Tag Archives: Value Proposition Development for Medical Devices

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Pre or Post Covid-19 creating the right message for new medical devices is critical

Preface

Since the early 1900’s it has been well understood that we, as marketers, sell holes, not drills. Translating that adage into the 2000s and relating it to medical devices, the saying goes something like this; we sell improved clinical outcomes, not the tool that provides it. We sell greater safety, not the equipment that enables it. Yet, I still see advertisements that describe in great detail the physicality of the device. I hear sales representatives take about how their device is made of optically clear plastic.  

 We complain that it takes a decade for physicians to adopt our technology, and yet, we take decades to deploy the latest realizations in medical device marketing.

 Virtual or not, digital or not, regardless of the channel, we must deliver a clear and relevant message. We must promote the outcomes of our products, not what the product is. The clinical benefits and health economic benefits motivate the healthcare institution to purchase, not the device’s features and attributes. They never get to what clear empowers or enables. They let the clinician connect the dots.

Set-up

Recently, I was working with a client on developing the messaging for a new medical device. He went on for 15 minutes on what the product was, how it worked, its cost, how it was better, lighter, and faster than the competition. He was articulate and passionate. It was truly amazing to hear.

 When he finished, I asked a couple of simple questions. Why would I need your device? What will your device allow me to accomplish? This sparked another 15-minute download about the therapy that the device supported. He was equally articulate about the therapy description as he had been about the device description.

 He started to realize that the connection between the two revealed the benefit that the device brought; that is what we were selling.

 The features and attributes exemplify how our drill makes the hole better than our competition’s. 

 I pulled this quote out and had him read it; then, I watched as the wheels turned. 

  Leo McGivena: “Last year one million quarter-inch drills were sold, not because people wanted quarter-inch drills, but because they wanted quarter-inch holes. . .”

 How do you get to the right message?

    •  We started with a one-paragraph description of the clinical problem from the perspective of the clinician. 
      • (Why we needed a hole)
    • We then wrote a two-paragraph product positioning (benefit) statement.
      • (How we provided the hole.)
    • We then wrote a one-page value proposition.
      • (Why our hole was more valuable than the hole our competitors made.)
    • We then crafted a pricing strategy.
      • (What was the realizable value of the hole.)

 Note: These documents are defined in previous posts and in INSIGHTS: 33 lessons learned in medical device marketing available on Amazon.

 Result

 Over the course of 3-weeks, we had created four of the five foundational documents (messages) that are needed to drive all the down-stream marketing activities and collateral material.

Lesson(s)

 1. Crafting a message is critical, no matter how long it takes.

2. Creating great foundational work is crucial to successful communication with the clinician customer.

 3. Who delivers the message, how the message is delivered, where the message is delivered, are all important, but are secondary to what the message is.

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

 Make it a great day!

 Tim Walker

Tim Walker is the Principal Consultant for The Experia Group, a consulting firm, which provides experience and expertise during critical device commercialization phases to increase the probability of success. Author of INSIGHTS: 33 lessons learned in medical device marketing, available on Amazon.

One-on-one or team coaching is available.

 www.theexperiagroup.com. Contact The Experia® Group for a free 30-minute consultation to determine if 30-years of experience can contribute to your success. [email protected].

© 2020, The Experia Group, LLC

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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

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Value Proposition Development for Medical Devices

Image 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.

Slide1

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.

Slide1

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).

Slide1

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”.

Slide1

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