Dr. P,
In accordance with our discussion regarding replacing our pharmaceutical
sales associates laptops with iPads I offer the following. For many years our firm has successfully utilized
laptops equipped with our current CRM program to market and sell drugs to
physicians. Our system has been
effective however as technology evolves we must embrace change and seize the opportunity
to use technological advances to creative a competitive advantage.
Implementing the use of iPads will improve the visual
portion of our sales presentations. In
addition, the iPads will enhance our brand image and we’ll perceived as a
technologically advance organization who is willing to invest in and embrace
new technologies.
Our sales associates typically speak with physicians for
approximately 2-3 minutes in the hallways of the physician’s office. It is critical that we optimize the extremely
limited amount of time we spend with the doctors. The iPads are smaller in overall size and
much lighter to carry making them easier for our sales associates to
handle. This ease of handling will
enables the sales associates to show the doctors graphs, forms, short videos or
case study results more effectively during their 2 minute presentations. A clean, crisp, efficient and technologically
advanced presentation will optimize the time our sales associates spend with
the physicians and increase our sales revenue.
From a financial standpoint we upgrade our laptops every
three years. We’re at the end of the
second year of our current three year rotation and our expected budget to
upgrade our laptops next year is $3,750,000.00 ($1,500.00 x 2,500 sales
associates). The laptops we’re currently
using cost us $3,375,000.00 ($1,350.00 x 2,500 sales associates). We’ve used our current laptops for 2 years
which using straight-line depreciation equates to a utilized value of
$2,250,000.00 ($3,375,000.00 / 3 * 2) leaving us with an unutilized value of
$1,125.000.00 ($3,375,000 - $2,250,000).
We can expect to sell the laptops for $750,000.00 ($300.00 x 2,500
units)
If we switch to iPads at the beginning of next year the cost
to purchase the iPads will be $1,500,000.00 ($600.00 x 2,500 sales associates)
plus the cost for CRM data conversion and training which is estimated to be $7,500,000.00
(5 times the cost of the hardware). Adding
the items together, one year of unutilized laptop budget (i.e. sunk costs) $1,125,000.00
+ cost to purchase iPads $1,500,000.00 + cost for CRM data conversion and
training $7,500,000.00 – sales of laptops $750,000.00 we arrive at a total cost
to switch to iPads of $9,375,000.00. Our
budgeted costs to upgrade our laptops in year three is $3,750,000.00 which
provides us with a delta expense of $5,625,000.00 ($9,375,000.00 -
$3,750,000.00) for the conversion.
During the three year expected life of the iPads each sales associates
will need to generate an additional $62.50 in monthly revenue to justify the expense
($5,625,000.00 / 2,500 x 36).
The use of the iPads will increase our brand image and allow
us to optimize the time our sales associates spend with the physicians which
will equate to additional monthly sales revenue during the course of a three
year period which exceeds the target mark of $62.50. For this reason I recommend we perform the
switch and provide our sales associates with iPads.
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