Why Market Segmentation is Key to Winning Hospital Business

case-three-rOne Size Doesn’t Fit All

When it comes to B2B marketing of medical device products in today’s environment, it’s important to realize that “one size doesn’t fit all” when developing a go-to-market strategy. Medical device leaders who do not fully grasp the significance of this in the “Post Affordable Care” market will be disadvantaged. It is becoming increasingly difficult to create a single umbrella marketing campaign that will appeal to the changing identity of the healthcare buyer persona.

Forming and executing a business development strategy that can accommodate the new market forces that influence adoption of your product, platform or solution is more imperative than ever before. CEOs, CMO, and Business Development executives charged with formulating marketing/sales strategies and tactics should consider carefully that a “one size fits all” strategy may not work as it once did in the past.

Product Purchasing Trends

Though it would appear on first look that the healthcare needs on a national basis are fairly uniform, the methods by which healthcare is consumed at the institutional level have changed substantially. With the changes demanded of healthcare institutions by the Affordable Care Ac and the rising influence that GPOs, IDNs and ACOs have on deciding who gets a seat at the table, the rules of engagement for companies looking to sell to these entities have change significantly over the past several years.

Regional Differences

In specific regions of the country, consolidation of health systems and the declining influence of physicians on the medical device purchasing process have caused some companies to struggle with acquiring and/or maintaining market share. This is in part due to past reliance on key physician influencers to drive product adoption as a time honored method of driving purchasing decisions of new technologies.

With an increasing percentage physicians becoming hospital employees, the power is shifting away from physicians driving product purchasing decisions on clinical need. Instead the power is shifting toward the C-suite where decisions on medical device product purchasing are driven increasingly by economics, return on investment and risk mitigation.

What Does This Add Up To?

The wrong strategy can have a significant impact on the cycle time for some medtech companies, particularly smaller firms that do not have the deep pockets that tier-one firms have.

Marketing and sales strategies that have been reported to be working for some organizations have factored in that each area of the country has its own marketing and sales characteristics that are distinctive for the region.

Correlate To Your Market

For example, the South Eastern U.S. is not as dominated by a small number of influential insurance-owned IDNs compared to the Rocky Mountain region where an insurance-owned IDN controls more than 50% of the patient population. This significantly alters the motivations that the healthcare buyer has when evaluating your product, platform or solution.

In the South East US for example, healthcare management has an incentive to attract patients away from the competing hospitals in order to boost revenues. If your value proposition emphasizes this aspect heavily this could have strong appeal to that market especially if it is new technology that gives a provider a competitive edge against other hospitals vying for the same patients.

In contrast that same appeal would fall flat in the Rocky Mountain region such as Utah where one IDN is dominant with “competing” providers owned by the same system. In this case the hospitals in that region have zero incentive to attract patients away from one hospital to another. There is no economic advantage.

Large IDNs that dominate a region in this way typically practice evidence based medicine meaning they do not want to be the pioneers for new technology. Instead they want to see extensive clinical proof before considering making a commitment. Being the first adopter is not their typical modus operandi. This can be particularly challenging for startup medical device firms rolling out new technology. These companies may need to find their early adopters in the North East or South East markets or even OUS first to build their evidence before rolling out to these more conservative markets.

Hard Lessons from the Field

Spending in the MedTech sector is significant due to the very high cost of entry into this highly regulated space and the high cost of product development. Large multinational medical products companies have substantially greater capital resources at their disposal for product commercialization and can outlast many of their mid-tier competitors. For mid to late stage startups and mid-sized medical companies, having a highly efficient and well honed strategy to address regional market considerations could be the make break as to whether they succeed or flat line.

As an example, one very promising startup company had succeeded in rolling out to the market a much needed cutting edge technology for the hospital operating room. When it came to the commercialization phase the management failed to differentiate their customers. The senior management imposed a “one size fits all” go-to-market strategy. Many painful months of frustration and failure, and many millions of venture capital dollars later, this firm learned this lesson the hard way. Millions raised and millions spent resulted in no adoptions–no sales.

Solutions to This Market Reality?

As healthcare recruiters what we see some successful companies doing that has been shown to be successful is taking a critical look at their value proposition and finding all of the ways it can be aligned to the differentiated needs in the market. Sometimes it is needed to lay aside previous biases about the market and to look at the current environment as it is and not as it was. Once defined then aligning one’s marketing and sales messaging to these differentiated regional, political and economic market needs.

Implementation of any new strategy can be tricky especially if there are vested interests internally that are resistant to change. New ideas can collide with fixed notions of what has succeeded in the past. Shifting marketing and sales messaging, retooling the firm’s value proposition and reinventing its business model to adapt to dynamic market forces can be very challenging.

Some organizations have listened closely to what each segment of their market needs and wants. It may be aligning your value proposition or focusing and/or focusing on different customer call points–each with their own special requirements.

Clinical efficacy of one’s medical device product, platform alone and not taking into account the political and economic realities of the present and future healthcare market may be costly as our startup example illustrated.

For this reason some CEOs, board members and investors may seek to infuse the company with new talent and ideas to accelerate the process of becoming more aligned to the differentiated needs of the medical device market.

However it is done, medical device leadership will inevitably need to be flexible and nimble when formulating sales/marketing strategy as the healthcare market continues to evolve.

If this resonates as true for your organization you may foresee the need to bring into your organization new ideas and new executive talent that can guide you through this process. We welcome the opportunity to have a conversation about your distinct needs. Please contact us here have a conversation about how we can bring you the talent and skill you need so you do not fall into the “one size fits all” trap.

2017-04-02T10:44:34+00:00

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