There are two basic approaches to market alignment and validation depending on your appetite for risk: Comprehensive Market Research and Real Time Go-To-Market Validation. Ideally they can be combined.
1. Comprehensive Market Research
Comprehensive healthcare market research is just that: using a combination of state-of-the-art primary and secondary research methods, you examine both the current market for similar products and services and the potential total market by individual segment and sub segment.
Optimal market segmentation is somewhat of an art. Assessing every possible definition and combination of segment(s) is typically not practical. Experienced market strategists and researchers can identify the segments or segment combinations most likely to optimize growth for your particular set of differentiated products and services.
So instead of examining every possible industry, size, and geographic combination, you might, for example, decide that your offerings are most appropriate for multi-hospital delivery systems with a combined bed count over 600 with a mix of 50 % commercially insured and at least 30% Medicare insured patients in the eastern half of the continental US. So you might still sub segment these by metro area and revenue. But now you’ve eliminated from the research scope smaller and individual hospitals which can’t operate at the scale your product requires to show value. And you’ve eliminated targets in the western US where you don’t have delivery, implementation, and service capacity.
For each segment of interest, you will want to value the opportunity (potential market size) in that segment. This should take place in several steps or levels. At the first level you should assume everyone buys what you are offering at the price you are offering it. You should also assume infinite capacity on your part to pursue, capture, and deliver this business. The result should be framed as the total theoretical market value of interest.
The next step is to discount this theoretical value by segment by considering the many service-offering and delivery factors in the capabilities assessment above. In other words, how receptive (how well aligned) are your potential market segments to what you offer and the way you offer it? The objective here is to estimate a potential market value by segment that is realistically attainable with existing capabilities and resources.
Most critical is to understand the real buyer objectives of each potential market segment. What are their needs relative to your product and service and what drives their buy decision? Understanding how your target market defines value is obviously critical. You’ll want to align your capabilities as closely as possible with buyer preferences and priorities.
The most common categories or potential sources of value include cost (your price), quality, user experience or satisfaction, purchasing experience, and service levels defined appropriately for your product or service. But the details are important.
- What precise metrics and measures do prospects use to define valuable quality, satisfaction, or service levels?
- What are they willing to invest including not only your price but their internal cost of implementation and utilization?
- Most importantly, how do they weight these factors relative to each other? Be careful here. Frankly there are some weightings that are more politically correct to express to researchers than others. Your research needs to dig past simply asking the question and instead attempt to determine to what extent price or quality or even some internal political objective is actually the dominant decision factor.
If the research on current similar products and services and “what if” prospect inquiries indicate a high level of alignment between what and how you are offering, what and how they want to purchase, and your ability to pursue and sell to that market, then your discount from total theoretical to potential attainable market value should reflect that strong alignment.
But misalignment on some factors may create barriers indicating a need for a higher market segment valuation discount. Portions of your potential market:
- May not be interested in your services at all.
- May only be interested in a subset of your offerings.
- May want your services but will not consider switching from your competitor.
- Won’t be willing to pay your prices.
- Won’t like your reputation, brand, or marketing approach.
- Like your product but not your delivery or contracting approach.
- Will expect to have related or “adjacent” services offered that you don’t currently offer or package together.
The factors that are likely barriers causing you to miss out on revenue opportunity represent “capability gaps”. Many, if not most such gaps, can be addressed through investment of one type or another.
At this point, you will understand the upside revenue potential for your services based on alignment of current capabilities and prices without consideration for any investment required to attain that upside – in terms of additional marketing or delivery capacity. You also have not yet valued the potential of adding related services that buyers want and expect to find as part of a total package offering – without which they may not buy at all. This capability gap and potential market segment valuation information will all be input to market strategy development (discussed below).
2. Real Time Go-To-Market Validation
Comprehensive healthcare market research requires a relatively significant investment. And it can take some time. The benefit of the approach is that a marketing strategy informed by comprehensive market research as outlined here significantly reduces the risk of failure. You are more likely to go to market pursuing the highest value targets with the highest return on investment in priority sequence with the highest probability of success.
In some situations, however, you might feel that you already have a good grasp of your target markets and feel that your alignment with them is strong without making further investment in comprehensive research. And for any variety of reasons you may feel that your time horizon to generate new revenue is so short as to preclude the time necessary for solid research.
Some organizations in this situation use a Real Time Go-To-Market Validation approach.
This approach is usually initiated with a short, anecdotal, and directional market validation followed by immediate identification and pursuit of target prospects. Real Time Go-To-Market is characterized by experimentation, learning, and adjustment. Basically, you attack the market with your initial product and service set, delivery approach, and pricing and see to what extent they result in successful sales. You adjust on the fly. Market alignment is indirectly measured in new contract flow and revenue. Potential market valuation is not really done unless success is limited by lack of alignment related to capability barriers. At that point, where possibly significant investment to address these barriers is required, there is usually more justification for careful potential market valuation.
Often existing resources are augmented by outside expertise in order to support the concurrent sales, learning, and adjustment activities.
Many leading organizations use both approaches concurrently. They value the benefits of comprehensive, research-driven marketing strategy planning and execution but are looking for real world validation and short-term revenue from the tactical real time and immediate go-to-market approach. The two approaches when performed concurrently should cross inform each other to the benefit of both.
To learn more about how your healthcare enterprise can benefit from strategic healthcare market research and planning, check out the free eBook: