Scoping Out the Market

magnifying glass

Historically, many medical technology companies, large and small, have downplayed the importance of market research. Many medical technology companies tend to primarily rely on a strong sales effort to overcome marketplace barriers to success. As one medical device executive put it “Market research? Who needs market research? All we have to do to succeed is use our expertise to develop outstanding products and pay our sales force outstanding commissions.”

More sophisticated medical device companies are increasingly turning to market research to succeed in cluttered and competitive markets. Data-driven marketing solutions, based on research, enable medical device companies to better meet customer needs, develop more effective client relationships and develop optimal pricing and contracting strategies at the product and corporate levels. Savvy marketers realize that the days of “build it and they will come” are over.

Emerging medical device companies are also facing the demands of investors for data-based marketing. Investors want proof of likely success before financing development efforts. In addition to clinical trial data, investors want market data that quantify the potential of a product’s commercial opportunity and demonstrate the likelihood of the investor earning an adequate return on their capital.

Investors and corporate managers often use a rule of thumb that healthcare manufacturers should speak with at least 200 customers while developing a new product. Some of those conversations come through advisory boards and one-on-one discussions. Other interactions come through well-designed, cost-effective market research.

Market Research Objectives

Through these interactions, market research delivers customer-driven insights that:

Market research is conducted throughout a product’s lifecycle. It is conducted while a product is under development to help ensure a successful launch. Post-launch market research helps refine marketing strategies as customer needs change or new competitors enter the market. At the end of a product’s lifecycle, the manufacturer may conduct market research to evaluate how to optimize the transition of market share to the next generation.

Market research is a continual process comprised of discrete initiatives. Each market research project typically addresses one or a couple of the above objectives. A step-wise approach provides incremental insights that can be applied and built upon by subsequent market research. A step-wise approach also helps best manage the budget.

Sample Design

Marketing medical devices involves multiple decision makers and influencers. To identify all critical success factors and barriers to achieving them, market research should involve a sample of all decision makers and influencers.

How a product is distributed and used determines with whom to conduct market research. For medical devices used in a hospital, the manufacturer should interact with the hospital executives who select and purchase the product, the physicians who drive use and patients who receive the device.

For a medical device used in a physician’s office, the manufacturer will want to conduct market research with physicians, office staff, patients, caregivers and health insurers. The physicians will decide which brand to use, the office staff will evaluate purchasing contracts and manage inventory, and patients and caregivers may contribute to brand selection and might evaluate any available support programs. Health insurers will set coverage and reimbursement policies.

Each market research project’s objectives determine which subset of customer segments to involve. For example, payers and integrated delivery network and hospital executives will address coverage, reimbursement, pricing, data needs and competitive positioning. Clinicians and patients provide perspectives that drive market size and definition and determine product adoption (e.g., optimal product features and benefits, marketing programs that support adoption, and clinical data that drives meaningful product differentiation).

A pricing study for a medical device used in the physician’s office might include payers, prescribing physicians, practice managers and patients. In contrast, a study to explore marketing pull-through opportunities might involve only physicians, patients and caregivers.

Sizing the Budget

Whenever conducting market research, a key question is how much capital to invest in the result. The key factor driving the budget for a market research project is the need for accuracy. Achieving a smaller margin of error necessitates a larger sample and more sophisticated analytical methods. Achieving directional results requires a smaller sample and less complex techniques. Sample size and sophistication have a positive correlation with budget.

Typically, lower-cost directional results are sufficient market research conducted early in a product’s development and for topics where a larger margin of error will not have a significant impact on revenue (e.g., messaging). Medical device companies should invest in more accurate results where small errors can put a significant amount of revenue at risk (e.g., pricing, market segmentation).

Continue to page 2 below.

Case studies

Let’s explore three case studies to illustrate the value of conducting market research.

Case study 1. A start-up medical device company is developing a catheter used after acute myocardial infarction. They are two years away from applying to the FDA for pre-market approval (PMA) and a few months away from starting final clinical trials to support the PMA.

The company would like to understand which clinical trial endpoints will maximize access to, and adoption by, hospitals and physicians, and deliver the best possible coverage and reimbursement from payers. In addition to optimizing the design of its clinical trials, the market research will help the company craft its messaging.

To achieve these objectives, the company conducted a series of five telephone interviews with medical directors at private payers offering commercial and Medicare Advantage products and an Internet survey with 30 hospital purchasing and clinical executives. The sample was designed to reflect the company’s need to efficiently use available funds to deliver directional results.

The study’s results focused the company’s attention on a subset of endpoints that they thought would be of interest to payers and hospital decision makers. The feedback also affected the duration of the clinical trial. Investing in market research, in the end, enhanced the likelihood of success for its product and saved money by getting its messaging and pricing right the first time.

Case study 2. A company was developing a digital-based healthcare product to better manage respiratory conditions. The company sought to determine how to position their sensor and data-management system for coverage. Conducting research with four payer executives uncovered unexpected avenues to gain coverage and opportunities to partner with payers to support utilization of their product. The company changed their marketing strategies to take advantage of these unexpected opportunities.

Case study 3. A large medical device company sought to understand the drivers of decisions made by hospital-based value analysis committees. An Internet survey with 150 purchasing and clinical executives delivered these insights. As illustrated below, the study gathered these executives’ stated decision drivers as well as the derived decision drivers.

Stated decision drivers are the factors that an executive will tell you are important to their decision.

Derived decision drivers are those that are inferred from the actions an executive takes. In this study, we determined the market share awarded to each manufacturer. We also asked each executive to rank each manufacturer’s performance on each of 15 potential decision drivers. Through statistical analysis, we tied each manufacturer’s relative market share to their performance on each decision driver to determine the relative importance of each decision driver.

For example, if manufacturers A and B have the largest market share and both are leaders in supply chain management systems, then “Effectiveness of Supply Chain Management System Systems” is an important decision driver. If manufacturers C and D have the least market share and both emphasize low prices, then “Low Pricing” is not an important decision driver.

As Figure 1 illustrates, stated and derived drivers differ. Both need to be addressed in marketing strategies and tactics. (Note: The data presented in Figure 1 are for illustrative purposes only. The study’s actual results are proprietary.)

For example, Figure 1 indicates that risk-sharing contracts are more important than customers might state. Therefore, it is a “hidden” driver that manufacturers should address by developing innovative risk-sharing arrangements. Doing so would differentiate the manufacturer from competitors and position them for success.

Figure 1. Stated and derived drivers differ and must be addressed in marketing strategies and tactics.

In contrast, fair market price is stated as important but does not drive relative market share (as stated above, these results are disguised). Therefore, cost leadership strategies are a formula for poor market share performance. The manufacturer should not invest extensively in innovative pricing strategies.

The large medical device company also sought to determine how its corporate brand compared to that of its competitors as perceived by hospital-based value analysis committees. A market research-based analysis yielded the perceptual map shown in Figure 2. The map shows that the large medical device company (indicated as “Client”) has a brand that is similar to that of Competitor 2. Both excel at innovative contracting and following guidelines. Competitors 3 through 7 have carved out a different market position. Hospital executives cannot clearly define Competitor 8’s brand.

Figure 2. A perceptual map can help a company lay out its competitors.

Figure 2 shows that no competitor’s brand is clearly defined by its payment terms or reimbursement support services. These are opportunities to stake out unique market positions.  However, competitors should refer to the driver chart to determine their value to clients and take into account their resources and abilities to capitalize on these unmet market needs.

Conclusion

As these few examples illustrate, well-designed market research can generate a significant return on investment. Research can expedite product launch timeframes and optimize revenue and market share through optimal pricing and competitive positioning. As markets become more competitive and investors demand quicker and bigger returns, market research can be an overlooked opportunity to come out a winner.

The design of the market research will weigh budget considerations versus objectives. A great deal can be achieved within a wide budgetary range. Therefore, there are opportunities to enhance marketing and sales strategies within a budget that meets most company’s needs.

Share this:

Related Articles

About The Author

Exit mobile version