Canadian Provincial telecommunications company based in Saskatchewan. They arenationally recognized for their customer service and positive relationship with the diverse group of

customers present in that province. The full service telecommunications company’s subsidiaries alsooffer “security monitoring, directory assistance, hospital-room communications to the health care sector and international telecommunications consulting”.ProductSaskTel has developed the LifeStat service to enable caregivers to communicate with chronically ill

patients and remotely monitor the results of self administered blood pressure, glucose tests, etc. Thetechnology is patented in Canada and has completed three successful trials. Future development couldcome from feedback and results from the three completed trials.Customers/MarketsCanadian Provinces face problems of decreasing resources and increasing costs of providing healthcareto an aging population. Simply put, the result is that there are too many sick people and not enough beds.

Diabetes and hypertension rates of 8.3% and 14.9%, respectively, have also caused policy makers toconsider a “preventative vision” to control costs. This would stop patients with these conditions fromrequiring expensive emergency in-hospital treatment as a result of mismanaging their own treatment.

1) Saskatchewan diabetes patients (end user): In Saskatchewan, 8.3% of citizens have been diagnosedwith diabetes. Diabetics need access to medical services to manage their condition. People suffering fromdiabetes must monitor and control blood sugar levels. Poor management of blood glucose can result inserious cardiovascular and neurological diseases. Diabetics have been able to monitor their own bloodsugar, but have not been able to immediately communicate that information to doctors to ensure proper levels are being maintained. Enabling the communication of this data and the remote monitoring of

patients, as LifeStat does, solves the problem of diabetics in the context of the Province reducing





healthcare costs through prevention.

2) Saskatchewan hypertension patient (end user): Persistent high blood pressure, hypertension, is theleading cause of strokes and affects fifteen percent of Canadians. People with Hypertension need accessto medical services to manage their condition. Hypertension patients also have been able to monitor themselves, and doctors suggest that self monitoring is the best preventative tactic. However,hypertension patients also need to have a caregiver monitoring their blood pressure so they can prevent,anticipate, and respond to medical emergencies.

Hypertension and diabetes patients choose products based on price, convenience, and ease of use. Also, patients value products that increase their independence. This applies especially to the rural and sparse population of Saskatchewan who seek products that spare them unnecessarily long journeys to have their blood pressure/glucose measured.

3) Intermediaries: Retail outlets like Shoppers Drug Mart, London Drug, and Safeway must keep productofferings up to date with industry trends and customer demand. WIth rising demand for telemedicinerelated services and hardware, it is vital that retailers compete by offering products that will solve their customers’ problems.

IndustryLifeStat would compete in the medical information technology devices/services industry.Threat of CompetitionThere are several strong competitors in this market that have more expertise in telemedicine than SasktelOne competitor in particular, Philips Medical Systems, is a revenue giant that just purchased a medicalalarm company with many Canadian customers. The industry’s projected growth rate in Canada of 15%over the next five years should attract more market entrants.Threat of Substitute Products and ServicesThis threat is medium because there are few distinct alternatives to solving this consumer problem.However, switching service providers would not be difficult or costly in most cases. Additionally,

smartphone advances including plug in external devices could create new and more convenienttechnologies that solve consumers’ problems and better fit buying patterns.Bargaining Power of BuyersDue to the limited number of intermediaries and large number of service providers, buyers have high

bargaining power. Buyers will leverage granting access to their established distribution channels. Buyers price sensitivity also strengthens their bargaining power.Bargaining Power of SuppliersSuppliers may have limited bargaining power because their inputs have a small effect on productdifferentiation. There is also high supplier competition.Intensity of Competitive RivalryThe industry is open to innovations that drive product differentiation. High advertising expenses and the

race to establish exclusive distribution channels increases rivalry.

Competition1) Cybernet Medical’s MedStar Cybernet Medical is a subsidiary of a larger systems company. Cybernet has been developing roboticstechnology in the context of commercial web devices and national defense for 24 years. Their medicalmonitoring product, MedStar, works by users uploading medical test results (conducted by the user) to adata management system with the ability to produce custom medical reports. The unit’s retail price rangedepending on medical hardware needed is $975-$2,946 in addition to a $37.50 monthly monitoring fee.2) AMD Telemedicine Inc.’s CareCompanion





AMD telemedicine, considered the leader in telemedicine maintains a strong global market presence with4,000 installations in 58 countries. The company has created a partnership with the Visiting NursesAssociation - the largest home care agency in the united states - giving AMD access to 24,000 patientsand 400,000 yearly home visits. AMD’s medical monitoring product, CareCompanion, features eventreminders, medication prompts, and medical measurements via the user’s monitoring equipment. Testresults can be sent via internet to a caregiver. CareCompanion is currently only available in the U.S. Theretail price is $125/month in addition to the cost of peripheral monitoring equipment.3) Philips Medical Systems’ Motiva Interactive

Philips Medical Systems is a subsidiary of Philips Electronics. Philips is a large, globally recognizedcompany with $30 billion in revenues and $4.4 billion in assets. Philips aquired a medical alarmcompany with 500,000 Canadian customers. This particular “LifeLine” service included telephonereminders, help buttons, and speaker phone systems. Philips’ medical monitoring device is the MotivaInteractive. It uses broadband television to transfer the results of self administered vital signs tests tocaregivers. Motiva costs $140 per month, plus the one time cost for peripheral devices.ContextPeople: Saskatchewan has a population of 968,157. This population is spread out over a very largegeographic area. Many live in rural communities. The province has the highest proportion of senior citizens in the country. 14.88% of the population are Native Canadians.Economy: Saskatchewan’s economy is 95% based on the production and processing of natural resources.

Increasing worldwide energy consumption has increased the demand for Saskatchewan’s uranium,natural gas, and oil. This has resulted in an economic boom for the province.With respect to the health care economy, the cost of illness in Canada was expected to exceed $140

billion. This shows a large, growing market with growing consumer pains.Politics: The voters of Saskatchewan were the first to give their provincial government the responsibilityof providing healthcare to its citizens. In its role as a health provider, both federal and provincialgovernments are dealing with rising healthcare costs associated with an aging population. Governmentsare judged and changed based on whether they are able to fulfill their responsibilities. Therefore,Saskatchewan, and all provinces are looking for ways to continue providing health care to all citizenswithout going broke or raising taxes.

CollaboratorsProvince of Saskatchewan: As a provincial Crown corporation, Sasktel has a strong relationship with the provincial government. This could ultimately protect the company from in-province competition and give preferred access to distribution, marketing, and operational channels.Diabetes Association of Canada: CDA is a special interest group for diabetes sufferers. They have given

positive attention the the LifeStat product for its use in the self monitoring of glucose levels. This is anattractive marketing channel that adds brand credibility. Other similar groups would represent goodchannel opportunities as well.Shoppers Drug Mart: Shoppers is an extremely strong brand in Canada with 1,055 stores nationwide.Shoppers maintains 45% margins on hardware and $75 commission on all one year contracts sold.London Drug: London Drug is a leading pharmacy in Western Canada. They have also diversified into

small appliances, furniture, cosmetics, etc. London Drug maintains 48% margins on hardware sold andrequired a $75 commission on all one year contracts.Safeway Pharmacy: Safeway Pharmacy has 1,775 locations in the U.S. and Canada. Safeway stresseswellness through education and prevention, in line with the Provincial governments’ health care stance.Safeway also has a focus on diabetes health. Safeway expects 40 percent margins on hardware and a $75commission on all one year contracts.

Market PotentialMarket: “The set of all actual and potential buyers of a product”Canadian Market Potential: 7,334,193 units. (See Ex. 1)





Market Segment 1: Diabetes patients in Saskatchewan who need to communicate blood glucose levels tocaregivers without having to travel to a hospital.Total Size: 78,420 units (Ex.1)Market Segment 2: Hypertension patients in Saskatchewan who need to communicate blood pressuremeasurements to caregivers without having to travel to a hospital.Total Size: 153,936 units (Ex. 1)

Opportunities/Issue Analysis

External OpportunitiesGrowing Sick Population: The number of potential customers in the market is going to rise as baby

boomers age. Other health issues could also increase the rate at which Canadians suffer from diabetesand hypertension.Rise of Telemedicine: The size of the Canadian medical IT industry is expected to grow 15% from $3.9

billion to $4.6 billion by 2011. More than just an increase in sick people, this statistic indicates that policies are going to increase the propensity for consumers and caregivers to turn to technology likeLifeStat to fulfill national, provincial, and personal healthcare goals.Increasing Focus on Preventative Care: Governments are having an increasingly difficult time bridgingthe healthcare funding gap. By taking a stance that focuses on prevention, products that attempt toidentify early warning signs before they become emergency health events will be more valued.

Relationship with Province(s): As a Crown corporation, LifeStat may be protected from directcompetition in Saskatchewan. Other province’s Crown telecommunications companies may choose to

become licensees and distribute LifeStat.International Competition: The major industry competitors are not based in Canada or identifiablyCanadian. Consumers in Canadian market segments may prefer to pair their uniquely Canadian medicalsystem with domestic products.Distribution: With the growth of medical IT, retailers need to include telemedicine products to keep upwith consumer demand. Strong national distributors like Shoppers and London Drug have alreadyestablished themselves as trustworthy purveyors of healthcare products and give strong brand equity tothe products they stock.

Rural Population: The rural population of Saskatchewan seeks products that will ease the inconvenienceof their geography.

External ThreatsStrong Competition: The industry is attracting the attention of extremely large companies with dedicatedmedical technology divisions. Large R&D budgets could advance telemedicine technology rapidly andmake older technologies obsolete. Large competitors have also taken notice of the rapid industry growthrate and have made market entry acquisitions like Philips’ purchase of the “LifeLine” service.Substitutes: As competition develops, firms will create more efficient and effective technologies toaddress these consumer problems. New developments could also be much cheaper, thereby minimizingthe inconvenience and cost of switching services.

Distribution: Retailers are able to demand high commissions because there are few of them and marketrivalry is high. Retailers will only want to carry the best products and may value brand recognition over other objective criteria. SaskTel is probably not well known outside of Saskatchewan and consumers may

be hesitant to trust a strange firm with an important responsibility.

Internal StrengthsProvincial Protection: SaskTel’s relationship with the province is mutually beneficial. In line with their

preventative approach, the provincial government is incentivized to champion the LifeStat product because it could help in controlling costs. In Saskatchewan, this relationship with the Province willdecrease the attractiveness of Saskatchewan to private firms.





Expertise in Communications: SaskTel’s wealth of experience in the telecommunications industry couldhelp them take advantage of the “rise of telemedicine”. Sasktel has logistical and infrastructure expertiseto leverage. Also, the new CEO is firmly rooted in the telecommunications industry.Acclaimed Product: LifeStat has been praised by the Diabetes Association for being an effective tool inself monitoring and prevention. This matches up with provincial governments’ focus on preventativecare.Popularity/Familiarity with Consumers: SaskTel knows its customers, and the people of Saskatchewan

praise SaskTel. Citizens are more likely to trust a company that they already receive services from than a

new entrant, especially when it comes to health. This could also shift bargaining power against retailersslightly because they will see the value in SaskTel’s brand in the Province.

Internal WeaknessesInexperience with Medical Technology: SaskTel has limited expertise in medical fields. Notunderstanding the nuances of providing in home healthcare to people may result in failure to deliver the“whole product” experience.Low R&D Priority: SaskTel has not had to focus on the research and development process in its role as atelecommunications provider.Poor International Brand Equity: Outside of Saskatchewan, SaskTel is not well known.

Patent Status: LifeStat is not patented in the United StatesObjectivesFinancial Objectives

Net Profit Margin2005: 6.4%2006: 7.2%Objective for 2007: 7.3%Marketing ObjectivesReach Unit Sales of 6500Achieve an unaided awareness of 75%

Strategy RecommendationsRecommendation (Refer to Ex. 2, 3)I would recommend targeting Market Segment 1: Saskatchewan diabetes sufferers. Because SaskTel isattempting to “cross the chasm” into a new industry, it is important that they identify a small nichemarket that they can focus resources to dominate. Although the alarming growth rate and larger size of Market Segment 2 is hard to ignore, there are far more situational factors that will allow SaskTel tosuccessfully enter Market Segment 1. Diabetes customers seem to be more compelled to purchasemedical equipment than those suffering hypertension when you compare the respective survey responses.This suggests inelastic demand that will give the firm greater pricing freedom. Also, pre-existing praisefrom the Diabetes Association of Canada suggests faster diffusion through the target market. Channel

Access/Fit is potentially better for market segment 1 as well because there are retailers, like Safeway,who already specialize in diabetes care and a preventative approach to personal health. This contributesto the firm’s ability to provide the “whole product” experience with distributors as allies. After successfully dominating Market Segment 1, SaskTel will be able to boast expertise in in-home diabetescare and further leverage special interest partnerships into new Canadian provincial markets.Differentiation StrategyDiabetes patients look for products based on price, convenience, ease of use, and if it contributes to

patient independence. Using a Fishbein analysis or some kind of perceptual map would tell us moreabout how consumers perceived market competitors. When looking at relative prices and competitive

product descriptions, the evidence suggests that consumers might be “over-served” by a $170 per month





device with capabilities they do not need. A low cost differentiation strategy would not force SaskTel - acompany that is entering a new market - to develop a cutting edge product that it couldn’t deliver or

provide adequate customer support for.Positioning StatementLifeStat is for Saskatchewan Diabetes sufferers who are dissatisfied with complicated and expensivemonitoring devices whose confusing capabilities are unneeded. Our product is a telemedicine bloodglucose monitoring system that provides all of the communication and testing functionality diabetessufferers need, at a fraction of the price. Unlike our competitors, we understand the citizens of

Saskatchewan and have used our communications and customer service expertise to assemble anaffordable, convenient, and easy to use device that works to prevent serious health complications as aresult of diabetes.

Marketing MixProduct StrategyThe LifeStat service enables diabetes patients to communicate the results of self administered bloodglucose tests immediately to their doctor or caregiver via secure internet connection and SaskTel datacenters.Pricing Strategy

The LifeStat service will be priced at $65 per month, plus the one time cost of necessary testing devices.This price, although at the top of the case range, is still far below the competition. Price has the greatesteffect on net profit. At $65 we can maximize our return and still fulfill a low cost differentiation strategy.Promotion Strategy

N/ADistribution StrategyI recommend distribution through Shoppers Drug Mart, London Drug, and Safeway Pharmacies inSaskatchewan. There are no financial terms being offered by any retailer that incentivize SaskTel to useone outlet exclusively. In order to reach as many Saskatchewan diabetics as possible and fulfillmarketing objectives, all distribution channels in the province need to be used. The hardware margins

and commissions on one year contracts are similar enough that it should not be a top deciding factor. Thelocations with required margins greater than forty percent are worth the additional distribution cost because of their importance to further expansion through the provinces in the long term. The samereasoning justifies the additional direct sales cost associated with this approach.Action ProgramsBudget ItemsTotal: $354,200 (See Ex. 5)Research Next StepsDuring the year of this marketing plan, there would be two main marketing research goals. 1)Segmentation research of potential next markets would be done. This would include profiling consumer

preferences in potential markets, conducting cluster analysis, and evaluating for fit. A Fishbein analysis

or perceptual maps could also be used to further evaluate consumer priorities and the next marketsegment to target. 2) It would be vital to conduct a Fishbein analysis via customer survey in theSaskatchewan market to understand how consumers have perceived SaskTel v. its competitors with themarketing mix being used. If the perception does not match differentiation and positioning goals, a re-evaluation of the marketing mix would be needed before any additional market segments were targeted.FinancialsFirst Year unit sales: 6500 (Ex.2)Contribution AnalysisPer Unit TotalUnit Sales ---------------------------------- 6500





Unit Price ($65/month x 12 months) = $780/year $5,070,000(Variable Costs) ($375) $2,437,500Contribution $405 $2,632,500(Fixed Marketing Expense) (54.49) $354,200(Fixed General and Admin, R&D, Insurance, Internet, etc.) (See Ex. 4)R&D, Insurance, Internet, etc.)(See Ex. 4) ($221.90) $1,442, 334Profit Impact $128.61 $835,965

Breakeven AnalysisIn terms of marketing costs:Total Marketing CostsUnit Contribution = BREAK EVEN UNITS$354,200$405 = 875 units875 units would need to be sold to cover the cost of the marketing program.

EXHIBITSEx. 1Population % w/ Diabetes % w/ Hypertension Market Potential (units)Canada-Wide Market 31,612,897 8.3% 14.9% 7,334,193Market Segment 1 968,157 8.1% 78,420Market Segment 2 968,157 15.9% 153,936

Ex. 2Segment Comparison Market Segment 1 Market Segment 2Problem Need to be able to measure and communicate blood sugar levels to doctors to prevent moreserious medical emergencies without having to take a trip to the hospital for costly emergency services

Need to be able to measure and communicate blood pressure levels to doctors to prevent more seriousmedical emergencies without having to take a trip to the hospital for costly emergency services.Decision Makers Diabetes sufferers and their caregivers Hypertension sufferers and their caregiversWho influences decision makers Doctors, family, friends doctors, family, friendsSituational Factors High prevalence in aboriginal peoplesFactors for Decision making Price, convenience, ease of use, adds to independence Price, convenience,ease of use, adds to independence

# Customers in Segment 78,420 153,936Growth Rate of Segment Increasing Increasing 33% in 4 yearsCompetitors in Segment Strong Strong% Positively Responding to LifeStat survey 8% 2%% Positive* Customers in segment 6274 3079

Ex. 3Segment Attractiveness Analysis Market Segment 1 Market Segment 2Compelling Reason to Buy 10/10 9/10





Growth Rate 8/10 10/10Competitive Intensity 10/10 10/10Customer Familiarity 10/10 10/10Channel Access 10/10 9/10Company Fit 10/10 7/10Total 58/60 55/60

Ex. 4

Totalling Variable and Fixed Costs (Year)

Variable$25/month tech support or $300/year $75/year commission

FixedDepreciation ⅓* 2,200,000 = $733,333R&D $47,000

Insurance $71,000Internet 3,500 per 2 month x 6 = $21,000Employees: $200,000Server Cost: $53,000Licensing fee: $167,000G&A $150,000Total non marketing fixed costs: $1,442, 334

Ex. 5 Marketing Budget

- (1)CDA trade show: $4,500- (10) Diva/Showcase 30 seconds: $1,000- (40) In store demos: $20,000- (1) E-Health conference: $2,500- (1)Canadian Health Magazine: $6,200- Direct sales team (16 persons x $400 x 50): $320,000-Total = $354,200

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Sasktel Case Study