If you are reading this post you are probably deserving of some congratulations. Your life science tools company has grown sufficiently to consider starting a subsidiary in the world’s largest market – the United States. Before doing so, however, there are many issues that you need to consider to make sure it’s the right move for your company. In the right situation there can be many benefits, but it can also be a waste of time and money if the need does not exist or planning is poor.
Before I get into the topic, I’d like to offer a disclaimer. BioBM Consulting consists of professional life science businessmen, marketers, and web experts. We are not lawyers or accountants. We strongly recommend that you seek the advice of a lawyer and / or financial expert to ensure that you fully understand the legal and financial considerations of establishing a subsidiary.
That being said…
In order to make sure that your subsidiary will deliver the value your company hopes to realize from it, carefully consider the desired benefits and create a plan to help ensure that value is actually delivered. In other words: why do you want to open a U.S. subsidiary? Is a subsidiary the correct solution to realize the desired benefits? If so, how? What will your company and its subsidiary need to do in order to deliver those benefits? Develop a plan that takes into account your company’s needs, the desired time frame, and the things that need to be done to meet your goals. Make sure that your goals and plan is realistic and that execution is feasible for your company.
That being said, there are many potential benefits that may be realized from establishing a U.S. subsidiary. For example:
- North American consumers may be more trusting of your company if it has operations in the United States.
- You will have easier access to the U.S. life science marketplace.
- Improved logistics. Your products will be more readily available to North American consumers and delivery times can be greatly improved
- Your subsidiary will be able to do business with customers across the Americas during normal business hours.
- Your company will have much greater control over U.S. sales and operations than it would if it simply sold through U.S. distributors.
- There may be a tax advantage over simply having a U.S. branch of your current company.
- Your company may be protected from the much of liability of your U.S. operations.
A U.S. subsidiary can be a great way to improve your company’s access and market penetration in the world’s largest life science market. Knowing what your goals are and establishing a plan to realize the intended value can help you get the most out of a U.S. subsidiary.
Life science companies frequently underestimate the value of building a strong brand. This is perfectly understandable – very often these companies are started by scientists or engineers and simply don’t think in terms of abstract marketing principles. Branding, however, is extremely valuable almost regardless of the product or service your company offers. The benefits and value created can be truly transformational, but care must be taken to establish a brand that facilitates such value creation. In this post, I’ll briefly go over why strong branding is valuable, provide some tips and thinking points on how to build a brand, and give you a ideas to actively leverage your brand once you’ve built it.
Why Branding is Valuable
As they are in their scientific endeavors, life scientists are notoriously cautious in their purchasing. They appreciate and value methods and materials that have been tried and tested. They want tools that have been published. They appreciate antibodies that have worked for the lab next door. Not everything relies solely on prior use, however. Scientists also give a degree of trust to certain companies and product lines, and this trust can be built and retained through the creation of a strong brand. Branding is the carrier of who you are or what your product is. Having no reputation at all is almost as bad as having a bad reputation, and having an indistinguishable brand is effectively the same as having no reputation. Without reputation, you cannot have that trust and confidence that is vital to life scientists in their purchasing decisions. In order for the “I’ve [seen / heard about / used] that before” factor to kick in, life scientists need to recognize your product or company (or, preferably, both). Along the same lines, strong branding helps you attract repeat business and creates a memorable impression among your customers. Once you’ve built a reputation and captured the customer’s loyalties, you’ll be able to spend comparatively less on marketing in order to maintain your market share.
Branding also gives your company a way to stand above competition is a crowded or commoditized marketplace. I won’t get into this because we discussed this in greater depth in a post about how branding can help companies avoid commoditization of their products a few months ago.
Establishing your brand as high-value also allows you to fetch a higher price for your products. By building your reputation through consistently high quality, value-added support and customer service, knowledgeable and helpful sales staff, etc., the overall higher value to customers that your brand conveys can be captured through higher pricing. Similarly, the higher perceived value will effectively entrench you against competition with weaker branding.
Branding also is used to establish market leadership. By “market leadership” I do not mean the company with the greatest market share, but the one with the greatest influence and respect within the marketplace. Being a respected leader offers you many strategies that may not be available otherwise and improves the effectiveness of many customer and business-to-business interactions.
Building Your Brand
When building a brand, you want to do two things: 1) make sure that your brand leaves an impression, and 2) control what that impression is. Obviously you want a positive impression, but your brand can be so much more than that. Think about how can your brand stand out from the rest. Let it express who you are, what you do, what your values are, or any combination of those. Use your brand to help captivate your audience. Does Thermo, for example, have a strong brand? Of course, but don’t think that putting your name in bold red letters on your products will be captivating. Thermo has the advantage of having those bold red letters in many places in labs across the globe and being a household (or perhaps I should say “lab-hold”?) name. Small life science companies will almost never have that benefit. Stop and think about what you really want your brand to say about you and creative and interesting ways to express that.
Once you have an idea of how your branding should take form and be expressed, be sure to express it across platforms. Your logo, advertising, website, product design, packaging design – incorporate your brand wherever you can to build and carry your reputation. Just be sure to express it consistently – you don’t want to send mixed messages to your target market.
Leveraging Your Brand
So you’ve built a strong brand, or are at least on your way. Researchers in your market know who you are and you’ve gained some trust and repute. Now what? As previously mentioned, a benefit of strong branding is being able to comparatively spend less on marketing to maintain your market share, but my suggestion would rarely be to simply benefit from the cost savings (unless you really need the cash). Instead, look at ways you can utilize your brand to continue to build your market share. I have mentioned just a few potential ways below.
One such way is to cultivate brand champions. Find who your best and most loyal customers are, those who hold your company and products in very high regard, and build personal relationships with them. You can get testimonials from them, use them as referrals, ask them to beta test new products, etc., etc. Be nice to them and they’ll spread the word of your company and products to those around them as well.
Having strong branding allows you to be far more effective at crowdsourcing. Be being a trusted, reputable brand, more customers will be willing to actively engage with you. Want to know what features you should add to your next product? Ask your customers. People want to be part of something important, and a strong brand makes you look more important to the crowd.
Perhaps one of the most powerful ways of leveraging strong branding is to put your weight into determining the future of your market. If you are becoming one of the most trusted brands in your space, you get to be the pioneer. If you’re developing innovative new products or technologies, put the weight of your brand behind it. You can even attempt to define future standards (for a familiar example outside of the life sciences, you can look at how Sony almost single-handedly killed the HD-DVD when it released the PS3 with a Blu-ray player).
Building a brand is not a simple task nor one to be taken lightly. Your brand will effect how customers everywhere perceive your products and your company, and the perceptions you build in the eyes of scientists will not easily be changed. Take care to purposefully build your brand and you’ll be able to grow your market share and realize a value that is difficult for your competitors to shake.
A lot of small life science companies, including those manufacturing products or offering services but especially small distributors, are unsatisfied by their penetration of the pharma / biotech markets. While academic labs are often quite open and accessible, access to labs in industry is extremely restricted. Because of this, it is very important to have an engagement strategy and make good use of your “ins” if you plan on increasing your sales to the pharmaceutical and biotechnology research markets. The best plan for your company will differ based on your company’s positioning, but I’ll quickly go over a few general strategies including some which are useful for all companies.
If you manufacture a research tool and do not have an outside sales force, you will likely be selling to industry via a distributor, at least in part. The easiest way to obtain better market penetration in pharma / biotech is to work with a distributor who has strong sales in those sectors (of course, the same guidelines should apply for selecting any distributor). Trying to sell directly to pharma in this circumstance would effectively be akin to reinventing the wheel. Don’t know what distributors have good penetration in those segments? Ask them. If they are interested in distributing your product, they’ll want to make themselves look good and will likely offer a reasonable metric from which you can gauge their pharma / biotech market penetration.
If you are selling to pharma / biotech companies directly, you likely either offer a high-value, high-complexity product or service or you are a distribution company. The precise strategies for the two would be different, but on the more generalized level appropriate for this discussion they appear quite similar. In either situation, perhaps the best way to get an “in” is to hire a sales representative with contacts to researchers, lab managers, or purchasing managers in industry. In this manner, you can utilize (and perhaps internalize) the rolodex of your new reps who have more extensive industry contacts.
Regardless of your company’s positioning, your sales to industry can benefit from good CRM practices and fully leveraging high-quality lead generation techniques. Draw potential customers in pharma and biotech to your product through advertisements, search engine optimization, and / or face-to-face at conferences and capture their information through requests for more information about your products, demonstration requests, special offers, etc. Once you have the information, you have your “in”. When industry prospects are converted to customers, manage these high-value relationships to allow you to maintain your access to their research facilities.
Many pharma and biotech companies purchase through procurement agencies such as VWR or Fisher. Be sure to maintain a good relationship with these companies. While they have been known to ask for something in exchange for nothing, they also try to steer the purchasing decisions of scientists to products which offer profits for Fisher and value for the customer. It’s not always possible, but getting your products a preferred status within their purchasing departments can be a significant boon to sales.
Pharma and biotech companies are notoriously difficult for salespeople to gain access to and marketing and selling to their scientists can be difficult. If you would like to improve your access to these markets, be sure to execute a plan which allows you to both create and capitalize on opportunities to get an “in” within biotechnology and pharmaceutical companies.
Small companies often have trouble with gaining traction for their new products. Researchers in the life sciences are notoriously hesitant to change brands or adopt new technologies. Once a lab has a tried and tested method and tried and tested products, good luck getting them to change anything. Furthermore, large life science companies with huge marketing budgets and well-established and trusted brand names add to the difficulty of market entry in many markets. With these factors stacked against you, and compounded by having a limited marketing budget to work with, how can you compete and gain a significant market share? The key to doing so is often not what a business owner or product manager wants to hear, but it often the best way of proceeding – be patient and think small.
The Pitfall of Impatience
Let’s be both frank and realistic for a moment – your marketing budget isn’t unlimited. In fact, if you’re a small life science company entering a new market your budget is very likely far smaller than that of at least some of your competitors. Canvassing a large market or advertising in highly visible, broadly targeted media (by, for example, running print ads in Nature) is very expensive and can quickly drain a limited budget. Even for a product that would have broad appeal and for which that might seem like a reasonable strategy, it is usually less efficient than other methods since in more mainstream media your marketing messages are still effectively trying to go toe-to-toe against those of your entrenched competitors. In short, trying to market your new product to everyone at once is a good way to burn through your marketing dollars with little return. If you do go that route, you better have some extraordinary benefits that you can convey extremely well, or have very deep pockets.
While you may think of a new product’s lack of market penetration as a curse, you also need to be able to view it as a benefit. You don’t need to protect a vast swathe of the market from competitors and you can pick your battles (read: you can pick the battles that you can win). Think about a certain market that your product would be more suited for than the competition. Does it have a certain set of features that would make it more suited for use in a particular method? Does it more easily integrate with certain equipment or processes? If not, can you design something in that would give in an advantage in a particular niche? Even if your product design has no niche focus, can you draw on the benefits of the product to show how these advantages could be leveraged by a particular audience? The answer to the last question is almost always yes (if it’s no, you’re probably just not giving it enough thought – call me and I’ll help).
Once you’ve determined a target market to focus on, you can market to that audience specifically. This will be more effective since you’ve tailored your marketing (and maybe even your product) to that audience, and will also be a good deal cheaper. Don’t forget to foster the ever-important customer interactions and feedback that any early-stage product needs. Chances are your entrenched competitor will not want to fight it out in the trenches over a niche market, and your product will gain significant market share within that niche. From that niche, your product will then be in a much better position to roll out your product to other segments of the life science research market.
When viewing the websites of companies selling life science tools or services, I frequently notice that many companies have problems with online content. Whether it is a general lack of content, quality of the content, or presentation of the content, one or more of these things is often a problem area for many life science tools companies, and chances are that these easily avoidable problems are costing you valuable sales and / or leads.
Quantity of Content
There’s a balance that needs to be struck with the amount of content that you create for your products. From a search engine optimization standpoint, more information is better, period, but SEO is generally not the most important thing to consider. From a user experience standpoint, which is generally more important, you want all the information that a prospective customer would want to be able to find, however not so much that any given piece of information becomes lost in a sea of content and is difficult to locate.
Generally, you should have enough content to do these things fairly thoroughly:
1) Identify the problem that your life science product or service is solving
2) Describe your product / service and how it solves the problem
3) Illustrate the comparative advantages to other solutions (value proposition)
4) Urge the prospective customer to the next step with a call to action
At worst, I’ve seen products described with two-paragraphs or a list of features and no accompanying documents. This is obviously not sufficient for ANY product. Even many products that have multiple pages of content, however, do not have all the content they need because they do not do those four things I listed above. It does not matter if you’ve talked about every bell and whistle that your product has if you don’t take any time to tell a prospective customer why they need it. Likewise, it doesn’t matter if you’ve masterfully illustrated a problem and convinced the researchers that they need a solution but have not communicated how your problem solves it. Every piece of the puzzle needs to be in place.
Quality of Content
If you have done those four things identified above then you should have plenty of high-quality content, right? No, it’s not quite that simple, and there is plenty more that you can do to communicate value. Do you have results showing how your product can improve a particular experiment or process? Show them. Do you have a relevant, attractive marketing video that you can add to the site? Do so. Do you have a list of protocols that are already developed for your product? References from published literature? Testimonials from customers? All of these things add to the quality of your content and, in turn, the perceived value of your product. Just make sure that this auxiliary content improves the case that you’re making when talking about those four key things (problem identification, product description, comparative advantages, call to action).
Also, when analyzing the quality of your online content, don’t forget to think of SEO. For example, google and other search engines like text and content that is directly on your website rather than hidden in a pdf or other document. As another good practice, don’t forget to include appropriate keywords that you’d like you site to come up in searches for. (Generally, any time you’re doing any sort of web design, whether a complete site build or a simple content change on a single page – always think of SEO. It never hurts, and always helps.)
Presentation of Content
This is the hardest part of content design, but also the part that will allow you to differentiate yourself the most from your competition, as you can absolutely make your product shine if you do it well. Presentation has to allow users to easily navigate your site and find the information that they want while accommodating all the information that you need to include. You should think about the user experience from the standpoint of prospective customers. Who will they be, why are they on your site, and what will they be looking for? Design your content to be presented in a way that takes them from the entry points, guides them through the information that they want to find (and the information you want to present) and funnels them into the beginning of the sales process.
If you’re not already, use Google Analytics. It’s free, and it’ll help you analyze the traffic on your website so you can help optimize the layout of your content. By knowing the traffic patterns on your site, you can improve your site and make adjustments to help drive researchers and purchasers to your most valuable content and into the sales process.
Remember that online, your website is who you are. The same can be said for your products and services. Content that is compelling, attractive, professional, well organized, well written and well designed will reflect well on your company and your product. Knowing what you need to say, how you need to say it, and how you need to present it will attract a larger and more relevant audience and improve your conversion of visitors into leads and sales.
Private labeling presents a lucrative opportunity for many life science businesses. It can rapidly and dramatically increase market access and also transfer marketing, sales, support, and other costs outside your company. On the other hand, it can incur redesign costs and introduce inefficiencies that weigh on your profitability, hurt distributor relationships, dilute your brand, and have other potential negative consequences. The question of whether to allow private labeling, and under what conditions, is a complex question with many factors to consider. I will go over some common issues and considerations so you can be more prepared to answer the question: To private label or not to private label?
Perhaps due to my having a strong background in issues pertaining to distribution, the first issue that I often address is how a potential private-label partner would fit into the current distribution network. An obvious ideal situation is one where the private-label partner would serve in area where you are looking to increase distribution anyway – perhaps one in a region where your distributors are not meeting targets or where you have no distribution in the first place. Forging a private label agreement with a company that would serve areas in which you have solid distribution can damage valuable distributor relationships.
Another issue to consider is branding. Whose brand is stronger, yours or your private-label partner’s? If your brand is stronger, the private-label partner will be less likely to compete with products carrying your brand (which is good for distributors and would mitigate conflicts mentioned above) and there is less risk. If your partner’s brand is stronger, they may be able to sell more product, but they may also become in a position of power once the agreement is in place if most life science researchers know your product only through your partner’s brand. This can give them a huge amount of leverage. Another ideal situation to look for and attempt to leverage is if your brands are strong in different geographic regions or different market segments.
Lastly, and probably most importantly, be sure you can trust your private-label partner. A successful partner will be building a business around one of your products but the customer loyalty will be theirs. Ensure that you trust them enough to not develop an analogous product themselves, jump ship and begin private-labeling a competitor’s product, or even steal your technology! Selecting a partner with whom you have a good relationship, or one who is highly reputable, is extremely important.
Many factors play into the decision of whether or not to allow private labeling of your products. The reasons for doing so or not doing so are different for every company (and indeed are different for every OEM company / private label company combination) and every situation. Keep in mind what is important to your company, realize where the value lies for your partner, and carefully weigh the pros and cons. Always keep in mind that even if your company and another are not ideally suited to work as OEM / private label partners, contract terms can often be used to alter the dynamics of the relationship and provide a mutually beneficial environment for all stakeholders involved.
A key to the success of many small bioscience products companies is the creation and maintenance of an effective global network of distributors (or dealers / resellers). Ensuring that you get the most out of your distribution network, however, is not a simple task. There is no formula to follow. It must take into consideration the changing competitive landscape, both among distributors and among competing products. It involves active relationship management. It needs to take into account marketing strategies and product positioning. It requires diligent contract negotiation to establish mutually favorable terms and provide a framework for a win-win outcome. It requires planning, preparation, and needs to be frequently revisited to ensure that goals are being met and proper analysis when they are not to determine the causes. Establishing and maintaining a distribution network can indeed be a daunting task, but the rewards are great when done properly. In this post, I’ll go over the most common issue that comes up when determining distribution strategy – coverage. Is it better to have one distributor in any given territory or as many as possible, such that life science researchers can get your products just about anywhere? This question alone has a highly multi-faceted answer.
Exclusivity vs. Availability
There is an opposing force of sorts when it comes to distribution. You want your distributors to put forth a good marketing and sales effort. At the same time, you want your product to be readily available to end users. This is a conflicting position, as maximizing the availability of your product means maximizing the number of sales channels that offer your product. On the other hand, if everyone offers your product, distributors will be hesitant to market your product since their marketing dollars are not guaranteed to have a return if customers can purchase your product anywhere. Balancing these two needs requires strategic planning, however the nature of the product can guide your decision-making somewhat.
Generally, more coverage is good for a product that may be somewhat universal, has a market leadership position or strong brand recognition, has an extremely short sales cycle, and does not require much effort to sell. If customers are more often than not going to be seeking out your product, you want to make it very easily available to them. Let us take a quick look at a company and product line that has such a strategy – Scientific Industries and their Vortex Genies. The Vortex Genies are a very popular line of vortexers, and the line is highly recognized among life science researchers. Distributors know that their products are going to sell reasonably well, and many distributors are willing to compete for a share of the large volume of sales. As is common with a simple and low-cost product, they know that the product will take little or no sales effort – they simply need to let the lab managers or other purchasers know that they carry the line. Scientific Industries is therefore better served by having a lot of overlap in their distribution network.
Now let’s look at a company and product that is in a much different position – Zellwerk and the Z RP tissue culture bioreactor. The Z RP bioreactor is a highly technologically complex and very expensive product that serves a niche market. It presumably takes a considerable amount of effort to sell and probably has a very long sales cycle. With this kind of a product, it is important that distributors know that their efforts in sales and marketing will be rewarded. No distributor will want to put forth the marketing expenditures, hours upon hours of customer interaction, and other necessary time and costs if they know that the customer can just turn around and buy the product from someone else who offered to undercut them on price. The way to reassure your distributors that they will indeed be rewarded for their efforts is with exclusivity in their territory (note that exclusivity need not necessarily be contractual, however this will not be discussed here since it’s a bit off-topic). Zellwerk should be working with one or few select organizations in any given territory, and these organizations should have a strong competency in tissue culture.
OEM / Private-Label
Products that are sold under OEM or private-label agreements are another potential challenge. These agreements can be very lucrative, however they can also take away control of the distribution of the product from both the manufacturer and the private labeler, as they will likely each have their own distribution networks for the product. While in many instances an OEM or private-label agreement is lucrative enough to be worth it regardless of the distribution issues it creates, the benefit should ideally be assured via favorable contract terms and frank discussion between both companies.
Direct Sales & Other Considerations
Another important issue when thinking about distribution is whether your company offers direct sales. Direct sales are a great high-margin revenue source, and a company can often achieve greater sales and a greater market share in it’s home market when marketing and inside sales are performed in-house. This, however, creates another conflict since distributors will not want to have competition from the manufacturer. Dealing with this issue can be complex, and solutions are not necessarily simple, but it is an issue that can be dealt with to mutual benefit.
There are a host of other, less common issues that can effect distribution coverage strategy that undoubtedly arise due to each company’s unique situation. Recognizing and dealing with these issues is key to maximizing global sales and achieving beneficial, long-term distributor relationships.
DisclaimerAs of the time of posting, BioBM Consulting has no relationship with any company mentioned in this post.
A challenge for any company is properly managing customer interactions. Sometimes overlooked in a small-company environment, customer relationship management should be an important process within any company in the life science research industry, even those who do not sell directly to end-users. A lack of proper customer relationship management can lead to poor understanding of marketing effectiveness, a lack of valuable customer feedback, a lack of understanding about the customer base, loss of potential sales, etc. Despite the great potential benefits, however, CRM implementation should not be taken lightly.
Reports from Gartner Group and Meta Group had three very striking findings: 1) Over 50% of CRM implementations are viewed as failures by the customer, 2) 55-75% of CRM implementations fail to meet their objectives, and 3) customers usually underestimate the costs of CRM implementations by 40-75%. Forrester Research, in an article published in CRM Magazine, elaborated on some of the problems experienced during CRM implementation. The problems most commonly cited by executives were:
|Defining New Processes||16.2%|
These numbers indicate that while customer relationship management is a very important process, it is not one to be taken lightly.
How can your company successfully integrate a CRM platform and avoid being one of the 50%+ who have a “failed” implementation? Being aware of the common problems is one key step, but it is not enough to simply know the problems – you need to be able to create solutions. One of the most common inhibitors to the creation of such solutions is that companies do not fully understand the problems that a CRM platform is trying to solve. Ask yourself: What are the issues that I am trying to address by implementing a CRM platform? How do you hope to improve marketing? How do you hope to improve sales? How about customer support? Do not simply assume that implementing a CRM platform will be a silver bullet to a myriad of problems. You need to define and design it to do so.
If you already integrated a customer relationship management system and you are not happy with the implementation, there is still good news. Chances are that your CRM system is built with enough flexibility to not require starting from scratch. CRM systems are generally very flexible and customizable and often they will have features or capabilities that will be able to solve the problems that you may be experiencing.
Customer relationship management can a very powerful tool across multiple functions of your business. Successful implementation, however, requires a good understanding of both your business, its needs, and CRM systems. Having all of this knowledge before delving into a CRM implementation project can help ensure the effectiveness of the system as well as constrain the costs of the project.
Commoditization – the transformation of goods and services into a commodity – is a major problem when it threatens to rear it’s head. As technologies age, lose patent protection and become less expensive, there are often more competitors that will join the market. For many areas of the research products market, the eventual threat of commoditization is almost an inevitability. This is particularly true with reagents, chemicals, low-end equipment, plasticware, and glassware, but is also readily apparent in the market for kits and some kinds of proteins and antibodies. If these products lack a qualitative differentiator, they will all eventually become commodities. As such, customers will seek out only the lowest price goods and profit margins will take a huge hit. However, such is not always the case. In many of these markets there is still one factor that can make a huge difference. There is one way to add perceived value and differentiate your product from the commodities: branding.
When I use branding in this sense, I don’t simply mean some flashy marketing and design that contributes to brand or product recognition. Branding must mean the entire value that is behind the brand, including quality, customer service and support. Indeed, quality, customer service, and support are the things least likely to be replicated by competitors looking to sell low-price products. So then why are these things not the “one way to add perceived value”? Simple – all of these things get expressed through the brand.
Let’s take plasticware as an example. Eppendorf has an enormous share of the microtube market, and not for lack of competition. There are literally dozens of manufacturers of microcentrifuge tubes, and most microtubes are far cheaper than Eppendorf’s. So then why does Eppendorf maintain such a huge share of what should, at a glance, be a commodity? Entrenchment and longstanding brand recognition aside, they have an extremely high quality product (and I would know – I’ve put all sorts of microtubes through the gauntlet in my day), and that quality is consistent. This is then captured through the brand. People see the Eppendorf branding on a product and presume, usually rightfully, that they can trust it’s quality. Many other manufacturers who are trying to undercut Eppendorf are not able to replicate their quality at such a low price, so Eppendorf maintains the advantage of pricing its product higher due to the differentiation created by the higher quality product and expressed through the brand.
Another great example shines out in the Life Technologies 2010 Q2 earnings conference call question & answer session. Jonathan Groberg of Macquarie Research asked about Life Technologies’ PCR portfolio and commoditization in the PCR market. Gregory Lucier, Life Technologies’ CEO and Chairman, responded by saying:
…the relationship between price and volume is not a direct connection. And that’s due to a lot of the friction of publications, previous experiments. There’s just inertia to switching. And when you have market leadership like we certainly do in the PCR business, people are inclined to stay with their products, and so we benefited from that.
Again, this is a non-tangible perceived value addition. Life Technologies is attributing the continued success of its PCR line in part of the value that the brand conveys – in this case a “tried and tested” product. Scientists know that everyone uses Life Technologies PCR products, and they therefore trust them to be reliable.
If you’re on the outside of a bioscience market where commoditization is either already present or a serious risk and you’re trying to get in, or if you have a small market share and a brand with little recognition, these examples admittedly may not seem too helpful to you. While market entry is a topic large enough for a lengthy book, I will offer a few tips as they pertain to a partially or wholly commoditized market. 1) Look at your entrenched competition and use them as a baseline. What are they doing that allows them to avoid commoditization where everyone else fails? Can you position yourself to have an advantage other than price? Evaluate the hurdles that need to be overcome to do so. You can generally assume that your price point will need to be lower than the products of any well-known, entrenched marketplace behemoths (if they are present), but can be higher than the commoditized products. 2) Commoditized markets are most often very large (there’s an economic reason for this that I won’t get into) and trying to gain market entry across the entire market can often be too big of a task that dilutes marketing efforts and decreases marketing ROI. Find a particular sub-segment of the market that can be easily identified and marketed to and tackle that segment first. This strategy is almost always much more effective and gives you a foothold to expand your market share from.
Aging markets almost always lead to increased competition, but with a good marketing and business strategy, commoditization can be avoided.