MARKET ANALYSIS

Over the past decade, the dynamics of the medical device market in the United States and worldwide have changed dramatically. As a result, medtech leaders seeking to address the new customers, global pricing pressures, and regulatory challenges of today's medical device marketing environment are finding a need for new tools to enhance their marketing strategy. In this new medtech environment, developing an integrated market intelligence strategy and infrastructure that can incorporate and disseminate data and information from both internal and external sources, and can blend qualitative exploration with quantitative validation, offers critical advantages for marketing success.

Once, all that was needed to build a successful market strategy was to gather the right information from key customers, and then develop the right tools. Doctors asked, companies listened, and products were launched successfully. Today's environment requires companies to undertake a number of different and important activities, including the following.

Medtech company strategies must adapt to such demands in the new medical and surgical device marketing environment. Happily, one of the core strengths typical of medical device companies is their ability to understand the challenges presented by customers and patients, and to turn them into for creating innovative solutions.

The key to successfully navigating such challenges is utilizing information to guide the direction of a company's business and product-development efforts. To fashion the best solutions, medtech manufacturers must first acquire and utilize information resources to develop integrated systems of market intelligence. In the current business environment this need is critical, because the assumptions and expertise that once led to success are often no longer sufficient to address new challenges.

By developing a systematic program of intelligence gathering and communication, and leveraging existing knowledge for data-driven decision making, a company can improve the reliability of the market predictions that lead to product innovation. This article describes an integrated market intelligence strategy that melds internal and external data into information, and communicates it to leadership and project teams.

The Toolbox

The market intelligence toolbox consists of internal and external resources of information (see Figure 1).

Internal Resources. The internal resources typically available to a medtech company include publicly available information as well as sales data, reports from the field force and physicians working closely with the organization, the 'knowledge estate' of past research, benchmarking efforts internal to the company, and many similar materials. The company should make full use of the expertise and experience of its personnel, including everyone from C-level ex­ecutives to janitors. The key to using internal resources successfully is to ensure that all possible sources can be accessed and utilized to their full potential.

External Resources. No company has all the answers within its own walls. External resources are those that a company acquires from outside sources. Such resources consist of primary or field research (the collection of data that do not already exist), and secondary or desk research (typically through the synthesis of existing information from a variety of sources). Primary research can be composed of qualitative and quantitative intelligence.

Qualitative Data. In practice, a company's earliest explorations into intelligence gathering usually involve the collection of qualitative data. Qualitative exploration is particularly critical in the medical device field because such information-gathering techniques create a context for translating the observation of user interactions with a product into tangible product features.

The number of people used for gathering qualitative data is typically small, and the interviews may be conducted in person, by telephone, or through Web-based conferencing. Focus groups, individual interviews, and observational forums may be associated with this approach.

Quantitative Data. Medical device companies use quantitative data to validate potential solutions across a population, so that success can be measured and behavior predicted. In today's marketplace, the increasing diversity of customers, costs related to launching a product, and risks associated with product failure, make it worthwhile to field a statistically rigorous survey that can validate the company's product-development assumptions across an extensive group of users.

Quantitative data can be collected in the traditional ways—in person, by telephone, or by mail. Companies have turned to fielding such surveys via the Internet, which has the advantage of reducing the cost of this type of data collection. When using multiple methods of data collection, the key is to employ a consistent survey and a consistent screener, so that the results from different sources can be combined for analysis.

When gathering quantitative data, it is most important that the field research be collected in an objective fashion, taking care to adhere to the principles of good market re­search, and without revealing biasing factors such as the manufacturer's name. Some companies commit to independent analytics in their organizational structure by having their market research team report outside of the marketing function, so that marketing leadership cannot unduly bias market research outcomes.

The Task at Hand

To provide an adequate basis for decision making in the medical device industry, a company's market intelligence strategy should address all of the following areas.

Execution of the final element should lead the company back to opportunity assessment, so that the entire cycle is repeated. In some companies, the process is continuous, with specific dates at which the cycle renews itself regardless of where another product is in the cycle. The following sections provide further detail about each of these key areas that make up a market intelligence strategy.

Opportunity and Threat As­sessment. Every marketing strategy starts with a market. A medtech company's first tasks, therefore, are to understand its market as well as possible, and to determine how—and how well—its resources can satisfy the demands of that market. Sometimes a market represents a new patient group or raises new treatment challenges. The company needs to consider whether these can best be satisfied with a new way of leveraging an existing technology, a new procedure, or an entirely new technology.

In order to develop a good understanding of a market, the company's business development staff should establish the size of the market and create a profile of its key stakeholders. They should identify the unmet needs in the market and—especially if it is a new field for the company—assess the risks involved in entering the market. Finally, they should evaluate the competition that already exists in the market, including potential competitors from other life sciences sectors, such as pharmaceutical companies.

One goal of such market research is to help the company respond rapidly to an opportunity or threat in its selected market. A step toward this goal can be achieved by implementing a software system that patrols the Internet to capture news feeds about sectors and competitors relevant to the company's business. When such information is posted to a central, searchable section of a corporate intranet, company staff can more rapidly identify events and trends affecting its market. When reviewing internal sources of information, market research staff should remember to consider studies conducted previously by other company departments.

At this stage, secondary research can be helpful for synthesizing market data originating with internal experience and external sources. The company should be sure to evaluate the sources that comprise the secondary research, since such data are only as reliable as their weakest source.

Primary research can also play a role in this stage of market assessment. To obtain an overview of expert opinions in the field, for instance, companies can explore the use of a qualitative research tool such as a key opinion leader study or voice of the customer research. Similarly, concept testing can help prioritize new opportunities, by determining those with the best chance of success among the broadest or most lucrative customer groups. To help quantify the market for a particular opportunity, companies can conduct quantitative surveys designed to reveal users' habits, practices, attitudes, and product usage.

Such market research methods can also play a role in the postmarket environment. After the occurrence of an adverse event or product recall, for instance, surveys can be used to rapidly assess the impact of such occurrences on product usage and brand equity.

Customer in Focus. Among all the elements of a market intelligence strategy, the most important objective is identifying customer needs. Accomplishing this objective is the only way to address customers effectively and systematically, and the best way of ensuring a company's survival and success. But in today's medtech environment, identifying customer needs isn't nearly as easy as it sounds. Because even before they do that, companies must first accomplish the critical step of identifying their customers.

In many medical device sectors, manufacturers routinely interact and work closely with physicians. Most medtech companies have traditionally considered physicians to be their primary customers, and they have relied on those physicians to recommend ways of improving product features and performance.

Physicians and other healthcare providers remain important customers, but in today's medical technology market they are no longer the only stakeholders of importance. And increasingly, many of the purchasing decisions are no longer in their hands.

Today, purchasing decisions are also influenced by healthcare professionals working in managed-care settings, materials management staff, hospital pharmacists, purchasing administrators, referring physicians, and, increasingly, by patients themselves. Each of these distinct sets of customers may have its own critical needs that manufacturers can use to differentiate their products and create a competitive advantage. As medical device manufacturers evaluate planning for proposed new products, company staff must explore the needs of such customer groups, assess their influence over the purchasing process, and determine how to incorporate this input into proposed products and their features.

Oftentimes, a manufacturer's best ideas for new medical products come from the healthcare professionals who already use its products extensively. But companies should not rely on the input from such customers to the exclusion of assessments from other sources. A doctor who works very closely with a company can lose objectivity when evaluating new products. And even though a leading physician may have been working with a company for many years, he may still become hesitant to continue doing so if his consulting fees from the company are made public in compliance with new laws or in response to current pressures for transparency. To avoid such difficulties when evaluating the potential of a proposed product for adoption in the real world of budget cuts and liability, it is critical for the company to evaluate proposals objectively, making use of a broad audience of potential users.

In short, to understand the needs of all product stakeholders, companies should conduct customer needs assessment using both qualitative investigation and rigorous quantitative assessment techniques.

Qualitative research methods that can be used as a platform for new product research include ethnographic research, operating room observation, patient pathway re­search, focus groups, in-depth one-on-one interviews, creative play, war gaming, and many others. Companies can also stimulate qualitative input from internal sources by offering incentives to sales reps and others who record their observations on a company intranet devoted to product development.

Quantitative methods of market research include new-product-concept tests and conjoint analysis. Such methods can efficiently validate the customer needs and clinical outcomes considered critical for the proposed product. They can also help companies define what types of products or product enhancements are preferred, and the likely patterns of adoption and use among many different types of customers.

The process of conducting both qualitative and quantitative product-development research is not inexpensive, but it is far less expensive than the costs of designing a product that does not meet the needs of the market.

Positioning for Success. Once a product has been selected for development, the marketing team needs the right information to position the product correctly. The team should develop a good understanding of the product's critical clinical endpoints, which product attributes can most effectively drive adoption among users, and how to maximize positive differentiation from the competition. Communicating attributes such as these in a way that resonates across customer groups is an important function that begins with having adequate market intelligence.

Market research also plays an important role in pricing a company's new products. To ensure customer access as well as company profitability, a new device or technology should be priced for optimal availability and return.

Qualitatively, companies can employ projective techniques to gain an understanding of users' views about a product or its features. Such research can help companies develop marketing messages and images that resonate best with customers, particularly with doctors and patients. Qualitative research can also help companies identify product attri­butes and performance ranges that should be submitted for rigorous quantitative testing.

Quantitatively, segmentation studies are helpful at this stage for understanding the views of important stakeholders. When applied to new and existing data sets, higher analytics such as regression analysis, correlation analysis, and Bayesian approaches can help companies to predict the influence of specific attributes on customer demand and preference. Sometimes, combining new data with existing internal data sets can help a company to increase the power of such analyses.

Conjoint analysis exercises can determine optimal price points with precision, enabling companies to find a balancing point in the complex interplay of demand and attribute performance among users and purchasers. One of the most common and expensive mistakes in the device industry is setting the price point of a new product too low. This error leads to price wars, commoditization, and revenue loss for a particular product—and also to revenue loss for all future iterations of that product. In the medical device industry this is a crucial mistake, since many product lines are based on and evolve from the company's original platform.

Monitoring Progress. Once a product has been launched, monitoring its progress is essential. This activity provides forecasting information, enables leadership to assess competitive threats, evaluates what is being done well and what could be better, and reveals new opportunities.

The main source of this information is typically internal sales data augmented by competitive sales tracking. But tracking and monitoring progress on other scales can be more helpful for understanding not only what trends are taking place, but why. When sales numbers go down, for instance, immediate access to the potential reasons for the downturn can help the company reverse the situation quickly and prevent its organizational dynamics from devolving into a blame game.

Software programs used for tracking are primarily quantitative in nature. Manufacturers can track brand and corporate equity, attitudes, trial and usage by key customer groups, sales performance, healthcare and regulatory compliance, attribute importance and message recall, among other factors. The keys to success in fielding the surveys that feed these programs are to maintain consistent lines of questioning, and to field the surveys with regularity. Within specific types of study, using a consistent set of questions across multiple product lines can facilitate trending and build benchmarks for use in future product development activities. For most projects, surveys may be conducted as rarely as biannually or as frequently as quarterly; for surveys related to a product launch or adverse event follow-up, an abbreviated weekly or monthly survey is better.

The area of monitoring is one in which qualitative research may follow quantitative methodologies. When quantitative tracking reveals that a critical shift in usage or attitude is occurring, it may warrant more ex­ploratory investigation using qualitative techniques such as interviews or focus groups.

Tracking is the type of marketing intelligence that is efficiently communicated to company leadership and translates quickly to an actionable strategy. When conducted throughout a product's life cycle, such tracking can also alert the company's team when a product is ready to be enhanced or retired from the portfolio and replaced—and point the direction to the next opportunity.

Implementation

In the past, the medical device industry has benefited from a relatively low cost of error and high reward for success. Consequently, the industry also enjoyed high tolerance for companies that chose to develop products for the wrong target—the wrong patient or procedure—or launched the wrong product, at the wrong price, with the wrong marketing materials. Over time, however, it has become increasingly expensive for companies to stand for such failures.

Just as industry tolerance for imperfections in quality control has diminished, tolerance of marketing failures has also diminished. Today, it is imperative for medtech companies to integrate their market intelligence strategy so that marketing and sales, R&D, business developers, and leadership all have access to the information critical to making the right decisions. Company leaders can take the following steps to ensure that a successful market intelligence strategy is being implemented correctly.

Align Infrastructure and Information Access. This goal can be accelerated by creating searchable online systems with varying levels of security access. The systems should encompass sales data, primary and secondary research, news feeds and public information, reports from the field, and incoming requests from users. It's fine to restrict full access to the data through a gatekeeper such as the department or marketer who commissioned the research, but the fact that such data exist within the organization should be transparent.

Support Data-Driven Decision Making. To speed an organization's use of data and adoption of a market intelligence platform, company leaders should challenge assumptions by demanding to see the underlying data. Limiting R&D to those projects that have been evaluated quantitatively, for instance, can be an effective approach for supporting data-driven decision making. Other ways that companies can send the message that the market intelligence strategy is important include incentivizing the sales force and others to contribute to the company's centralized databases, or having the company CEO contribute to an internal question-and-answer query board or chat room.

Develop Consistent Processes for Market Intelligence Collection. For each phase of the opportunity assessment-monitoring cycle, make sure that product teams understand the types of information expected by the company at that stage. Market research training for the nonmarket research manager—like finance training for the nonfinancial manager—can help each member of the team understand and implement the right tools for his or her role, especially in companies that have limited internal market research staff. By developing consistent questions for tracking and concept testing studies, the company can develop benchmarks for measuring success.

Measure for Success. Companies should establish metrics for assessing the success of their market intelligence implementation, and then measure product performance against those metrics. People will do what works, but measures need to be available to demonstrate what works.

Conclusion

Companies navigating the challenges of the current medtech environment need to assess opportunities, understand their customers' needs, position themselves for success, and monitor their progress. Industry leaders' intuition and experience are still invaluable for determining what questions to ask of the market in order to identify the most valuable opportunities. But today, company leaders can create considerable competitive advantage by using an integrated market intelligence strategy, bringing the company's data and knowledge resources to bear on critical decisions.

The marketing of medical and surgical devices requires the same kind of precision and adaptation that goes into developing the devices. Armed with good information, focused expertise, and the right instruments, medical device manufacturers can predictably improve outcomes for their products, their patients, and their profit.

Rebekkah Carney is associate vice president responsible for medical device research at GfK Healthcare (East Hanover, NJ), a provider of custom healthcare market research.

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