Marketing Mix, A Strange Brew

by

Harvey Hauschildt

hauschildt1@msn.com

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 US Asia Europe Latin America

Does the product match our core engineering competencies? Senior ManagementHow does this product help the company grow? Senior ManagementHow does this product help gain a competitive advantage? Senior Management/Marketing/SalesDoes the product match our distribution network? Senior Management/SalesWhat are the ramifications of not doing the project? Senior Management/MarketingCan the project be acquired faster or less costly by OEM agreement or company acquisition Senior Management & Engineering What other projects would generate better growth for the company? Senior Management

Global Market Opportunity by Nation Business Assessment US Asia Europe Latin America

Annual Dollars Estimated revenueAnnual Units Sold Estimated unit salesAverage Sales Price ASP by countryMargin Dollars Estimated Gross MarginsNumber of Competitors By countryMarket Shares of Competitors By countryBarriers to Market Entry Costs/distribution/name recognitionCost of Entry Roll up of costs

Product Specification Development Staffing US Asia Europe Latin America

Assign Project Manager Coordinator Assigned by Senior ManagementAssemble Multinational investigational team Assigned by General Manger

Break tasks down into data collection phases by specialty and schedule completion dates with each major market

International Specification TeamDefine technical trends and requirements of market Engineering 1 1 1 1Define regulatory approval process and certification by country Regulatory 1 1 1 1Work with customers to translate customer requirements into functional specification Marketing 1 1 1 1Provide requirements on clinical utility and functionality of device Nursing 2 2 2 2Investigate best manufacturing practices to reduce time to market and maxim profit Manufacturing 1 1 1 1Obtain customer contacts and competitive input from sales Sales 1 1 1 1Insure that final product can be serviced quickly and cost effectively Service 1 1 1 1Insure products meet the present and future demands of networking, integration to hospitals information and accounting systems MIS/IT 2 2 2 2Review and advise on clinical utility and information output of device Physicians 2 2 2 1

Specification Collection Data Collection US Asia Europe Latin America

Assemble Clinical Requirements from ACC/AHA or governing bodies Marketing/EngineeringAssemble competitive product features & advantages Sales/MarketingIdentify customer issues and requests Sales/MarketingList Regulatory Requirements from each Nation RegulatoryIdentify Language Requirements RegulatoryCall out patient safety issues & mandatory requirements RegulatoryList labeling requirements Regulatory

Commercializing The Product What is it?

Internal documentation Programming code Engineering diagrams User manuals Inventory projections Major component spares

Training programs Technical Support Field Service Sales Training

Promotional documents Data sheets Brochures Advertisements/Trade shows Press releases White papers/clinical studies

Launch Checklist Resp. Group Resp Person Due Date Status CommentsProduct: Launch Manager:

KEY DATE: Pilot units available onKEY DATE: Production units available onPRODUCT TARGET MARKET:

Marketing Materials1. Are any new marketing materials required for this launch? (list each with due date) Marketing 1a. Sales sheet 1b. Email 1c. Direct mail 1d. Advertisement 1e. Trade show graphic 1f. Other promotion3. Does this launch affect any existing marketing materials? (list each with due date) Marketing4. Are any new marketing claims being made? Marketing/Regulatory4a. If yes, what are they and what supporting materials are required? Regulatory4b. Is a change to the 510(k) or other regulatory filing required? Regulatory5. Update the website Marketing 5a. Copy: Review and update any changes in features and product claims Marketing 5b. Images: Find and replace all with new Marketing6. Add to the online store Marketing

Events1. Will this launch be unveiled at a key event or show? (list show and date) Marketing

Public Relations1. Are any PR events planned for this launch? (list and describe) Marketing

Manuals and Labeling1. Users Manual Marketing 1a. Translation to other language required? Marketing

1b. Users manual validation Marketing2. Are any quick start cards or other product materials required? (list each) Marketing 2a. Translation to other language required? Marketing3. What labels are required? (list each) Marketing/Engineering

Packaging1. How will this product be shipped? Marketing/Engineering

1a. Is a new box required? Marketing/Engineering1b. Is any special packaging material required? Marketing/Engineering1c Any additional materials to be developed or included in packaging? (list each) Marketing1d. Do our warehouses and/or distributors have any new requirements? Operations

Customer Service1. Is a new troubleshooting guide required for this product? Engineering/Customer Service2. Are changes to an existing troubleshooting guide required? Engineering/Customer Service3. What customer service training is required? Marketing

3b. Prepare training materials4. Schedule customer service training at least 3 weeks prior to launch. Marketing5. Schedule follow up training 2 days prior to launch. Marketing6. Update the price list Marketing7. Make sure Great Plains has the correct part number, product description and price Operations

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

Primary Care Physician

Physical Therapy

Orthopedic Surgeon

Hospital Out Patient Surgery Center

40% of referrals from Primary Care

Physicians

May send patient to either facility

depending on injury

60% of patients are self or ER referrals

Ouch!Patient Injury

Through The System

10/16/2008

Following The Injury

Emergency Room

Treats non- surgical patients

Hom

e C

are

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

Product Manager

Eastern Regional Manager

Western Regional Manager

Direct SalesCalifornia

MRWA, OR,ID

MRAZ,CO

Direct SalesMN,WS,

Direct SalesMI, IND,IL

MRNY,PA

Direct SalesTexas

OK MRLO,MISS,,AK,AB

OEM

VP Engineering

VP Marketing

OEM Management Team

CFO

Regulatory

Direct SalesFlorida

MRUT, NV

New England

ND,SD,WY

MRKS,OK Direct

GA,NC,SC

Clinical Applications

Legal

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!