New Technology, Four Market Segments

So many opportunities, so difficult to choose where to focus.

Situation: A small company with proven technology was generating sales in four distinct market segments. The sales force wants the company to more aggressively pursue market A which represents 60% of sales, but markets B,C and D are also attractive and some in the company believe either B or C should be prioritized.


Background:

  • Technology included a small piece of capital equipment plus a disposable component
  • 90% of profits came from the disposable component

What our analysis uncovered:

  • Market A (surgical patients) ARP = $35M (ARP= US Annual Revenue Potential)
  • Market B (hospital inpatients) ARP = $700M
  • Market C (outpatient clinic patients) ARP = $1,200M
  • Market D (trauma patients) ARP = $10M
  • The surgeons in segment A were the primary decisions-maker, sales conversions were easier with them, which drew the sales force to focus on this segment
  • Segment B required coordination among several hospital stakeholders to both authorize the purchase and drive broad utilization
  • Segment C patients were widely distributed across primary care, hard to identify, and would require a very large and expensive clinical study

Conclusions:

  • Pursuing segment A was a dead-end and was the primary reason why sales growth was below expectations
  • The selling organization was not trained or incentivized to target and succeed in segment B
  • Segment C had very low ROI and would experience very slow adoption due to the issues identified
  • Segment D was too small to pursue despite outspoken advocacy by a few prominent physician thought leaders

Recommendations:

  • Target segment B exclusively
  • Retrain sales organization and change sales incentives  to focus primarily on utilization (not equipment placement)

Results:

  • The analysis was embraced at all levels of the organization (including sales)
  • Sales trajectory improved within a single quarter
  • Within 9 months sales mix trend had dramatically shifted in favor of disposables and average monthly sales per ‘active’ customer had already increased by a factor of 3