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Next generation segmentation for medical device OEMs – Part 1

The Minnesota miracle?

By most accounts, the US state of Minnesota is a worldwide Mecca for healthcare. It boasts a healthy population, world-class medical institutions and low costs for high-quality care. This small Midwestern state is a model for what healthcare could be for the entire United States. Or so it would seem.

In January 2016, the Minnesota Department of Health issued a wakeup call. The 35% of residents with chronic conditions – diabetes, asthma, cancer, and heart disease among others – account for a full 83% of all state healthcare expenses. To put it in terms of individual patient spending, Minnesota spends $12,800 per year to treat chronic conditions versus $1,600 for everyone else. For those of you doing the math at home, that’s about eight times more.

“We cannot afford to treat our way out of this crisis,” said Health Commissioner Dr. Ed Ehlinger. “We must more strongly focus on preventing chronic disease or delaying its progression by investing in healthier communities, public health and primary care.”

He’s right. But how? Put simply: Chronic conditions must be treated more cost-effectively. For medical device manufacturers, one of the most striking implications is the need to treat patients at home with cheap, effective technology. Those devices must communicate securely with care professionals. And they must provide data to improve individual patient outcomes as well as improvements in population-level cost/quality of care.

Therein lies the business opportunity for the medical device community. Your devices are going home.

Patients are your next customers: The 7 driving trends

Rethinking medical devices for this brave new world is a significant technical challenge. Engineering that balances user-experience and cost-effectiveness is a see change in approach for these organizations. While not insignificant, this is a fairly straightforward process. Understanding buyer behavior of the end consumer? Not so much.

Medical device manufacturers will be forced to make the investments necessary to become experts in B2C (Business to Consumer) marketing strategies in order to achieve consistent growth over the long-term. Companies that fail to do so will not be viable in as few as five years.

But why does this shift toward consumer-use of medical devices mean any change in the marketing approach? Why can’t medical device manufacturers continue to market and sell through established physician specialized channels? Megatrends in demographics and healthcare delivery are driving this change.

Trend 1:

Aging of the population – most spending occurs in the final years of life and in the management of chronic conditions (as we have already seen in Minnesota)

Trend 2:

Building from Trend 1, the overall increase in healthcare costs has been driven by an explosion in innovations that extend quality and quantity of life (big markets attract big investment which yields big results)

Trend 3:

Building from Trend 2, the reduction of adjusted median income of the average household over the past 30 years calls into question affordability of healthcare (patients want and need these advances, but have trouble affording them)

Trend 4:

Building from Trend 3, the ACA and HDHPs/HSAs are placing more of the ownership of healthcare decisions directly in the patient’s hands (patients increasingly will need to make hard choices about their care balanced against affordability)

Trend 5:

Building from Trend 4, consumers have more information than ever about how to do this effectively (but much of the information they have might be of dubious quality)

Trend 6:

Building from Trend 5, they are getting much of this information from the consumer technology companies entering the market (Google and Apple are spurring disruption by resetting the expectations about user experience and quality of “medical” devices – especially around connectivity to the internet)

Trend 7:

Finally, building from Trend 6, the regulatory environment, while adapting to the changes, is woefully behind the curve (in other words, don’t expect clear rules of engagement)

Bottom line: These seven trends are driving the entire medical device market from B2B to B2C. Most medical device manufactures simply aren’t ready.


Next: In Part 2, we explore 5 segmentation skills needed to help medical device OEMs set the stage for success in a B2C world.


Jason Voiovich
Chief Customer Officer


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