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SASKTEL

Marsha Watson prepared this case under the supervision of Elizabeth M.A. Grasby solely to provide material for class discussion.
The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.
Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. This material is not covered under authorization from CanCopy or any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey School of Business, The University of
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Copyright © 2009, Ivey Management Services

Version: (A) 2009-04-22

It was January 2007. Pat Tulloch, senior director of marketing at SaskTel, was in her Regina,
Saskatchewan, office reviewing product information for the LifeStateTM health monitoring system.
SaskTel’s executive committee had recently approved a proposal to launch this system into the Canadian marketplace. In preparation for the proposed July 1, 2007, product launch, Tulloch had been given the task of developing a marketing plan, which she would have to present to the executive committee in two weeks’ time. To create this plan, Tulloch would need to quickly make some distribution and promotion decisions and conduct a financial analysis of the product’s potential profitability.
CANADA’S HEALTH-CARE SYSTEM
History

Canada’s health-care system, introduced more than 40 years ago, provided universal, comprehensive coverage for medically necessary hospital and physician services. These services were provided on the basis of need rather than on the patients’ ability to pay. This health insurance program, known to
Canadians as “Medicare,” was best described as an interlocking set of 10 provincial and three territorial
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health insurance plans, all of which shared certain common features and basic standards of coverage. This universal health-care system was funded primarily through personal and corporate taxation, with private donations accounting for about a quarter of the funding. Roles and responsibilities for Canada’s healthcare system were shared between the federal and provincial-territorial governments. Under the Canada
Health Act (CHA), federal health insurance legislation, criteria and conditions had to be satisfied by the provincial and territorial health-care insurance plans in order for them to qualify for funding. Health
Canada was the federal department responsible for helping Canadians maintain and improve their health, while respecting individual choices and circumstances. Provincial and territorial governments were
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responsible for the management, organization and delivery of health services for their residents.

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Health Canada, http://www.hc-sc.gc.ca/hcs-sss/medi-assur/index-eng.php, accessed August 18, 2008.
Health Canada, http://www.hc-sc.gc.ca/hcs-sss/medi-assur/index-eng.php, accessed August 18, 2008.

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2000 – 2007

The costs of illness in Canada were expected to exceed $140 billion dollars due to an aging population. To control costs, the number of hospital beds had been decreased by over 11.5 per cent from 1999 to 2004. As
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well, Health Canada had adopted a preventative vision and an active role in health-care across the country, subscribing to the belief that an active role in prevention by all Canadians could help lower the costs of health care, increase quality of life and reduce wait times. With wait times and overcrowded emergency rooms, many Canadians began to look at other options for faster treatment. One of these options was private clinics where services were paid for by the patient.
With chronic diseases among the costliest to the health-care system, Health Canada had been forced to consider alternatives to acute care and had begun funding programs that provided patients with the ability to manage their own condition. In 2006, three per cent of Canada’s health-care spending (approximately
$3.9 billion) was spent on information technology. This market was expected to grow by approximately
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15 per cent for the next five years, with software and services growing the most rapidly, followed by mobile health care.
SASKATCHEWAN
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With a population of 968,157, Saskatchewan was Canada’s sixth largest province and the birthplace of
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Medicare. Because of its large land mass, many of Saskatchewan’s population lived in rural communities that focused on agriculture, forestry and mining. Almost 95 per cent of the goods produced in the province were dependent on natural resources. With China’s need for potash and commodity prices on the rise,
Saskatchewan’s economy had been booming, and the province had become one of the world’s top producers of uranium. Oil and natural gas production were also important industries, attracting Canadians from across Canada to the province. Saskatchewan had the highest proportion of citizens over the age of
65 in Canada, and 14.88 per cent of the population was of aboriginal descent.
SASKTEL
Company Background
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SaskTel, in operation for nearly 100 years, was a provincial Crown corporation that specialized in fullservice communication to the province of Saskatchewan. Its service offerings ranged from voice, data and dial-up high-speed Internet, entertainment, web hosting, text messaging, cellular, wireless, home phone, business solutions and multimedia data services. Through its subsidiaries, Sasktel offered security monitoring, directory assistance, hospital-room communications to the health care sector and international
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telecommunications consulting.
SaskTel had posted a consolidated net income of $64.4 million in 2005, and the company had exceeded $1 billion in operating revenue in 2006, resulting in a consolidated net income of $72.2 million. SaskTel and its subsidiaries employed 5,200 people, had been ranked by Maclean’s magazine as one of Canada’s top
3

Health Canada, http://www.hc-sc.gc.ca, accessed August 18, 2008.
Among developed nations, Canadians were the highest users of the Internet and computer technology.
5
Government of Saskatchewan, http://www.gov.sk.ca, accessed August 19, 2008.
6
The Canadian universal health-care system was modelled on Saskatchewan’s public hospital insurance program and
Medicare program. The program, enacting hospital coverage in 1947 and medical coverage in 1962, was the first of its kind in Canada. Envisioned and promoted by Thomas C. Douglas (1904-1986) a politician from Saskatchewan.
(Source: http://www.mta.ca/about_canada/study_guide/doctors/delivery.html)
7
A Crown corporation was a government-owned business that did not pay income tax. Most Crown corporations operated at arm’s length from the government, with control exercised on budgeting and appointments only.
8
Sasktel, http://www.sasktel.ca/about-us/company-information/corporate-profile.html, accessed August 16, 2008.
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100 employers six years in a row, had won the human resources award from the International Association
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for Native Employment and had been deemed by J.D. Power and Associates to have the highest customer satisfaction levels for contracted wireless providers of any service provider in Canada.
Robert Watson

In late 2004, Robert Watson, a telecommunications veteran, assumed the position of president and chief executive officer at SaskTel. Watson had held executive positions in many telecommunications companies across Canada, was the recipient of the Saskatchewan Centennial Medal and had served on the boards for the Information Technology Association of Canada and the Canadian Prostate Cancer Network.
Pat Tulloch

Upon graduating from the University of Regina’s marketing program, Pat Tulloch was immediately hired by SaskTel as a marketing associate. She progressed within the company where she had worked on many projects for various products, including the launch of Max Entertainment Service, merchandising programs
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for the SaskTel stores and promotional activities for the 2006 Juno Awards in Saskatoon. Tulloch was promoted to senior director of marketing in 2005.
LIFESTATTM
Product Description

The LifeStatTM service was a monitoring device that enabled the communication of a client’s health information and could be used by the client, a direct relative (or a loved one) or a professional caregiver.
Clients used tools such as blood pressure monitors, scales, glucose meters and heart rate monitors (see
Exhibit 1) to collect information, which was then transmitted to SaskTel’s secure data centre. Thus, the service linked the communication gap between patients and their caregivers to ensure personal health and well-being was maintained. LifeStatTM also provided a means for the patient to be monitored around the clock by health-care professionals who would contact the client in the event of an emergency (see Exhibit
2).
Sasktel had trademarked LifeStatTM with the Canadian Intellectual Properties Office and had a patent on the technology for Canada. To date, the system has undergone three successful trials (seven First Nations reserves with the Battleford, Saskatchewan, Tribal Council, St. Paul’s Hospital in Saskatoon, and the
Diabetes Education Centre at the Royal University Hospital in Saskatoon) and was showing promising results for its public launch.
Potential Customers

Tulloch had identified two potential customer segments that would benefit from the LifeStatTM technology: individuals with diabetes and individuals with hypertension.

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J.D Power and Associates was a global marketing service company known for its customer satisfaction research.
The Juno Awards are presented annually to Canadian music artists acknowledged for their achievements in aspects of music. 10

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Diabetes Customers
The LifeStatTM system had recently gained attention from the Diabetes Association of Canada and was being promoted as a resource to aid in the self-management of blood sugar levels. There are two main types of diabetes. Type 1 diabetes occurs when the pancreas is unable to produce insulin, and Type 2 diabetes occurs when the pancreas does not produce enough insulin or the body does not use the insulin it produces. If blood sugar levels are not properly controlled through monitoring and regulation, complications could lead to long-term health problems ranging from vascular disease, coronary artery disease, stroke, gangrene and dementia. Typically, monitoring was performed by the individual at home or at work through a small monitoring device; however, no data was transferred to the patient’s caregiver, so it was left to the individual to ensure that their own glucose levels were within the normal range and to administer self-treatment when needed.
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Approximately 8.3 per cent of the Canadian population had been diagnosed with diabetes, and, in an independent survey, eight per cent of individuals diagnosed with diabetes indicated they would purchase
LifeStatTM at a monthly cost of between $50 and $65 to help monitor their blood glucose levels. In
Saskatchewan, 8.1 per cent of the population had reported being diagnosed with diabetes, with a high prevalence in aboriginals.

Hypertension Customers
Hypertension is the persistence of high blood pressure and is the No. 1 cause of strokes. Blood pressure measures the force of blood against the walls of the blood vessels, and readings consistently higher than
140/90 mm HG are considered high. In Canada, 14.9 per cent of the population had been diagnosed with hypertension, and this number was expected to grow to close to 20 per cent by 2011. Self monitoring was the primary doctor-recommended preventative action for hypertension patients. In Saskatchewan, 15.9 per cent of the population has been diagnosed with hypertension and, in an independent survey, two per cent of those diagnosed said they would purchase LifeStatTM at a monthly cost of between $50 and $65.
When managing their health, both hypertension and diabetes patients searched for products that were reasonably priced, convenient, easy to use and added to the patient’s independence.
Competition

There were three major technology and communications companies, CyberNet Medical, Philips Medical
Systems and AMD Telemedicine, that posed potential competition for LifeStatTM.

CyberNet Medical
CyberNet Medical Corporation was a division of CyberNet Systems Corporation, which was located in
Ann Arbor, Michigan. Founded in 1988, CyberNet Systems focused on robotics technology with developments in commercial web devices and national defence robotics. CyberNet’s medical monitoring system offered to the public was called MedStar. Users collected physiological information from in-home devices and sent the information, via the Internet, to a data management system where medical reports could be compiled to individual specifications. The MedStar unit retailed in the United States for $975 to
$2,946, depending on the specific devices needed for the unit. There was also a $37.50 monthly account monitoring fee.
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Canada’s population in 2006 was 31,612,897.
2005: Statistics Canada, Canadian Community Health Survey, 2005.

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Philips Medical Systems
Philips Medical Systems, a division of Philips Electronics, operated in 63 countries, including Canada, with over 6,000 sales professionals and service technicians. As of 2004, Philips Electronics had yearly revenues of US$30 billion and assets exceeding US$4.4 billion. In 2006, Philips purchased LifeLine Inc., a medical alarm company that serviced over 500,000 Canadians. This service included telephone reminders, personal help buttons and speaker phone devices. Philips’ medical monitoring device was called the Motiva Interactive, which used broadband television, along with home vital sign measurement devices, to connect individuals to a health-care provider and monitoring system. The monitoring service cost $140 per month. This fee did not include a one-time cost for the specific devices needed to take physiological measurements.

AMD Telemedicine, Inc.
AMD Telemedicine, Inc. (AMD) had over 4,000 installations in 58 countries and was considered to be the leader in the telemedicine industry. In 2006, AMD signed a contract with the Visiting Nurses Association, the oldest home care agency in the United States. U.S. home care nurses cared for over 24,000 patients and made more than 400,000 home visits a year. AMD’s health monitoring system, the CareCompanion, provided event reminders and medication prompts and measured vital signs through the user’s peripheral monitoring equipment. This information was then transmitted over the Internet to the patient’s health-care professional for monitoring. This service was currently available only in the United States and retailed for
US$125 per month plus a one-time cost for the specific devices needed to take physiological measurements. Distribution Options

Market research indicated that 70 per cent of respondents would prefer to purchase LifeStatTM through their local pharmacy, while the majority of the remainder of the respondents preferred to be able to purchase the product online. After discussions with a number of pharmaceutical representatives, Tulloch narrowed her distribution options to three possible retail chains: Shoppers Drug Mart, London Drugs and Safeway
Pharmacy. She would have to choose which of the retailers should be offered the product to ensure its success. Shoppers Drug Mart
Shoppers Drug Mart (Shoppers) represented a large portion of the pharmaceutical retail market. A wellknown brand with more than 1,055 stores across Canada, Shoppers presented a significant opportunity to
LifeStatTM for national sales. Although Shoppers was the best option for national distribution, Tulloch wondered whether a nationwide launch would be too aggressive so early in the product’s life cycle.
Shoppers maintained margins of 45 per cent on all hardware and expected a $75 commission on all oneyear contracts sold.

London Drugs
A leader in Western Canada, London Drugs had not yet entered the Eastern Canada market. With more than 45 million customers across British Columbia, Alberta, Saskatchewan and Manitoba, London Drug’s pharmacy was still the centre of the business, despite the company’s having diversified into small appliances, furniture, computers and cosmetics. London Drugs maintained a 48 per cent margin on all hardware sold in-store and expected a $75 commission on all one-year contracts sold.

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Safeway Pharmacy
Safeway Pharmacy was a division within the Safeway grocery stores that were prevalent across Western
Canada and the United States. With over 1,775 locations, this option had the greatest potential for diversification into the United States. Within Canada, Safeway had 182 stores west of Thunder Bay,
Ontario. Safeway Pharmacy offered a focus on diabetes health and wellness through education and preventative education. On all hardware, Safeway expected margins of 40 per cent and a $75 commission on each one-year contract signed.
Promotion

Tulloch needed to determine LifeStatTM’s promotional plan for fiscal 2007. The 2007 marketing budget was set at $300,000 for a Saskatchewan-only launch and at $1.2 million for a national launch, and she would have to effectively allocate these resources to various promotional activities. After the first year, the promotional budget would be eight per cent of sales. It was critical that the promotional campaign should create awareness and interest to foster sales and profitability. See Exhibit 3 for a breakdown of prices for various promotional alternatives.
Projected Costs

SaskTel’s goal to achieve profits in the first year was an aggressive one. Upfront costs for the project’s development were $2,200,000. Annual research and development was projected at $47,000, and technical support per subscriber was projected at $25 per month. Due to the risk involved with medical monitoring, insurance would need to be purchased for $71,000 annually, and Internet security would cost $3,500 every two months. Other additional annual costs included: hiring of five more employees at a cost of $200,000
(including benefits), server costs of $53,000, a $167,000 licensing fee, and $150,000 for general and administration expenses.
CONCLUSION

Although LifeStatTM had shown promising results in clinical trials, Tulloch knew she faced a challenging task to get this product “off the ground” in six months. Tulloch wondered what the campaign should entail, which distribution and pricing strategy would be best, how to maximize the current marketing budget and how many units would need to be sold in order to recoup the costs. Tulloch knew the success of LifeStatTM would rely on an effective marketing campaign, and she would have to decide quickly on an appropriate marketing mix to meet the expectations.

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Exhibit 1
HARDWARE COST TO RETAILER

Hardware Needed

Glucometer BT* accessory
Landline BT access point
Blood pressure monitor
Cell phone
Glucometer
Source: Company files.

Purchase Price

$
$
$
$
$

48
120
120
150
51

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Exhibit 2
LIFESTATTM SERVICE BREAKDOWN

Consumer has illness Diabetes or
Hypertension
etc

Consumer is made aware of
LifeStat service through advertising

Consumer visits retailer or echannel to learn about and purchase service,

Pharmacist or patient activates
LifeStat service via online portal

Pharmacist provides hardware (shows patient how to use it – optional)

In the event of a crisis situation

Patient is contacted by 7/24 monitoring service staffed w/ healthcare professionals

Patient uses service in their home, at work, at school, etc…

Care team review data together and modify current lifestyles and regimes to better manage condition
Healthcare provider views health data via
IP connection

Loved one views health data via IP connection Source: Company files.

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Exhibit 3
SAMPLE COSTS FOR PROMOTIONAL ALTERNATIVES

PROMOTIONAL CHANNEL

COST

Television

Discovery Health Channel
Diva/Showcase

$420 per 30-second spot
$100 per 30-second spot

Radio

$350 per 30-second spot

In-store Demonstration

$5,000 for 10 in-store demos

Direct Mail

$10,000 per 50,000 pieces

Trade Show

Canadian Diabetes Association
E-Health conference

$ 4,500
$ 2,500

Newspaper

The Globe and Mail (1/8 of page)

$300 per weekday
$500 Saturday

Canadian Health magazine

$6,200 per issue

Direct Sales Team

Source: Company files.

$10 per hour per employee