Medical Device Branding - Building Identity and Equity

Author: Duncan Fatz - Consultant

A brand describes both companies and products whilst branding is the art of manipulating those images. As a marketing tool branding is wielded with force in the majority of consumer markets around the world, but it is one that in reality has been used only sparingly in the medical device industry. This is despite the majority of companies believing that they use it extensively.

The medical device industry is one of the fastest growing industries in the world - rising from a value of $130 billion in 1997 to $185 billion in 2000 and an estimated $225 billion in 2003. Unsurprisingly it is certainly a market that branding agencies would like to be involved in, but the traditional driving forces behind the market have obviated the need for branding. These market drivers have been:

· The ageing population:
· Increased demand for new technologies
· Increased healthcare spending

These three factors have been sufficient in themselves to continue to drive up the value and the size of the medical device market and because of this growth it has been fairly easy for medical device companies to survive within it. However, times are changing as new pressures come to bear on the market. These pressures are:

Emerging markets: Markets such as Eastern Europe, Asia/Pacific, and Latin America have been opening up to foreign medical device companies and have been demanding improved healthcare. Such emerging markets are not demanding the latest high end technologies, such as tissue engineered products, but rather are focusing on good quality basic devices at a reasonable price. At this end of the technology scale there are many competing companies selling similar equipment and this is where branding can play a major role because one of the main functions that branding performs is to increase the sales of a company or product in a saturated market. Companies such as Siemens and Abbott have been strategically placing themselves in countries such as Bulgaria and Poland in order to gain early admission of their brands into these markets, whilst other companies that depend on local distributors frequently dealing with more than one brand, are advertising their brands heavily in these countries to gain brand recognition with the customers and achieve a lead on the competition.

Consolidation: The consolidation of medical device companies allows them to lower costs and offer providers one-stop shops through broadened product lines, and price concessions through increased volume. From 1991 to 1994, the average number of acquisitions and mergers per year was 50 but in 1995 there were 88 acquisitions and in 2002 there were 104 deals in the first three quarters of the year alone. This means that the number of major companies in the market is diminishing whilst their product diversity is increasing bringing these large companies into greater direct competition with one other.

In addition to consolidation amongst companies this trend amongst healthcare providers, in order to cut administration costs, is also occurring. Admittedly healthcare consolidation activity is on the decrease, falling by 34%, from 728 deals in 1999 to 481 deals in 2000, but it still means that as the number of major companies is decreasing so too are the number of major customers they are pursuing. In such a situation the power of the purchaser is greatly increased, placing them in a position where they can demand added value on a purchase. As an increasing number of medical device manufacturers are discovering, good branding can communicate quality and added value to a customer.

Market pressures in both new and established markets are therefore increasingly encouraging medical device companies to use branding in their marketing strategies. Unfortunately many medical device companies are either deaf to this message, unaware of how to create an effective branding strategy or already have branding structures in place that are so disorganised that it will be a difficult process to clarify them and increase their efficiency.

The companies that are deaf to the message of branding choose to be for two reasons: they believe that their products are so technologically advanced that it is this factor that sells their products or alternatively they believe that their customers are so sophisticated that they will be impervious to branding. The technological reason is potentially a good one as if the product is the only one that is capable of performing a certain function then there is little reason to use branding to help it stand out from the competition. However, this is a short sighted and potentially costly view as even though there may be no competition today there will be tomorrow and branding can help pass the success of one product onto another, or, in other words, become the start of a product line. A company that followed such a tactic is Roche whose Amplicor range of diagnostic assays has become world renowned as a line of sophisticated reliable tests and, even though their advanced HIV (Human Immunodeficiency Virus) and HCV (Hepatitis C Virus) tests could be promoted as stand alone product brands, they are included within the Amplicor brand to lend their strength to the other products. These are, as a result, all major leaders in their fields. In such high technology areas, where high investment in R&D is essential it is not necessary to also place high financial investment in branding. Nevertheless it is wise to plan ahead and place the product or products into a strong supportive brand structure.

Figure 1 illustrates the driving pressures on the medical device market and how branding can turn negative pressures to an advantage.

With regards to the theory that customers for medical devices are too sophisticated to be affected by branding messages, this is a concept that is quickly taking on the form of an urban myth as many executives within the industry state that, although they know of others who believe this theory, they personally have had proof to the contrary. It is true that at the higher levels of purchasing where committees are involved in the decision, branding messages can be subsumed by other factors such as cost effectiveness. At lower levels, where it is down to one or two individuals who need to make a rapid decision, the reassuring familiarity that can be created with a brand can certainly help to influence purchasing decisions. Companies, such as Welch Allyn, that have realised this and strived to gain early brand allegiance have effectively erected a wall of loyalty around their core customers that other companies have found difficult to infiltrate.

One of the major problems with the medical device industry, in regards to branding, is that every company believes they have a branding strategy when in fact the majority do not. Or the case may be that at the very least their branding structure is so disorganised or fragmented that it either does very little to help the company and, in some cases, may actually be having a negative impact on sales and costs. The reason why many companies in the sector harbour the misconception that they have a branding strategy is because they fail to understand what a brand really is. Many are of the opinion that a brand is merely a name associated with a product or the company itself. In truth this is only one of the physical manifestations of a brand and all of the functions of a brand work on the subliminal psychological level to create rapport. For example, straying from the medical device field temporarily, the Nike logo represents a tick, which, although nobody really views it as that anymore, does act subconsciously to create an impression that the product is correct or positive because of the associations with such an established symbol. An example of this symbolism in the medical device world is the old Smith and Nephew logo, which used to represent the word ‘and’ in the middle of the logo with a cross, which through the historic use of the Red Cross and other cross symbols created great psychological links to medicine and healing. It is perhaps indicative of the failure to understand some of the finer points of branding that in their re-launch exercise Smith and Nephew removed the cross symbol and added what they describe as a depiction of an energy burst, but which most people take to be an illustration of a flower. Having said this at least Smith and Nephew have been brave enough to take a bold step with their company brand image whilst the vast majority of medical device companies are too nonchalant or reserved in their branding attitude to risk such a move.

There are a number of companies in the medical device sector who are indifferent about branding because they believe that they have a strong brand image. The fact is that, unlike other consumer sectors, there isn’t a single medical device company that has analysed its brand strength objectively and tested the brand lines independently. As this is an extremely expensive procedure to undertake it is perhaps not surprising, but companies cannot make sweeping assumptions about their brand strength without testing them and the brand strength of the larger companies is on the decline. The reason for this declining brand strength is, ironically, the consolidation occurring within the industry, which, as stated earlier, is also one of the major drivers towards implementing branding strategies. Mergers and acquisitions bring with them new brands and if these aren’t managed and integrated carefully into the new company they can dilute the core branding message of the parent. A well-managed brand structure, like that of GE Medical Systems, should look like a slim tree with the product brands, product lines and product ranges all quickly feeding back into each other to provide support to each other and the company brand.

Medical device companies are beginning to realise that they can no longer rely on the traditional drivers of the market to maintain their competitive positions and are making the decision to succumb to the market pressures and reanalyse their approaches to branding. However this is proving to be a rude awakening for some companies as they realise that their competitors have already surpassed them through effective brand strategies and they haven’t even allocated a budget to brand management.