The nature of the medical technology industry – where products are launched every day with increasing pressure for sales results – demands that companies explore several markets to start and later expand sales. However, this also represents one of the biggest pain points for business leaders, who usually do not know enough about the “new markets” and must deploy teams, resources and investments in the best possible manner they can muster.
Adding to this challenge, several markets have modified their approach or implemented new ways to evaluate and pay for medical technologies. In particular, we see a clear move in the United States and major European markets to assess and select medical products on the value they can offer, not simply on their cost or purely clinical benefits. After all, there is simply not enough money to pay for all medical products that come into the market: being "low-cost" is just not good enough.
While no secret recipe can eliminate this challenge, the same situation is an opportunity for teams to work cohesively and focus the right efforts, at the right time, to ensure their medical products will stand out for clinical and non-clinical stakeholders. In this post, I want to share the 3-stage approach that our teams at ValueConnected have applied to minimize the risk for customers entering new markets for medical products.
So let’s get down to it. Notice that the sequence of actions is crucial: it ensures that your investment into the new markets will generate at least the expected return in sales and expansion.
Step one: Determine the economic value proposition of your product
When market stakeholders ask: “Why should I use your product?” your teams must take less than 30 seconds to give at least one compelling reason. This is the actual value proposition.
However, there is rarely one stakeholder – think reimbursement authorities, doctors, hospital administrators, controllers, etc. – so you cannot run with only one value proposition. It takes time and energy to assess who the key decision-makers are and what they look for when evaluating your medical product.
If you consider this, you can understand why you should assesses your product’s economic value proposition during the development stage, and long before the product launch. How many products have we heard of that offer a host of features and technical advantages that the market simply does not care about or consider valuable?
Value propositions reflect the needs of decision-makers – so invest the time to understand who is making the decisions in your target markets, and why they might select one product over another. In almost all cases, decision-makers have problems (pain points). Knowing them is key to positioning your medical products as a valuable solution.
Step two: Assess how quickly markets will take on your product
Truth is, some markets are clearly more innovation-friendly than others. While market size remains the key decision factor for medical companies planning international sales, the openness of a market to medical innovation is far more important.
This is because we live in a transparent world with global price transparency. For example, market stakeholders in the largest European markets constantly share pricing and cost information before engaging in local pricing and/or reimbursement negotiations.
Imagine this situation: A medical company is looking forward to enter the European market.
The company knows there are dozens of different healthcare systems and decides to focus on the largest markets first. After all, they need to generate “quick sales”. Unfortunately, the same largest markets are usually the ones that generate the slowest sales. Everyone is using the same approach to score “big wins”.
So what is the easiest way to generate sales in the large market? Oh, of course: to reduce price!
This is when the problems start.
Say you enter the largest market with a low price. First, you will be giving away the value of your product, which the market would be happy to pay for if they could at least understand your value proposition. Second, the moment you start with a low price, all other markets around will know about it within weeks and demand even lower prices due to the nature of information transparency. Your chances for future success abruptly decline.
A better approach is to identify markets whose needs align best with your product’s benefits. In other words, look for markets that will more easily understand and accept your value proposition. Why? Because they will be willing to pay for and use such a valuable medical technology.
There is one caveat: sometimes the largest markets are the ones with the strongest need for your product. You could discover this through mere luck – or by using the process I describe here.
Therefore, it is about price. The global equation for revenues is the quantity (Q) of units sold multiplied by the unit price (P). To minimize the risk of short- and long-term problems, medical companies must prioritize the P and not simply try to achieve the highest possible Q up front.
Which leads us to the final step.
Step three: Define the right pricing
If you followed the previous steps, by now you should know:
By answering each of these questions, in this sequence, you will significantly increase the likelihood of determining a price range that reflects the true value of your product and meets market expectations, which will foster sales expansion locally and/or internationally.
This process is to determine, justify and protect your price. By targeting the best quick wins and demonstrating value, companies increase their sales force’s effectiveness and efficiency. Commercial teams do not need to “shoot everywhere” because they know where to go, what to say, and how much the market will pay to solve a clear need.
The “inverted process”
I have lost count of how many times I have attended meetings and spoken with colleagues whose first question is, “What price should I charge for my product?” Do not get me wrong: this is indeed THE question to ask, and if you have read this far you know it should not be the first question.
I think it is safe to say that companies typically apply the same steps in reverse order:
I hope this provides some valuable insights for you. Write me with your comments and describe your experiences in assessing new markets. Is it a challenge for you? (OK, this was an easy one.)
Finally, I want to ask you a favor. Write “YES!” in the comments below if you have recently seen the “inverted process” being applied when entering new markets.
And let me be the first to comment…YES! (Many times.)
Thank you for reading. Until the next post!
Ernesto M. Nogueira is obsessed with finding value in medical technologies for patients, professionals and healthcare systems. Not surprisingly, he is the founder and manager of the Value of Medical Technology LinkedIn Group and the Managing Director of ValueConnected. Contact Ernesto at firstname.lastname@example.org.