The medtech apprentice
In our February issue, Alan Connington discussed the reasons why many UK companies are diversifying into the healthcare sector. Here, he looks at what such newcomers need to understand about marketing and selling medical technologies.
Diversification is the process by which a company brings new products to a new market. For science or technology companies diversifying into the healthcare sector, sales and marketing are crucial issues. Negotiating the regulatory and procurement hurdles, demonstrating clinical and cost effectiveness, and building sustainable relationships with customers are all ground rules for selling products and services in healthcare.
This article provides a beginner’s guide to the commercial aspects of diversification into healthcare. For readers already well-versed in these issues, the article will serve as a reminder of the key priorities and a prompt to remain up to speed with what can be a highly demanding business environment.
Targeting the market
Sales is a component of the marketing process. Marketing activities support sales efforts. The basics of marketing are discovering what product or service the customer needs; producing a product with the appropriate features, benefits and quality; pricing the product correctly; and spreading the word about why customers should buy it. Selling is the process of making the product or service available to the customer and influencing them to buy it.
It is essential that you first develop a comprehensive marketing plan, the elements of which are:
Quantify your market – size/trends.
Define the opportunity – why?
Analyse your customer base – who/where?
Detail your products/services – your USP
Explain your route to market – direct/ distributor/private label.
Assess your competitors – strategies/ strengths/weaknesses.
Detail your sales targets – pricing strategy/ forecasts.
When a company makes the decision to launch a product or service into the healthcare market, it must evaluate its links with the supply chain. This is critical for successful business.
Market intelligence
The process of gathering market intelligence has several aspects. The first issue to consider is your target market:
How big is your target market – geography and value?
What is your current market share?
Is the market in a period of growth or decline?
What trends in the marketplace favour or threaten your products or services?
Who are your competitors, what are their products, prices and promotions?
The second crucial issue is the current environment. Include a short section in your marketing plan on the external factors likely to impact on your business, such as new laws or product regulations, an increase or decrease in Government expenditure, new competitors or new products, an increase in imports, or advances in technology.
Also summarise your company’s latest financial reports and sales figures by product and region. Historically, how well have your products sold? What are the most recent sales forecasts?
Understanding and implementing the NHS procurement rules can seem daunting to any supplier. However, there are only three main rules to learn: 1. Learn the rules. 2. Learn the rules. 3. Learn the rules.
Marketing strategies
The bulk of your marketing plan will be concerned with strategies. It is helpful to divide this section into the five Ps: product, price, promotion, people and place – also known as the ‘marketing mix’.
Product – details of your current product and service range, including brand names. Are there any new products or services, or upgrades, to be launched in the coming year? Do you offer any add-ons, installation services, guarantees, or after-sales support? Briefly summarise the main features of your products and how these can benefit the customer. Rank the products in order of profitability. After taking account of overheads, are any products loss-making?
Price – summarise your current pricing strategy, your pricing structure and how it compares to your main competitors. Will you increase/reduce any product prices in the coming year? If so, what will be the likely impact on profit margins? What are your payment terms, credit terms, special deals, discounts?
Promotion – Your marketing activities for the year must support achieving the marketing goals that you have set. For example, you may offer a range of special discounts throughout the year.
For each of your marketing goals, consider what combination of promotional tactics will be most effective. Allocate detailed budgets, responsibilities, targets and deadlines, as appropriate. Ensure that your marketing activities work together to promote a consistent message to your customers. This will help to build awareness of your brand, and customers will remember you when they are ready to buy.
Remember, your promotional activities can be adapted as your business grows according to changing market conditions. Your marketing plan simply provides the starting point to co-ordinate your promotional efforts.
People – provide a short summary of the people who work for your business, particularly those who are customer-facing. Assess their strengths and weaknesses in such areas as industry knowledge and experience, professionalism, enthusiasm and creativity.
Place – this is your route to market: how you sell to your customers. You may want to consider how you would cope if you expanded your operation. For example, if you already sell via a retail outlet and want to start selling online, do you have the capability to handle the additional orders?
A brand of healing
The Dictionary of Business and Management defines a brand as “A name, sign or symbol used to identify items or services of the seller and to differentiate them from their competitors.”
There are some general principles to creating successful brands:
The product itself must be high-quality.
The brand name must fit the product or company image.
The brand name should be distinctive and relate to the product or its benefits.
The brand name should be easy to say, spell, write and remember.
The company should offer superior service in order to keep the brand’s value trustworthy as perceived by target customers.
These principles of branding apply to consumer goods, but equally to healthcare products such as MRI scanners or medical instruments.
To make a success of branding your products or services, your company needs a clear brand strategy. Here are a few pointers:
Bear in mind that your brand should relate to or say ‘healthcare’ in some way, shape or form.
What is your company’s name/logo? What does it say about the company? If it is a medical company, regardless of where it is positioned on the value chain, does the name/logo say that?
What does your company strapline say to your customers? The best example of a strapline that I can think of is “It does exactly what it says on the tin.”
Brands are your public face: the message that you give to your customers. Brands can last for a very long time (think of Hoover). However, do not be afraid to review your brand and adapt it if necessary (e.g. Opal Fruits are now called Starbursts).
Love me tender: selling to the NHS
To understand the processes involved in selling goods or services into the healthcare marketplace, it is useful to divide them into two categories: hard procedures: (paperbased) and soft procedures (people-based). These are equally important.
1. Hard procedures – Like any public sector organisation, the NHS has to follow procurement rules. Understanding and implementing these rules can seem daunting to any supplier. However, there are only three main rules to learn: 1. Learn the rules.2. Learn the rules.3. Learn the rules.
There are both local and national procurement processes, each being varied and currently subject to change. The rules are too complex to be easily summed up, but useful contacts for information and guidance on the rules include the NHS Purchasing and Supply Organisation (www.pasa.nhs.uk) and NHS Supply Chain (www.supplychain.nhs.uk).
Procurement in the NHS is about ‘value for money’ – price being a major, but not the only, element. Value takes account of the quality of the goods being provided, the cost of the goods, sustainability issues (such as recycling) and after-sales support. In NHS speak, these amount to ‘the whole-life costs’.
In general, tenders are divided into two categories: low-value contracts (below £90,000) and high-value contracts (over £90,000). The procurement process has several stages:
‘Expression of Interest’ – this is a form for the supplier to complete.
Pre-qualification Questionnaire (PQQ) – a stage in which the supplier has to show that they have the capability to meet the tender requirements. This is potentially the ‘rejection phase’.
Invitation to tender – companies that have cleared the PQQ hurdle will be asked to submit a tender application.
Contract award – companies that have been successful will be asked to sign the contract.
Within this process, there are many pitfalls. Timescales will vary and rules must be followed to the letter, so it is imperative that the documentation is read. If you do not understand, ask. If you are unsuccessful in gaining a tender, ask for feedback – and remember you have the right to appeal.
2. Soft procedures – these are essential for getting your company out there, building up its reputation and kudos. They include speaking to key influencers (clinicians) and key decision makers (the managers and senior buyers).
Many roads to market
The healthcare supply chain is flat and linear, whereas that of most industries (such as the car industry) is hierarchical. Thus in the car industry, a small company would be unlikely to produce its own dashboard, market it to the public, and then sell or license production of it to a major car manufacturer – but the equivalent scenario happens in healthcare.
For a medical technology supplier, the routes to commercialisation can be many and varied. The supplier may position itself as an inventor, a manufacturer and/or a distributor. For example:
An inventor may develop a concept into a product and find a distributor, who sells the device to the marketplace.
An inventor may license a concept to a medical device manufacturer who is also the final distributor.
A product may be developed, validated and then presented to a medical devices distributor, who takes it to market.
A manufacturer may make a component for a device, but have no further involvement in developing the product or taking it to market.
When a company makes the decision to launch a product or service into the healthcare market, it must evaluate its links with the supply chain. This is critical for successful business. A few considerations particular to the healthcare marketplace are worth noting here.
To validate a manufacturer, you need to consider:
Accreditation – do they have the ISO 13485?
Expertise – do they know the healthcare market?
Quality – can they meet their standards each and every time? Healthcare is unforgiving because failure can be dangerous.
To validate a distributor (and biggest is not necessarily best), you need to consider:
How well do they know the marketplace?
How large is their customer base? Is all their income coming from one or two major customers?
Do they provide customer support? Healthcare will require this.
How financially stable are they as a company? Healthcare is risk-averse.
Do their sales people have good knowledge of your product and its application? Are they willing and able to sell it?
Taking your business elsewhere
Of course, the NHS is far from being the only market open to UK companies entering the healthcare sector. Healthcare offers a global market, and not looking for customers overseas is somewhat short-sighted. However, exporting your product or service abroad brings its own set of problems.
To successfully export medical products, it is imperative that companies have a sound knowledge not only of the product they are exporting but of the culture they are exporting to, the marketplace and its business practices, and the laws of that country appertaining to these products. You need to identify the costs for the project as a whole and relate this to your pricing strategy.
Completing a short piece of market intelligence gathering at this initial stage will incur a cost to your business, but it will save you time and money in the long term.
Absolute beginners
For any company diversifying into the medical technologies field, the sales and marketing function is fundamental to success. Both marketing and sales strategies need to be informed by knowledge of the clinical and commercial context of medtech use, whether in the UK or elsewhere. That knowledge is beyond the scope of this article, which simply outlines the structure within which you need to pursue information, make contacts and build lasting relationships.
Healthcare is all about playing the long game. Like the sorcerer’s apprentice, the healthcare apprentice needs to avoid looking for short cuts and be ready to do the groundwork, to learn and change. The fruits of profit, reputation and making a real difference to health outcomes are within your reach – but you’ll need to stretch.
Alan Connington is Commercial Director at Innovations Factory Ltd (previously HealthTech Organisation Ltd), an SME dedicated to helping individuals and companies develop their ideas from basic concept to full commercialisation within the healthcare sector. Innovations Factory Ltd has developed effective partnerships with NHS Trusts and other organisations in the region. Its Directors have over 60 years’ experience in the healthcare and medtech sector.For more information, phone 07740 368035, e-mail alan@innovationsfactory.co.uk or visit www.innovationsfactory.co.uk.
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