The Limitations of Referrals
Carlton Hoyt
While less common in highly technical industries such as life science tools and services, it’s not wholly uncommon for entrepreneurs to “boot-strap” their start-up companies (try to start without external funding and race to become profitable before they run out of cash). Yet more common, even with outside investment, is under-capitalization. In either case, when small companies start to become low on cash, one of the first corners that often gets cut is marketing. Entrepreneurs sometimes think that word-of-mouth or referrals will be a sufficient marketing tactic to grow their business, but that is very rarely the case for life science products and services. Why is this the case? Customer interaction patterns. To illustrate my point, let me give an example of when referral-based marketing can be effective.
Take Twitter as an extreme example on one end. Twitter never advertised. They were established 100% on word-of-mouth marketing and over their short sub-5-year history have ballooned to over 200 million users and are now the ninth most popular site on the internet. You can top that off with an estimated valuation of $8 to $10 billion dollars. Why was twitter able to be so successful at harnessing the power of referrals / word-of-mouth marketing? There are two key factors. The first is that Twitter was something that people were excited about and talked about – obviously you can’t be successful at word-of-mouth marketing if you don’t create something that people want to talk about. That, however, is something that life science companies can replicate. The other factor, however, is something that life science companies cannot replicate, and that is customer interaction patterns. Anyone, anywhere could be a twitter user so long as they had a computer or a cell phone. This meant that in many markets everyone was a potential user, and connections between users and potential users could be drawn seamlessly. Interaction between the groups was very easy and close at hand.
Companies manufacturing life science tools do not have the advantage of everyone being a potential customer. Customers are usually grouped into discrete units with limited interaction – universities, research institutes, pharma / biotech company research centers. If a scientist at university X is very happy with your product, this scientist will tell others around him or her, but the pool of potential customers will often be limited to those within their institute since that is where the relevant connections involving frequent interaction stop. This is especially true in the more restricted-access and secretive environments of pharmaceutical and biotech laboratories.
You can analogize the situation to an infectious virus. If a virus can infect anyone, it will have an easy time spreading. If it can only infect a small subset of the population, however, and those populations are grouped together and quarantined from each other, the virus will have a very difficult time spreading. A similar quarantining happens to word-of-mouth marketing in the life sciences, so don’t rely solely on referrals to grow your market share. There are enough low-cost and effective ways of marketing to provide even cash-strapped bioscience startups high-ROI options to more proactively reach their target audiences.
Success in Product Development
Carlton Hoyt
For companies, success in life science product development does not mean completed development of a single product, or even successful commercialization of a product. Likewise, triage of one product development project does not equal failure. Successful product development lies in product development operations which best contribute to the success of the company. For any life science product development project, or for product development operations as a whole, projects must be evaluated for four key factors: value, strategy, balance, and resource availability.
Value is the most obvious factor by which to evaluate a product development project. There are many metrics by which to measure project value, such as net present value (NPV), expected commercial value (ECV), Productivity Index (PI) and a host of others. Our favorite metric is slightly different – We take the NPV of expected future profits, divide that by the NPV of project costs, then multiply by the probability of success. Note that for projects that are in progress, only future costs are considered. Money already spent can’t be recovered, so it is effectively irrelevant. Value, while very important, should not be the only thing considered. If your company is evaluating projects by value alone, you are likely making some poor decisions and not realizing it.
Strategy is crucially important in selecting life science product development projects. Companies must determine how the product will fit in with their greater strategic direction. A project that does not fit with the company’s strategy can shift focus away from more important areas, both within and outside of the context of product development.
Bioscience companies should also have a balanced portfolio of product development projects. Balance comes into play in many forms: long-term projects vs. short-term projects, projects with higher probabilities of success vs. those with higher potential returns, projects that are a close fit with corporate strategy vs. projects that are more loosely aligned, products that will protect markets vs. products that aim to expand the company’s market, etc. Too little product portfolio balance, either by too little diversity or too much, can increase risk.
Last but not least, life science product development must take into consideration resource allocation and availability. If an otherwise attractive project will hit a bottleneck because of insufficient resources, it may be more effective to begin another project first which better addresses current and projected resource availability.
In order to be successful, companies need to look at life science product development at a high level, ensuring that not only is each product right for the company, but all product development projects taken as a whole represent the best mix of projects for the company in terms of value, strategy, balance, and resource allocation. While many companies will rush to declare success based on individual projects, lasting success will come from a product development selection process that takes into account multiple factors and is geared to improve the company’s performance over a long term.
Encouraging Action
Carlton Hoyt
Life science marketing often involves an abundance of technical information. This is often for good reason – scientists are inquisitive and want to know what they are potentially buying. What amazes me is how often, in the whirlwind of technical information, lists of benefits, and descriptions of products, life science marketers fail to use effective calls to action. Alarmingly frequently, life science marketing materials contain a complete lack of any call to action whatsoever. There have been brochures, product pages on company websites, and a host of other materials where I get to the end and think “so if I’m a customer, how do I go about buying this or making an inquiry?”.
There is no excuse to not have a strong call to action in your marketing materials, be them print, web, or other. Calls to action to not detract from the content of the message, they don’t have to be distracting, and they are incredibly easy to use. Simply think at what point(s) a potential customer would want to place an inquiry or make a purchase and provide them simple, straightforward directions for doing so. If you want them to call to make an inquiry, tell them to call in order to do so. If you’d like them to fill out an online form, provide a link or put the form in a sidebar, etc. If they can purchase online, put an “add to cart” button on your site or direct them to your e-commerce page.
When you get your marketing message in front of potential customers and you have their attention, you have successfully completed one of the most difficult tasks in life science marketing. Don’t waste that opportunity by failing to lead them to the next step in the sale or inquiry process. Continue the engagement by using calls to action which inform them how to continue to the next step in the purchase process and encourage them to do so.
Leveraging a Weak Dollar
Carlton Hoyt
In one of the first posts on our new site we discussed some ways in which life science tools companies can take advantage of a weak dollar, but with a decidedly U.S.-centric focus. With the dollar index hitting a three-year low last Thursday and not far from an all-time low, we decided to revisit the topic, this time with an international focus. While a weaker U.S. dollar is most often a positive for U.S.-based manufacturers, it can pose problems for international companies that want to export into the United States. While there is no way for a company to circumvent the exchange rates, a very weak dollar may present a good time to act on certain cross-border opportunities for some non-U.S. life science companies.
The U.S. Dollar Index (5-year chart)
For non-U.S. distribution companies, the exchange rate probably doesn’t seem so bad. A cheap dollar can be a good time to stock up on inventory from U.S. suppliers. Manufacturers need to look a little harder for a silver lining as their products become effectively more expensive in the U.S. Now, however may be a time to look to the U.S. to source parts, etc. in order to decrease manufacturing costs. If you are willing to bet that the dollar is near a local minimum, you may even want to prepay for items that are sourced within the United States.
Ever think about starting operations inside the U.S.? Now might just be the time. One-time expenses will now be relatively cheap and operating costs will currently be low, allowing your company to mitigate the large capital outflows necessary to begin operations. (shameless self-promotion warning: looking for a way to less expensively start U.S. operations?) Speaking more generally, for non-U.S. companies, now is the time to execute dollar-denominated contracts.
The dollar may not stay weak for long. With expected budget cuts by the U.S. Government and tightening of fiscal policy by the Federal Reserve (including the end of the second round of qualitative easing) imminent, it is likely that the dollar will stabilize at the very least, meaning we are likely near or at low levels. If your bioscience company have a future expense that will be in dollars, you may realize significant savings by pushing that expense forward and executing now.
A Note on Off-Site Blogs
Carlton Hoyt
Going somewhat in step with our previous post on projecting expertise, I’ve noticed a recent trend of life science companies starting or sponsoring unbranded, off-site blogs. I have no problem with using such blogs as a marketing tool so long as the strategy for doing so is properly addressed. There are a lot of potential things that can be done wrong, strategically, and some key issues need to be considered before launching an unbranded off-site blog. Here are a handful:
- Scientists don’t like underhanded marketing. If you’re promoting your company or products and you aren’t forthcoming about self-promotion (for example, neglecting to mention that the blog is written by a company employee or that the blog is funded by your company), scientists will think you are trying to trick them and that will hurt your reputation.
- How will you target the desired audience? I’ve witnessed many of these blogs post information that doesn’t seem to have a well thought-out theme and end up being more general and less focused than the target audience. Remember the ultimate purpose: marketing.
- Set goals, and make sure they’re well-defined. What do you want to achieve? How will you measure success? If the blog isn’t meeting the required metrics, take it down and focus your resources somewhere more worthwhile.
- Have a valid reason for neither incorporating a blog on your main site, nor using your branding in a more prominent manner.
Off-site / unbranded life science blogs can be good marketing tools when used correctly, but all the rules of marketing still apply. Think strategically to make sure that you’re achieving your goals with such a blog.
Be The Expert
Carlton Hoyt
The life sciences are, almost by definition in being a science, a highly technical field. Most life science products, and certainly life science services, are of a similarly highly technical nature. At the same time, experiments are precious and expensive. In this environment, scientists want to be sure that the products and services they purchase will provide high-quality results, and they are often highly skeptical customers. For many small life science companies which may not have the strong branding or widely adopted products or larger companies, such skepticism can be especially acute. Making customers comfortable enough with your company and products to shake this skepticism can pose a challenge, but there are strategies that small life science companies can leverage to help preempt it. Among the best strategies is to project an image of being an expert in the relevant scientific areas. This requires two things: actually having expert knowledge and understanding, and successfully projecting that knowledge.
Being an expert is often the easier component of the strategy. Chances are if you are creating a product for a particular purpose you already have members on your team who are experts in the the relevant scientific area. There are rare situations where this is not the case, however, and the solution is straightforward – learn. Never will a scientist run from your company faster than if your customer-facing employees don’t know what they’re talking about.
Projecting your expertise is harder. Some customers will contact your company if they have doubts, giving you an opportunity to demonstrate your knowledge and ability to them, however many customers will never contact you in the first place if they question your knowledge and skills in key areas. This requires you to be proactive in projecting your expertise. You need to actively seek out opportunities to show the scientific community that you really are a top-caliber thought leader in your field. How can you do this? There are many ways, and here are a few ideas (this list is nowhere near comprehensive):
- Discuss new research and ideas in your field on social networks
- Present at relevant scientific conferences
- Author or co-author methods papers or other journal articles
- Make compelling presentations of your technology on your website
- Draft white papers
- Maintain a blog where you address current topics in your field
- Create a website with updated information relevant to your life science field
Scientists want to do business with people and companies that it has faith in, and a large part of that is faith that you have sufficient expertise. By effectively projecting the image of an expert, you will simultaneously improve your brand image earn the trust of scientists, effectively making them more willing to do business with you.
The Lost Art of Go / Kill
Carlton Hoyt
Great ideas are precious things. They are the fuel driving innovation, the sustenance of progress, the energy that powers success. Not all great ideas are so great in practice, however. In the life sciences, as in all industries, ideas that are put into action need to be periodically re-evaluated to make sure they are working out to be as good as we thought they were. If they are not, then we would be best off scrapping them and focusing our energy and resources on something else … but life science companies seem to have a very hard time doing so, and this inability is to their detriment.
For your information...
Want to learn more about go / kill decision making? You can read about the stage-gate project management technique, from which go / kill is based, on Wikipedia.The area where this lack of go / kill is most prominent and has the largest effects is product development. Life science product development projects have well-defined milestones and easily tracked metrics, yet go / kill criteria are usually nonexistent and when they are they are most often poorly defined and almost never strictly obeyed. Put simply, not having such criteria is a poor business practice and not obeying them is a poor business decision. Go / kill criteria are defined based on the risk at any point in time in comparison to the revenue potential. This information, which may be subjective but is still based on the best knowledge and information at the time the criteria is created, tells us whether we are likely to achieve our desired returns at any stage-gate (the point at the project when the go / kill decision is made) if we move forward with the project. If you are unlikely to achieve the desired returns, and resources would be better allocated elsewhere then the kill decision should be made, yet it very rarely is.
It is, to some extent, easy to understand why companies so infrequently utilize stage-gates successfully. Kill decisions are hard to make. In our business culture, killing a project is often interpreted as the project failing and this can cloud the business judgment of those on the team who do not want to appear to have been on a failed project. In practice, recognizing the need for a project kill and implementing it should be commendable, a gesture that the project team are willing to put the greater good of the company as a whole. Unfortunately, this rarely happens. No one ever handed out a “best project kill decision of the year” award. Kills are not seen as an achievement but project completion is, so most often projects push on even in the kind of adversity that makes desired returns extremely unlikely.
Other types of endeavors can benefit from stage-gate type go / kill decision making. For example, marketing campaigns can be periodically re-evaluated for ROI determination. If the ROI is not up to par, the campaign can be killed in favor of another which has a greater likelihood of success. Distributor / supplier relationships can be subjected to go / kill, and because of easily quantifiable metrics these decisions can be very easily gauged. Go / kill gates can even be easily and beneficially applied to the continuation of existing products. There are a multitude of other areas where life science companies can benefit from such gates as well.
Ensuring that resources are allocated to areas providing the greatest benefits is a cornerstone of a successful company. Ongoing projects and processes have a need to be periodically reevaluated to determine if they should be continued or “killed” in favor of other more promising endeavors. Despite this, life science companies rarely use go / kill decisions. Implementation of stage-gates and proper adherence to go / kill criteria will help life science companies ensure that that their resources are more optimally allocated and utilized.
Ion Torrent’s Apple Spoof
Carlton Hoyt
So I ran across Ion Torrent’s / Life Technologies’ spoof of Apple’s “I’m a Mac” commercials, where Ion Torrent rips into the Illumina MiSeq a bit … okay, more than just a bit, the Ion Torrent attempts to pretty much tear apart the MiSeq in comparing it to the PGM. If you haven’t seen it, take a look…
UPDATE: As of 4/11, Ion Torrent has made the video private and it is no longer available for viewing. It seems they didn’t appreciate the mixed feedback they were getting. … UPDATE #2: And as of 4/12 it’s back! I guess Life Technologies decided a little bit of controversy might not be such a bad thing after all.
I commend Life Technologies’ marketing team for their guts to start an advertising war. It’s something rarely seen in the conservative world of life science marketing. If they believe they can out-market Illumina, then this tactic should benefit them long-term assuming they actually succeed in doing so.
That being said, there is a problem… Life Technologies just put a whole lot of cards on the table with that ad.
Part of the reason Apple’s strategy was so successful is, beyond the obvious requirement of getting the audience’s attention, it was a rapid-fire assault of consistent marketing messages highlighting various reasons why a Mac is better than a PC. People wanted to see Apple’s ads – most were very unique, some were funny – and Apple kept them coming. They used them in fantastically creative ways, such as on the New York Times homepage. They were about 30 seconds each and mostly focused on one small aspect, such as a positive review, hardware compatibility, bundled software, security, OS stability, etc. They showed their hand slowly which allowed them to sustain the campaign.
Life Technology / Ion Torrent did not do that. In their minute and twelve second ad, they talk about price, run speed and the 6 month delivery time of a MiSeq. There go your three big competitive advantages, all right there in one ad. Now perhaps this was calculated. Perhaps Life Technologies expects Illumina to pull a Microsoft and have a weak, if any, response, but counting on them to do so would seem premature at this point.
If Life Technologies spoofed the ad well and captivate their audience with this ad, which I think they’ll succeed in doing, then they could have drawn a lot more value from turning a single, highly effective ad into a highly effective ad campaign. They could have continued to engage the audience in the future, releasing a series of ads every month or two for a year. While I could see this video going semi-viral in the scientific community (albeit not nearly as successfully as Bio-Rad’s PCR music video), a sustained campaign could multiply that success. As it stands, especially if they continue to play their cards this quickly, I don’t think they’ll be able to turn this ad into such a sustained marketing campaign. If I’m right, they now need to hope that Illumina doesn’t have too many cards up it’s sleeve.
Illumina, in the meanwhile, needs to not pull a Microsoft. It certainly can. The brand image, while perhaps more polished than Ion Torrent’s, certainly isn’t of an old, dated, out-of-touch behemoth. It can strike back very well with a bit of creativity…
Send the Right Message
Carlton Hoyt
Life science marketing can be a difficult task, especially because scientists often don’t like to be marketed to. They are particularly adept at identifying marketing and ignoring it. With the limited chances your company may get to win over life scientists, you need to make sure you send the right messages to the right people using the right mediums. If your sales aren’t where you think they should be, throwing more money at the problem in the form of more marketing or advertising may not be the answer, especially if you have a good sized marketing budget already. Poor marketing ROI can be a symptom of many things – sending the wrong or sub-optimal marketing message, sending the message to the wrong audience, using the wrong medium to convey the marketing message, etc. In order to identify what the cause is you need to take a hard look at your marketing. You need to perform marketing research.
The American Marketing Association defines marketing research as “the function that links the consumer, customer, and public to the marketer through information–information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process.” Simplified, marketing research is the tool that is used to determine the best way for marketing to be performed.
Life science marketing research can answer many questions. Some examples include: What is the best medium to market to a target audience? What is the best message that we should use, and / or what benefits of our life science research tool should we highlight? Are we marketing to our customers enough? Are we marketing to them too much? What can we do to improve our marketing ROI?
Marketing, at its most basic, seems easy. Convey the benefits to the customers and the customers will buy the product, correct? Not necessarily. It’s very easy, and often the case, for a company to have a different viewpoint than the customer or overlook something that is important to the customer. (Some of the most hilarious marketing message gaffes come from mistranslations and would have been readily and easily avoided if the companies spent anything on marketing research. If you’d like some hilarious examples you can read about some here.) Marketing research helps you be on the same page as your customers.
You probably wouldn’t make product development decisions based on a gut feeling, so why make marketing decisions based solely on instinct? If your company is concerned with making sure your marketing is optimized and you’re getting the most from your marketing dollars, then spending a few of those dollars on marketing research can go a long way for you and supercharge your marketing ROI.
Managing a Product Portfolio
Carlton Hoyt
All companies making and / or selling life science tools and services have a product portfolio, but often these portfolios are not viewed in a strategic manner. While aligning current company competencies with current marketplace needs is a simple way to have successful products, a broader view of the product or service portfolio is necessary to ensure greater corporate, and long-term, success. In this post, I’ll go over some of the broader considerations of managing a product portfolio.
Note that many companies discuss product portfolio management to effectively be the new product development project selection process. While new product development project selection is an important part of product portfolio management, I believe this viewpoint to be too narrowly focused, as existing products need to be factored into portfolio management as well, and there are issues related to portfolio management that are indeed independent of new product development. I will discuss new product development project selection in more depth in a later post, as it is a critical business process, but for this post I will simply try to address some common questions relating more globally to product portfolio management in the life sciences.
How many products are the right amount?
Deciding how many products should be in your product portfolio is a difficult question, but there is a correct answer that requires balancing a multitude of factors. First of all, and arguably most importantly, is the amount of products that you can profitably develop. If you have the skills and the market need exists for more products, then building more is usually a good idea. Also important, however, are risk and the scope and goals of the company. If your product portfolio is too small or too narrow, then you may be exposing yourself to a large amount of risk by putting too many eggs in one basket, so to speak. On the other hand, if you have too many products you may lose focus of your scope and your goals, or simply lose the ability to effectively maintain or all of your product lines.
Should product X be in our product portfolio?
Again, if you have the skills to build a given product and the market need exists for it, then it is usually a good idea to build it. Before diving in head first, however, be sure you know the opportunities and threats of doing so. Also, if a given product is sufficiently outside the rest of your product portfolio, then other problems may arise. Your customers not view you as having a competency in that area and this can hurt customer confidence in that particular product or product line, adversely affecting sales. Furthermore, a disparate product from others in your portfolio may incur large marketing cots, as the effective economies of scale achieved by co-marketing (effectively marketing for many products at once) may not exist. For older products, you periodically need to ask if the product is still worth supporting. This should not be a simple question of if the product is obsolete, however, but rather will the profits from making or selling the product meet the desired rate of return. Ultimately, strategy and rate of return are the most important deciding factors in deciding if a product should be developed, maintained, or scrapped.
How do I know my product portfolio has the right mix of products?
Your developed product portfolio should accurately reflect your core competencies and the current needs of the life science research market while your product development projects should be addressing anticipated future needs. Make good use of market research to figure out exactly what those needs are with respect to your business.
Notes for life science distribution companies
If you’re a life science distribution company your job of product portfolio management is in many ways much simpler since you have no product development costs. However, there are still costs associated with bringing on a new product or product line, so having as large an offering as possible is often not a good strategy. Also, consider your strategic positioning within the life science marketplace and align your product offerings to that positioning. If your strategy involves certain segments of the life science market, leverage your product portfolio to gain a reputation as an expert “go-to” seller within that market segment. Since you have less variables to deal with than manufacturers, fully-quantitative, even automated, processes for dealing with portfolio management processes are also sometimes possible.
Effectively managing your product portfolio will not only ensure that your business is profitable in the short- and mid-term, but by aligning with strategies and goals can help lead your bioscience company to long-term success.