Launching Revolutionary Products in Slow-Changing Markets: Who to Target? What to Charge? When to Launch? (Pt. 1)
What makes a product or service revolutionary? Its cost/pricing structure, its impact on end-users, its potential to change the way a business operates, or the way it meets the decision maker’s needs? Naturally, the answer to the question depends on the solution at hand and what’s at stake. Ultimately, the marketplace defines what’s “revolutionary” and decides whether it’s ready to embrace the value proposition and adopt it as a solution. This is a particular challenge for companies in slow-changing markets: what might be considered a seismic shift in one industry might be a blip on the radar for another, making an innovative, new offering a relatively substantial risk.
How, then, does a company successfully come to a slow-changing market with a product or service that’s by all accounts revolutionary? Let’s consider an example inspired by Blue Canyon’s recent engagement with a leading medical products company. We stepped in to help them strategize their launch of an innovative product in the acute care space—a product with the potential to revolutionize the delivery of care in a marketplace that’s notoriously slow to embrace “seismic shifts.” By exploring the answers to three key questions, we were able to arrive at a reasonable and measured approach to launching their product.
A Health Care Industry Game Changer
Let’s start by setting the context: health care in the United States has always been slow to adapt to change—a byproduct of the fact that health care has been delivered to patients in more or less the same way for decades. Without clear, fact-based evidence proving superior efficacy, it can be difficult to introduce a game-changing new solution and get it to stick. But now, with the industry slowly shifting from fee-for-service to outcomes-based health care, it’s more critical than ever to prove a new form of health care delivery will not only benefit the patient, but also benefit a hospital’s bottom line.
It’s in this environment that our client had a new product it was ready to launch, albeit carefully. This product required higher material and production costs, making it higher-priced—yet it would increase patient experience and safety and decrease a hospital’s overall costs, all of which would potentially warrant a hospital’s increase upfront spend on the product. Our client was faced with a need to balance short-term success and long-term vision while accounting for customers’ perceptions of costs and value—and, indeed, willingness (or not) to change.
Three Key Questions to Ask of a Revolutionary, New Product
In order to come up with a strategy to move ahead with the greatest chance for success, we worked with our client to answer these critical questions:
1. Who will buy this new product? Segmenting the market would help determine not only which hospital systems are likely to value this new product, but also which health care professionals within those hospital systems will champion the product.
Related Reading: A Market-Driven Framework: Aligning Product Development and Markets
2. What will customers pay for this new product? Understanding how the value analysis committee(s) at each hospital decides whether this new product is worth the investment is essential for effective pricing. Customers need to conclude that the new product will provide enough value to the hospital system to justify its higher upfront cost.
Related Reading: How Much Will Your Customers Pay? And How Can You Capture This Value?
3. When to launch this new product? Predicting how fast the health care market will adopt this new innovative product can feel like attempting to look into a crystal ball. That’s why it’s important to consider multiple variables, such as the current medical product’s position compared to competitors; the type, depth, and number of case studies and/or clinical trials required to change perceptions; the switching costs involved; and the investment cost necessary to change processes and protocols.