In the search for growth, pharmaceutical companies often face harsh reality when new OTC launches flop because they did not match the market’s need. Dr Michael Scholl, Managing Director and Richard Laven, Consultant, Homburg & Partner, Mannheim, Germany propose a market-oriented innovation management approach, where pharma companies turn around the launch process, by first properly positioning products into carefully identified market gaps
When searching for growth opportunities, consumer health companies frequently experience deadlocks. Within these companies, various ready-to-launch substances together with compelling stories oftentimes exist. Basically, these substances are approved, registered and are said to be well-tolerated. However, it is unclear whether there is a market for them. Most consumer health companies in India know this problem.
Within numerous projects at Homburg & Partner, we have discovered that marketing these substances may end in a deadlock. In many cases, target groups are too small, marketing hurdles are too high, competitive environments are too intense, or customer demand is simply lacking. Positive feedback from enthusiastic individual users do not change this either.
The consumer health market is particularly vulnerable to these kinds of flops. In the prescription market, considerations focusing on the patient/ market potential or the willingness-to-refund respectively are always evaluated in advance due to exorbitant development costs. In contrast, the innovation approach occurs at-will within most medium-sized consumer health companies. Although multifunctional teams can roughly narrow down the suitability of their ideas, substantial development budgets are cleared repeatedly, without a systematic assessment of market acceptance. This way, overall development costs quickly exceed the costs of an early review. In case such an idea is driven by the board or by the head of development, the willingness to conduct an evaluation decreases even further, according to our experience.
Alternative: Market-oriented innovation management
In the previous paragraph, we suggested a review of the marketability of internally-developed product ideas in time. By doing so, we typically determine that only one-third of these product ideas at most are marketable. The reasons are diverse, ranging from the already described aspects to small emotional hurdles.
As an alternative to this approach, the principle of “market-oriented innovation” exists. At its heart, this means that the innovation process is completely reverted. Instead of starting with finding a substance and reviewing whether the own substance or the product idea would fit into a market, we define a systematic innovation process together with the consumer health company.
In a first step, it is necessary to define which indications generally align with the company. By conducting a workshop, we develop a growth map including a long list of suitable indications. The central question at this point concerns the overlap of selected indications with actual served markets. For instance, a very small overlap could lead to a lack of focus due to missing synergies in cultivating the market. This holds particularly true in the case that different indications imply addressing different patient groups, specialist groups or pharmacy shelves. This first indication map should prevent a lack of focus since a mid-sized consumer health company may normally serve only a small selection of indication fields.
In a next step, we analyse these indication fields and identify all contained sub-indications, including market size as well as market occupation. This way, we see more than 15 sub-indications in the area of the common cold that may be systematically-reviewed, for instance.
By combining the company’s strategy and capabilities with the market analysis, structured market gaps appear – market gaps of sufficient size and sufficient accessibility. With the help of this systematic analysis, products that are properly positioned into the market gaps can be expected to be most likely successful. Of course, further marketing hurdles exist, such as the danger of another company occupying this niche. However, it can be successively ruled out that a newly-developed product will fail due to existing market conditions.
In a last step, market gaps are systematically analysed together with research and development experts. These market gaps and possible product ideas should especially be orderly tested for possible positioning. For this purpose, Homburg & Partner developed a three-step positioning approach that can also be tested with doctors, patients and pharmacists. The core of these tests includes the localisation of sub-indications and the integration of indication-specific developed products into the therapy path. As a result, we clearly prioritise which positioning is most promising. Specifically, we clearly and systematically explain why certain positioning models should be rejected.
Based on this positioning measurement, an initial business case may be developed to show potential revenues contingent on investments. Here, initial costs or test market investments also play a role.
Case study
We have performed innovation assessments for a globally leading company in the consumer health market – also successful in India – for more than 10 years. Through these assessments, we have saved the company from several flops and have identified why certain products would not have a chance to be successful, based on the previously-described criteria. When the company decided against our recommendation to bring two products to the market, the launch failed because of the previously-predicted hurdles. The motivation to bring new products to the market was very low.
In an intense discussion with global management, business development and R&D leadership, we suggested a reversal of the innovation process and conducted a project on market-oriented innovation. Based on a systematic analysis of market gaps, we defined three innovation fields. Now, the company focusses on these three fields within its market approach.
The first innovation field was located among the three biggest consumer health indications. We systematically determined a free market gap and demonstrated that an existing substance could fill the gap via a repositioning strategy. With the help of positioning tests, we found that certain positioning options are dangerous due to competitive occupation, patient taboos or belittlement by medical professionals.
Based on our positioning analysis, a clear and sharp product profile, as well as patient profile, was developed. For this profile, patient and market potential was already validated by the help of our preliminary study. Resting upon an existing drug approval, the product at-hand was able to be newly positioned. Already shortly after market introduction (silent launch), plenty of pre-economic indications worked: the relevant target group accepted the product immediately and discussed it in social networks, medical professionals looked for information from the producer and sales representatives were approached regarding the product. A situation that differed from several other previous product launches: in spite of intense effort, there were no or even negative reactions from the market.
From our perspective, market-oriented innovation management is the key to successful growth of consumer health companies. There is no shortage of ideas in the industry; there is a lack of structured measurement of market gaps. Consultants like Homburg and Partner can help in successful growth of consumer health companies.
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