How Does Intuitive Surgical Attract Its Customers To Upgrade To Latest da-Vinci Systems?
Intuitive Surgical (NYSE:ISRG) has maintained an Average Selling Price (ASP) of $1.5 million for its da Vinci surgical systems over the last few years. With such high costs, buyers may prefer to continue with cheaper refurbished systems. Moreover, concerns have already arisen concerning the efficacy of da Vinci surgical systems relative to standard surgery, given its high cost. Until studies clearly establish the cost-benefits of the da-Vinci systems, Intuitive has to provide incentives to its customers for upgrading to the latest models of da Vinci Systems.
One of the strategies of Intuitive is to allow its customers to trade-in their older systems for credit towards the purchase of a newer generation system. As a part of a trade-in transaction, the customer receives a new generation system in exchange for its older used system. According to our estimates, 57% of the 492 systems units of da Vinci systmes sold by Intuitive in 2015 were a part of trade-in transaction.
We arrived at this estimate as follows: We calculate the trade-in of the systems in a given year (Y) by adding the number of systems sold to the prior year tally to the installed bse of the prior year, and then subtracting the year-end installed base. (That is, prior year installed base plus number of systems sold, less current year installed base.) Below we show how trade-in as a percentage of yearly sales have changed in the last 5 years:
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Going ahead, this proportion might well decrease. This comes from the fact that Intuitive Surgical generates most of its current sales from the U.S. and Europe. However, it is now aggressively expanding into international markets like Japan, South Korea etc. A new market is likely to witnesses a higher number of new systems being installed and a lower number of trade-in of existing systems.
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