Tag Archives: Insights

The Story:

I just completed teaching a Marketing Management course at the MBA level. In the same time frame I was working with a start-up medical device company advising on their investor deck. I reached a common realization. There is a natural tendency to inflate market projections by capturing every conceivable dollar potential worldwide. There is nothing unethical or morally wrong in putting your absolute best foot forward, but there is no value in inflating the opportunity.

My professional opinion is that the revenue or potential opportunity you quote must be congruent (Walker’s Law of Congruency illustration below) with your overall story and plan. Angels, VCs and VPs of Marketing are too savvy to be drawn into an overstated market potential.

It is better to progress the story through the fair market potential to the realizable potential, quickly and then tell your story (plan) and state the five-year revenue forecast, then dwelling on a fantasy.

If your story doesn’t sound like it is worth it, or, if it doesn’t deliver on the expectations of Senior Management don’t fudge the model, change the story.

Over the Top Market Assessment

By over-the-top I am referring to the fact that every marketing plan I see states that the product represents a billion dollar opportunity. Not every marketing plan does have a chance at reaching a billion dollars and that is ok. If is does, it might be well beyond the timeline for a needed return.

Realizable Market Opportunity

In general, there are exclusions from the Grand market that are driven by the nature of your product. If the product has a narrow indication or is a line extension it probably will not be worth a billion dollars ever. It may be the first of five applications needed to reach full potential. It is not productive to spend a disproportional amount of time explaining the grand potential, mention it and move on to your story. As much as you would like to think that the most important thing to the reader is the huge market opportunity, it is not.

Most humans are risk adverse. They would rather see a tight story as to how you will realize the revenue forecast than create a dreamscape for the future.

Targeted Market Opportunity

I read with delight as a student defined the nature of the customer segment that they believed they would be successful with or in. By having a customer target, which you should have, you exclude a section of the Realizable Market Potential. If your segment represents only a quarter of the realizable potential then reduce that number by 25%.

Revenue Forecast

Once you know the Target Market Potential you continue to discount your potential for factors such as:

Competition
Capacity
Market attractiveness (Did the product end up with the features and benefits you had hoped for?)
Channel leverage
- The number of outlets
- The number of direct sales representatives
- Access to the targeted customers
Launch timing
Environmental barriers

Last but not least you need to have a beta factor (ß) a final reduction in your target market that represents the unknown and the unknowable. How do you calculate this last discount factor? You look to history either internal or external to your company. How accurate have your prediction been in the past. Do you have positive or negative reasons to believe that you will be as accurate this time?

Typically, the revenue forecasts are seldom realized. Of the 100+ products I have launched more of them under perform, in the first year, than over perform. After 30 years of product forecasting you would think that I could get the first year launch numbers correct. But there is always the unknowable and the X factor. The X factor is the political (not always bad) aspects of revenue forecasts. Typically, there is what you believe and then what everyone else is willing to bet on. Plot your actual performance against both numbers and learn.

Remember that your marketing plan will move through the project with you. At each step you need to add credibility by validating any and all assumption you have baked into the story. (E.g. the first version assumed that R&D would delivery on the utility that you wanted to commercialize. Some subsequent revision will account for whether they did or did not).

Note: The challenge to increasing accuracy with time is keeping the caveats and assumptions clearly in the mind of top management as decisions are made. I have been in many discussions just before launch where a Sr. Manager reminded me that my original forecast numbers where much larger than they are now at launch. You need to be prepared to answer that challenge without throwing the manager or the team under the bus.

“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.

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Assessing Opportunities in the Medical Device Market

February 29, 2016 timwalker317526

The Story: I attended a recent Med Device investor conference and was approached by a colleague who had been following my blog for a year or so. I’ve known this gentleman for over 20-years, but had not spoken with him in quite a while. He asked when I was going to post something about doing Opportunity Assessments.

It is funny how people pigeonhole you into different skill sets. He remembered a Market Assessment I had done in the 90’s that apparently impressed him. I have done so many assessments, both Product and Market that I had to look it up. I was humbled by the fact he remembered it.

A second gentleman that was at this same conference remembered me for the way I developed a Product Portfolio, he asked when I was going to blog about that topic. Again I was humbled. This guy is as sharp as they come.

Both topics are huge in scope. This post will set up some thoughts and definitions; I will follow-up with a more detail set of posts over the next month or so.

Opportunity Assessment defined: An opportunity assessment is the systematic, fact based, analysis of the market and/or product variables and assumptions that are used to determine the future financial viability of a given “Opportunity”.

Portfolio Plan defined: The Portfolio Plan is the resultant of a systematic decision-making process that combines a series of investment options (opportunities) into a strategic investment across time. When the opportunities are combined they will optimize that investment against a strategic objective set forth by senior management, hopefully that came out of a formal strategic planning process.

Connecting Opportunity Assessments and Portfolio Planning: You can create an Opportunity Assessment completely independently of portfolio considerations. But to do a serious Portfolio Plan you can’t do it without a series of valid Opportunity Assessments. To facilitate a defendable Portfolio Plan you have to make sure that the methodology used to develop the Opportunity Assessments is consistent and not based on opinion.

Side note 1: Even if your organization uses M&A activity to build the Portfolio you still need that Opportunity Assessment. You might just call it Due Diligence. Take care to ensure that all departments use the same Opportunity assessment rules and validation requirements.

Side note 2: Depending on how your organization is structured, you will more than likely need to build the assessment in tiers of certainty. Some of the work takes resources and if you don’t have the resources you need then you will need to convince someone that the opportunity is worth looking into. Think about the following flow:

Vision
Hypothesis
Preliminary
Verification
Validation

What does a good Opportunity Assessment look like? It all starts with defining a problem in a specific therapeutic area or market. Opportunity identification is a whole different topic. For this post I will assume that the problem has been identified.

So the key questions that must be answered are:

Is the opportunity real?
Is it worth going after?
Can your company win, if they go after it?

A NO to any of these basic three questions suggests that it is not viable, for you. Of course everything has many shades of gray and all assessments are nuanced by political, economic and time frame realities. So I will write from a simplified dogmatic position. Take it for what it is worth to you.

Is the opportunity real? There are two parts to this question. Is the problem real? Is the solution real? To answer these questions you must have a clear understanding of the un-met need. You must also have a reasonable belief that full utility can be delivered via the final product design at a cost that is affordable.

Side note 3: A mistake that often occurs is that someone sees a problem and assumes that everyone must see, have, or suffer from the problem. This is seldom the case. A measured assessment of the size of the opportunity is step one.

Side note 4: In almost all cases the problems are already being solved or mitigated today, somehow to some extent. Don’t discount the value of understanding how this happens. In a latent need these substitution solutions maybe your largest competitive hurdle.

Is it worth it? This a unique question that each organization will answer differently. Depending on your grand objectives that have come down from the Strategic Plan there maybe hurdle rates that must be met even to be considered as a viable opportunity to be considered.

In general this is a financial/strategic question that requires a number of models and market/segment/solution assumptions to be made. The more informed these assumptions are, the better the decisions will be.

Typical you will need:

A disease model
A market model
A set of explicit solution assumptions (validated to your comfort level)
A set of explicit market assumptions (validated to your comfort level)
A set of assumptions about the success of your product solution (validated to your comfort level)
Cost of developing the product
Cost of launching the product
Sensitivity analysis of the revenue and profit models
A discount factor is developed (probability of success on all fronts)(project ßeta)
A pricing model
A business model to deliver long-term success
NPV
IRR
Payback period
Strategic value (risk reduction, critical growth objective, etc.)

Side note 5: If, you are going to use this as one of the opportunity assessments in your portfolio planning process, then the there needs to be a pre-set standard quality level for validation of assumptions.

Can you win? This question is primarily an assessment of your internal capabilities and resources. Some of these questions feedback to the “worth it” question. For example, if you need to acquire or invent a new technology to provide an effective solution then you need to make sure the cost of invention or acquisition are in the financial models and it could well impact your discount factor (project ßeta).

Do you have, a cross all functions:

The right people?
Enough capital?
Enough cash?
The right sales force?
The right knowledge?
The right management control system?
The right distribution model?
Access to the right KOL’s?
The right vendor base?
Enough mfg. capacity?
The proper internal systems? Etc.

For any sub-point no, you may plan to acquire the missing aspect that lead to a no; just make sure you discount the probability of success and account for it’s cost.

When you bring it all together the high level scoring is simple, if you don’t have yes, yes, yes, than move on. If you have some narrowly classified no’s, you may want to move to a higher level of accuracy (refer to note 3 above). Just remember that the goal is to eliminate the losers and select the winners. Make a decision and move on.

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

Make it a great day,

Tim Walker

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Creating Customer Profiles for the Medical Device Market

December 3, 2015 timwalker317526

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.

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

Describe your customer

Demographics
Psychographics
Behavior
Language preferences

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?

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?

Understand your current customers

Why did they original buy from you?
Why do they continue to buy?
Why didn’t they buy from you?

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

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

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

September 2, 2015 timwalker317526

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.

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.

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.

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.

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?

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

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

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

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The Marketing Continuum: a progression of activities

July 24, 2015 timwalker317526 2 Comments

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.

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

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The Inventors Dilemma in Medical Device Start-ups

July 14, 2015 timwalker317526

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).

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

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Message Congruency in Medical Device Commercialization

July 2, 2015 timwalker317526 8 Comments

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.

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

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STP Marketing Brings FOCUS to Medical Device Commercialization

May 22, 2015 timwalker317526

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.

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.

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.

More to come…

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

Make it a great day,

Tim Walker

Uncategorized

Hard and Soft Cost Reduction defined for Medical Devices

May 15, 2015 timwalker317526

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.”

Hard 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

The 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

www.medicaldevicemrktgblog.com

Uncategorized

Positioning Statement Development for Medical Devices

April 20, 2015 timwalker317526 9 Comments

The Story

Once during a staff meeting, the marketing team was discussing the portfolio of products that were under development. Of the Product Managers gathered at that time, five of them were preparing to launch new products and two were post-opportunity recognition and pre-requirements planning.

The discussion worked its way around to the realization that only one of the seven managers had formally written the “positioning statement” for their respective products. We bantered about the question of when should you write the positioning statement for the new product. There were positions voiced around the table that ranged from, after verification testing, to after limited market evaluations.

Coming out of that meeting all seven managers were given the assignment of writing position statements for their new products. Not surprisingly, over the next three days I was asked, “What makes a good positioning statement?” I was also asked, “Why one needed to be written them at all?”

Why write product-positioning statements?

I have always believed, that the most enjoyable part of being a Product Manager was the early phases of defining a potential new product. No boundaries, no conditions, a clean canvas upon which you painted a dreamscape for your product. This is when you reach for the stars. This creative writing exercise, for me, often resulted in two-to-five pages of text and included a description of the clinical environment, the nature of the clinician character, the problem statement, the perfect utility that the product could deliver, a forecast, a theme and never, never was restricted by the technology that was known to my company at that time. Very few of these stories have ever been read or even been seen by my colleagues. I used to think that it was a silly indulgence. What I now believe is that it is a critical aspect, which differentiates good new product definitions, from great ones.

What are marketers, if not the inventor of the story and the keepers of the vision?

Why write them?

Simply, we need to write the Product Positioning Statements to be able to concisely describe a vision to others, so that they can join us in making that story come to life. It is our elevator pitch to the organization and parallels the sales persons elevator pitch to the clinician customer. It is the executive summary of the multi-page story.

One real benefit to me has been that writing and telling the story imprints a vision of success in my mind and spirit. These visions of success often infected those around me, and instill a sense of confidence within them.

When should we write them?

So I think it is obvious that the value proposition should be written before the requirements planning process. The expense associated with research and other VOC activities is significant. You owe the organization a complete vision before you incur those expenses. If you can’t generate some excitement with your vision then you shouldn’t move forward, yet. Requirements planning reduces the grand story to something particle, that is tied to internal limits of resource and capability. The initial positioning statement never survives to the launch. Keep it current and revise it as needed. Always ask the question, “Is it still worth going after?”

What makes a good one?*

For the first ten-years of my marketing career I didn’t know what made a good positioning statement. I wrote good ones instinctively and mine were never consistent from product to product. At some point I took a class and some really smart instructors from Stanford laid out a template. I use this template as a starting point for every positioning statement I have written since then.

There are seven distinct elements required for a complete positioning statement:

Customer identification
Description of those customers problem
The name of the product (preliminary)
A basic description of the product utility
A description of the components that offer the most relevant value (functional or emotional benefits)
How it is different from competition
Reasons to believe

Format of a positioning statement

The statement is typically written as a single paragraph, I use two. However, your style can vary as long as you include the seven elements, can recite it in 15 seconds, and it test as a strong statement. The paragraph typically follows the following structure:

For… . Who… . The… . Is a… . That… . Unlike… . It… .

Example (completely fictitious):

For the cardiovascular surgeon, who believes in the clinical benefits of beating heat surgery. The Squid is a combination rib spreader, holder, and electrical isolation device. The (that) Squid offers maximum visibility and access to the heart, hands-free stabilization and counter traction, with the added ability to electrically isolate small areas of the muscle, all to provide a still and placid surface on which to sew. Unlike many devices on the market today that perform only one of these functions and do not offer an integrated solution to the problem of high quality stitching on a beating heart, such as the: [list competition here].

The Squid (it) is offered by the leading manufacture of surgeon-focused equipment in the World today. It was designed for the unique requirements of the CV surgeon as directed by Dr. Spock, head of surgery at the Never-Never Land Heart Institute.

How strong a statement is it?

Test your statement against the following four questions:

Is it compelling?
Is it distinct?
Is it achievable?
Is it sustainable?

Have a group or independent marketers score the strength of your statement against the above four questions. Have them provide the reasons for their scores and then try to incorporate their feedback until an independent group scores you strong on all four counts. Strong, average, poor makes a good scale.

*I have committed this template to memory and I don’t have any of the original course material. There is no way I can attribute this to its source. Suffice it to say that I did not create it and take no credit for it. I have used it more than 20 times and every time the exercise has proven invaluable to me.

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

Make it a great day!

Tim Walker

Medical Device Marketing Insights

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