Medical Device Link.

Originally Published MX January/February 2004

MARKET ANALYSIS

Medtech executives can determine a new product's viability through careful collection and employment of market intelligence.

William F. Gotha

It is a common misconception among many corporate executives that market research alone can describe everything they need to know to grow their company. On the surface, it seems as though well-designed market research should fulfill such a role. After all, the major purposes of market research are to help company leaders understand the sector in which they are doing business, to identify what customers want, and to establish working parameters before a company implements its business plan.

Unquestionably, in the hands of the right person, market research can be a valuable tool. But in the hands of an overanxious company executive it can just as easily become a chilly fog that obfuscates the common truth.

The challenge for medtech leaders, then, is to ensure that their company maximizes the value of its market research and does not permit such information to sit idly, awaiting a call to action. This article will outline a few common routes for gathering meaningful market research, and will describe a useful method for ensuring that such research is put to use. Company leaders who adopt such a method will be well on their way to getting the most from market research, helping it to become the valuable tool that it should be for company growth.

Market Needs

In essence, market research is intelligence. And although good decisions can flow from good intelligence, it can be challenging for medtech companies to determine which are the most important types of information they need in order to grow. In today's environment, for instance, medtech manufacturers that want to make profitable additions to their product lines must address two key questions (see Table I). The first is "What does the market need?"

The needs of the marketplace for medical products can be ascertained in a number of ways, but company researchers would be well advised to start by looking at the broadest possible view. Doing so will enable them to identify areas worthy of further investigation without immediately incurring the extraordinary costs of a detailed market research project. Sources for such broad-based information might include the following (see Table II).

• Industry groups that monitor customer requirements and sponsor trade shows can provide information about trends, market drivers, growth dynamics, and geographic requirements. Manufacturers should relate what they do to what they discover. If they are in a good position to capitalize on a trend, they should look for areas in which they can respond faster than others.
• Industry publishers who will share indicators that outline where they see the market moving, including tips on niche advertising categories.
• A friendly company or group of companies that are willing to partner with a manufacturer to purchase available industry research. Sometimes executives may only be interested in one chapter of an expensive study; if so, they should look for companies that want exclusive access to other chapters for which they have no need.
• The forecast and outlook sections of industry magazines that keep readers abreast of the news. On-line publications often publish the most current information.

A more detailed market research study might include the following sources.

• Key customers who are willing to share information in exchange for a customer service product or program.
• A focus group of random customers conducted by a hired professional. Executives should be clear about what they are looking to learn and strict about their time commitment. After receiving the focus group information, executives can write a summary of findings that explains how they will use the information to provide better service to the participants and the rest of their customer base.
• A well-designed e-survey that can extract additional information from a manufacturer's customer base and sales prospects. A market research company can create an e-survey that is easy to navigate and takes only minutes to fill out.

Price Points

The second key question for a medtech company seeking to add to its product lines is "How much is the market willing to pay?" Although focus groups can be helpful in providing an answer, executives should watch out for misleading information from focus group respondents who were afraid to be blunt. In a broad-based study, an executive can find out what the market is willing to pay using the following tactics.

• Manufacturers can research the price of a product similar to what they envision, and create a matrix of features, specifications, and cost.
• Manufacturers can use available market studies or on-line resources to build gross market tables in the target market segment, factoring in general business and consumer trends.

In a detailed study, a medtech company executive can find out what the market is willing to pay using the following tactics.

• Ask focus groups specific questions on price points. Such questions can cover issues such as the percentage price increase participants would pay for a product that includes certain improvements or capabilities, or how delivery schedule and service resources might affect their willingness to pay a certain price.
• Research the adoption curve of a mature product in a similar market segment. They should examine the product's marketing cycle, regulatory delays, and estimated marketing costs.
• Send e-surveys to customers and prospects with the message, "You helped us design our product; now we need to know how much you would pay for it."

If an executive has been successful with some or all of these initiatives, employing a marketing company might then be useful in boiling down the accumulated information in order to provide a clear statement of findings. These findings should include information about the following areas.

The Market. A manufacturer will require a clear view of the business environment that surrounds the product, its projected growth, and areas for improvement over existing, competitive products.

The Audience. A manufacturer will need to determine who will be interested in the product and what that audience is currently using.

The Message. A single sentence can properly position the product in the market. This becomes the closing line upon which all aspects of the product's marketing rest. The message should convey the product's value, including its functionality, ease of use, and savings.

Marketing Plan

Figure 1. Steps for ensuring that a company's market research is turned into actionable items. (click to enlarge)

After gathering sufficient market research data, executives should edit the information to produce a marketing plan (see Figure 1). Creating a plan is the first and most important step toward making the most of market research because it provides a summary and an interpretation of market intelligence. The plan becomes the product's road map, dictating its required media strategy and all other marketing communications.

Executives should present a draft of the plan to the company's investors as well as its engineering, sales, and marketing staffs. The responses from these departments can serve as an additional check to see whether the product has been adequately researched, and any insightful comments should be incorporated into the plan's final draft. Questions that are raised should be addressed carefully, not defensively, to detect soft research. Such questions can flag a future problem and potentially save a company a large sum of money. Executives should therefore provide conclusive answers to all concerns and commission spot research into those areas determined to be soft. New findings and interpretations can then be incorporated into the existing marketing plan.

Next, executives should assemble a brief version of the plan for the media that reveals as much information as can be allowed. More than anyone else, members of the media in the medical technology industry will have their fingers on the pulse of the market that an executive is about to enter. Publishers, for example, can provide valuable feedback on the strength of the research.

At this point, executives will be ready to begin writing advertising copy for the product. To create effective positioning language, they should make use of the words used in the market research and the original dialogue of the focus groups. Customers will often tell executives what they need to know—if they are willing to listen. Executives should take notice of any hot-button topics or phrases and include them in the copy.

Once the positioning language is established, executives can begin to draft a product announcement.

Return on Investment

Market research can be a valuable tool in determining a product's potential return on investment. In a broad-based study, an executive can assess a product's return on investment using the following tactics.

• Manufacturers should contact industry groups a second time to identify any new industry trends and market drivers. Again, they should relate their new product to what they discover. Executives should seek to discover whether their company is still in a good product position.
• Manufacturers should present their advertising and product publicity to the media again. Once they have seen more complete creative, industry publishers will have a better opportunity to comment on the effectiveness of the message and contribute additional marketing ideas.
• Manufacturers should continue to read the forecast and outlook sections of industry magazines and e-newsletters.

In a more detailed study, a company can refine its projections for a product's return on investment using the following tactics.

• Key customers can provide reactions to the new product's market presence. Executives should ask those customers for feedback on the wording of the advertising copy and product releases.
• After six months, executives should conduct a second customer focus group and relate their comments to the original research. It is helpful to then chart any differences to identify problems.

Once this information is compiled, executives should create a revised marketing plan, with new research data included in the addendum. The result will be a thorough, intelligent market research study that is likely to yield tangible results.

Research Evaluation

It can be beneficial for medical device manufacturers to sort through a variety of marketing intelligence sources. Each source will have strengths and weaknesses that need to be examined with a critical eye. In evaluating research, executives should decide how to use these sources in combination so that strengths are exploited and weaknesses are mitigated. Good sources of marketing intelligence may include the following.

Existing Market Information. This information should be procured and assembled by an objective third party. Organizations that compile existing market information frequently have access to company presidents and operations executives who can comment on shipped products, realized revenue, and future trends. A catch is that the information may be slightly dated. For example, information reported in studies released in the middle of 2003 may actually have been gathered in late 2002. As the recent past has proven, markets can change dramatically, sometimes within a three-month period. Executives should ask the vendor for information on its research techniques and timetables before incorporating the data.

Another weakness of existing studies is that they may cover aspects or segments of a market that are not applicable to an executive's specific requirements. One solution is for an executive to find a friendly company that can make use of those aspects and is willing to contribute to the study's cost.

Custom Marketing Information. Custom reports are typically commissioned by the executive, so the scope of the research should be well defined. A survey audience can be carefully selected and monitored to ensure that results are not skewed by responses from irrelevant job titles. If a vendor properly monitors the survey process, good results are likely to follow. However, there is no one but the executive to blame if the survey's wording results in flawed information.

Focus Group. In this case, information is current, unvarnished, and typically rich with explanation. A long-term benefit of a focus group is that attendees can later be converted to customers or, at the very least, friends in the industry who might spread a good word about the company and its new product. The trick is to find the right focus group leader. If a leader is ineffectual, an executive might be left with costly, misleading directives. A good leader should run a tight ship that allows for freewheeling discussion but also harnesses the group's energy toward its intended purpose.

Personal Interviews with Media. Face-to-face communication with authoritative industry publishers can yield undeniable benefits. The information is likely to be current and anecdotal, provided that the discussion is confidential. However, publishers may have their own agenda and simply view an executive as a future advertiser.

Personal Interviews with Customers. Face-to-face communication with customers is also likely to net information from people who are authorities on the market segment. The information may also be current and anecdotal, however, it is wise to remember that customers or prospects may not always want to participate. An executive could run the risk of irritating the customer, in which case there would be no appreciable upside for the company.

Conclusion

Executives can make the most of market research intelligence by carefully collecting and employing that information. Executives should begin by conducting research broadly from sources that are readily available, including existing studies, media outlets, and customers. Any gaps can be filled in with custom research. A summary of the intelligence should be compiled into a marketing plan, which can be shared both inside and outside the company for feedback and reconfiguration.

Above all, market intelligence is no more than a tool. In the right hands and as part of a complete marketing plan, however, it can be a valuable tool.

William F. Gotha is president of Ward Hill Marketing Inc. (Lawrence, MA).

Copyright ©2004 MX