2.4 Market Analysis

Market Analysis Example 1 – The Need and Approach

In a series of three short clips, a team of Biodesign Fellows presents and then discusses its approach to performing a market assessment.

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Market Analysis Example 2 – The Need and Approach

In a series of six short clips, Julie Papanek, a medtech veteran and former student in the Biodesign innovation course, describes one approach to conducting a market assessment.

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Awair: Estimating the Value of a Need

Former Biodesign Fellows, Rush Bartlett and Ryan Van Wert, describe how they estimated the value of developing a solution in their need area.

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•  2.4 Market Analysis •  Awair •  Rush Bartlett •  Ryan Van Wert • 

Getting Started 

Validating the market opportunity associated with a need is of critical importance, but can also be an exciting and rewarding experience. Use the following steps to tackle this challenge.

Landscape the Market

What to Cover

Start by thinking about the total market for the need area by evaluating total spending for the disease state. Next, revisit and build on the information gathered about existing solutions, including which diagnostics and treatments dominate the need area, as well as their approximate cost, utilization, relative effectiveness, and growth rates. Map this information and identify gaps that exist across the treatment landscape. Better understand competitive positioning by assessing the landscape within specific treatment categories to identify existing solution providers and their relative positioning.

Where to Look

Segment the Market

What to Cover

Take an iterative, progressive approach to defining market segments. To address the complex interactions with multiple stakeholders in medical markets, start by segmenting patients based on symptoms and risk factors. Then, segment these patient subgroups based on treatments. Next, segment the patient/treatment subgroups based on their providers. Finally, segment the patient/provider subgroups based on payer attributes. Consider whether there are other unique characteristics of patients, providers, or payers in the particular area of need that should be “layered” in to the segmentation analysis to ensure a complete understanding of the similarities and differences among customers in this market.

Where to Look

  • Business Plans – Reviewing the business plans of other innovators and entrepreneurs may help stimulate ideas regarding the development of segmentation frameworks.
  • Other Chapters – The analysis described in 2.1 Disease State Fundamentals may be useful for performing risk-based segmentation. The information in 2.2. Existing Solutions may be helpful for provider segmentation and segmentation based on diagnosis and treatment options. 2.3 Stakeholder Analysis and 4.3 Reimbursement Basics may be helpful with provider/payer segmentation.
  • Up-To-Date – A database of evidence-based clinical information.
  • PubMed – PubMed is a database of the U.S. National Library of Medicine that includes more than 16 million citations from MEDLINE and other life science journals back to the 1950s.
  • RightDiagnosis.com– A disease and symptom research center.
  • Centers for Disease Control and Prevention – Part of the Department of Health and Human Services (HHS).
  • Clinical Trials (see ClinicalTrials.gov or published clinical trials at PubMed) – Enrollment criteria for clinical trial designs can provide insights into how competitors segment the market.
  • Product Labels for Other Treatments – Located on the U.S. Food and Drug Administration (FDA) website, the labels for approved treatments can provide insights into different market segmentation approaches.
  • Marketing Consultants – Professional market research analysts and marketing consultants can help to complete the process.

Size the Segments

What to Cover

The goal of this activity is to calculate the size and value of each market segment that has been defined, along with the rate at which it is growing. Perform both top-down and bottom-up evaluations and rationalize/reconcile the results. By combining the top-down and bottom-up approaches, confidence intervals also can be derived for the size of the market. Other factors to take into account include the potential cost of the new treatment relative to existing treatments, the likelihood and rate of reimbursement, and the growth rate within the segment. All of these factors will influence the total value of each market segment.

Where to Look

  • Agency for Healthcare Research and QualityAHRQ sponsors and conducts research that provides evidence-based information on healthcare outcomes; quality; and cost, use, and access. From its website, one can gain access to longitudinal data regarding patient interactions with the healthcare system, including all transactions and their codes (indicating procedures and diagnosis), as well as location of service, which can be used to help develop market segments. Important databases accessible via the site include:
    • HCUPnet – A free, online query system based on data from the Healthcare Cost and Utilization Project (HCUP). It provides access to health statistics and information on hospital stays (inpatient encounters) at the national, regional, and state levels.
    • MEPS Data– The Agency for Healthcare Research and Quality provides longitudinal data on the health expenditures of 30,000 U.S. households via the Medical Expenditures Panel Survey (MEPS). This data is publicly available for primary analysis. It is useful for more detailed analysis of market segments (and sizing), but working with the data can be labor intensive. This source is probably most helpful if the innovator or company needs to support a need specification with actual publications as part of a marketing strategy. Data is available for conditions with a 1 percent or greater prevalence rate.
  • FastStats – Offers high level numbers organized by disease state. See also “hospital utilization” for numbers of procedures performed annually in the U.S.
  • National Health and Nutrition Examination Survey – Provides longitudinal data for large samples of patients regarding medical condition(s) and medical expenditures for families and individuals.
  • Professional Societies – Professional societies often provide statistics and data that can be useful in sizing a market.
  • Analyst Reports – When investment analysts begin coverage for a company, they typically write an initiating coverage report that gives an overview of the company’s products and the market for those products. These reports are available using a database such as Reuter’s Research On Demand, OneSource’s U.S. Business Browser, and Business Insight. Typically, it is easier to find reports focused on established companies and treatment areas than for emerging companies and treatment areas.
  • Market Research Reports – Depending on the topic, MarketLine, MarketResearch.com Academic, and Mintel may be useful sources (all three offer healthcare selections). Market research reports can also be accessed on the Internet (e.g., through Google). Sites such as Datamonitor and Marketresearch.com have healthcare sections that provide detailed reports that sometimes include primary research. Unfortunately, these reports often cost several thousand dollars to purchase. However, if a market research budget happens to be available, this may be a lead worth pursuing. Some university or business school libraries may be able to provide access to these reports as well.
  • Press Releases – Market research firms put out press releases when they publish new research reports. If the report itself is too expensive, these one-page “teasers” usually provide overall dollar amounts spent on treating a given disease. Business Wire is one source for this information.
  • Disease and Solution Research (see 2.1 Disease State Fundamentals and 2.2 Existing Solutions for basic epidemiology and economics).
  • Annual Reports and SEC Filings – Large firms traded in public markets such as the New York Stock Exchange issue an annual report with detailed financial information and they also file an annual 10-K financial report with the Securities and Exchange Commission (SEC).

Understand Market Dynamics in Each Segment

What to Cover

Create profiles of the products and companies associated with the most dominant treatments in each segment. Identify the product costs and market power of each player. Also include emerging companies that may not have a product on the market yet. Perform a SWOT analysis for each of the most powerful market players. Use Porter’s Five Forces to evaluate the market as a whole, then summarize the results.

Where to Look

  • Solution Research (see 2.2. Existing Solutions to identify competitors and results from gap analysis)
  • Analyst Reports
  • Market Research Reports
  • Annual Reports of Publicly Traded Companies
  • Company Websites
  • Press Releases

Assess Market Needs

What to Cover

Evaluate how market needs may vary by segment by referring back to observations and research performed early in the needs finding process. Assess how well needs within each segment are being addressed by current treatment alternatives. Start by evaluating outcomes for the disease state without treatment. Then, analyze how these outcomes change when existing treatments are utilized. Make a qualitative judgment regarding the extent to which patient needs are being satisfied relative to improved outcomes and new/different complications and risks introduced by existing solutions. Revisit the SWOT analysis to ensure that no broad unmet needs or market gaps are overlooked.

Where to Look

Evaluate Willingness to Pay

What to Cover

Determine the price for a new solution that each segment is likely to accept. Consider which stakeholder are decision-makers, who will be making the payments, and each stakeholder’s willingness to pay by evaluating comparable devices, performing financial analysis related to the cost and benefits of the device, and interviewing or surveying a sample of stakeholders to ascertain this information. Bring this information together with the assessment of market needs to create a value estimate for a new solution in each segment.

Where to Look

Choose a Target Market

What to Cover

Once various market segments have been analyzed, a target market must be chosen. Evaluate each segment according to the factors and criteria outlined above to determine the most favorable target. Remember to take into account other market enablers, such as the availability of investor funding, the accessibility of the market, and the receptiveness to new technology.

Where to Look

  • Quarterly Venture Capital Activity Reports – Provides quarterly listings of venture capital investment activity in the U.S. based on data from PricewaterhouseCoopers, Thomson Venture Economics, and the National Venture Capital Association.
  • VentureXpert – The functionality of VentureXpert is now available through Thomson ONE on a subscription basis. This source provides data on mergers and acquisitions, initial public offerings (IPOs), and venture capital funding based on data from Securities Data Corporation. Users can search the database to find detailed information about private start-ups including funding, investors, and executives.
  • Venture Capital Firm Websites
  • Analyst Reports

Bring It All Together

What to Cover

Validate the target market through the development of patient towers that summarize the size of the patient population, the extent of the medical need, and the growth rate for each of the primary market segments considered. These charts can be used not only to confirm that the right target market has been chosen, but also to convince stakeholders and potential investors that a sizable opportunity exists.

Where to Look

Refer back to references used to segment the market and determine the size of its subgroups. Discuss the findings with key advisors and team members.