Scoping Out the Market

By Robert Kaminsky
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As competition for market share and investors tightens, well-designed market research can significantly enhance a medtech company’s strategy.

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:

  • Profile target markets (i.e., identify those with the greatest revenue potential)
  • Estimate market size, which drives the cost of driving access and adoption
  • Identify the product features and benefits that matter most to clinicians and patients
  • Prioritize clinical trial endpoints to deliver data that prescribers, payers and patients most value
  • Help craft or refine data-driven messaging that define competitive positioning that is most likely to be successful
  • Support optimal pricing and contracting strategies
  • Determine how manufacturers can best develop effective stakeholder relationships (e.g., value analysis committees)

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).

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About The Author

Robert Kaminsky, MedSpan Research

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