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Market Research for Medical Equipment Markets Steven J. Fuller InforMedix Marketing Research, Inc.

Why Should Equipment Manufacturers Use Market Research? The financial risks involved in developing, selling, and servicing medical equipment can be very high, and they can be reduced to a manageable level through the use of specialized market research. Consumer products companies use market research more intensively, but medical equipment manufacturers facing complex, dynamic markets have as just as much to gain, from market research specially designed for their product and customer groups. Aggressive, innovative companies look for opportunities to solidify their sales and profit plans by responding creatively to customer needs, in ways which distinguish them from their competitors. Upto-date information about new and existing customers provides a foundation needed for executing a winning strategy in complex medical markets. Market research has its greatest impact for an equipment manufacturer in any of these situations:      when managers are not sure whether a new market is big enough to be attractive; when engineers, marketing managers, and/or salespersons disagree about the specifications for a new product; when a company is not sure how to approach a customer group with the right sales and marketing message; when managers need to know whether sales trends are the result of successful sales and marketing tactics, or overall market conditions; whenever the company needs to contact many customers in an efficient, structured way, to define user needs or find ways to improve customer satisfaction.

This report explains how medical equipment manufacturers can use market research. There are seven major types of research used by equipment manufacturers, and each is covered in some detail, with an explanation of the benefits to be gained, and the techniques which are usually used.

InforMedix Marketing Research, Inc.

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........ 7 5.... 4 3... 9 7....... Equipment Usage Studies..... from individual inventors and start-up enterprises...... Clients of InforMedix cover a broad range. 3 2.............. 10 The observations and conclusions stated here are drawn from the experience of InforMedix Marketing Research Inc...... Customer segments have included traditional hospital markets.. laboratory diagnostics.... to the largest medical manufacturing companies in the world.. Measurement of Market Sizes and Shares . and patient monitoring.... Product Development .. surgery and anesthesia..... Sales Lead Generation .......... which has provided market information for medical equipment manufacturers since 1991.. orthopaedics.. 5 4.............. homecare markets... 8 6....................... Research investigations have been completed in product areas throughout the range of medical disciplines..The seven areas of market research described here are shown below......InforMedixMR.. InforMedix Marketing Research..... ambulatory care centers. www. and health maintenance organizations... Assessing Market Potential ................... with their location in this report: Topic Page 1. Customer Satisfaction Studies... including diagnostic Page 2 .......... outpatient surgery centers......... non-hospital labs and imaging clinics....... IV and enteral therapy............. Defining Sales and Marketing Techniques ........ Inc...............

In the early stages of product development. or the application is too novel to have attracted the attention of industry analysts. because a highly accurate quantification of sales volume is not required.1. www. it is not important to have a final product design ready for customer evaluation. and securities firms' reports for investors.InforMedixMR. and major changes in equipment design. Survey samples do not need to be large (response counts of 20 to a few hundred are common). Results The result of a market assessment evaluation should be a set of information that is deep and broad enough to give the manufacturing company a high level of confidence in its decision about whether to move ahead. and whether they think an alternative type of device or equipment would be beneficial. after only a few dozen contacts.even without knowing detailed specifications. Many times. what problems they encounter and how they solve Page 3 . Although inventors and product champions must have a high level of enthusiasm and confidence for any product idea to move ahead. This type of market research should be conducted by individuals who are able to understand the technicalities of new medical equipment sufficiently to convey the concepts to the respondents. other inexpensive sources include syndicated market research reports covering the relevant segment of the industry. InforMedix Marketing Research. These surveys normally are able to report on the general level of demand. the market must be measured by a customized research project -. given the features and benefits they have in mind. or marketing methods. taking detailed notes and pursuing new lines of discussion brought up by respondents.usually when the product area is very specialized. Custom market research usually involves phone or mail surveys directed to medical personnel who will be the customers. pricing estimates. researchers often have a fair idea of the ultimate market demand for the concept they are evaluating. Assessing Market Potential Goals New medical equipment. Market research is used to assess future market potential by contacting likely users. manufacturers frequently question conventional wisdom regarding the likely sales potential of the new products. Ideally. For the first steps of market research. many product development teams look for some outside assessment of the potential sales they can expect. Inc. Methods Used Some of this information (such as procedure volumes) can be found in government databases. it is risky to assume that a large number of potential customers will share this enthusiasm and back it up with orders and dollars. they should also be able to listen carefully. and which is large enough to form an attractive market. In fact. usually face an uncertain market. and discussing with them such issues as how often they perform a particular procedure. Results should also link product designs to the needs of a customer group which can be described and located. and likely frequency of use of products under development -. At this stage. What is important is to be able to clearly describe what a new product or design change will bring to the intended user.

testing products only in the largest teaching hospitals or with respected "thought-leaders" of the industry. Market research can usually provide a much clearer picture of how a product will be used in each segment. Respondents are usually chosen from two general categories of users: (1) the average clinical person. in order to know exactly what product design(s) will be most useful and acceptable to customers. because their specifications do not reflect the usage patterns typical of much larger medical markets. www. because they may identify new customer groups and applications of a product. and the terminology used in talking about these products. and even beta-site test units. Some research projects begin with an outside researcher visiting the development laboratories.In some cases. and changing the characteristics of existing products. or the level of interest in the product is too weak to justify an expensive product development program. market assessment surveys can often lead to further product development. Because medical devices are often complex mechanically. 2. some distance from the development process is important. discussing customer needs with sales representatives. this complexity offers many options for cost reduction -. the results show that the anticipated market is not there: either the number of likely customers is too small. and (2) department supervisors or managers. or depend on computer programs to define the way a user interacts with the product. who can speak from broader experience.InforMedixMR. Methods Used Most product development market research is done with the hands-on techniques of face-to-face interviewing or focus groups. Products designed in this way run the risk of appealing to too narrow a market. do not provide the exposure to a broad range of everyday users that is needed to fine-tune product designs for larger markets. Although it may be hard for enthusiastic designers to appreciate. Furthermore. typical of the customer who will have to be served in the long run. and even observing medical procedures. the benefit of the market research work is that it can save a manufacturer from the expensive error of developing products that have tiny or unreceptive markets. Market researchers who help with product development work need to spend the time required to learn at least the basics of the technologies involved. with many types of users requiring their own variations or even different products. are areas where equipment manufacturers very often turn to formal market research. Product Development Goals Finalizing the specifications for new products. and what design changes will distinguish it from competitive products and alternative techniques. Inc. and their advanced features and benefits can raise the price beyond competitive levels.a key goal of manufacturers with established products who face price pressures from belt-tightening customers. and from low-cost competitors. the clinical settings where the equipment is to be used. Lab prototypes. most medical markets are diverse and segmented. because the researcher needs to remain open to a range of InforMedix Marketing Research. with the benefit of exposure to many alternative products and methods. Market research is important in these cases. of course. Page 4 . A common error in the design process is to evaluate new products only with a select group of "cutting edge" clinicians -. Even in these cases. At the same time. there are endless alternatives for the final product design. driving a shift in focus and opening an unforeseen market opportunity.

links to explanations. or through different channels. 3. In general. In these cases. and paper components. and points out which subsets or related disciplines will need variations on the central theme. but when properly carried out. with several respondents interviewed in each location. the results are presented for each subset -. For large equipment. they are looking for an outside. Interviews and group discussions on the topic of product development can take many forms. wood. and product service. and asked for their reaction to the proposal. market definition research is used when manufacturers sense that they are entering a market where decision-making takes place at a different level. and devices requiring the facilities of a laboratory. product pricing. even if the manufacturer has considered and abandoned similar concepts in the past. Sometimes new products can be transported from one city to another. Results Product development research usually gives the manufacturer descriptions of the features and benefits needed by large and important segments of the market. Developing markets outside the U.defining product requirements which vary from one group to another.InforMedixMR. drawings or models of new medical devices. Inc. while avoiding the logistical problems and risk of moving expensive prototypes around the country. A good alternative is to choose the time and location of a medical convention for product research. are also driving manufacturers to use market research to help them with decisions on prospecting and sales techniques. www. than they are accustomed to. It is unusual for market research to produce detailed technical specifications. if these can be faxed or mailed to the respondent. which can include graphics. objective statement describing the proper contacts and sales messages. InforMedix Marketing Research. Some interviews are successful in using only concept statements. Software tests can be easy using a web survey. customer support. Methods Used Market research investigations on these topics usually begin with a few exploratory telephone calls. or to paste together their concepts using cardboard. respondents are given a description of a product or prototype. in the simplest cases. and other elements. promotional Page 5 .S. In especially innovative investigations. research interviews can be conducted by telephone. to identify the entire network of decision-makers involved with using and purchasing a particular product. respondents have been asked to design their own ideal product. since this allows a company to economically access respondents from many geographic locations. When important market segments can be identified. market research is sometimes conducted in an actual clinical setting. Defining Sales and Marketing Techniques Goals The growth of increasingly diverse markets outside the hospital for many aspects of medical care has caused equipment manufacturers to put a higher priority on clarifying exactly how to sell their products.suggestions and new ideas. the research findings can be readily converted into specific design requirements. and the values that decision-makers place on various features and benefits.

group purchasing organizations. Sales training groups are prime beneficiaries of this type of market research. these decision-makers are interviewed. Results Market research to support the sales and marketing process seeks information that allows a manufacturer to enjoy the highest possible sales volume. and another with end-users of the equipment involved. In many cases.The simple model of "purchasing manager. some research projects are designed to actually prepare or re-write sales training materials. Inc. discounts. department managers. health maintenance organizations. various levels of administration and finance. The key questions to be answered are:      For each person involved in the selection decision. In fact. what types of promotion. a marketing program can be created that not only enhances the sales of the product involved. end user" rarely describes the real-life processes that go into selecting and buying (and continuing to buy) a medical product. either in one-on-one situations. marketing programs. considering their resources and alternatives? Where do they get their information. and what process do they go through to decide among product alternatives? How can a sales representative best reach the decision-makers. InforMedix Marketing Research. and even patients. A comprehensive evaluation of the buying process may find that significant input is obtained from users. and pricing. the facility's biomed department or maintenance staff.InforMedixMR. but strategically distinguishes the product from the competition in ways that cannot be copied. or other initiatives are of interest to these decision-makers? With this information. purchasing. referring physicians. another with supervisors of the affected departments. www. a manufacturer can usually design effective sales and marketing programs which are directed squarely at the needs of decision-makers and users of the product. what are the specific aspects of product and service that they value the most? What value do they place on these components of the product? How much would they Page 6 . customer satisfaction. clinical research support. and it is completely inadequate for expensive medical equipment. product bundling or tie-ins. education. and to present the results. and what messages should be communicated first? Besides direct sales. Second. will typically be supplemented with one-on-one interviews with administrators and financial managers. guarantees. a planning or marketing group. A series of focus groups with purchasing managers. or in groups of people with similar roles but from different work settings.

InforMedix Marketing Research. because often there is no prior contact between a new customer and every prospective equipment vendor. random-sample" market research methods. or has a stream of disposables that provide a reason for frequent contact with their customers. and purchases by individual customers can be few and far between. particularly if respondents are then made the targets of unwanted sales calls and mailings. in the mind of the respondent or the researcher. (In emerging non-hospital markets. Most respondents will not reveal their buying plans to an anonymous telephone caller.4. any more than a manufacturer would reveal confidential business plans to strangers. because equipment by its nature can have a very long replacement cycle. and names of decision-makers. Telephone calls placed for lead generation should begin with a clear statement of the caller's intent -. Inc. Lead generation should not be confused with "blind. the customer company may not even have been in business prior to looking for a vendor of the equipment it needs. registrations with medical regulatory agencies (such as Certificate of Need programs). sales lead generation is an important activity.) Repeat customers can also be hard to locate. Some companies use these programs to support a sales call reporting system. telephone numbers. and personnel transitions to see where a business may be starting or growing in a way that requires purchases of medical equipment. Results Properly conducted lead-generation programs can yield descriptions of the status and needs of a very large number of prospective buyers. Telephone contacts are also useful because they can provide updated information on addresses. however. to discuss their equipment needs if they understand that salespersons may call them.and allow for respondents to decline to participate if they so choose. because they do not depend on respondents to take the initiative in providing information. to misrepresent the aims of survey research. Sales Lead Generation Goals One of the common challenges of medical equipment marketers is to be sure that they are aware of all the sales opportunities that exist in their market. mailing labels. which receives input from sales representatives and from independent surveys. This data can be presented as prioritized prospect lists.InforMedixMR. "share-of-mind" reports. Unless the manufacturer has the luxury of being able to visit every prospect very often. and in many other forms. A well-designed lead-generation program can be repeated periodically to update records and identify emerging market opportunities. Purchases by first-time buyers are the most elusive. and usage volume. and if they are told the identity of the sponsoring Page 7 . a well-written sales-lead survey can reveal small amounts of more conventional market research information. and magazine "bingo-card" responses. In addition. such as identification of equipment in use. and damaging to the research industry. comprehensive account profiles. www. Methods Used Telephone surveys are the most reliable way to contact all prospective facilities. new-business filings. Some companies monitor reports of new construction. It is unethical. Most are willing. Other techniques that have been used for sales lead generation include mailings with reply cards.

-. or by a sophisticated sales call reporting system. In fact. often benefit from a rigorous review of how devices are being used in the clinical setting. from the viewpoint of the financial department? What is the average reimbursement rate for procedures conducted? How often do you see a service person for problems? For preventative maintenance? When did you last see a salesperson? From which company? www. etc. and redesign of established medical products. patient characteristics. When these changes are observed in one or two customer sites.InforMedixMR.can be supplemented with any number of revealing questions directed to a customer base. Information can sometimes be reported by the instrument itself. however. Marketing managers often have the experience of visiting a customer site and finding that their customers have found new ways to streamline their use of a device. manpower reductions. Popularization of new types of medical tests. As every marketing manager knows. In other cases. Sometimes this can be accomplished adequately through regular calls by a central customer service group. but cannot because of its technical limitations? What is the cost of operating the system. the question usually arises as to how widespread the change may Page 8 InforMedix Marketing Research. the same type of information gathered from competitive sites can be even more enlightening. medical equipment may have been designed with one set of customer priorities in mind. . and evolution of procedures from traditional settings to alternate sites are all examples of market transitions that can cause shifts in usage of a product by a customer group. or have added attachments of their own design to expand the utility beyond what was originally planned. and so on. new emphasis on efficiency or safety. The basic questions asked in these surveys -. In many cases. and why? What tests and procedures are you doing more (or less) than you did last year? Are there any situations where you would like to use the system. the growth of a specialized patient base. a customized market research investigation must be designed to discover and report how customers are using their equipment. but over time the requirements have shifted subtly in a new direction. Equipment Usage Studies Goals Creation of upgrade paths. peak usage requirements. if it has been designed to record data such as procedure or test type. Keeping track of relevant shifts in customer needs is the goal of equipment usage studies. types of procedures. time in use.5. Consider the value of having regular answers to these questions:       Which of your (several) systems is used most often. Methods Used Telephone or mail surveys are usually a good way to monitor the status of the installed base of medical equipment. Inc. and whether product redesign (or new product development) should be a high priority.frequency of use. eventually someone else will. if the manufacturer of a product does not upgrade and replace its own products.

procedure volumes. A sufficiently large survey can quantify usage differences between. and innovative for-profit non-hospital sites with a competitive device in the Southwest. and contact more than one respondent per location. . these may be immediately available "off the shelf" at a low cost. Measurement of Market Sizes and Shares Goals Market size and share measurements provide the most commonly used and most easily understood market data available. between users of various competitive devices. Authors of these reports frequently survey an industry's product managers and salespersons. Medical equipment companies use market share and size reports . 6. Inc. geographic and sales regions. Others take the process to its logical extreme: contacting all of their own sites and all of the competitive sites as well. Facility types and sizes. Equipment manufacturers with a small installed base can survey every facility.they are a key measure of the overall health of the manufacturing company. and draw generalizations about the market from their opportunity that is generally lost when a mail survey is used. model and age of Page 9 . At the very least. because this method allows the researcher to control the number and distribution of respondents -. urban/rural locations. InforMedix Marketing Research. for instance. these statistics can show how large the survey sample would need to be to provide a desired level of confidence in the results.Fairly large surveys are usually involved for product usage issues.InforMedixMR. Rough estimates of market sizes and shares are often published in industry reports. It is usually possible to calculate confidence intervals and other measures of precision which will show the significance of measured differences between market subsets. Accurate market sizes are valuable for many purposes beyond providing colorful and encouraging graphs at annual sales meetings -. teaching hospitals in the Northeast using a manufacturer's top-of-the-line product. they have probably accounted for the largest portion of investment in market research. . but differences between sites with different models of equipment. www. Results This type of market research data can be tabulated and summarized to show not only overall market trends. because the goal is to be able to perceive trends that are not obvious from a few site visits or from discussion with a few salespersons. among medical equipment manufacturers. and respondent title are all common criteria for subdividing usage survey data.      to monitor the success of their own new products to discover where competitive products are making inroads to find market subsets where individual products are particularly successful to view notable but limited success or failure in a larger perspective to determine the likely total available market for a group of products Methods Used Telephone surveys are usually used for market share studies. and between many demographic subsets of the market.

The best market share investigations continue from year to year. or other segmentation criteria. size. as companies place higher priorities on the quality of their interaction with customers. based on location. number of physicians. Customer Satisfaction Studies Goals Use of customer satisfaction research has grown during the past several years. volume. current sales. and trends through time. specialty. procedure volume. and have at least a reasonable correspondence to internal sales figures and "general knowledge" about the market involved. etc. and so on. that is. Ultimately. the relative position of each competitor. for example. fraction of facilities. and continues until a pre-planned number of responses have been gathered from each subset. When customer satisfaction surveys reveal the name of the sponsoring manufacturer.Customized studies which seek to report market sizes and shares for several product lines.InforMedixMR. because more data points generally provide higher levels of accuracy. the final results should provide estimates of market sizes and shares that can be supported with statistical analysis. Non-hospital markets can be segmented by procedure volume. and analysis of the data can be one of the most challenging statistical problems market researchers face. In addition. facilities which have gone out of business. As their base of installed systems expands. and for individual market segments. and avoiding the bias caused by unbalanced sampling can be quite difficult. total placements. and often call upon an independent market investigation to provide an objective picture of their customers' satisfaction. and provide ongoing measures of total market opportunity. "unknown" answers. These investigations provide valuable information about areas where customers think that service could be improved. they show customers that their vendor is concerned enough to make the investment in asking how they are doing. Results Projecting the results to form useful and credible market share tables requires that the researchers investigate each subset individually. Methods Used InforMedix Marketing Research. shares are often calculated to show these figures for the total market. it is common to subdivide the hospital market into bed-size groups. www. The reason for these complexities is basically that no market is entirely homogeneous. Market shares can be measured in units. many equipment manufacturers find it difficult to stay in close and frequent contact with every site. dollars. and any number of other useful perspectives. for medical products. number of users. 7. a survey of one market segment will yield different answers from those given in another subset. and for many subsets.. Inc. Proper planning for a market share investigation requires deciding in advance what parts of the market will likely be different from others. require relatively large survey samples. accounting for non-responses. Design of these investigations can be Page 10 . Then the survey is directed toward a pre-determined fraction of each market. they also identify areas of success that the manufacturer may not be emphasizing as much as it might. as long it is known in advance how many sites exist in the country for each subset.

www. Customer satisfaction studies are often linked to market image studies.").where a respondent can make direct comparisons of the service and support provided by alternative vendors.InforMedixMR. As in the measurement of market shares. In these investigations. so that opinions can be compared between the two subsets of the market. These are particularly valuable if the study is repeated in the same form after some corrective action has been taken. and competitive accounts. InforMedix Marketing Research.. Some of the most useful data can come from facilities using equipment from more than one manufacturer -. it is likely that if a customer has specific and important criticisms. Non-response to a mail survey should be remedied with a supplemental telephone contact. how would you rate Company A on. and the greatest potential source of useful information.. Telephone surveys offer some advantages. Inc. if interviewers make it a priority to note or record significant comments by respondents. The mail technique is more successful for this type of survey than for others. statistical validity of changes and differences in the data can be calculated. service. Large image studies are used to contact both a company's existing customers. they will find it easier to express this information in the relative anonymity of a mail survey. but how their competition is serving other facilities. manufacturers learn not only how they are perceived by their own sites. because both concentrate on the customers' subjective view of a manufacturing company. in that they usually provide customer satisfaction information faster.It is very common to use mail or telephone surveys to assess customer satisfaction. and allow the interviewer to be sure that the proper respondent is surveyed. customer satisfaction investigations can reveal a great deal more information that is not quantitative. Some of the best survey summaries contain verbatim comments which can directly influence a company's sales. On the other hand. since those who do not respond may be those who are least satisfied. because the mailing list (customer database) is readily Page 11 . In addition. and customer support activities. Results Measures of customer satisfaction can be created from numerical rating questions ("On a scale of one to ten.