Tuesday, September 19, 2006

Winning Arguments vs. Winning Customers

Early in my career, I worked for a small company that made medical equipment. One of our product lines was a relatively low-tech item used during surgery to prevent a common complication. It was a cool product - a simple, non-invasive technique that replaced expensive pharmaceuticals with potential side effects and could save people's live.

The product wasn't developed by the company; we'd bought it (before I was there) from its inventors, a local doctor and lawyer. The lawyer stuck around in a sales/product development role under contract to us. He was a smart, passionate guy who believed absolutely in his creation and spent his days out evangelizing for it as hospitals.

And sales of it has steadily increased; it was a profitable item for the company.

Sounds great, right? Not when you peeked under the covers.

Our biggest competitor was a large medical manufacturer who came out with a very similar product that included some extra features. The features made it complicated (and far more expensive), and the clinical benefit was questionable. We had a ton of peer-reviewed studies showing that our simpler, cheaper version did everything that theirs did; they had one or two papers suggesting the opposite. This being peer-reviewed medical research, nobody was endorsing anything, but our stack of studies from respected medical professionals was pretty impressive.

The company had never looked at market share - they just watched the sales come in and were happy. This isn't unusual in a small family-run outfit like that company. But when our new head of marketing (first ever in the position) went and did a little research, she found something troubling: sure, our sales had been increasing nicely, but the overall market for the product had exploded. So as we watched nice year-over-year revenue increases, our market share had plummeted from more than 50% to under 10%.

That's a prescription for disaster, because the market was showing signs of consolidating, and you don't want to be a tiny little player in a consolidating market. Her recommendation was that we just exit; we were completely outgunned from a marketing standpoint, and she thought it made sense to sell off the business (a small part of the company's overall revenues) while it was profitable.

Needless to say, the clashes began. Our inventor was a typical entrepreneur: smart, committed, and absolute in love with his product. He was also a lawyer: that meant he was in love with being right and winning arguments. Those are great skills for a lawyer.

For a marketer, not so great. Our approach to the market was one that you could defend in a court of law, but not so successful in the marketplace.

The product and pricing decisions were quite sensible, unless you happened to be buying the product. The up-front price was high, but the ongoing costs for supplies very low. You'd save money. But if you were a hospital, buying supplies was much easier than buying equipment, so despite the money that would be saved, it was very hard to get it through purchasing.

Then there was our communications. The inventor sent out endless newsletters to the medical community highlighting studies that demonstrated our product's value. Great, right? Well, not when you're telling surgeons, "You are all wrong in choosing that other product" (and that was the tone of the newsletter).

Surgeons really, really don't like being told that they are making a bad medical choice by a lawyer. Or a marketer. It doesn't matter if you have enough clinical studies to fill an ER from one wall to the other; they are the surgeons. (Interestingly, nurses were very eager to hear what the studies said.)

At trade shows, it was typical to have surgeons come up to our stand and say, "That doesn't work." If you tried to offer them copies of some of the clinical literature, you'd get a patronizing "Oh, that's so cute, the non-doctor thinks he knows something" smile and the surgeon would walk away, saying, "No, it really doesn't work."

We had our advocates, to be sure.

Looking back through the lens of experience, it's easy to see where we went wrong. We picked the wrong fight. We tried to convince doctors that they were wrong, and that's a doomed strategy.

What we should have done was stop trying to win the argument and win the market battle instead. We should have leveraged the surgeons who understood the product's benefits. We should have made better use of the nurses, who were the ones dealing with cost issues and sitting on hospital purchasing committees. (The inventor, showing some professional snobbery, liked talking to surgeons but thought the nurses were just, you know, gals in white uniforms.) We should have marketed directly to hospital purchasing staff, whose influence was already on the rise. We should have talked to insurers.

Instead, we went into an unwinnable argument with the moral clarity of the faithful... and the market consolidated. Sales started to level off and drop. Eventually, my former employer sold off the business. The big competitor dominates to this day.

Being right isn't all it's cracked up to be. It feels nice, but if you want to succeed in the market, you need to understand stop worrying about being right (though not settle for being wrong!) and let go of arguments.

The goal isn't to prove people who don't buy your product wrong. It's to find the ones who will buy it, because it's the right choice.

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