Hand, die Würfel mit "FLOP"-Buchstaben zu "TOP"-Buchstaben umdreht

Stop the flop: Customer-oriented product development in medical technology in 3 steps

Product development in medical technology is time-consuming and associated with high costs. Accordingly, it is momentous when a new product flops. Nevertheless, the flop rate for new developments across industries is 70%. The reason: In many companies, it is still common practice to make development decisions solely on the basis of a few internal opinions and not to involve an external target group.
As a result, products are not optimally tailored to the actual target market and customer needs. Not all customers are addressed, which means that sales potential remains untapped, margins shrink and the potential willingness to pay is not fully exploited. There are simple ways of assessing a product’s chances of success at an early stage of development and thus aligning the entire development process optimally with customers’ willingness to buy and pay. One method is PRE analysis – it enables well-founded go/no-go decisions to be made for product concepts at an early stage, enabling them to be developed specifically in line with market needs and willingness to buy, and thus clearly increasing overall product success.

1. Profiling the market landscape

In order to obtain a holistic picture of the market, it must be examined from various perspectives. The 5P framework can be used to successfully conduct this assessment. It contains five dimensions: Process, Physician, Payors, Patients and Players. To gather the necessary insights for each point, the following sources are typically used: Interviews with internal experts, secondary research (e.g. academic literature, market reports, company websites), and interviews with external experts.
At least two-thirds of the experts interviewed should be based in countries, among the potential target market for the new product. This ensures that the perspective of the interviewees matches the scope of the product. that quality experts with high experience and knowledge level of the experts is more important than a large number of interviewees. Personal on-site interviews at the respondent’s workplace promise the best results.

Analysis along the 5-P framework

Process

An analysis of the process provides information on which players need to be addressed in what way during the market launch of the new product. For this, one follows the patient flow (diagnosis site, therapy site, monitoring site) and the patient life cycle (diagnosis, treatment and monitoring). Pain points, needs and optimization potentials are uncovered for each sub-step. In this way, insights are gained into which customer or physician segments are most important, who decides on a purchase, and which country specifics exist. In Japan, for example, neurosurgeons play a crucial role in the treatment of mental illnesses, whereas in Europe these are treated by psychiatrists. Thus, the Process provides information on who you need to address, depending on the product, when entering the market later on.

Physicians

The Physicians sub-step focuses on identifying and segmenting target groups of physicians. Characteristics such as willingness to use, purchasing potential, willingness to innovate or digital affinity can be included in the segmentation. Physician groups are often segmented according to three archetypes: scientifically driven experts who place great value on product accuracy and pay less attention to price, generalists with high demands on product handling look and commercially driven optimizers. In addition to the division into individual segments, an understanding of their size and development is central. For example, the proportion of traditional, digitally non-affine physicians in private practice may decline over the next few years as they often retire due to older age.

Payors

With respect to Payors, the goal of the analysis is to create a profile of payors and an understanding of the flow of money. In the case of medical technology products, costs are often not borne by the physician or patient, but by health insurance companies. These have their own requirements, which are essential for subsequent product and price acceptance. For the international distribution of new products, it is helpful to collect country-specific information during the analysis and to distinguish between private and public payers. By understanding the regulatory requirements for physicians and hospitals, the reimbursement rate of health insurance companies, the average lifetime of the product and the hospital’s or physician’s cost share, the price for a medical technology product can be derived.

Patients

When it comes to devices that are directly used by patients, it is very important to directly interview patients. Example products are blood glucose meters, ventilators in private homes, and numerous other solutions from the point-of-care and digital health areas. The aim of the analysis in this step is to develop patient categories and emotional decision-making bases. Patients represent a comparatively new target group: Just a few years ago, purchasing decisions were mostly made by the physician; now, an increasingly self-sufficient patient population is bringing their own needs for a medical technology product to the forefront. Two related, often forgotten stakeholders are patient relatives and patient organizations. By involving not only patients but also these two groups in product development, companies significantly increase market acceptance of the new solution.

Players

The goal of the analysis in terms of players is to understand the competitors in the market. This includes the market regions and segments they serve. This identifies white spots in the market – areas that show great potential for brand entry. In this step, a representation of competitors’ products in a matrix (e.g. with the dimensions “target customer types” and “customer needs fulfillment”) is helpful. By looking at the costs of the competitor products and their marketing strategy, best practices can be derived for the own new product.

2. Requirements & customer needs

After profiling the market, the next step is to translate the gained market understanding into concrete customer needs and product requirements. In this way, one’s own product concept is critically scrutinized.

Readiness to buy

Readiness to buy arises when the features of the new product meet the requirements and unmet needs of the customers. To identify these features, all relevant stakeholders (e.g. market experts, physicians, payers and patients) must be considered. This uncovers weaknesses of current product solutions and unmet needs. It is important to note here that different end-user types have different product requirements. What is essential for one customer is a secondary feature for others. Differentiating product features into overarching categories of requirements (“must-haves” and “nice-to-haves”) enables their prioritization and the derivation of an appropriate market positioning strategy. The focus is usually on medical benefits and needs, which in combination with technical feasibility define the target product profile.

Willingness to pay

Finding the optimal price for a product is always a major challenge. Various methods help: First, expert interviews are suitable for obtaining an initial estimate of end users’ willingness to pay. In combination with market research methods (e.g. Van Westendorp price analysis or Gabor-Granger method), anchor prices are determined – prices that correspond to customer expectations. Costs for similar or close competitor products can provide additional information here. With the help of these methods, a clear initial estimate of willingness to pay is made.

It is important to note that willingness to pay differs between countries, segments and physician groups. In addition to willingness to pay, payment methods are also important for the final price. Depending on the product type, different models (e.g. Pay-Per-Result, Purchase, Razor & Razor Blades, Rent / Lease) are established in medical technology. To identify a suitable payment method, it is important to note that it meets manufacturer and customer needs in equal measure.

Market entry barriers

In medical technology, market entry is often arduous – there is widespread competition (e.g. local dominance from an incumbent supplier) and price pressure (e.g. cheaper products from Chinese suppliers). But additional external and internal hurdles also make market entry difficult. External hurdles can include strict regulations for new products (e.g. FDA regulations), low reimbursement rates, or established techniques. Internal hurdles are mostly rigid established work processes, prevailing infrastructures and customer inhibitions to accept new products. To circumvent these entry barriers, it is essential not only to know the advantages of one’s own solution, but also to present them convincingly to other players. The PRE analysis creates the necessary knowledge base for this.

3. Evaluation of product potential

Finally, the evaluation of the product potential and its probability of success completes the PRE analysis. This step ensures confident and informed decision making and highlights different scenarios from to best/medium/worst cases.

Quantitative estimation

A market potential estimate is essential to determine revenue and profitability expectations. For this purpose, a first business case will be calculated and expected expenses will be included. The previously determined price ceilings and price floors as well as the average willingness to pay for the respective product are used for the calculation. This information is supplemented by market figures from secondary research (e.g. number of customers per customer segment, used equipment) and a quantitative forecast that includes current and projected future trends to estimate market development. The previous two steps of the PRE analysis ensure that the required information is easily accessible. It is a good idea to additionally validate the results in a dialog with market experts.

Qualitative assessment

The qualitative assessment integrates all findings about the potential product for a go- or no-go recommendation of product development and market entry. Go-to-market success factors and commercial cornerstones are considered. As a result, a target profile and launch strategy are derived. Various scoring models are used for this purpose: Models that combine country-specific effects (e.g. market leverage) as well as opportunities and threats (e.g. local regulations, competitive strength) with assessments of the company’s strengths and weaknesses (e.g. rapid research and development capability, existing technology experience).

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