Augustine Medical, Inc.

The Bair Hugger Patient

Warming system
Reena | Pranita | Saravanan | Yasha | Ashish | Shank Saxena |
Anirban |Amit

Introduction
Augustine Medical
Founded by Dr. Scott Augustine an anesthesiologist
Incorporated to develop & market products for hospital
operating rooms and post operative recovery rooms

ompany planned to sell two major products

Patented patient warming system (Bair Hugger Patient Warming system)

Tracheal intubation guide used in operating room & emergency medicine

Bair Hugger Patient Warming system

Heater / Blower unit
Separate Inflatable plastic / paper blanket

Problem definition
Company faced a problem of pricing the product consisting of
two components (blower & blanket) and positioning it against its
competitors.
There was no air-circulating blankets available in U.S but the
company faced competition from water-circulating blanket
Priced of unit at a range of $4000 - $4895 and disposable blanket
priced at a range of $20-$24

Market/Industry Analysis
In United States about 21 million surgical operations were
performed annually or 84000 operations per average
8 hour of work and approximately 5500 hospitals have operating
rooms and post-operative recovery rooms.
Post operative recovery patients are 60-80% proven to be clinically
hypothermic
Research by company indicates that 31,625 post operative
recovery beds and 28,514 Operating rooms in hospital in the U.S
Further studying the trends indicated that hospitals with less than
7 beds in post-operative recovery room will not adapt the Bair
system.
It was projected that for every 8 post-operative recovery room 1
system will be sold.

STRENGTH
1)Easy access of disposable
covers
2)Easy to transport as it is on
wheels
3)More comfortable for patients
and cause speedy recovery
4)Less risk of cross
contamination as the blankets
are disposable

WEAKNESS
1)The warming cover needs to
be restocked several times
2)Result could be seen only
after two hours

SWO
T

OPPURTUNITIES
The product has competitive
advantage over the others as
the units were given for free

THREATS

Several other alternatives exist

such as Water circulating blanket
For hypothermic patients

Competition Analysis

Competitors

Warmed
Hospital
Blanket
Water
circulating
blankets

Air circulating
Mattress
Thermal
Drapes

Analysis/Strategy

Number
TOTAL NUMBER OF BEDS
of
numbe
Average
Total number of beds from the table = 21949 beds
postoper
r of
number of
total
ative
hospita postoperativ number
From research we know 31365 beds , we remove hospitals having less
beds
ls
e beds
of beds
Seven
fewer than 7 beds
wont beds (31365 (3*3602) ) = 20559 beds
0
1608
buy bair
Assuming
a higher value of 22000 beds
fewer than 7 beds
wont
1-6
3602
buy bair
7-11
1281
9 TOTAL
11529 NUMBER OF UNITS TO BE GIVEN
12-17
391
14
5474
18-22
135
20 Total
2700
number of blower to be offered free = (22000 / 8) = 2750 units
23-28
47
25
1175
29-33
17
30
510
Cost
incurred in offering free blower = (2750 * $380 / unit ) = $10450
>33
17
33
561

21949

NUMBER OF CASE

Research indicates 60-80% of all post operative room patients = (21 Million x .60) = 12.6 Million

of Cases required = (12.6 / 12 ) = 1050000 cases (assuming 1 patient requires 1 case consisting of 12 blan

Analysis/Strategy
COST OF BLANKET CASES
Number of Case = 1050000 cases (assuming 1 patient requiring 1 case consisting of 12 blankets)
Cost of cases for the targeted patients = (1050000 x 0.85 x 12) = $10710000
TOTAL COST INCURED = ( cost of blower) + (cost of cases) = $10710000 + $1045000 = $11755000
Strategy : We are offering free blower units for the complete target market of 22000 beds
along with one case of 12 blankets
Which will be costing us total = $11755000, we will be pricing only for our blankets !
# Razor blade business model
SALES OF BLANKET
Sales = (SP of blanket x no of blanket) = ($10 x 12 x 1050000) = $126 Million (I will be selling a
blanket for $10 , compared to my
Competitors at $24/blanket)
Assuming distribution margin of 40 percent

Conclusion/Recommendations
The Price of blanket even at $2 we will make a profit of 3.4
Million
Hence it depends on the number of hypothermia affected
patients which are assumed to be 60% in this case.
Augustine relies greatly on the distributors to demonstrate
and advertise their products, hence it should work on
developing its own marketing strategies as well.
Being a R&D Company it should develop new products as well
Distribution cost is fairly high and should be reduced for
greater profits