Augustine Medical

|

Augustine Medical Case |

Summary |

|

By Sid Powar |

3/29/2011 |

In July 1987, Augustine Medical, Inc. was incorporated as a Minnesota corporation to develop and market products for hospital operating rooms and postoperative recovery rooms. Founded by Dr. Scott Augustine, an anesthesiologist who was convinced that hospitals needed and desired a new approach to warming patients after surgery. Dr. Augustine used his expertise in medical knowledge and technical flair to develop the Bair Hugger. |

Major Issue/Problem:

How to price the heater/blower unit & disposable warming covers of the product? How to position it compared to its competitors?

There are many substitutes available for hospitals to treat and prevent hypothermia. However, there are many disadvantages to the variety of other devices which virtually treat the same condition. Augustine Medical believes that their product is superior to their competitors’ products.

ALTERNATIVE 1: Change the Pricing strategy

Advantages: The Bair Hugger is a huge technological advancement. Augustine will enjoy success due to the fact that they are the first to penetrate the United States market. The blankets provide a competitive advantage for Augustine, thanks to their patent rights and low costs. By selling the blower for free, Augustine will create a monopoly with regard to blanket sales. Augustine’s blankets can be sold under the price of water circulating blankets, and compete in the market immediately.

Disadvantages: The Bair Hugger is the only product in Augustine’s Medical line. Success will depend on it sale and promotion. Pricing the blankets too high can destroy demand.

Quantitative Implications:

Warm Hospital Blankets:

* Number of blankets used per customer = 10.5, since 50% of patients receive more than one application at an average of 7 blankets.

* Total cost per patient is about $2.73.

Water-Circulating...