1 Washtenaw County Chapter AED and Training Services Competitive Analysis Final Report December 2002

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COMMUNITY CONSULTING CLUBCOMMUNITY CONSULTING CLUB

Washtenaw County Chapter

AED and Training Services Competitive Analysis

Final ReportDecember 2002

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AGENDA

Executive Summary 3 Industry Mix 4 Market Segmentation 5 Overview of Washtenaw County Chapter 6 Competitive Analysis

Cardiac Science (Survivalink), AED Manufacturer 7 Medtronic, AED Manufacturer 8 Zoll Medical Corporation, AED Manufacturer 9 AHA, AED Distributor and AED/First Aid Training Provider 10 National Safety Council, AED/First Aid Training Provider 11 Zee Medical, AED Distributor (restaurant and industrial) 12 Life Saving Resources, Inc., AED Distributor (water and public safety) 13 Huron Valley Ambulance, Ambulatory Services 14

Evaluating Partnerships 15 Next Steps 16

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This study revealed six major competitors for the Chapter. The primary means to increase the Chapter’s competitive position is through customer education.

Three primary training competitors for the Washtenaw County Chapter were identified:

American Heart Association National Safety Council Huron Valley Ambulance

Three primary AED competitors for the Washtenaw County Chapter were identified: Cardiac Science Medtronic Zoll Medical

In order to improve competitive standing, the Washtenaw County Chapter should consider the following:

Improving the customer education process (hidden costs associated with competitors) Targeting subject matter experts that refer customers (doctors, OSHA, police officers, insurance, etc.) Ensuring alliance with AED manufacturer is designed to support the Chapter in its pursuit to place

AEDs in the commercial market

Executive Summary

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The Chapter has a unique position combining service and equipment; however, to become more competitive, the Chapter will need to increase its positioning in equipment.

Industry Mix

Equipment

Service and Training

ChapterNSC

HVA

MedtronicZoll Medical

AHA

Zee Medical

Lifesaving

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Virtually all customer segments are being served by one or more competitors. The AED market is growing 30% a year; the training market is continually gaining new entrants.

Market Segmentation

Targeted Customers

Minimal to Zero Focus on Customers

Legend

AED Industry

•The 2002 worldwide AED market is estimated between $150-170 M.

•Approximately 70,000 AEDs will be sold in 2002, 85% will be sold in the US.

•Four companies represent the majority of AED sales: Medtronic, Philips, Cardiac Science, and Zoll Medical

•Currently, only 5% of police vehicles, 25% of fire vehicles and 1% of corporations have AEDs.

•AED market is growing at 30% a year

Training Industry

•Training is a fairly easy market to enter.

•AED technological developments make training less important. Mean defibrillator time for trained technicians is 67 seconds; for untrained 6th graders, 90 seconds.

•Good Samaritan law increases the likelihood of non-trained AED users.

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The Washtenaw County Chapter of the American Red Cross has strong community recognition; however, AED penetration in the corporate market is relatively low.

Target Market: Large corporations, medical facilities, indoor and outdoor recreational areas.

Potential Threats: AED manufacturers and other organizations offering comparable devices and training programs.

Washtenaw County Chapter of the American Red Cross

Strengths Weaknesses

Community presence; Chapter #1 in outreach, and #3 in AED sales.

Organization and accessibility of customer and sales data.

Range and reputation of first aid training programs; reference point for public.

Control of certified trainers; model subject to competition for same customers.

Ability to cross-sell products and services: first aid and CPR classes with AEDs.

Potential difficulties in educating customers of competition’s hidden costs and overall value of Chapter’s product and service offerings.

Chapter has access and appeal to untapped market. Opportunity to establish new, or strengthen existing, alliances with AED manufacturers.

Company Description: Local chapter of internationally recognized non-profit organization. The Health and Safety division provides first aid, CPR and lifeguard training and AED placement.

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Cardiac Science is the third largest in AED sales. However, to-date the company is unprofitable.

Target Market: Public access, hospitals, corporations, educational institutions, hotel and leisure industry, law enforcement, and Fire Department/EMS applications.

Potential Threats: Changing FDA regulations, specifically with respect to AED home use, would pose a large threat to Cardiac Science, which is entirely dependent on how the FDA receives the Powerheart AED.

Cardiac Science (Survivalink)


Fast-growing manufacturer; grew over 780% over the last five years.

Limited products and services; company only focuses on AEDs.

Advanced, patented technology. Restricted environments; Powerheart AED only approved for medically supervised environments.

Scientific, professional image. Small player; competes against much larger companies like Medtronic.

Cardiac Science’s long-term growth strategies are ambiguous. Will they focus on medical channels or try to expand into the Chapter’s client territory?

Company Description: Cardiac Science develops defibrillators and disposable electrodes that monitor and treat patients with life-threatening heart rhythms.

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Medtronic is a world-renowned leader in cardiac rhythm management, #1 in AED sales; however, allocation of sales force in Michigan seems relatively weak.

Target Market: Hospitals, emergency response and commercial businesses.

Potential Threats: With distribution relatively weak in the commercial market, Medtronic may loose market share to other manufacturers dedicated to the commercial market.

Medtronic


Global leader; occupies #1 spot with over 350,000 LifePak AEDs distributed worldwide.

Small sales force; only two Medtronic sales representatives cover the state of Michigan.

Strong partnerships; offers company-wide programs with LifeLinkMD and NSC.

Lack of training program; customers receive “EduCredits” for CPR and first aid training.

Cardiac medical device leader; provides a wide array of cardiac medical devices, accounting for 46% of overall sales.

Lack experience in commercial market; rely on four distributor partnerships to sell to Michigan’s commercial customers.

A key opportunity exists for Medtronic and Red Cross to form an alliance. Medtronic can provide AEDs to Red Cross at a discount; Red Cross can provide the sales force or training services in the commercial market.

Company Description: Manufactures, sells and services AEDs. Positioned as the company to provide the “total solution.”

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Zoll Medical focuses on the production and distribution of resuscitation equipment including its first AED unit released this year; however, it lacks training offerings.

Target Market: Zoll Medical targets a wide customer base, and has experience selling to fire and police departments. Zoll plans to increase its direct sales force to promote its product in addition to leveraging its current distribution channels and website.

Potential Threats: Zoll Medical is a late entrant to the AED market and may be severely disadvantaged by the significant momentum that its competitors already have.

Zoll Medical


Large company: 524 employees. New to AED market; first product came out in 2002.

Has established distribution system and sales force.

Only one AED product to-date (Zoll AED Plus).

Strong international sales (e.g., German Army, Australian organizations).

Does not currently offer AED training, but refers customers to the AED Instructors Foundation.

Zoll has a strong reputation in the defibrillator market and poses a significant threat to the Chapter because of its expanding sales force; however, Zoll still lacks training component.

Company Description: Designs, manufactures and markets a full line of cardiac resuscitation devices, disposable electrodes, mobile ECG systems, and EMS data management solutions. Mainly focuses on health care professionals to provide both pacing and defibrillation.

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The AHA is the industry leader in cardiac management research and guidelines. However, customers are indifferent to receiving training from the AHA or the Red Cross.

Target Market: Primarily focuses on Emergency Response; the AHA also targets public venues and businesses (Fortune 500 companies).

Potential Threats: Increasing competition as more organizations are entering this market.

American Heart Association


Leader in setting standards; competitors use its national guideline as reference.

Smaller scope; focus on heart disease only.

Broad network of training centers (147 in Michigan).

Brand confusion; customers confuse AHA with Red Cross.

Independence; AHA does not sell, distribute or endorse any AED products.

Limited staff; one person covering marketing in Michigan.

AHA, with its local training center, has become an indirect competitor for AED sales.

Company Description: The American Heart Association is a national voluntary health agency. It provides CPR/AED training through a network of independent Community Training Centers. AHA does not sell or endorse any medical equipment, but the local training center in Ann Arbor, Life Support Services, Inc., sells AEDs as a secondary business.

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The National Safety Council provides extensive training services to its members, but must also rely on certified centers to meet its mission.

Target Market: Offices, homes, community centers and environmental organizations.

Potential Threats: Organizations offering both AED units and related training.

National Safety Council


Large customer network; access to over 37,500 members employing 30M persons.

Breadth of mission may be limiting; unknown customer value of training.

Extensive training reach; accomplished through certification of training centers (Huron Valley Ambulance).

Lack of AEDs; does not sell AEDs at this time, but does offer training.

Large online product selection; products oriented to workplace, home, and environment of first aid and safety products.

Located outside Ann Arbor; closest chapters in Lansing and Southfield.

Members cannot purchase an AED directly from the National Safety Council. However, AEDs may be available for sale through certified training centers.

Company Description: Non-profit with mission “to educate and influence society to adopt safety, health and environmental policies, practices and procedures that prevent and mitigate human suffering and economic losses arising from preventable causes.”

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Zee Medical is a subsidiary of McKesson Corporation, a Fortune 35 company, but the local affiliate does not appear to be a major force in Ann Arbor.

Target Market: Restaurants, hotels, manufacturing plants, construction sites and companies with multiple office locations.

Potential Threats: Better perceived value of non-profits selling AEDs and first aid training.

Zee Medical


Extensive online catalog; 19 product categories and direct ordering capabilities.

Potential credibility issues of for-profit in AED sales and service market.

Dedicated sales teams; national account service for businesses with multiple locations.

Not cost-effective for smaller businesses or those with less frequent restocking needs.

Confidential evaluations of workplace first aid and safety procedures.

Low penetration in local market.

Products and services appeal to companies with multiple locations and those in need of standardized safety procedures and routine restocking of first aid products due to nature of operations.

Company Description: Van-based provider of occupational first-aid and safety products, training and services.

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Life Saving Resources, Inc. focuses primarily on providing safety training and products for the water and ice rescue market.

Target Market: Public safety and rescue, aquatic recreation.

Potential Threats: Not significant.

Life Saving Resources, Inc.


Full range of water/ice rescue products, low AED price (ACCESS from $1295, ZOLL from $2119).

Small business (<5 people, <$500,000 sales) located in New Hampshire.

Focus and specialization; considered AED provider of choice in water and ice rescue market.

Low recognition outside areas of aquatics safety, water rescue, and ice rescue fields.

Award-winning website and customized training program.

Low training coverage in Michigan

Because of its size and location, Life Saving Resources, Inc. is not a significant competitor to the Chapter.

Company Description: Lifesaving Resources, Inc. is a private corporation providing training, consulting services and equipment for the fields of aquatics safety, water rescue, and ice rescue.

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Huron Valley Ambulance is dedicated to providing medical transport and other training services; however, it is limited in its ability to partner with suppliers and customers.

Target Market: Hospitals, education institutions and households.

Potential Threats: With increasing competition and because HVA is a small, local, specialized organization with low customer awareness, it will have difficulty distributing AEDs to a large portion of the AED market.

Huron Valley Ambulance


Large force of ambulances (about 65). Specialized in mobile services, not AED sales.

Strong relationships with 17 local hospitals, 26 nursing facilities, and other urgent care services.

Local presence only.

Offers 6 types of training including CPR and other high-end EMS training.

Weak customer awareness.

Huron Valley Ambulance has a local monopoly in emergency medical transport. It can compete with the Chapter on training and has a potential distribution channel into households and hospitals.

Company Description: Emergency paramedic and transport for 675,000 local residents and transport services to other urgent care facilities. Offers paramedic-based call centers and outbound disease management. HVA provides EMS education services in three counties.

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The chapter needs to evaluate partnership opportunities, paying specific attention to market prospects and synergies.

Why a Partnership? Marketing - Distribution - Service

synergy Favorable price Technical and informational support Exclusivity in local market Bundled sales opportunity

Issues to Consider What value-added does AED/Red

Cross have to consumer? What is the relative size of potential

consumer markets? What are the costs and benefits of

each market? Are there legal restrictions in the

market? How attractive is each market

segment? (i.e., is there a relative lack of competition in a segment?)

Evaluating Partnerships

Medtronic Philips Red Cross

Medical

Commercial

Education/ Government

Household

X

X

X

X

??

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Developing the appropriate market approach can be accomplished in five phases. This study has completed phase one.

Next Steps

Market Market AnalysisAnalysis

22 33 44 55

Consider Consider OptionsOptions

Development Development and Testingand Testing

Budgeting and Budgeting and PlanningPlanning ExecutionExecution

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•Customer

•Competitor

•Company

•Context

•New market?

•New partnership?

•Expansion of product/service?

•Dropping product/service?

•Concept testing (surveys, focus groups, etc.)

•Develop detailed marketing plan

•Test marketing

•Setting objectives

•Budgeting

•Monitoring

•Plan revision

Immediate Next Steps Survey non-customers to understand areas of improvement in the AED marketing and

selling process. Analyze benefits and costs of Philips alliance; compare with proposed Medtronic alliance. Determine marketing approach, based on competitive and market research findings.

Documents

1 Washtenaw County Chapter AED and Training Services Competitive Analysis Final Report December 2002