Preparing for the Era of Consumer-Driven Healthcare

It's more than a trend—it's a transformation.
  As Published in Medical Device Executive 1999

teri_pic2.jpg (15275 bytes)

                                                                                                   Teri Louden

What began as a quiet trend is rapidly emerging to become what many consider will be a major transformation of our nation's healthcare industry. Consumers have not only taken a prime seat at the healthcare table, they are now also taking charge of the podium.

Consumers have become a driving force in the healthcare industry, demanding choice and access in their managed-care plans, spending cash out-of-pocket on alternative medicine and self-care services, and making healthcare the number-one topic searched on the Internet. Pharmaceutical companies launch billion-dollar drugs overnight by utilizing direct-to-consumer marketing campaigns. And yes, even the medical device industry has now begun to hear the wake-up call.

One indicator of the growing importance of this transition is the fact that this year's meeting of the Health Industry Manufacturers Association (HIMA) devoted more than three hours to a special panel on the topic of consumer-driven healthcare—a first for the association. For HIMA's membership of medical device manufacturers, almost no topic could have been more timely—or more complex. Because of their general lack of experience with consumers as a customer group, device manufacturers face an especially steep learning curve for dealing with a consumer-driven market. Equally important, the rapid pace of the consumer transition is allowing companies very little time to think through what it might mean for them or their products.

Working Your Way through the Maze

Although a few medical device companies have stepped into the direct-to-consumer game, the results of their efforts have been mixed, and there are few success stories to follow. The few companies that have launched consumer-related initiatives have focused primarily on developing patient education materials and placing selected articles in consumer publications. Even companies with home-use products, such as those for diabetics, have continued to focus their attention on retail distribution strategies.

For the most part, medical device companies have continued to target clinicians, particularly physicians, as their primary customers. In fact, it is only recently that device manufacturers have begun to address such "economic buyers" as group purchasing organizations, materials managers, and hospital administrative staff.

However, the world is changing. Both Zimmer (orthopedic products) and Medtronic (cardiology products) have recently sponsored programming on America's Health Network, the 24-hour cable TV health channel.

The rapidly emerging world of the consumer will bring with it many new opportunities. But medical device companies should take time to think and plan before rushing headlong into this new territory. Following are 10 tips for executives to follow as their companies work through the consumer-driven healthcare maze.

10 Tips to Help You through the Maze

1. Invest in the right amount and type of market research.

2. Begin by studying your existing product and customer opportunities.

3. Don't forget to include physicians.

4. Understand the world of healthcare on the Internet, and determine how you will play.

5. Spend as much time addressing the challenges as you spend investigating the opportunities.

6. Be prepared for new and different competitors.

7. Consider partnering opportunities.

8. Stay focused and targeted instead of trying to reach the mass market.

9. Don't expect a quick, big hit.

10. Take time up front to develop a specific consumer-driven healthcare strategy.

Get the Right Market Research

Consumer product companies are known for their ongoing, large expenditures on consumer research. Even with all this research, however, the mind of the consumer is a hard one to track (consider the dismal failure of New Coke).

By contrast, medical device companies are notorious for spending small amounts of money on large-scale customer research. Instead, they conduct highly focused research using targeted groups of key customers and clinicians.

Since consumer research will be a must in the coming environment, medical device companies will need to be focused and creative. To make the most of their limited research budgets, companies should pick specific target populations, work in partnership with their healthcare professional customers, and work through patient and consumer advocacy groups and associations. Also, companies should tap into outside market research experts who are savvy about the ins and outs of consumer market research.

Study Existing Opportunities

Before taking the big leap (and its associated risks) of focusing on new products and new customers, start closer to home. Companies should investigate their existing products to find out what the consumer-driven healthcare movement might mean to them.

Questions that a company might pose include the following. How might existing product utilization patterns change as consumers opt for less-invasive treatments? What opportunities might there be to help existing customers provide better education to their patients about the company's products? Are there Internet technology opportunities to enhance the company's patient education efforts? Would the company benefit if patients were sent home with packaged products and education kits? Should the company explore homehealthcare or retail market opportunities? What, if any, benefits could the company derive if consumers were educated about and desired that its brand be used by their healthcare providers?

Include Physicians

While consumers are taking charge, don't forget that physicians will continue to play a critical role in healthcare. After all, they continue to control prescriptions, and they occupy key positions as advocates for their patients.

Some companies are conducting focused marketing efforts that can assist primary physician customers in their own efforts to target consumers. At this year's HIMA meeting, Karen Zupko, president of Zupko and Associates (Chicago), discussed how one device company is conducting a patient referral program involving its top plastic surgeon customers. Her advice: "Don't give your program away. Make your physicians buy in, and keep your program targeted as a perk only for your top physician customers."

Companies can also gain customer loyalty by helping physicians get through the consumer-driven healthcare maze. One way of managing this is to help physicians address the growing challenge of dealing with patients who arrive in their offices with armloads of Internet articles about how to treat their ailment. Another idea is to assist physicians in designing and operating their own Internet sites.

Understand and Use the Internet

There is no doubt that there will be winners and losers in the world of healthcare on the Internet. Already, a dozen or so companies are jockeying for leadership of healthcare e-commerce services. For medical device companies seeking to market products directly to consumers, making contacts and keeping up with who is ahead in this area will be critical. Just as took the lead in Internet book sales, it is likely that there will be a lucky winner in healthcare e-commerce.

Other key Internet questions for medical device companies include the obvious: "Should we have a consumer-directed Web page and, if so, what should it look like?" So far, most medical companies' Web pages look like annual reports and would be dry reading at best for consumers. Companies that decide to develop a consumer Web page should keep in mind that it had better be fun. Only an exciting site will be capable of competing with all the other consumer-friendly Internet news.

Spend Time on the Challenges

It is easy to get carried away with the thrilling upside opportunities offered by the expanding world of consumer-driven healthcare. Companies can easily lose themselves in their rush to develop direct-to-consumer marketing, new self-care products, and retail distribution—not to mention activities designed to retain the loyalty of current clinical customers by helping them to address their own patient and consumer needs.

However, it is also important for companies to think ahead about the challenges and to spend time making sure these are addressed. Challenges to think about include the following:

  • Targeting the right consumer segment(s) and conducting effective research to understand their needs.
  • Learning about different consumer marketing approaches and testing consumer responses. Remember, the device industry has generally relied upon sales to drive demand. Companies in this industry have very little experience with market-driven demand.
  • Designing and developing simpler and less-expensive products that are consumer-friendly and are not likely to require visits from home-service technicians.
  • Dealing with different legal and regulatory issues.
  • Balancing the focus on current customers with the new consumer focus.

Mike James, a marketing executive at Medtronic (Minneapolis), shared some insights about these consumer marketing challenges at this year's HIMA meeting. "This is a very different kind of marketing than anything you are used to," he noted. "While Medtronic holds the leading position in pacemakers, research revealed that more than 70% of the patients with our pacemakers had no idea what brand had been implanted in them. Also, patients receiving pacemakers have about a 24-hour notice from the time they learn about their procedure until they undergo implantation. These represent some pretty major consumer marketing challenges."

Be Prepared for New and Different Competitors

Whenever there is a large, highly touted, and growing market opportunity, companies should expect that they won't be the only ones wanting a piece of the action. Many different types of companies are already approaching the consumer healthcare market: pharmaceutical firms, retailers of packaged goods, health and beauty aid manufacturers, herbal and vitamin companies, food companies (nutraceuticals), software firms, television networks, and so on.

Keep in mind that many of these players will be very large consumer product companies that are banking on their years of consumer marketing experience to enable them to tap into a new area of consumer spending and interest. Typically much smaller, and with limited consumer experience, medical device companies will need to watch all of these competitors carefully. As a matter of competitive intelligence, device companies should watch what the large companies do. But they should also consider ways that they can learn from those competitors, or even partner with them instead of competing against them for market share.

Consider Partnering Opportunities

There are a number of reasons why working with selected partners makes particular sense as medical device companies seek to address the consumer market. First, the market is huge but also very complex; second, medical device companies are not experienced in the nuances of consumer marketing; and third, there are many potential partners who could add value and reduce the device company's risk at the same time. In turn, the device company can represent a valuable source of expertise and contacts in the medical market.

There are numerous partnering opportunities. Companies should take time to think about and research their options, and to be creative in investigating opportunities. Some partners to consider include the following:

  • Existing clinical customers. Think about cooperative consumer marketing efforts with some key customers. Try a couple of local market pilots to obtain valuable consumer research and intelligence. An added benefit of this strategy is that it enhances relationships with existing customers.
  • Pharmaceutical companies. Device companies should look particularly at pharmaceutical companies whose customers coincide in some way with their own.
  • Consumer product companies. Here companies need to be creative, as there are many different types of consumer product companies. Device companies should focus on those consumer product companies whose specialties involve customers similar to their own patient populations (for example, a company with a matching interest in specific genders, diseases, regions, ages, and so on).
  • Consumer education companies, publishing houses, and Internet and software companies. Obviously, the sky is the limit here. The key is to pick a long-term winner and not one of the many new entrants that may be here today and gone tomorrow.

Stay Focused

Given the cost of reaching the masses, this tip may be the easiest of all to follow. The hardest part is figuring out how best to focus and which consumer targets to address. One approach is to start by thinking about specific market segments, such as those related to particular diseases or illnesses. From there, it is much easier to find creative ways to communicate with these groups and to focus on their specific needs.

There are an increasing number of consumer segment—specific communications opportunities related to healthcare topics. At this year's HIMA meeting, Tod Fetherling, president of America's Health Network (AHN), presented a whole new world of communication ideas for device companies. AHN's programming is structured topically, with individual programs focusing on a single issue such as a particular disease, surgical procedure, age group, or even product (a recent program spotlighted women's views of Viagra). Such an approach enables advertisers to more directly target a consumer audience with an interest in that particular healthcare topic.

Obviously, using the Internet is another way to tap into specific consumer targets. Particularly for patients with chronic diseases, connecting via the Internet has become an essential means of gathering information and conversing with other patients.

Don't Expect a Quick, Big Hit

While the consumer-driven healthcare market is exciting, it may be no panacea for medical device companies seeking to return to the industry's heydays of the 1960s and 1970s. The consumer market may be large, but it is also highly complex and confusing. Consumers are expensive to reach, demanding a level of marketing savvy that medical device companies have never possessed.

It is also important for device companies to think about where the really big opportunities in consumer-driven healthcare may be and whether these are within or outside their reach. The "big" consumer healthcare opportunities are likely to be as follows:

  • Pharmaceuticals.
  • Alternative medicine.
  • Self-care products.
  • Home-use diagnostics.
  • Consumer education and information technology (e-commerce).
  • "Aging gracefully," wellness, and life-style enhancement services.

Those companies seeking quick upsides from the consumer-driven healthcare market will likely be disappointed if they attempt to develop appropriate products in-house. Acquisitions and successful partnerships may help speed the entry and reduce the risk.

Develop a Consumer-Driven Healthcare Strategy

As a final caveat, it goes without saying that careful planning is essential as medical device companies address the challenges and opportunities of the emerging consumer-driven healthcare environment. Given the significance of this movement to the entire healthcare industry, it cannot be ignored. Up-front planning, which will help to clarify key areas of focus, is essential during this early phase of the consumer-driven healthcare transformation.

To be successful, medical device companies will need to address the many aspects of a consumer-driven healthcare strategy discussed above. Taking time to think through all of these areas in advance will help to reduce future risks and help your company focus on those key areas of opportunity where it is most likely to succeed.

The U.S. healthcare industry is experiencing a time of significant change, turmoil, and transformation. The consumer is at the forefront of this transformation and, given the continued booming economic climate, is likely to remain at the forefront. At the same time, medical device companies face a much more difficult market in their traditional healthcare provider world. Understanding and responding to the growing consumer-driven healthcare movement is, therefore, not an option, but a necessity. What's your strategy?

Teri Louden is president of The Louden Network (San Diego). She can be reached via e-mail at