Marketing Mix, A Strange Brew by Harvey Hauschildt [email protected] Overview of Discussion Market research. Product development procedures. Vetting products and ideas. OEM/Private Label and Licensing agreements. Tales from the Crypt, when things go terribly wrong! You Need To See A Target Before You Can Hit It The best product development comes from market based research Research doesn’t have to be complicated, but it does need to answer the hard questions. Getting The Answers The hard questions: Does the product (FIT) the customers needs? Can it be delivered in the (FORM) the customer requires? Does the product provide better performance, (FUNCTION) or lower costs from what the customer is currently using? Can you prove your claims? What price point is acceptable to the customer? Do you have the distribution channel to deliver the product to market? Identify Strategic Vision Project Assessment Does the product match our core engineering competencies? How does this product help the company grow? How does this product help gain a competitive advantage? Does the product match our distribution network? What are the ramifications of not doing the project? Can the project be acquired faster or less costly by OEM agreement or company acquisition What other projects would generate better growth for the company? Senior Senior Senior Senior Senior Global Market Opportunity by Nation Business Assessment Annual Dollars Annual Units Sold Average Sales Price Margin Dollars Number of Competitors Market Shares of Competitors Barriers to Market Entry Cost of Entry Estimated revenue Estimated unit sales ASP by country Estimated Gross Margins By country By country Costs/distribution/name recognition Roll up of costs Product Specification Development Staffing Assign Project Manager Coordinator Assemble Multinational investigational team Assigned by Senior Management Assigned by General Manger Asia Europe Latin America US Asia Europe Latin America US Asia Europe Latin America Management Management Management/Marketing/Sales Management/Sales Management/Marketing eo pl e 1 1 1 1 1 1 1 1 Marketing Nursing 1 2 1 2 1 2 1 2 Manufacturing Sales Service 1 1 1 1 1 1 1 1 1 1 1 1 MIS/IT Physicians 2 2 2 2 2 2 2 1 Data Collection Assemble Clinical Requirements from ACC/AHA or governing bodies Assemble competitive product features & advantages Identify customer issues and requests List Regulatory Requirements from each Nation Identify Language Requirements Call out patient safety issues & mandatory requirements List labeling requirements Marketing/Engineering Sales/Marketing Sales/Marketing Regulatory Regulatory Regulatory Regulatory US Asia P eo pl e P Engineering Regulatory Specification Collection P P eo pl e eo pl e Senior Management & Engineering Senior Management Break tasks down into data collection phases by specialty and schedule completion dates with each major market International Specification Team Define technical trends and requirements of market Define regulatory approval process and certification by country Work with customers to translate customer requirements into functional specification Provide requirements on clinical utility and functionality of device Investigate best manufacturing practices to reduce time to market and maxim profit Obtain customer contacts and competitive input from sales Insure that final product can be serviced quickly and cost effectively Insure products meet the present and future demands of networking, integration to hospitals information and accounting systems Review and advise on clinical utility and information output of device US Europe Latin America Commercializing The Product What is it? Training programs Internal documentation Programming code Engineering diagrams User manuals Inventory projections Major component spares Technical Support Field Service Sales Training Promotional documents Data sheets Brochures Advertisements/Trade shows Press releases White papers/clinical studies Launch Checklist Product: Launch Manager: Resp. Group KEY DATE: Pilot units available on KEY DATE: Production units available on PRODUCT TARGET MARKET: Marketing Materials 1. Are any new marketing materials required for this launch? (list each with due date) 1a. Sales sheet 1b. Email 1c. Direct mail 1d. Advertisement 1e. Trade show graphic 1f. Other promotion 3. Does this launch affect any existing marketing materials? (list each with due date) 4. Are any new marketing claims being made? 4a. If yes, what are they and what supporting materials are required? 4b. Is a change to the 510(k) or other regulatory filing required? 5. Update the website 5a. Copy: Review and update any changes in features and product claims 5b. Images: Find and replace all with new 6. Add to the online store Marketing Marketing Marketing/Regulatory Regulatory Regulatory Marketing Marketing Marketing Marketing Events 1. Will this launch be unveiled at a key event or show? (list show and date) Marketing Public Relations 1. Are any PR events planned for this launch? (list and describe) Marketing Manuals and Labeling 1. Users Manual 1a. Translation to other language required? 1b. Users manual validation 2. Are any quick start cards or other product materials required? (list each) 2a. Translation to other language required? 3. What labels are required? (list each) Marketing Marketing Marketing Marketing Marketing Marketing/Engineering Packaging 1. How will this product be shipped? 1a. Is a new box required? 1b. Is any special packaging material required? 1c Any additional materials to be developed or included in packaging? (list each) 1d. Do our warehouses and/or distributors have any new requirements? Marketing/Engineering Marketing/Engineering Marketing/Engineering Marketing Operations Customer Service 1. Is a new troubleshooting guide required for this product? 2. Are changes to an existing troubleshooting guide required? 3. What customer service training is required? 3b. Prepare training materials 4. Schedule customer service training at least 3 weeks prior to launch. 5. Schedule follow up training 2 days prior to launch. 6. Update the price list 7. Make sure Great Plains has the correct part number, product description and price Engineering/Customer Service Engineering/Customer Service Marketing Marketing Marketing Marketing Operations Resp Person Due Date Status Comments Know Where The Land Mines Are Before You Step Market driven growth starts with: Sound product development procedures. Seeks to leverages core competencies. Strives to strengthens & grow I.P. Insures correct distribution channel is in place. Includes options for both vertical and horizontal paths for growth. Current Project Project: Penetrate hospital market. 20 million dollar company Dominates sports medicine, Physical Therapy and well regarded in Orthopedics. Where to start? Expansion Markets Hospitals HMO’s & GPO’s Military & Veterans Hospitals Surgery Centers OEM/Private Label Agreements International Markets 10/16/2008 Following The Injury Home Care Through The System Hospital Physical Therapy Orthopedic Surgeon May send patient to either facility depending on injury Out Patient Surgery Center 60% of patients are self or ER referrals 40% of referrals from Primary Care Physicians Primary Care Physician Treats non- surgical patients Ouch! Patient Injury Emergency Room Hospital – Military & VA Conduct Three Regional Focus Groups by March 2009 Understand product applications, (Fit) by department & what is currently used. OR-PACU-ICU-MED/SURG-ER-PT-CS-BIOMED Discover issues surrounding products (Form) Is it acceptable in it’s present configuration? What changes need to be made? Does the revenue potential justify the changes? Map work processes by departments When would the product be used and by whom? Identify Decision Makers Who are they and what are their needs? Pin Point Barriers To Entry Infection Control Issues MRSA Methicillin-Resistant Staphylococcus Aureus Drug resistant infections kill two times more people annually in the U.S. than AIDS VRE Vancomycin-Resistant Enterococci Infections According to the CDC the incidence of occurrence in hospitals is increasing Infection Control Issues The Joint Commission National Safety Goal .07.05.01 Hospitals must implement best practices for preventing surgical site infections. Medicare will no longer reimburse hospitals for preventable nosocomial infections Products must meet strict guidelines for eliminating the spread of infectious organisms Keys To Hospital Integration Identify key personnel that order and administer the technology. Determine the correct economic models Ownership vs. Rent per use program Evidence-Based Medicine Ability to prove one’s superior clinical outcomes over traditional therapy. Getting rid of “Sacred Cows”. Meeting The Challenge Use current customers to create anecdotal articles that validate the product. Generate case studies that compare sports injuries and treatments with those seen in a hospital. Establish multiple clinical studies that validate both therapy and economical advantages of product. Clinical Studies Clinical Studies are a long term investment. Studies should be managed by a full time Clinical Coordinator with a Clinical Research Organization background. Studies must address both the clinical and economic benefits of the product and be conclusive in their outcome. Challenges Continued Establish beta sites for R&D. Establish reference sites that can be used as validation to new customers. Develop strategic hospital alliances to test different economic use models. Define the roll of the Medical Advisory Board and actively engage them for clinical oversight and to promote the company. Going To Market Traditional hospital distribution channels Direct Sales Force Manufacturer Representative Distributors OEM/Private Label Agreements What Are The Differences? Direct sales people are paid company employees. Pro’s: Company has complete focus on customers and results. Provides superior control of product and understanding of the customer. Con’s: Added overhead cost until sufficient sales are generated. Requires additional layer of management Distributors As A Sales Channel Distributors purchase and re-sell products in an exclusive territory. Pro’s: Distributors contractually are required to buy specific levels of inventory providing a financial investment in selling the product. Minimal overhead cost to the company. Con’s: Diffused market focus do to dividing sales time between multiple manufactures. Less control over final pricing,where product is sold and more company exposure to false product claims. Manufacture Representatives As A Sales Channel Independent Sales Representative paid a commission on each sale. Pro’s Minimal impact on over-head. A must sell situation to survive, company maintains control of the billing and location of customer. Con’s Company gets only a fraction of mind-share do to competing interests from other companies. More discounting by representative to get the business fast. OEM/Private Label Agreement Company builds the product for another manufacturer. Pro’s NRE funding for development may pay for R&D. Well established manufacturers can provide a focused sales presence in a target market and shorten sales ramp up time. Minimum revenue levels can be contractually guaranteed. Very successful OEM relationships can result in selecting the company that buys you. Long term contracts increase company value and strengthen its product portfolio. OEM/Private Label Agreement OEM/Con’s Successful sales growth is not associated with manufacturers name by the industry. No control over sales process or end user pricing or knowledge of where products go. Exiting the relationship can be complicated and time consuming. Company intervention in OEM sales process is almost impossible. Opportunities For License Agreements/OEM Products Technology is extremely competitive. Manufacturers are resource constrained and often short on fresh ideas. Product differentiation is critical to selling. Evidence based medicine is economically driven and required. Disruptive technology can be the pot of gold for everyone. “You can't build a reputation on what you're going to do.” Henry Ford You Are Not Henry Ford..Yet! What you should know about big companies Hard to get to a qualified decision maker, easy to get people who say they are. Have a well oiled NIH program in engineering. May still work against you once contracts are signed. Will give you contracts that are very one sided. Can take up to a year to sign a contract once everyone is agreed to go forward. Can easily absorb the failure if project bombs. Good Ideas Are Always In Demand Targets Small to medium sized companies that have a reputation for innovation. Licensing agreements that change the competitive landscape. Get help selling your idea Protect your intellectual property. Get help in Sales & Marketing. Get sound legal advice. Understand financial ramifications of business transactions. CEO VP Hospital Sales CFO VP Marketing VP Engineering Product Manager Regulatory OEM Clinical Applications Legal Western Regional Manager Eastern Regional Manager Direct Sales California Direct Sales MN,WS, MR WA, OR,ID MR AZ,CO Direct Sales Texas OK Direct Sales MI, IND,IL MR NY,PA MR LO,MISS,,AK,AB OEM Management Team MR UT, NV Direct Sales Florida ND,SD,WY New England MR KS,OK Direct GA,NC,SC Tales From The Crypt R.I.P. We Learn More From Our Failures Than Success When Things Go Terribly Wrong MARS 2000 Technology that is to far ahead of the market and to complicated to explain. Black Fish Wonderful technology that everyone wanted except the sales force, marketing and engineering. Q-Flop Engineering never thought it necessary to see how the product was used. OEM- Mock Apple Pie It looked like a product and seemed to function like a product, but it never was a product. What These Projects Had In Common Someone knew from the beginning that projects were badly flawed in Fit, Form or Function. With one exception, there was no market research or customer input and no beta testing prior to release. Senior management did not understand enough about the technology or the market to audit the development process and correct problems before they happened. Two out of 4 projects were OEM because they fell outside core competencies of the company. Tales of The Crypt Continued Two products required extensive re-design over a span of two years to be acceptable to market. One product was killed as it would never work. One product ended up in litigation and was re-sold to another company. The Costs 2-to-5 Years of development per project. Cost of each project 1.5-to-5 million dollars. Lost revenue from failed projects 100 million dollars. Lessons Learned By Companies Being Stupid Costs Extra!