Tag Archives: Marketing

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

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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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

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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

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Value Proposition Development for Medical Devices

Image May 11, 2015 timwalker317526 6 Comments

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.

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.

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).

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”.

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

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

Uncategorized

Pricing a New Medical Device

April 10, 2015 timwalker317526

The Story

A prospective client approached me recently who needed help in setting the price for the new medical device they were about to commercialize. We sat down to go over the project and they indeed needed help. The first thing he told me was that they needed a 65% margin and the fully burden manufacturing cost of the device was expected to be $50.00, the plan was to price the device at $150.00.

I said great! You have met your goals. He stared at me for a while and then said, “but I think it is worth a lot more than $150.00.” As he got up and started to leave I said, “Why do you think it is worth more than $150.00?” He responded, “if they use my device instead of how they do it today, they can save time, reduce nursing injuries, and reduce their stocking inventories”.

The prospective client had put the cart before the horse, and instinctively knew it.

Understanding the value proposition of the device (the devices utility), in the eyes of the clinician users and economic buyers, is the first step. Pricing is the monetizing of that value, the second step.

Pricing Strategy

I am a big fan of writing out your pricing strategy very early in the commercialization process. Start with your financial goals, your unit / time goals, your situational analysis and the value proposition. Craft a sentence that best describes your intentions with respect to pricing an elevator speech for the sales force.

We will set our price, to ensure that we signal a congruent message with our value proposition, garner at least 50% of the added value of our widget, we will be profitable and we will be 80% confident that the price will not become a barrier to success in more than 20% of the A accounts.

Pricing

The art of monetizing value, pricing, is just that an art. I have spent as much as $140,000 doing value + pricing studies. I’ve spent as little as nothing. You need to do a situational review before you set off on value or price determination. By understanding the situation you can “right size” your effort (risk stratify the work). This is especially important for start-ups who need efficiency over effectiveness.

With setting price, it is never one size fits all. Here is a partial list of the questions that will lead you to understanding your pricing situation better:

What is the nature of the product that you are launching?

Commodity
Line extension
Line expansion
New product area within your current portfolio
New portfolio
Disruptive technology

What is the nature of the market into which you are launching the product?

Current geography or new geography
New segment or current segment
New customer base or current base
New channel or current channel
Will there be value added services or not

Determine the risk if you under or over value the product?

How forgiving have your customers been historically
Do they give you second bites at the apple
What are the consequences if you price incorrectly out of the gate?
1. Do you slow the momentum down
2. Do you cast doubt in the minds of the customers about the value of the product
What will the competitive response be to a pricing error?

Watch out!

It is critical that your value proposition and your price point support each other. If you are talking about the device as, the greatest advancement of the therapy and you price it at the same price point of old technology, it sets up a disconnect in the hearts of the target customer. You have to resolve that disconnect before they will emotionally accept the value story.

So how do I set a price?

I am not trying to be disingenuous, but it depends. As a general rule of thumb, I try to split the increased value with the customer. For example, if my perspective client demonstrated an increase in hard value of 30% over the current state of the art product, I would increase my price, volume for volume, by 30% over the competition, hoping to realize 15%.

Caveats

In the medical device space there are always nuances that need to be taken into account. Reimbursement and service line profitability are always two potential barriers to realizing the true value of a new product. If the hospital service can absorb the premium and there are savings within that service then you may get the full value of the device. However, when you are selling into a service line that is barely profitable and you are changing their reimbursement/cost relationship, you may not get all you had hoped for.

A Happy Ending

We did the work to determine the added utility that the product in question brought to the critical care nurses and it came out to a 100% increase over the current technique. Total cost for the current technique was monetized at $308.00. Some of that 100% was based on a reduction of inventory cost, some was on saving time and some was on increased safety for the nurses (a reduction in lost time accidents). So our hypothesized price point was $600, not the $150 that the client has targeted.

We tested the monetization with a few nurse managers and no matter how much evidence we showed them, they just could not get their minds and hearts to accept the $600 value. Strategically, if we had priced the device at the point that we could justify, we would have either slowed acceptance, lowered demand, or failed all together.

Because the risk of being wrong had both a high probability (based on the initial qualitative interviews) and a high severity (given the financial state of the company) additional testing was warranted. We surveyed 30 key customers in the US. We selected the Van Westendorp PSM technique as our methodology. We discovered that 65% of our 30 surveyed customers would consider the product a good value between $300 – $400 dollars. An additional 23% indicated that they would consider $400 – $500 too expensive for general use, but would still purchase the device. Historically, I would have set the price point in the $450.00 range. There is typically a low bias when using survey methods to determine price points. However, in this case we set the Average Selling Price at $375.00 and held firm to that target. List price was set at $400.00.

We exceeded the target profit margin, we garnered a premium over current technology, and we did not inhibit the sales process. A win-win-win result!\

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

Make it a great day,

Tim Walker

Uncategorized

What is marketing?

April 1, 2015 timwalker317526

By Tim Walker

What is marketing?

Have you ever tried to explain what it is you do and fumbled with the answer? Explaining what marketing is to my father has proven a significant challenge. He grew up in a time when there was just “Sales”. I often tried to use the “Mr. Spock” quote, “The good of the many out ways the needs of the few, or the one.” The idea that Sales serves the one, Marketing serves the many. In a business-to-clinician (B2C) setting, sales and marketing are connected at a level that requires significant two-way communication. An interdependent relationship, neither can succeed without the other. Neither is first nor more important. Both are critical elements in the strategic marketing flow.

Strategic marketing flow

Marketing defined

For me, marketing is the ethical application of applied psychology, with the intent of changing a targeted group of humans behaviors. In our case, delivering a message in the “language” of the user that will motivate them to modify their clinical practice, product choice or perception about their definition of value.

When I use the word “language” above, I don’t simply mean the words, or even the media, that they are delivered with. I mean the application of a deep understanding, at an emotional level, of the target audience. That you thoroughly understand what makes the target audience, mad, sad, glad, fearful, hopeful and envious. Understanding the full gambit of emotions that your target audience experiences in their practice and letting that come through in your messaging will help you connect with them, making your messaging all that much more persuasive.

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

Make it a great day,

Tim Walker

Medical Device Marketing Insights

Tag Archives: Marketing

The Inventors Dilemma in Medical Device Start-ups

STP Marketing Brings FOCUS to Medical Device Commercialization

Hard and Soft Cost Reduction defined for Medical Devices

Value Proposition Development for Medical Devices

Positioning Statement Development for Medical Devices

Pricing a New Medical Device

What is marketing?

30 Years of Lessons Learned