All posts by timwalker317526

Creating Customer Profiles for the Medical Device Market

The Story

The project I am currently working on for a client will go much quicker if I follow my own advice and take care of the basics before creating final field facing messaging. I consider writing customer profiles or personas as one of the most important aspects of marketing fundamentals.

Maze mind and key
Maze mind and key

Once you have identified all the influencers in your buying decision the next step should be writing the personas. Without the personas you can’t develop a segmentation or targeting strategy. Without segmentation and targeting you can’t really develop positioning statements or value propositions. This is why the customer profile is a basic building block. Combined with your environmental scan you will have the fundamental inputs to developing the rest of the S-T-P marketing fundamentals.

Customer Profile Defined

A customer profile is a one-page document that describes the psychosocial aspects of your targeted customer group. Specifically, it will include the following elements: demographics, psychographics, behaviors, media preferences, influencers, preferences and environmental/organizational constraints.

Psychographics

Are they anything like demographics? Sort of! Demographics explain “who” your buyer is, while psychographics explain “why” they buy. Demographic information includes gender, age, income, and marital status – the dry facts. Psychographic information might be their habits, hobbies, spending habits and values.

You can only effectively reach your target audience when you understand both their demographics and psychographics. The combination of both sets of data starts to form your buyer persona – a detailed picture of the people you work with now, and would like to work with in the future.[1]

Why are these profiles so important?

In a crowded field you must constantly look for leverage, something that will give you a leg up on the competition.   Understanding your customers at a deeper level than competition will give you that leverage. It might lead you to align your product with a select group of customers. It might cause you to use colors and language that are more appealing. It might mean that you hirer different types of salespeople.   Even if you can’t spend the market research money to do this exercise in a systematic method, it is worth doing! Treat the first draft as a hypothesis! Come back to that draft after every significant customer interaction to see if you have confirmed or rejected an aspect of your profile.

Here are a few simple steps in creating a good profile 

  1. Describe your customer
  • Demographics
  • Psychographics
  • Behavior
  • Language preferences
  1. Locate your customers
  • Where do they hang out?
  • What do they read?
  • What do they watch?
  • How do they learn?
  • How do they communicate?
  • Who do they admire?
  1. Understand their buying practices
  • Where do they begin their research?
  • How do they receive the information they use in device selection?
  • What is their problem?
  • What benefits will you provide if you solve their problem?
  1. Understand your current customers
  • Why did they original buy from you?
  • Why do they continue to buy?
  • Why didn’t they buy from you?
  1. Write your first draft of the persona/profile
  • Write one per influencer.
  • Use names to give them life.
  • Look at the intersections for common elements.

Test, Test, Test your beliefs

You must find a way to validate your personas. Market research is the obvious choice, unless you don’t have the cash to pay for it. Then you have to use time and touches.

Tip

There is no such thing as an average customer! It is ok if you have to breakdown the persona into subgroups. I call these Archetypes. Your leverage will be greater if you find multi-modal conditions. Use of the mean/average is something that will lead you to being an average marketer.

“Experience is what you get, right after you need it most.”

Make it a great day,

Tim Walker

Tim Walker is the Principal consultant for The Experia Group. A small consulting firm that specializes in providing experience and expertise during critical device commercialization phases to increase the probability of success. www.theexperiagroup.com.

© 2015 The Experia Group, LLC

[1] http://blog.hubspot.com/insiders/marketing-psychographics

Running a Key Opinion Leader (KOL) Meeting within the Medical Device Market

The Story

I will be running a KOL meeting this week and I thought writing this blog would be a good way of capture advice that I might give myself.  KOL panels can be incredibly valuable, if done well.  They can also be a bit embarrassing if done poorly.  Here are some helpful tips.

Doc team

#1 tip: Know what your objective is first. Otherwise you will end with, at best a fragmented process, at worst an expensive party.

Bullseye

The top ten list

  1. Bring value to the clinician beyond the honorarium that you will be paying them.  i.e. one suggestion is using a keynote address speaker on a relevant topic that is slightly off-axis.
  2. Know what you want to learn before you plan the event or invite a physician.
  3. Don’t settle for narrative as the only input mechanism; get qualitative and quantitative data.
  4. Recruit a physician to co-host the event. This will bring credibility to the event as well as providing you a test bed for your structure.
  5. Don’t solicit advice on issues that you are unwilling to act on.
  6. Work them hard; it communicates how valuable you believe their views are.
  7. Comfort and convenience wins out over fancy and exotic every time.
  8. Leave time in the schedule to let the physicians talk to one another without you present.
  9. If you and they have the time for entertainment, make it memorable not expensive.
  10. Themes are great for spring dances; don’t go overboard with tying everything together.

More tips for success

  1. Logistics, logistics, logistics
  2. A good rule of thumb is to spend 4 hours of planning for every one hour of meeting time.
  3. Structure is important to good data capture, however physicians will rebel against any structure that you might design. Accept that and make sure that within your structured discussions that you plan for unstructured time.
  4. Conducting a pre-meeting survey is a great way to learn of dramatic differences of opinion. Actually using the slides from the survey is a great way to introduce controversial topics without it seeming as though you are trying to stir the pot.

When to utilize professional and independent moderator/facilitator

I have developed the view that whether a professional moderator is used or a skilled facilitator from your own company is employed is dependent on a couple of issues:

1.  What is the critical nature of the decisions I am collecting information to support?

For high-risk critical decisions I prefer a non-company based facilitator. It eliminates bias.

For politically charged decisions I prefer an independent facilitator. It takes the pressure off the product marketer.

2.  How many physicians will be attending?

I don’t recommend more than 10 physicians, however if you must go above 10 then a professional facilitator is preferred.

3.  If there are a number of different physician specialties or a mix of clinician types than a professional facilitator can be helpful managing any accidental friction that occurs.

4.  If you are going to spend the time and money to gather a group of physicians to help you resolve your critical issues, an additional $10,000 to have a coach or moderator involved make the chances for success go up dramatically.

5.  Take the time to prepare a final report document that captures all that you learn and reveals the data organized by the data or findings that are associated with the critical questions you were trying to resolve.

report

Tips in selecting the attendees for your KOL panel

  1. Select your attendees based on your objectives.
  2. Make sure the invitees are representative of your target customer base.
  3. Ensure that the physicians are still practicing physicians.
  4. Don’t send the invitations until you have vetted the potential personal conflicts or subservient relationships that may exist.
  5. If you “over-invite” to cover potential no’s or last minute cancellation make sure you can handle the overflow, if it happens. My approach is to nominate 30 physicians who all meet the acceptance criteria. Rank them. Invite 12 to get 10. If you don’t get 10 out of the 12, then extend to the next three people on your list. Keep rolling until you get your 10. This way you minimize your exposure.

Final thought

If you have never organized a KOL panel before, don’t be stubborn, ask for help. If there is no one in your organization that has done one well, hire someone to help.

“Experience is what you get, right after you need it most.”

Make it a great day,

Tim Walker

 

Tim Walker is the Principal consultant for The Experia Group. A small consulting firm that specializes in providing experience and expertise during critical device commercialization phases to increase the probability of success. www.theexperiagroup.com.

 

© 2015 The Experia Group, LLC

 

Market Development; “is it really different than Product Marketing?”

At the heart of the Marketing continuum are three aspects of strategic marketing: 1) New Product Portfolio Development, 2) Market Development, and 3) New Business Development.

Slide1

Are they really different? Yes and No is the answer. To be successful in any of the three areas you need a strong understanding of the core principles of marketing, a great understanding of your organizations capabilities and of course, a strong understanding of the nature of the customer and the environment in which they work.

The analytic tools you use will be very similar.   The basics of great messaging will apply. Where they differ is in the nature of the problem you are trying to solve.

Market Development Defined

Market Development is simply the creation or expansion of a market. To expand a market or create a market you have to first “sell” the idea that a problem exists. You need to educate the potential buyers that they have an un-met need that they were unaware of.

Product Marketing Defined

With Product Marketing you are “selling” the solution to an already established problem or un-met need.

The Question is, “do you ever have to do both at the same time?”

The answer is yes, to varying degrees.

Slide1

Typically, it is very expensive and a slow process to develop a market from scratch. There are many benefits in being the leader who creates a market. Typically the first mover advantage will provide leverage in the market place right up until someone develops a better solution.

On a relative scale product marketing is quicker and less expensive than creating markets.

Slide2

The Story

A client of mine has a great product. There is a real clinical problem that this product solves. There are three or four “use cases” for this product. Some of the use cases are obvious to the key stakeholders, some aren’t. The strategic marketing challenge is where to place the available funds? Which will drive the right kind of success?

It is not always obvious what to do. What will bring the most success for the least investment? It is times like these, when you are facing complex strategic questions when I fall back on the core principles and tools of marketing.

  1. When in doubt ask a customer (s):
  • Who is/are the buyer(s)?
  • Who are the key none buying influencers?
  • Are the problem(s) that you are solving the same or different?
  • Is the product the right product for all use cases?
  • What are the barriers to success?
  • Is there a genuine value proposition for all stakeholders?
  • Is the value proposition strong enough to make it worth the users time to be educated?
  • What resonates with the customers?
  • What evidence or proof will the buyer need to accept your proposition?
  1. Scan the environment:
  • How large is each use case opportunity?
  • Is there competition or are you substituting an alternative solution?
  • Is there new technology on the horizon?
  • New laws or regulations that are coming or that are needed to provide leverage?
  • Are there any parrallel examples of successful strategies
  1. Craft a hypothesis strategy:
  • Test your hypothesis
  • Model the potential results of your strategy
  • Select a strategy
  • Fire a bullet not a cannon ball[1]

There are no formulae for crafting great market development strategies. You have to eliminate the non-starters and then design tests to explore the ones you have hope for.

“Experience is what you get, right after you need it most.”

Make it a great day,

Tim Walker

Tim Walker is the Principal consultant for The Experia Group. A small consulting firm that specializes in providing experience and expertise during critical device commercialization phases to increase the probability of success. www.theexperiagroup.com.

© 2015 The Experia Group, LLC

[1] Great by Choice, Jim Collins, Harper Business Press, Chapter 4, p. 60-98.

The Marketing Continuum: a progression of activities

The Marketing continuum provides a tremendous variation of opportunity for you to ply your special talents. From corporate strategy to advertising, from portfolio planning to merchandizing, from market development to product requirement planning, there is an opportunity for growth for you.

The Story

I met with a recent MBA grad that I found to be brilliant.   This person questioned whether they could sustain the excitement that they felt in their first marketing position over a life long marketing career. My first question was, “why worry about it now?” Just enjoy the position. As we spoke it became apparent that no one had ever laid out the opportunities that the marketing continuum could offer him.

Intent

What this blog will do is define the continuum, explain some stages of the continuum and provide a tip or two about working within the continuum.

Caveat

Before I dive in, it is important to explain that the continuum is drawn left to right. There is not a hierarchy. Every role in marketing is equally important. There are a number of other continuums in the Medical Device Company as well. None are superior to the other. It takes a team to commercialize a medical device.

Marketing Continuum Defined

The marketing continuum is the progression of marketing activities that move from high-level strategy to tactical implementation of the business model. Marketing is the framework in which companies get intentional about their pathway to success.

Slide1

As shown in the figure above there are, about, seven areas of marketing contained within the continuum.

  • Corporate Strategy
  • Corporate ID/PR
  • Strategic marketing
  • Market development, Product portfolio development, Business development
  • Commercial marketing
  • Marketing communications
  • Field activities

Corporate Strategy is included in the marketing continuum because to develop strong corporate wide strategies many of the areas of expertise that marketers must processes are required. Without a marketing mind-set you cannot develop corporate strategies.

Corporate ID/PR is critically important and must provide an over reaching consistency with the product messaging. I include it to differentiate from the Market Communication role. Corporate Identification, i.e. corporate branding is a very different set of skills than standard marketing communications. There are so many more customers for that type of message, employees, future employees, government, investors, users and buyers, C-suites at your customers, etc. The messaging becomes broader and less specific.

Strategic Marketing represents the general overall positioning that an entire portfolio of products or services will be built around. It will define the opportunities for Market, Products and Services, and Business Development. Strategic marketing is often performed as a staff function, committee or senior management. Many times, too often, an outside consulting firm performs this function.

Market Development creates a larger opportunity, for the products and services by facilitating a new understanding or behavior in your current targeted group of customers.

Portfolio Development creates more products and services that act synergistically to penetrate market segments within the define market.

Business Development or M&A activities create new markets or provide access to technologies that power product and service development.

Commercial Marketing is critical to the success of the continuum. It is where the activities turn toward selling, training and building broader relationship. It is where the needs of the many are converted to the needs of the few or the one.

Marketing Communications is the process by which, all the core messages are posed into a language, an image, a smell, and a feel all to trigger the desired emotional response from the customer. Once created these messages are then packed into different outlets or media types to reach out to the customers in an effective and efficient manner.

Field Activities, such as, sales, clinical support, referral development, national accounts, customer service, service, etc. has the task of taking the general messaging about the corporation, products and services and making it relevant to one customer at a time. Each customer interaction has to be nuanced.

Having a marketing mind-set will serve you well up and down the continuum. The tools vary a bit, but the basics of marketing are the same in each stage of the continuum. I encourage you to work the continuum until you find your best fit.

 

“Experience is what you get, right after you need it most.”

 

Make it a great day,

 

Tim Walker

 

Tim Walker is the Principal consultant for The Experia Group. A small consulting firm that specializes in providing experience and expertise during critical device commercialization phases to increase the probability of success. www.theexperiagroup.com.

 

© 2015 The Experia Group, LLC

 

The Inventors Dilemma in Medical Device Start-ups

The Story

This Post may seem a little self-serving, it may be. But I celebrate everyone’s success and feel compelled to sing out when I see inventors going down the wrong road.  To some, the issue we are going to discuss is a bit of a chicken and egg scenario. I don’t think so. It is more like the birth of twins.

I have been working with a number of early-stage start-ups [5] over the last several years [3] and have witnessed 15 ‘funding pitches’, or more. I have noticed a trend. Those that get funding have strong technology, strong teams, some traction, and have real solutions to real problems all woven into a story that shows how they will generate revenue (the business case).

The Story

To an investor there must be a viable business case. The stronger the case, the more solid the ‘go to market strategy’, the less risk is perceived, the more likely they are to invest.

I watch as these inventors ‘pitch’ their ideas and never deliver the punch line. How will this solution specifically make money? The second thing that is missing is an integrated commercialization strategy [the reason to believe that the solution can be delivered to the target market].

Passion and technology are critical, but they are not enough. Crafting an effective commercialization strategy and packaging it into a clean, understandable story is an art. It can’t be formula driven.   Yes, there are several outlines that the story can be organized into, but it is the connective tissue that links the story elements together. Humans make emotional decisions. The investors have to feel the value as much as calculate it.

There are a number of ‘approaches’ to telling your story. Lean start-ups, the Canvas, the five T’s, etc. Many inventors get caught up in these approaches because they don’t have formal business [marketing] training. They think that there is a formula for business success that is disconnected from their solution.

What Can They Do?

Developing that commercialization strategy needs to be done by a “professional” marketer. Yes, it will cost some money. As a scientist, clinician, inventor it is baked into your mind that if you “build it they will come”. The investors that you are presenting to are smart enough to know that it is simply not going to be that easy.

As an inventor/entrepreneur you need to factor into the use of funds during the friends and family or angel rounds enough cash to hire a professional marketer to develop a commercialization strategy that is plausible. At the very least you need to have them scope the process that they would use to develop the story. A plan-to-a- plan. Find a good marketer and let them craft your story and determine the strongest go-to-market strategy.

 “Experience is what you get, right after you need it most.”

Make it a great day,

Tim Walker

Tim Walker is the Principal consultant for The Experia Group. A small consulting firm that specializes in providing experience and expertise during critical device commercialization phases to increase the probability of success. www.theexperiagroup.com.

Conducting an Autopsy for Medical Device Launches that are Heading South

The Story

In the last post I made mention of a “Launch Autopsy”. I received several inquires as to what I meant by that term. So here is the answer with a high level look at the process that I have developed to figure out, “what went wrong?”

The first product I ever launched went south. That was in the 80’s. I was committed to determining what went wrong and what I could learn to prevent it from happening again. That is the first time I formally dissected the activities that lead up to a failed launch. I became a fan of “de-briefs”, regardless of the level of success that was obtained. A commitment to constant learning and refining of my skills was to become a hallmark of my life. If you’re curious what went wrong with my first launch? The short answer, pricing.

A “Launch Autopsy” is the name that I have assigned to these de-briefs. The name came from an article I read titled, “The Anatomy of a Good Product Launch”. I figured if we have anatomy, we can have death and therefore an Autopsy.

Launch Autopsy, Defined

A Launch Autopsy is the formal process one uses to investigate an under performing product that was launched within the past 12 months, it doesn’t have to have failed (died) to have an autopsy performed (perhaps I should rename it).

Why do Product Launches not Achieve Success?

Invariable the launch failures distill down to a “miss”. A miss in the classic aspects of Marketing:

  1. Product
  2. Price
  3. Promotion
  4. Place

It might seem a bit old school, but it works. Each one of the four P’s has additional levels below them. The ‘what’ is level one, the ‘how’ is level two, the ‘why’ is level three.   It might make sense to think of Process as the fifth P. To modernize the thinking I also add two Cs, customer and competition.

  1. Product
  2. Price
  3. Promotion
  4. Place
  5. Process
  6. Customer
  7. Competition

I find that if you interview 5-10 key players in the launch, looking for the ‘miss’ in the seven categories’ identified above, you can write a good hypothesis to explain what went wrong.

Slide1

Beware the Motives

If this process is to be used to conduct a witch-hunt, it will fail to deliver an optimized result. If the goal is to genuinely figure out what went wrong, then it can be a great learning experience for the organization and will improve future launches.

A High Level View of the Process

  1. Read the Quality manual – understand the Quality System well
  2. Scan the DHF paying close attention to the customer inputs (VOC)
  3. Interview the Product Manager and their supervisor
  4. Interview the person that initiate the autopsy
  5. Interview the top sales person
  6. Interview the best historic salesperson who has not done well with this product
  7. Interview the clinician customer that has bought the most
  8. Interview the clinician customer who evaluated it and chose not to purchase
  9. Develop a hypothesis or two that fit the puzzle pieces together
  10. Test the hypothesis
  11. Draw your conclusion(s) and present the findings

Tips

  • Pull on every loose thread that you discover
  • Focus on the blocking and tackling
  • Note but don’t focus on the names
  • Focus on the process of the work and the content quality

“Experience is what you get, right after you need it most.”

Make it a great day,

Tim Walker

Tim Walker is the Principal consultant for The Experia Group. A small consulting firm that specializes in providing experience and expertise during critical device commercialization phases to increase the probability of success. www.theexperiagroup.com.

 

© 2015 The Experia Group, LLC

Message Congruency in Medical Device Commercialization

The Story

Have you ever seen messaging related to a new product that was clearly disjointed? Maybe you saw a tradeshow booth that spoke of the product a bit differently than the sales brochure and the salesman’s pitch was a different story all together?

A VP of Marketing hired me to figure out why their dynamite new product wasn’t gaining the momentum that they had expected. This is one of the most enjoyable and potentially beneficial services that I get to perform for clients. Consider it a launch autopsy.

There are many other causes for a slow takeoff of a new product. For this particular client the issue was a confusing message.   So confusing that one might describe it as conflicting. Why is this a big deal? Walker’s Law of Congruency™ states, “As human beings we seek congruency. We constantly are trying to connect the dots. The price has to match the value of the product. The color schemes have to represent the claims, etc. When our minds detect an incongruent message we start to doubt everything about the issue or in our case the product. The customer loses trust in the product.”

How do we prevent incongruent messages as marketers? There are lots of factors, but simply we need to know exactly what our message is, more importantly everyone that is working on or near the launch must understand the message.

How do we stay on message?

We write. We publish the five documents that then serve as the source for every piece of collateral, every training script, every creative brief.

  • Segmentation
  • Targeting (user and buyer)
  • Product positioning statement
  • Product value proposition
  • Pricing strategy

These are the five documents that act as the base. Everything else flows from here.

Slide1

In addition to these five basic documents there is a format to the story line. It is not mine; it is something that is adapted from other sources.

  • Problem statement
  • Solution statement
  • Reasons to believe
  • Proof set
  • Call to action

If you publish the five core documents and keep any promotional materials and sales pitches in the five-element format it is unlikely that you will have incongruent or even worst conflicting messages.

“Experience is what you get, right after you need it most.”

Make it a great day,

Tim Walker

Tim Walker is the Principal consultant for The Experia Group. A small consulting firm that specializes in providing experience and expertise during critical device commercialization phases to increase the probability of success. www.theexperiagroup.com.

 

© 2015 The Experia Group, LLC

STP Marketing Brings FOCUS to Medical Device Commercialization

The Story

A couple of years back, I was leading a discussion with a group of Product Mangers about, “Getting the Message Heard” in the crowded arena of Medical Device Marketing. The group felt as though their product messages were getting over shadowed by the “Big Boys”.   They were complaining that to reach every physician in the relevant specialty they would have to spend an enormous amount of money.

The question I asked in return was, “why are you trying to reach every physician?”

I received several blank stares, a few chuckles, and a yawn. The conversation turned toward the power of FOCUS. My follow up question was, “When you are in a crowded room, say a cocktail party, how do you make sure you are hearing the person that you are talking with?” The responses: get closer to them, lean in, watch their lips to see if I can see what they are saying, isolate them in a quieter location, if it is important we leave the room.

The last question was, “what do all those techniques have in common?” The response: FOCUS. By increasing the Focus, concentrating our attention on the one voice that was important made their message and in return our message get through.

Slide1

So what is the allegory in marketing? Segmentation, Targeting, Positioning (STP). STP Marketing is the thought construct that provides a vehicle for bringing focus, narrowing the beam, to those physicians who are most likely to want to use the device that you are preparing to launch.

Segmentation, Targeting, Positioning

For this post, I am really just trying to introduce the topic. There will be subsequent posts that go more into detail about each of these three elements. There are whole books dedicated to STP marketing and I encourage you to read them. The really cool aspect of STP marketing is that it can be used upfront in the new product development process to determine where the next right device opportunity is, or at the backend to focus the messaging of a device that you have inherited.

When you think about STP marketing or if you are trying to explain it to a colleague or supervisor I use the analogy of hunting.   Perhaps not politically correct but quite effective in getting the concept across.

Segmentation – Identifying the part of the forest you should hunt in. Typically looking for habitat that is conducive for your desired prey.

Targeting – Knowing the nature of your quarry to an extent that you are excluding large numbers of alternative quarries.

Positioning – Using the right equipment, bait, where to build your blind, what type of call or decoy might be helpful.

Practical Example

My first successful application of STP marketing was quite by accident. The device that we were commercializing was used to cool a blood-based mixture referred to as cardioplegia. This particular device utilized counter-current flow to optimize the efficiency of heat transfer.   It also featured two other features, it had the lowest priming volume of any competitive devices and it was easy to use, once you had it set-up.

3M Plain & Simple

Segmentation – hospitals with high procedure volume (ease of use), a focus on pediatric surgery (low priming volumes), which believed in cold-blood cardioplegia, had an active PTCA practice (quick set up required), and was a teaching hospital (ease of use)(more likely to have University educated Chief Perfusionists).

Targeting – In those hospitals identified above, the probability of success went up dramatically if the Chief Perfusionist was a graduate of The Ohio State University Perfusion program. Why, because on the final exam was a physics question, ‘Which type of flow is most efficient when trying to remove heat from blood?’   The answer, “counter-current flow.” No selling or education was needed from the sales representative; they were already biased to believe.

Positioning – For perfusionist who are required to provide cold blood cardiolpegia in the most demanding of environments. The [device name] provides the most efficient cooling, lowest prime, and over all easiest to use system on the market. Utilizing a heat exchanger technology that maximizes cooling surface area, uses the most efficient exchange method (counter-current flow) all packaged in an innovative compact housing to minimize prime volumes.

The [device] went on to become the market share leader at a premium price.

STP thinking is not easy to reduce to practice with meaningful results. It requires a good deal of insight that can only come from un-paralleled understanding of your customers. For me, Segmentation is always the greatest challenge. To make it meaningful and differentiated from the competition requires a truly unique perspective.

Slide1

More to come…

“Experience is what you get, right after you need it most.”

Make it a great day,

Tim Walker

Tim Walker is the Principal consultant for The Experia Group. A small consulting firm that specializes in providing experience and expertise during critical device commercialization phases to increase the probability of success. www.theexperiagroup.com.

 

© 2015 The Experia Group, LLC

Hard and Soft Cost Reduction defined for Medical Devices

The Story

I received a text, after the Value Proposition post, from a colleague who asked me to define the difference between Hard and Soft cost savings. This is the response to that request.

The Context

From the Value Proposition blog post: “Material management processes within hospitals have become much more sophisticated over the past decade. They no longer will “buy” a good story. They need to see the health-economic data to believe. Realized increases in value are considered hard savings. Those unrealizable cost savings that you include in your story are considered soft savings. Hospitals will hold you accountable for whatever value increase that you claim/promise your product or service will deliver.”

Slide1Hard Cost Savings Defined

The Hard Cost savings are those resource utilization reductions that are tangibly realized. Such as, your new device does the jobs of three devices.

As an example, (Price of device 1 + Price of device 2 + the Price of device 3) – The price of the new combination device = Hard cost savings.

($100.00 + $60.00 + $35.00) – $125.00 = $70.00 x 1,000 (the quantity of devices used) = $70,000 (realized cost reduction)

Soft Cost Savings Defined

Slide2The Soft Cost savings are those theoretic savings that don’t add up to a real reduction, or are those that may or may not be realized based on a probability, or those that might be saved by a department that is not in the same service line as the therapy that your new device is intended for.

Example 1: Let’s say that using your device will reduce OR time by 10 minutes per procedure.   OR time is valued at a rate of $1,000 / min. Therefore you tell the hospital that they will save $3,000 per procedure. This is a soft cost reduction. Why? The hospital has three OR suites that run concurrently. So any corresponding labor reduction won’t reduce staffing. The timesaving isn’t enough to do an extra procedure, so there is no increase in capacity. So the likelihood that the hospital will realize the benefit, in a monetary sense, is low.

Example 2: The national numbers indicate that a Serious Adverse Event (SAE) occurs for this procedure at a rate of 1/1,000 procedures.  Nationally there are 100,000 procedures done. 100 SAEs per year. Your device reduces the probability of that SAE occurring to .1/1,000, so there would be 10 SAEs per year. The cost of that SAE to the hospital is $100,000. So, Nationally the cost of those SAEs is $10 Million dollars.

The hospital you are selling to does 500 procedures per year. The probability that they will experience an SAE is .05%, not very likely. The national story is solid but the local reality is that this is a Soft Cost reduction.

Hard vs. Soft

Focus on the hard costs as a promise. The soft costs are bonus points, emphasis them in hospitals where they are more likely to matter. From example 2 above, if they are a hospital that does 10,000 procedures per year, or if they recently experienced the SAE they might be more inclined to see the benefit in the soft cost.

Remember

This post only deals with the monetization of the value proposition. If your product doesn’t add utility the cost of it doesn’t really matter.

You sell locally, not nationally. Make sure that when you localize your story it still plays. As an aside, your value proposition may not play across borders. Don’t assume, do your research.

“Experience is what you get, right after you need it most.”

Make it a great day,

Tim Walker

Tim Walker is the Principal consultant for The Experia Group. A small consulting firm that specializes in providing experience and expertise during critical device commercialization phases to increase the probability of success. www.theexperiagroup.com.

© 2015 The Experia Group, LLC

www.medicaldevicemrktgblog.com

Value Proposition Development for Medical Devices

The Story

No story this time, sorry that I am breaking my format. As a reminder, the purpose of this blog is to share experiences and lessons from a 30-year (still going strong) career marketing Medical Devices. Not all of the lessons are directly applicable to every situation. At best I hope you gain a “golden nugget” of insight that will be helpful.

I received a phone call, after the pricing post, from a friend who asked me to layout my thinking on value proposition development. This is the response to that request.

Reminder about Value

Value is the Utility of the device divided by the cost of acquisition plus installation or other switching cost – total resource savings.

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What is a Value Proposition?

The value proposition is the step between the Positioning Statement and Pricing in the Value Development Process. The diagram below is a little misleading in that it shows only one arrow.

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The truth is that each step is gone through multiple times. First as a “vision”, then they are revised to a “hypothesis”, then they are revised once data is received as a “preliminary” plan, then once again after verification data is collected and again as after pre-launch market evaluations (validation).

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Yes, I am sorry, that is five sets of revisions. Fortunately, the bulk of the work is done early so each subsequent revision is a matter of changing numbers or the priority of the features.

If you find yourself re-writing the value proposition every time you revise it something is wrong with the original version.

The value proposition is the gross amount of economic benefit (expressed in words and numbers) that you will deliver to the user, the economic utility. As mentioned above, it goes through a number of progressively more “proven” phases of development.

How Should I Start Thinking About the Value Proposition of My New Device?

Suffice it to say, that the sources of value (utility) are not foreign or complex. Better, faster, cheaper, simpler, safer or access to new customer based revenue are the sources. Combining the sources of value is a great way to enhance your story.   What can be very complex is, understanding the puts and takes of significant changes in the cost structure of the therapy that your new device will be used with. Even tougher is, proving that the value will be realized in a specific hospital or practice.

How Do I Start?

Start by creating a resource utilization map for the procedure that your device is used with. Find a friendly hospital/physician combination and follow the patient, with their permission, and write down, time or cost for every action, supply or RX used, from the time they are moved to the procedure suite until they are released to home, include anything they are required to take home with them. Map it. Cost it. Sum it. This becomes the source for your “vision”.

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Ask yourself, with my new device, in a perfect world, how would the map change? Brainstorm the possible sources of value. There will be puts and takes (+, -). Pay particular attention to reductions is steps, reductions in meds, reductions in labor, and reductions in devices used. Also pay attention to, increases in safety, increases in clinical outcomes, increases in resource utilization, etc.

Look at the resources used in accomplishing the therapy the old way. Then inject your device into the therapy map. Measure (theoretic) change through modeling. Then work to verify and validate those changes.

Find ways of proving the value will be realized on a hospital-by-hospital basis.  Test the map with different types of hospitals, rural vs. urban, community vs. university, private vs governmental, teaching vs. non-teaching, large vs. small, etc. The most important ones will be those included in your customer profile or your segmentation and targeting.

A Good Tool

Now that you have the actual data, it is fairly simple to build an excel based cost savings calculator. Having a tool that the sale professional can use to walk the materials manager through the value story is a strong way to customize the story and make it more real for the manager.   If they give you their numbers to plug into a validated cost model it makes it real hard to argue the conclusions.

Material management processes within hospitals have become much more sophisticated over the past decade. They no longer will “buy” a good story. They need to see the health-economic data to believe. Realized increases in value are considered hard savings. Those unrealizable cost savings that you include in your story are considered soft savings. Hospitals will hold you accountable for whatever value increase that you claim/promise your product or service will deliver.

“Experience is what you get, right after you need it most.”

Make it a great day,

Tim Walker

Tim Walker is the Principal consultant for The Experia Group. A small consulting firm that specializes in providing experience and expertise during critical device commercialization phases to increase the probability of success. www.theexperiagroup.com.

copyright 2015 The Experia Group, LLC