Marketing Mix, A Strange Brew

1. Marketing Mix, A Strange Brew by Harvey Hauschildt hauschildt1@msn.com

2. Market research. Product development procedures. Vetting products and ideas. OEM/Private Label and Licensing agreements. Tales from the Crypt, when things go terribly wrong! Overview of Discussion

3. 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.

4. 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?

6. 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

8. 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.

9. Current Project • Project: Penetrate hospital market. • 20 million dollar company • Dominates sports medicine, Physical Therapy and well regarded in Orthopedics. • Where to start?

10. Expansion Markets • Hospitals • HMO’s & GPO’s • Military & Veterans Hospitals • Surgery Centers • OEM/Private Label Agreements • International Markets

12. 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?

13. 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

14. 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

15. 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”.

16. 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.

17. 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 andeconomic benefits of the product and be conclusive in their outcome.

18. 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.

19. Going To Market • Traditional hospital distribution channels • Direct Sales Force • Manufacturer Representative • Distributors • OEM/Private Label Agreements

20. 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

21. 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.

22. 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.

23. 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.

24. 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.

25. 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.

26. “You can't build a reputation on what you're going to do.” Henry Ford

27. 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.

28. 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.

30. Tales From The Crypt • R.I.P.

31. We Learn More From Our Failures Than Success

32. 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.

33. 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.

34. 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.

35. 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.

36. Lessons Learned By Companies • Being Stupid Costs Extra!