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  2. 2. TABLE OF CONTENTS Executive Management ................................................................................. 8 Introduction .................................................................................................... 10 Chapter One: Can This Product Win?...................................................... 12 1.1: Introduction 1.2: Potential Products 1.3: Comparative Product Analysis 1.4: The QuickCheck 1.5: Product Utility Bundle 1.6: Summary 1.7: Conclusion Chapter Two: Winning in the Industry..................................................... 32 2.1: Introduction 2.2: Industry Overview 2.3: Comparative Product Analysis 2.4: Competitive Trend Analysis 2.5: Linear Evolution Analysis 2.6: Industry Life Cycle 2.7: Technology Trend Analysis 2.8: Social Trend Analysis 2.9: Economic Trend Analysis 2.10: Legislative Impact 2.11: Summary 2.12: Conclusion Chapter Three: Where to Play the Game................................................ 60 3.1: Introduction 3.2: Industry Profile 3.3: Market Share Analysis 3.4: Life Cycle Analysis 3.5: Linear Evolution Analysis 3.6: Geographic Location Analysis
  3. 3. 3.7: Product Distribution 3.8: Summary 3.9: Conclusion Chapter Four: Why Is the Product Bought?........................................... 80 4.1: Introduction 4.2: Buyer’s Decision Matrix 4.3: Type of Decision 4.4: What’s Wrong List 4.5: Attitude Scale 4.6: Maslow’s Hierarchy of Needs 4.7: VALS / PRIZM / LOV 4.8: 5 W’s Analysis 4.9: Summary 4.10: Conclusion Chapter Five: Selection of Hobbies and Occupations .....................111 5.1: Introduction 5.2: Key Benefits 5.3: Hobbies and Occupations 5.4: Hobbies and Occupations Matrix 5.5: Master Matrix 5.6: Micro Matrix 5.7: Summary 5.8: Conclusion Chapter Six: Target Niche ........................................................................131 6.1: Introduction 6.2: Problems Solved 6.3: Niche Variables 6.4: Demographic Segmentation 6.5: Use Segmentation 6.6: Demographic Segmentation 6.7: Psychographic Segmentation 6.8: Summary 6.9: Conclusion
  4. 4. Chapter Seven: Product Plan...................................................................157 7.1 Introduction 7.2 Goals and Strategies 7.3 Product Life Cycle 7.4 Competitive Product Analysis 7.5 What’s Wrong List 7.6 Comparative Trend Analysis 7.7 Utility Bundle Analysis 7.8 Hierarchy of Needs Analysis 7.9 Competitive Assessment 7.10 Summary 7.11 Conclusion Chapter Eight: Distribution Plan ............................................................186 8.1 Introduction 8.2 Goals and Strategies 8.3 Needs Analysis 8.4 Channel Structure 8.5 Potential Retailers 8.6 Policies 8.7 Summary 8.8 Conclusion Chapter Nine: Pricing Plan........................................................................210 9.1 Introduction 9.2 Goals and Strategies 9.3 Skim/Penetrate and Push/Pull 9.4 Break-Even Analysis 9.5 Price Flexibility Analysis 9.6 Comparative Product Analysis 9.7 Price Positioning 9.8 Pricing Policies 9.9 Pricing Plan Over the Life Cycle 9.10 Summary 9.11 Conclusion
  5. 5. Chapter Ten: Promotion Plan...................................................................235 10.1 Introduction 10.2 Goals and Strategies 10.3 Communication Mix 10.4 Media Schedule 10.5 Channel Mix 10.6 Message Design 10.7 Competitive Advertisements 10.8 QuickCheck Advertisements 10.9 Contests 10.10 Summary 10.11 Conclusion Bibliography..................................................................................................263
  6. 6. 8 EXECUTIVE MANAGEMENT Joe Moran Chief Executive Officer Max Balzer Chief Financial Officer Ricardo Castaneda Chief Operating Officer Nick Jeffers Chief Visionary Officer Olivia Mogaka Chief Competitive Intelligence Officer Shannon Roney Chief Business Development Officer Jess Trinkl Chief Scientific Officer
  7. 7. 9
  8. 8. 10 INTRODUCTION CNOGA, Inc. is a small family-run company headquartered in Cincinnati, Ohio. The company did not fully recover from the economic downturn and is currently facing financial troubles. CNOGA formed and assigned the team of Joe Moran, Max Balzer, Ricardo Castaneda, Nick Jeffers, Olivia Mogaka, Shannon Roney, and Jess Trinkl to create a product that will turn the company around. The team came up with the QuickCheck as this product. This report outlines the research, analysis, and decisions that went into choosing the QuickCheck and the target customer for this product. This report then lays out the future plans for the product, including pricing, future versions, and a promotion plan. The team is highly confident that the QuickCheck is the best product to save CNOGA, Inc.
  9. 9. 11
  11. 11. 13 1.1 Introduction CNOGA, a family owned company based in Cincinnati, is at risk of bankruptcy due to falling sales and a decrease in popularity of its product lines. The company has created a marketing team and tasked it with selecting a creative and high-value product that will generate $10 million in net sales at a 40% margin. The team selected, researched, and compared five such products. The products were evaluated using the Comparative Product Scorecard and the Utility Bundle Analysis. The products were then ranked based on their scores in these analyses and the best product was selected based on these rankings. The marketing team identified and analyzed five high-value products: the Fresh-Aire UV in-duct air purifier, the Wagables Treat ‘n Play dog play system, the ShockBox concussion sensor, the Smart Cooler, and the QuickCheck non-invasive blood glucose meter1 . Using metrics such as a Comparative Product Analysis and a Market Analysis, the team was able to identify which of these products was most likely to succeed in the market. Products were ranked based on several variables, relating to the product’s value in use, utilities 1 CNOGA.com, Glucometer
  12. 12. 14 delivered, and metrics of the market for like products. The product that will be the most likely to meet CNOGA’s sales goals is the product that scores consistently the highest on the analyses. These scores identify the product as a high value in use product with a large and easily targeted potential market. The overall goal of CNOGA is to make $10 million in net sales at a 40% margin. A risk the marketing team identified as integral to the analyses performed was that the product selected would not meet these sales goals, due to several market variables. The company could face fierce competition when introducing the selected product into the market and fail to meet goals. The analyses could also have identified the incorrect product. It is possible that the company could have met its sales goals more quickly and effectively with a product other than the selected product. However, the team concluded that these risks are negligible and the product selected by the analyses will lead the company to meet its sales goals of $10 million at a 40% margin.
  13. 13. 15 1.2 Potential Products Before selecting a product to produce and market, the team first selected and researched several potential products that CNOGA, Inc. could potentially succeed with in the market. The team selected several products that have both large and addressable markets and that solve important unfilled consumer needs. The following products were the five that the team researched. Fresh-Aire UV The Fresh-Aire UV is an in-duct air purifier installed in a home’s air conditioning system that kills bacteria using UV light. Through ionization and UV light, the Fresh-Aire UV can kill the microorganisms passing through a home’s air system. According to the Environmental Protection Agency (EPA) 2 , indoor air is five times more polluted than outdoor air. Most in-home air purifiers used to tackle this problem are not equipped to kill airborne bacteria or have limited ranges. Since almost all common air purifiers are 2 EPA, Care for Your Air: A Guide to Indoor Air Quality
  14. 14. 16 solely in-room or short range, the Fresh-Aire UV Air Purifier enters a market with a lot of potential: whole-system purifiers. However, it is important to note that current air purifier manufacturers do not usually explain what kind of UV technology is used, and some of these technologies produce high volumes of ozone. Ozone is not an effective or safe way to eliminate airborne pathogens. The Fresh-Aire UV aims to provide safe and clean air purification with the use of UV light instead of ozone. With a 6.7% expected growth in the consumer market over the next 5 years, the Fresh-Aire UV will be a great option for a homeowner looking to take care of their health and the health of their family. Wagables Treat‘n Play The Wagables Treat‘n Play is the up-and-coming dog toy dispenser developed by Wagables. The play system timely dispenses toys and treats throughout the day to keep dogs both entertained and fed while owners are away. Market research suggests that despite a few similar products on the market, pet owners are looking for more friendly and engaging toys to keep pets active. The pet store industry had revenues of $14.7 billion dollars in
  15. 15. 17 2012 with an expected 2.8% average annual growth rate for the next five years (predicted $17.8 billion total revenue and 3.8% growth rate by 2017).3 Since dogs are often considered family members, pet owners frequently invest in special foods, toys, and treats4 . This product targets indulgent pet parents and professionals who own dogs and want to keep them occupied during the workday. Targeting this demographic with a new and varied dog play system could prove very successful. ShockBox The ShockBox In-Helmet Concussion Sensor is the first of its kind. The ShockBox is a concussion sensor that attaches inside a contact sport player’s helmet to monitor the number and the force of the hits to the head. This information is then relayed to a smartphone app to alert players and spectators of danger. Although there is a more widespread awareness of the dangers of concussions in 2015, there are few monitoring systems to help prevent them. The ShockBox sensor provides a quick and accurate way 3 Marketresearch.com, U.S. Pet Market Outlook 2014-2015 4 IBISWorld, Pet Stores in the US, February 2012
  16. 16. 18 to detect the slightest possibility of brain damage or injury. Parents of young athletes in non-professional sport programs or high school athletes can buy the sensor in order to prevent long-term concussion damage. There is a big place in the market for this product with the self-monitoring medical device industry expected to grow by almost 8% over the five years.5 The sensor could be widely distributed and sold in local sports stores. The ShockBox is an easy-to-use, cost- efficient way to avoid the detrimental long-term consequences and costs from brain damage. Smart Cooler 6 The Smart Cooler is an innovative five-in-one cooler, which includes a built-in blender, waterproof Bluetooth speakers, LED lights, big wheels, and a bottle opener. Its portable and all-in-one design attracted high interest from consumers in 2014. The Smart Cooler became the most 5 IBISWorld, Medical Device Manufacturing Industry at a Glance 6 Time, Coolest KickStarter Ever
  17. 17. 19 successful Kickstart campaign ever, raising $13 million from more than 60,000 backers in 52 days. Party-loving adults, especially in areas with large football schools where tailgating is a widespread activity, would be the Cooler’s target consumer. At a retail price of $299, the Smart Cooler could generate significant revenue for CNOGA. QuickCheck Bloodless Glucose Meter The QuickCheck is the world’s first no prick glucose meter that allows people, particularly those with diabetes, pain-free blood glucose monitoring. This device uses LED light technology to measure blood color and then formulates the glucose level of the blood. Almost 80% of diabetics believe their disease management can be improved, pointing to a large market for this type of product.7 More traditional methods in the past require frequent painful blood samples and the constant purchasing of expensive supplies. Non-invasive meters have often been described as a threat to current market of blood-based meters and strip testing. The QuickCheck can be used at 7 Mintel.com, Diabetics: Attitudes and Behaviors
  18. 18. 20 home or in public without embarrassment and does not require monthly resupply unlike other methods. Moreover, the QuickCheck has smart phone connectivity features installed, which currently is a popular new feature in many blood-based testing meters. The QuickCheck device is also eco-friendly and reusable. It avoids bio-waste in the form of used lancets, gauze, test strips, alcohol swabs, and packaging. In addition to the practicality of the QuickCheck, it would be the first of its kind in the American market since the FDA approved it for testing in 2010. 1.3 Comparative Product Analysis After determining and describing the five potential products, the marketing team at CNOGA conducted further analysis of the products using a Comparative Product Scorecard. The main purpose of the scorecard is to look at strengths and weaknesses in 20 different variables to quantitatively determine with which product CNOGA can “win”. The chart does not attempt to look at industry differences since it compares features of the products not unique to their market. In each category of criteria, the products are rated on a scale of 1 to 10. A score of 1 indicates a strong weakness or absence of that criterion and a score of 10, the highest level or quality in that category. Since these critical factors coincide with a product’s success, the team at CNOGA considered the final average scores when selecting a product.
  19. 19. 21 CNOGA used customer reviews for each product along with several other specific sources to better objectify the listed scores used in the figure below. Figure 1.3.1: Comparative Product Scorecard After numerically evaluating each potential product, the team was able to identify that the QuickCheck Glucose Meter gives CNOGA the greatest opportunity to reach its sales goals and meet its profit margin. Since the QuickCheck received the highest rating of 180 amongst all the potential products, the marketing team determined that it would be the best product for CNOGA to produce and sell. The QuickCheck’s high score means the product will be the most successful out of the potential products the team researched. The QuickCheck CNOGA QuickCheck Fresh-Aire UV Wagables Treat'n Play ShockBox Smart Cooler 1 High value in use / low cost to make it 10 10 7 7 10 2 Protection 9 8 7 3 5 3 Ease of use 10 8 10 10 10 4 Differential advantage 10 8 9 8 8 5 Rate of technological change 8 8 6 7 8 6 Type and degree of competition 8 9 6 8 8 7 Unique and trendy 10 7 8 7 10 8 Shelf space at retail 10 6 9 10 5 9 Prior use patterns 10 10 5 5 7 10 Affordable 9 10 10 7 6 11 Newness 9 10 9 7 10 12 Divisibility 7 6 6 6 4 13 Rate of use 10 8 8 6 5 14 Durability 9 10 8 10 10 15 Life cycle 7 10 8 8 5 16 Bankabale 8 10 7 10 7 17 Fundamental trends 10 10 8 10 8 18 Size of market for like products 8 8 8 5 6 19 Consumer purchase patterns 9 10 10 10 8 20 Web friendly 9 7 10 10 10 SUM 180 173 159 154 150 AVERAGE 9 8.65 7.95 7.7 7.5
  20. 20. 22 especially exceeded in High Value in Use / Low Cost to Make, Differential Advantage, Newness, Rate of Use, Rate of Technological Change, and Affordability. The QuickCheck’s high score in these areas has strongly to do with its bloodless feature. This new method of self- monitoring provides an easier to use, cheaper, and more time efficient process to the consumer. Although the Fresh-Aire UV followed the QuickCheck closely with a score of 173, the demand in the market for a noninvasive glucose monitor was stronger than an air system. Since CNOGA considered five products that were already high scoring in all the categories, the product selection was based on the QuickCheck’s strength against its competitors (discussed in the next section). The team found that the QuickCheck is capable of great success, and its wide selling platform makes it a natural choice for CNOGA. 1.4 The QuickCheck The QuickCheck is the world’s top non-invasive blood glucose monitor. The monitor uses painless infrared light to analyze the color of the user’s blood and then determines the user’s blood glucose level based on the color data. The QuickCheck is a vast improvement on painful traditional blood glucose testing methods, as it, unlike virtually all other testing meters, does not require a blood sample to operate.
  21. 21. 23 The QuickCheck will be a valuable product to diabetics who are tired of painful and expensive traditional methods of blood glucose testing. How the QuickCheck Operates The QuickCheck is simple and easy to use. Users insert their finger into the device by opening and closing it using hinges along its center, shown in the picture below. Figure 1.4.1: The QuickCheck in Use The user then presses a button on the device’s face to start the test. After several seconds, the QuickCheck will display the results of its blood glucose analysis on its front screen. Users can then upload the test results to their computer or send the results to their physician. The QuickCheck is fast, painless, and extremely easy to use.
  22. 22. 24 Problems the QuickCheck Solves The QuickCheck will succeed in the market, in part because of the many problems that it solves for diabetics. The list below describes these problems solved: • Painless and Bloodless: The conventional blood glucose testing methods currently on the market all require users to puncture their skin in order to take a blood sample to test. Since diabetics must perform this procedure several times a day, it can be a painful and irritating process. The QuickCheck, however, does not require a blood sample to measure the user’s blood glucose level. Therefore, it represents a massive improvement over current blood glucose testing methods. • Cost Savings: Most blood glucose monitoring manufacturers operate under a razor-razor blades model: the monitor is initially sold at a low price to the consumer, with the single-use test strips necessary to test the user’s blood sold at a high price to boost the company’s revenues. An analysis of strip usage shows that the average diabetic can spend over $1,000 per year on test strips alone. Since the QuickCheck does not require a blood sample and does not utilize test strips, the device can pay for itself quickly and represent a high level of cost savings to the user.
  23. 23. 25 The Science Behind the QuickCheck The QuickCheck uses patented optics technology to painlessly measure the user’s blood glucose level. Inside the device, several LEDs are placed on the face of the finger hole so that they can shine through the user’s finger. Once the user inserts his or her finger into the QuickCheck, these lights emit infrared light, which travels through the patient’s skin and is colored by the blood in the finger. On the other side of the finger hole is a small camera to pick up these light waves. Figure 1.4.2: QuickCheck Technology8 8 USPTO, Patent no. 8,489,165
  24. 24. 26 The QuickCheck then determines the color of the user’s blood using the color of the incident light shining through the user’s finger, as shown in the diagram above. Once the wavelength (and color) of this light is determined, the QuickCheck uses its patented matching algorithm to match the wavelength of the light to the user’s blood glucose level. Once this level is obtained, the QuickCheck displays the test results on its screen for the user to see. 1.5 Product Utility Bundle The Product Utility Bundle is a tool used to analyze the product’s ability to meet basic consumer needs. CNOGA’s goal is to optimize the utility bundle for the QuickCheck. The analysis matches each product’s satisfaction of Maslow’s needs to the product’s respective niche. It is divided into six categories: form, time, place, possession, image and information. The 20 numerical categories from the Competitive Product scorecard are divided and placed into the utility categories, in which they fit best. For comparison in this analysis, CNOGA identified alternative blood glucose testing methods to the QuickCheck’s. By using the Utility Bundle Analysis, a more in-depth analysis could be formed, leading to broader perspective on the comparative and individual strengths of the QuickCheck.
  25. 25. 27 Figure 1.5.1: Product Utility Bundle The QuickCheck yielded the highest total average score with an impressive 9, suggesting it caters to consumer needs better than its competitors. The QuickCheck was greater than or equal in score within the utility subdivisions. The competitors represent the different methods of blood glucose monitoring: the GlucoWatch (Non-Invasive), traditional testing, alternative site testing, and glucose pumps. For QuickCheck GlucoWatch Traditional Alternative Site Glucose Pumps Form Utility 1 High value in use / low cost to make it 10 7 5 6 3 2 Protection 9 8 3 3 1 3 Bankabale 8 5 4 5 5 4 Differential advantage 10 7 5 6 3 5 Type and degree of competition 8 8 5 3 2 Form Average 9 7 4.4 4.6 2.8 Time Utility 6 Durability 9 3 3 5 5 7 Rate of use 10 7 5 7 7 8 Life cycle 7 6 3 4 2 Time Average 8.7 5.3 3.7 5.3 4.7 Place Utility 9 Rate of technological change 8 8 4 4 4 10 Shelf space at retail 10 6 3 5 6 11 Consumer purchase patterns 9 6 3 5 5 12 Web friendly 9 9 5 6 6 Place Average 9 7.25 3.75 5 5.25 Possession Utility 13 Ease of use 10 10 1 6 3 14 Affordable 9 9 6 4 2 15 Divisibility 7 6 3 5 3 16 Prior use patterns 10 7 4 6 8 Possession Average 9 8 3.5 5.25 4 Image Utility 17 Newness 9 4 4 4 2 18 Unique and trendy 10 7 2 5 1 Image Average 9.5 5.5 3 4.5 1.5 Information Ultility 19 Size of market for like products 8 4 3 5 6 20 Fundamental trends 10 7 2 5 2 Information Average 9 5.5 2.5 5 4 TOTAL AVERAGE 9 6.4 3.48 4.1 3.7
  26. 26. 28 form utility, the QuickCheck is a necessity for the consumer and a cheaper alternative to other devices. The QuickCheck scored an average of 8.7 for time utility, significantly higher than its competitors. This is because although it is used daily, the device automatically turns off when not in use and does not require replacements. CNOGA’s average score for each utility is higher than its competitors, which suggests that its bloodless non-invasive technology is the user- friendliest method in the market. Due to their product utility bundle scores, the marketing team was able to place each testing method in a life cycle stage: • QuickCheck (9): Introduction/Growth • GlucoWatch (6.4): Growth • Traditional Testing (3.48): Maturation • Alternative Site Testing (4.1): Maturation • Glucose Pumps (3.9): Maturation Since the testing methods most common in the market received scores that indicated that they were in a maturation phase, the marketing team expects that the QuickCheck will have a high level of success in the market. Customers of companies in maturation will be more willing to switch to a new and better testing method, which will be the QuickCheck. It will thus be easy for CNOGA to meet its sales goals.
  27. 27. 29 1.6 Summary 1.2 Potential Products Considered five potential products • Fresh-Aire UV: an in-duct, UV light air purifier that kills bacteria and pathogens for whole home systems • Wagables Treat ‘N Play: Treat and toy dispenser to keep pets occupied while alone • ShockBox: In-helmet sensor that alerts players of potential concussions by measuring the force of hits • Smart Cooler: Cooler on wheels with a built-in blender, waterproof Bluetooth speakers, USB chargers, LED lights, and a bottle openers • QuickCheck: Non-invasive glucose monitor which checks glucose levels bloodlessly 1.3 Comparative Product Analysis A comparison of the five potential products with criteria including protection, ease of use, differential advantage, etc. Final scores: • QuickCheck: 180 • Fresh-Aire UV: 173 • Wagables Treat ‘N Play: 159 • ShockBox: 154 • Smart Cooler: 150 1.4 The QuickCheck The QuickCheck is a bloodless blood glucose monitor. Its testing technology uses infrared light to determine the glucose level in blood.
  28. 28. 30 1.5 Utility Bundle Analysis A further, more detailed analysis of different methods of blood glucose testing. Total Averages: • QuickCheck: .95 • GlucoWatch: .55 • Traditional: .3 • Alternative Site: .45 • Insulin pump: .15 1.7 Conclusion Using different tools of analysis, the team was able to select the QuickCheck as the product for CNOGA. In the comparative product analysis and utility bundle analysis, the QuickCheck was the best product across the board. These analyses demonstrated the QuickCheck’s high value in use and strong potential market. These results demonstrated to the team that the QuickCheck had the most potential of all the products researched. The utility bundle analysis, performed against the QuickCheck’s competitors, demonstrated the product’s differential and competitive advantage over its competition. The QuickCheck, due to the high amount of utility it delivers, is the best product in the blood glucose monitoring market. Thus, the team concludes that the QuickCheck will be very profitable for CNOGA and help its declining business.
  29. 29. 31
  31. 31. 33 2.1 Introduction For this section, the team at CNOGA conducted an assessment of the industry, i.e. the US Self-Monitoring Blood Glucose industry, or SMBG for short. This section will analyze the various techniques used in disease management and the available products that employ these techniques. This research will help CNOGA identify when to enter the market and which market player to attack with the QuickCheck. The team researched the market that the QuickCheck would be released into. It employed several analytical tools to identify certain aspects of the market and the market players, such as: the Comparative Product Scorecard, the Competitive Trend Analysis, the Linear Trend Analysis, and the Industry Life Cycle analysis. These tests identified the leading players in the market, the relative strengths and weaknesses of their products, the stage of the market in the market life cycle, and the business modes of the leading market players. This information will help the team to determine which market players are the weakest and most vulnerable to attack from a new, innovative product like the QuickCheck. The team will then be able to determine the likelihood of the product’s success in the market and tailor its business plan to maximize this success. The team also researched market trends that will affect the QuickCheck’s ability to succeed.
  32. 32. 34 Facing competition in the market is an extremely risky portion of the QuickCheck’s business plan. Larger and more successful market players may try to block CNOGA’s growth and force the QuickCheck out of the market. These companies have large research and development teams and will be able to devote resources to developing competitive products. Likewise, a quick change in market trends would also be harmful to the QuickCheck. A change in the regulatory or social environment would quickly cause the QuickCheck’s sales to drop and force it out of the market. 2.2 Industry Overview The Self-Monitoring Blood Glucose industry is currently comprised of four types of self-monitoring techniques. The first is traditional testing, in which a diabetic pricks his or her finger then uses a strip to read the glucose level of his or her blood. The second is alternative site testing, which is similar to traditional, except that the diabetic pricks less painful sites such as the upper arm, forearm, or thigh. The third is insulin infusion therapy in which the patient uses an insulin pump to constantly monitor his or her blood glucose level. However, the pump must be inserted into the abdomen every 3-4 days. Lastly, non-invasive techniques require no blood sample to test blood glucose levels. Non-invasive techniques are quickly gaining popularity.
  33. 33. 35 US SMBG was valued at $3.99 billion in 2013 and is expected to increase to $4.18 billion by 20169 . The industry annual growth rate is expected to be, at a minimum, around 2%. Figure 2.2.1: Market Revenue Growth, SMBG Due to the market’s razor and razor blades strategy, only 10% of market revenue arises from the sale of blood glucose monitors, while the remaining 90% of revenue comes from the sale of testing strips.10 Figure 2.2.2: Percentage Sales Breakdown, SMBG 9 Frost & Sullivan – US Self-Monitoring Blood Glucose Market 10 Ibid.
  34. 34. 36 As shown below, Roche Diagnostics (brand Accu-Chek), LifeScan (OneTouch), Bayer Healthcare (Contour), and Abbott Diabetes (FreeStyle) are the key providers of such products.11 These three companies alone account for 77% of total market revenue. They represent an oligopoly that CNOGA can easily attack. The marketing team found that LifeScan, which is owned by Johnson and Johnson, is the best target out of the 5 industry leaders. This decision will be discussed in-depth later in the chapter. Figure 2.2.3: Market Share Analysis, SMBG 11 Ibid.
  35. 35. 37 Traditional Testing Products that require blood samples currently dominate the SMBG industry. The products shown below, the Bayer Diabetes Contour and Roche Diagnostics Accu-Chek, utilize the traditional finger-prick testing technique.12 To use this type of product, a diabetic will insert a test strip into the bottom of the meter. He or she will then prick his or her finger with a lancet and use the test strip to pick up this blood sample. The meter will then analyze the blood sample and return the level of glucose in the blood sample. 12 Diabetes Self-Management, Tools of the Trade 2012 Bayer Healthcare Contour Accu-Chek Nano
  36. 36. 38 Alternative Site Testing The Accu-Chek Fast-Clix, sold by Roche Diagnostics, is a typical alternative site lancet. A diabetic will use this special type of lancet to prick a less painful area of the body than the finger. The user will then pick up and analyze the blood sample with a traditional glucose meter. This technique is less painful than the traditional finger-prick technique, but requires special lancets. Insulin Pumps Insulin pumps are also very common among type 1 diabetics. These provide constant monitoring of blood glucose levels; however, patients must insert a catheter into their abdomen and replace it every 3-4 days. The key providers of insulin pumps are LifeScan, Roche Diagnostics and Medtronic. Accu-Chek Fast-Clix LifeScan OneTouch Ping Accu-Chek Combo
  37. 37. 39 Non-Invasive Products Non-invasive products do not require diabetics to take a blood sample. The Cygnus GlucoWatch is the only other non-invasive blood glucose monitor that has received FDA approval (in 2001). The GlucoWatch could have served as the QuickCheck’s direct substitute. It used an electronic current to draw glucose through user’s skin. However, it went out of business due to mismanagement and several issues with the product. These issues included inaccuracy and skin damage. Additionally, the GlucoWatch still required users to calibrate the instrument with a finger prick before using. Though similar in type to the QuickCheck, the GlucoWatch falls far short in product quality. Thus, the QuickCheck serves as a vast improvement for the non-invasive sub-section of the SMBG industry. 2.3 Comparative Product Analysis In this section, the research team assessed the competition and evaluated their individual strengths and weaknesses. The research team found that brand strength of the manufacturers is a huge decisive factor for buyers and is the top criteria on threats to the QuickCheck. LifeScan received the highest satisfaction on a survey created for its Cygnus GlucoWatch
  38. 38. 40 parent company, Johnson and Johnson. 13 Its formidable brand strength positively impacts its sales, making it the global market leader. LifeScan therefore poses the biggest threat to the QuickCheck’s producer, CNOGA. Figure 2.3.1: Competitive Analysis, SMBG 13 Mintel.com, Diabetes and The Diabetes Landscape
  39. 39. 41 While looking at their products, Accu-Chek and LifeScan pose large threats to CNOGA due to the perceived advantages of their customers. Figure 2.3.2: Product Analysis, Roche Diagnostics and LifeScan With the enhanced understanding of the competitive threats in SMBG, the team put together a list of variables by which to rank the different competitors. Since there are many direct competitors in the SMBG market with extremely similar products, the team decided to compare the QuickCheck to several different testing methods rather than specific products. Overall, the QuickCheck emerged as the product with the highest quality.
  40. 40. 42 Figure 2.3.3: Competitive Product Scorecard As is shown in the comparative product scorecard, the QuickCheck highly outranks its competitors in all variables. The team found that the following are what most clearly sets the QuickCheck apart: • High value in use / low cost to make it: the QuickCheck, unlike other single-use testing techniques, can be reused over and over. It saves its users the expense of having to continually purchase expensive test strips as well as is completely painless. • Ease of use: the QuickCheck, since it does not require a blood sample or any catheter use, is vastly easier to use than its competitors in all categories. CNOGA QuickCheck Cygnus GlucoWatch Traditional Alternative Site Glucose Pump 1 High value in use / low cost to make it 10 7 5 6 3 2 Protection 9 8 3 3 1 3 Ease of use 10 10 1 6 3 4 Differential advantage 10 7 5 6 3 5 Rate of technological change 8 8 4 4 4 6 Type and degree of competition 8 8 5 3 2 7 Unique and trendy 10 7 2 5 1 8 Shelf space at retail 10 6 3 5 6 9 Prior use patterns 10 7 4 6 8 10 Affordable 9 9 6 4 2 11 Newness 9 4 4 4 2 12 Divisibility 7 6 3 5 3 13 Rate of use 10 7 5 7 7 14 Durability 9 3 3 5 5 15 Life cycle 7 6 3 4 2 16 Bankabale 8 5 4 5 5 17 Fundamental trends 10 7 2 5 2 18 Size of market for like products 8 4 3 5 6 19 Consumer purchase patterns 9 6 3 5 5 20 Web friendly 9 9 5 6 6 SUM 180 134 73 99 76 AVERAGE 9 6.7 3.65 4.95 3.8
  41. 41. 43 • Fundamental trends: the current trends in the SMBG market favor non-invasive testing methods and lower cost methods of blood glucose testing. The QuickCheck is both non-invasive and effectively pays for itself due to the saved expense of test strips. Overall, the team at CNOGA is confident that the QuickCheck is a superior product that will disrupt and revolutionize the SMBG market. Since its overall product scorecard average is much higher than those of its competitors, the marketing team is confident that the QuickCheck will quickly succeed. The competitive product scorecard places its competitors (with the exception of the GlucoWatch) into the maturation stage. These competitors will be extremely easy for a highly ranking product to attack and win market share from. 2.4 Competitive Trend Analysis This section evaluates the major trends in the glucose monitoring industry. It then compares QuickCheck’s strengths and weaknesses to those of its competitors with regards to these trends. The trends listed here fall within broad categories: product quality, social trends, cultural trends, economic trends, demographic trends, competition, technology, and political and legal trends. A + rating means that the product meets or exceeds expected standards, while a - rating is an indicator of a subpar performance.
  42. 42. 44 Figure 2.4.1: Competitive Trend Analysis Like the competitive product scorecard, the competitive trend analysis shows that the QuickCheck is a highly superior product to its competitors. The team found that the following are what most clearly sets the QuickCheck apart: • Obesity epidemic: the obesity rate in America is expected to consistently grow in the future. Since obesity is one of the leading causes of diabetes, the increased percentage of the population that is obese will also have a higher risk of diabetes. The team expects that this trend will help fuel demand for the product. • High demand for painless devices: there are no painless, non- invasive monitoring devices currently on the market. However, CNOGA QuickCheck Cygnus GlucoWatch Traditional Alternative Site Glucose Pump 1 Market recovery + + - - - 2 High growth in healthcare industry + + + + + 3 Self-monitoring becoming popular + + - - - 4 Non-invasive devices becoming popular + + - - - 5 Market is looking for painless devices + - - - - 6 Market is looking for easily useable devices + + - + - 7 Generic traditional devices taking market - - - - - 8 High market demand for a bloodless model + - - - - 9 Many diabetics are unhappy with their treatments + - - - - 10 Wide patents + - - - - 11 High market demand for a bloodless model + + - - - 12 New product, new technology + - - - - 13 High rate of technological change - - - - - 14 Obamacare and greater prevalence of health insurance + + + + + 15 Many health plans pay for traditional glucose meters - - + + + 16 Aging population + + + + + 17 Rate of diabetes increasing + + + + + 18 Obesity epidemic + + + + + 19 Diabetes especially prevalent in largely obese areas + + + + + 20 Health and dieting are becoming more popular - - - - - SUM 16 11 7 8 7 AVERAGE 0.8 0.55 0.35 0.4 0.35
  43. 43. 45 demand is high for one of these products and the QuickCheck can meet that demand. • Many diabetics are unhappy with their treatment: research14 done by Mintel shows that 80% of diabetics are not fully pleased with their treatment of their disease. The QuickCheck is a vast improvement on current testing methods and will be a good solution to the problems of unsatisfied diabetics. Since its overall trend analysis average is much higher than those of its competitors, the marketing team is confident that the QuickCheck will quickly succeed. The trend analysis places its competitors (with the exception of the GlucoWatch) into the production stage. These competitors are often unaware of market trends and emerging competitors. This often means that these competitors are selling products that do not satisfy their users, which makes these companies extremely vulnerable to attack. 2.5 Linear Evolution Analysis The research team then assessed the SMBG industry using a linear evolution analysis. The linear evolution analysis is divided into three sections: production, selling and marketing. 14 Mintel.com, Diabetics: Attitudes and Behaviors
  44. 44. 46 Figure 2.5.1: Linear Evolution Analysis CNOGA’s Quick Check received a 0.8 on the comparative trend analysis, which is over 200% better than its primary competitors, the traditional testing products, which received a ranking of 0.35. To attain the stated rankings, the research team utilized information from the comparative trend analysis and industry life cycle. Through the data obtained in the analysis, the team discovered that many leading industry competitors are unaware of emerging industry trends and have not updated their products to better adapt to these trends. Therefore, these competitors are clearly in the production mode; they are only focused on producing a product and not on appealing to potential customers in the market. This makes their products unsatisfying to potential users and leaves them vulnerable to attack from companies with better products.
  45. 45. 47 The QuickCheck’s high rank comfortably places it in the marketing mode, which is only fitting given its superiority over competing products. The team discovered that the QuickCheck applies to almost all of the current trends in the market. This fact implies that the QuickCheck will easily satisfy its users, who are currently forced to use subpar testing methods. Being in the marketing mode, CNOGA is highly aware of trends in the industry and therefore has a good ability to adapt to emerging trends in the future. This awareness also indicates that the QuickCheck will become a popular product in the market. The research team is confident in QuickCheck’s potential performance due to the high disparity between its rankings with those of the competitors. 2.6 Industry Life Cycle The SMBG industry is ready to be disrupted since it is at its maturation stage, as evidenced by the comparative trend analysis. The diagram below shows the life cycles of several testing methods on the market in addition to the QuickCheck.
  46. 46. 48 Figure 2.6.1: Industry Life Cycle The majority of the products currently in the market are in the maturation stage. Their users are unhappy with their products and are hopeful for an improvement in the diabetes management options available. In fact, about 80% of diabetics believe their disease management can be improved15 . It is for this reason that traditional testing only received a score of 0.35 on the comparative trend analysis that translates to its position on the peak of the life cycle curve. These companies have not adapted their products to emerging market trends, and therefore are highly vulnerable to attack from companies that are 15 Mintel, Diabetics - Attitudes and Behaviors – US August 2010
  47. 47. 49 more aware of the market needs and trends. The only other non-invasive product, GlucoWatch, is in the growth stage. However, the research team chose to disregard GlucoWatch in the life cycle evaluation due to its design and manufacturing defaults. With only the valid products under assessment, the SMBG industry stands mature and ideal for attack. Since the dominant products are not expected to experience a growth in sales, rather a decline, and the research team found that now is the opportune moment for the QuickCheck to disrupt the SMBG market. The QuickCheck is highly adapted to current market trends and has received both a high trend analysis and product scorecard rating. These both indicate that the QuickCheck fulfills most of the needs of consumers and will easily win market share from the industry oligopoly. With its trend analysis rating of 0.8, the QuickCheck can only move up the large slope from its current position at the bottom of the life cycle. 2.7 Technology Trend Analysis The current health technology industry is fast-paced and rapidly developing. This can often lead to a short life cycle and quick changes in industry practices and trends.16 In the medical industry, patents are key in protecting one’s product from competition and copying from low- 16 Frost and Sullivan, US Self-Monitoring Blood Glucose Market
  48. 48. 50 cost manufacturers. Lawsuits are extremely common in defending these patents from infringement. Since the QuickCheck has several design and content patents, the team expects that CNOGA will have to defend its patents several times in court after the product’s introduction into the market. Since the medical industry is so technology-focused, there is a high risk of technological obsolescence in markets with high growth. Medical companies often place a large amount of effort in research and development; new technologies emerge every month. However, in low- growth industries where market oligopolies exist, competitors tend to remain at the same technological level and focus less on development. The glucose monitoring industry currently has a large oligopoly, so new development is rare. However, once the QuickCheck disrupts the market, the rate of technological change will increase dramatically. 2.8 Social Trend Analysis Several key trends exist in the social structure of diabetics. From high dissatisfaction with current testing methods17 to the obesity epidemic in America, the diabetes demographic is rapidly changing. Below are the key social trends in the market: 17 Mintel, Diabetics – Attitudes and Behaviors – US August 2010
  49. 49. 51 Figure 2.8.1: Key Social Trends Social Industry Trends Obesity epidemic Rates of diabetes increasing Health and dieting becoming more popular Of the several social trends currently in the market, the most important are: obesity and diabetes epidemics in America and the rise of health and dieting amongst young people. As certain parts of America become more and more impoverished and unhealthy food becomes more and more available to low-income individuals, the rate of obesity amongst the poor is expected to keep increasing rapidly. Since diabetes incidence is linked to obesity, this also means that the proportion of diabetics to the healthy portion of the population is expected to increase. These two trends are prevalent across all regions of the country, all age groups, and all races. These two are system-wide trends and directly benefit the QuickCheck. Conversely, health monitoring and dieting are highly popular amongst young millennials.18 This trend, however, is not nearly as widespread as the previous two. Out of the three key trends, then, the team selected the growth in diabetes rates across America as the most important trend 18 Ibid.
  50. 50. 52 to the company. This key trend will directly impact the growth of the QuickCheck’s user market and will help to grow sales in the future. The team will focus on this trend while selecting a target market. 2.9 Economic Trend Analysis The economy at large has recently seen a recovery from the recession and banking crisis of 2008. Despite the success of the stock market and the recovery of the unemployment rate, net wages and salaries are still close to their low recession levels. This trend has kept many lower- and middle-class individuals at low- or poverty-level incomes. Because these people do not have the amount of disposable income that they previously enjoyed before 2008, they have less leeway to spend extra money on necessities such as food. Healthy food is often more expensive for these people, and so they have to forgo it and consume more unhealthy, and thus cheaper, foods. This issue will only contribute to an overall worsening of the obesity rate in America, particularly in low-income areas that are already highly at risk for obesity. Medical research has shown that obese individuals have a higher risk of developing diabetes, so this alarming trend will only contribute to the growth of diabetes in America. With uncertainty still in the markets regarding overall economic health and wage growth, this trend will only worsen.
  51. 51. 53 Despite the tepid recovery in the markets and in wages, the purchasing power of the target market was greatly increased by the introduction of the Affordable Care Act (ACA), officially known as The Patient Protection and Affordable Care Act (PPACA), and sometimes known as ObamaCare. The ACA increases the quality, availability, and affordability of private and public health insurance to over 44 million uninsured Americans through its many provisions, which include new regulations, taxes, mandates, and subsidies. Due to the introduction of this policy and its subsidies, more Americans can now afford to better monitor their blood glucose levels and bound to choose more efficient products than those commonly used. The joint effects of the return to full employment and ObamaCare will help to increase the level of health insurance coverage in America. This will mean that more individuals will have new access to a wide range of medical treatment options and spending on healthcare will increase. This is a good sign for medical products like the QuickCheck, which will only mean their sales will increase greatly in the future. 2.10 Legislative Impact The blood glucose industry is heavily regulated due to its products' nature as medical devices. Below is a table of the medical regulation landscape in America.
  52. 52. 54 Figure 2.10.1: Regulation of the Medical Industry Federal FDA ObamaCare (ACA) Medicare/Medicaid Other medical legislation State Little to none, regulatory power lies mostly with the federal government The Food and Drug Administration is in charge of granting approvals for this type of product. Medical products that will be sold in the United States must undergo a rigorous testing and trial regimen before they are approved for sale on the open market. A typical medical device research and approval process can take up to 5 years, though actual times vary depending upon which approval route a company selects for their device. Once a device is approved for sale in the US, its performance is monitored and the FDA periodically reviews its approval. If a device begins to develop issues, manufacturers will voluntarily or involuntarily recall it from the market. One such example within the SMBG industry was the Bayer Ascensia, which was recalled after reports of the device being inaccurate.19 A recall can often be extremely harmful for the product and the manufacturer’s reputation. 19 FDA, Medical Devices List of Recalls
  53. 53. 55 ObamaCare (discussed previously) and the Medicare/Medicaid programs regulate public assistance for purchases of medical supplies and services. These programs typically give devices a wider market by enabling low-income and elderly individuals to purchase medical supplies at lower or zero prices. However, a recent slash in Medicare reimbursements and national mail order program adversely affects the SMBG industry. 20 Beneficiaries who want their diabetes testing supplies delivered to their home must use a Medicare national mail- order contract supplier in order for Medicare to pay for the supplies. They can also pick up their testing supplies from a local store (pharmacies or suppliers) enrolled in Medicare. 21 However, such strictness limits the ease of purchase of SMBG supplies, leading to a reduction in revenues for all the different products under assessment. 2.11 Summary 2.2 Industry Overview The US SMBG industry is a growing industry with high revenues and a positive rate of growth. The projected revenue for the industry is above $4 billion. The dominant competitors are LifeScan and Roche Diagnostics. 20 Frost and Sullivan, US Blood Glucose Self-Monitoring Market 21 American Diabetes Association, Medicare’s National Mail-Order Program for Diabetes Testing Supplies
  54. 54. 56 LifeScan is the major competitor for CNOGA to attack. 2.3 Comparative Product Scorecard The comparative product scorecard placed the major testing methods in the SMBG industry and compared them to the QuickCheck. After analyzing the products, the team found that the QuickCheck was the best product on the market. 2.4 Comparative Trend Analysis In the comparative trend analysis, CNOGA analyzed the trends currently in the SMBG industry and applied them to the QuickCheck and other major testing methods. The team found that the QuickCheck is best adapted to the current market trends. 2.5 Linear Evolution Analysis The linear evolution analysis showed the major testing methods on a spectrum of business modes. The QuickCheck is currently in the marketing mode, unlike the other methods, which are in the selling or production modes. This shows that the QuickCheck has the greatest ability to disrupt the SMBG industry. 2.6 Industry Life Cycle The industry life cycle analysis showed the current life cycle stages of the major testing methods. Although the SMBG industry is growing, the major testing methods are currently in maturation or decline. This shows that they do not appeal to
  55. 55. 57 customers and adapt to trends as well as the QuickCheck, which is in a growth phase. 2.7 Technology Trend Analysis The QuickCheck is in a fast-paced, high-tech environment. This can lead to short life cycles and a high rate of technological change. A quick change in technology could pose a risk for the QuickCheck. 2.8 Social Trend Analysis After analyzing the social trends, the team concluded that the current market is ready for a product like the QuickCheck. Customers are highly dissatisfied with current products and are looking for new and innovative alternatives to their treatments. 2.9 Economic Trend Analysis The passage of the ACA will drastically increase the amount of people with health insurance. This will benefit CNOGA, since more diabetics will have the financial capacity to buy the QuickCheck. 2.10 Legislative Impact The SMBG industry, since it is a medical industry, is highly regulated by the FDA. In addition, reductions to Medicare reimbursements will further restrain the market. 2.12 Conclusion The analysis conducted convinces the research team that now is the prime time to introduce an advanced product into the SMBG industry. Furthermore, the competitive trend analysis positively rated
  56. 56. 58 the QuickCheck at 0.8. This is a good indicator that market trends currently favor the QuickCheck and will contribute to both its success and the growth of its target market. These trends include a growth in both the diabetes and obesity rates and a general dissatisfaction with current SMBG products. More specifically, demographic trends suggest an anticipated increase in number of diabetics, which is likely to result in an increase in demand for glucose testing products. Research on relevant legislation revealed that implementation of ObamaCare will directly increase the economic capacity of diabetic patients, who can now purchase SMBG products under their newly acquired insurance plans. Due to the QuickCheck’s significant differential advantage, the research team concludes that the positive impact of these trends on the SMBG industry will more specifically be reflected in large sales revenue for the QuickCheck. However, the research team acknowledges that factors such as the competitors’ strong brands and consumers’ leniency towards traditional products might inhibit the QuickCheck’s pace of growth. The research team therefore advises that intensive advertising be conducted prior to the release of the product to ensure that this is not a problem.
  57. 57. 59
  59. 59. 61 3.1 Introduction After deciding on the QuickCheck as the company’s new product, the company then began to discuss “where to play the game”, or where to attack the market. One of the most important factors in this decision is which portion of the market to attack. In order to identify which portion of the market to attack, the team used an industry profile analysis, a market share analysis, and a linear evolution analysis. These tests will help the team to determine which portion of the market is most vulnerable to attack and which market player should be attacked by CNOGA. The QuickCheck will succeed if it attacks this weakest player and wins based on its high differential advantage. There are several risks involved with attacking the market. The market oligopoly is powerful and has high revenue levels. Accordingly, the companies that make up the oligopoly will be able to use many resources to avoid and survive the QuickCheck’s attack. These companies could block CNOGA’s growth and force the QuickCheck out of the market in a counterattack. The company’s attack must not fail. 3.2 Industry Profile The company used a pyramid diagram to illustrate how each part of the industry is controlled and how much of the market is controlled by the companies in each tier.
  60. 60. 62 Figure 3.2.1: SMBG Industry Profile The industry for glucose monitors is an oligopoly. Four major players control the market: LifeScan, Roche Diagnostics, Bayer Diabetes, and Abbott Diabetes 22 . (Market shares are denoted in the diagram with an “MS”.) Together, these four companies control about 77% of the market share. Because of their dominant position in the market, these bigger companies are no longer focused on adapting to the changing needs of the consumer. Their main goal is to maintain the same course that they are currently on. 22 Frost and Sullivan, US Self-Monitoring Blood Glucose Market ATTACK
  61. 61. 63 The middle level for the industry is comprised of many mid- sized companies that produce generic glucose monitors and diabetes products. The market share of all of these firms combined is about 23%. Because of this, entering the market in this area would not be a good business strategy. There are many firms there that produce similar products that are constantly trying to compete with each other for the best position in that section. Because of the nature of the product, there are not very many “mom and pop” shops that produce glucose monitors23 . Glucose monitors require very specialized skills and are expensive to produce. So while there are smaller companies that produce products like this, there is not any significant presence in the market from smaller companies. This tier is mostly comprised of smaller startups that are trying to grow their market share and break into the market. The team concluded that the oligopoly is the best place for the firm to attack the industry. The ideal company for CNOGA to attack is LifeScan because they are making the least effort to evolve as a company in order to meet the needs of the consumer. The company concluded that because of this, it would be easiest to take a portion of LifeScan’s market share. The large companies that are in that position 23 Ibid.
  62. 62. 64 are not concentrating on innovation and evolving so a new firm that can provide an innovative, new product that caters to the needs of the consumers could easily take over a large share of the market. The team also concluded that it would be best to stay away from the middle sized companies because there are so many companies in that range that are trying to produce new products. These middle size companies have higher trend ratings than the market oligopoly and will be more aware of industry trends. They are therefore less vulnerable to attack from new companies with new products. The market oligopoly, however, has very low trend ratings and is unaware of the industry trends that CNOGA is focusing on. These companies are highly vulnerable to attack and the QuickCheck will easily win market share from them. The QuickCheck is the ideal product with which to attack the oligopoly. With the help of health coverage it would be affordable to the consumer. The QuickCheck is a significant improvement over anything that is currently on the market, and it is a product that makes life easier for the consumers that really need the product. 3.3 Market Share Analysis After careful analysis of the market to determine that the industry for glucose monitors is an oligopoly, the company created a
  63. 63. 65 market share analysis to illustrate how the top firms control the market and how the industry has the potential for growth in the future. Figure 3.3.1: Market Share Analysis In 2013, the Self-Monitoring Blood Glucose market was valued at $3.99 billion24 . There are four major companies that control the market: Roche Diagnostics, LifeScan, Abbott Diabetes, and Bayer Diabetes. Together, these firms make up about 77% of the market. This demonstrates that the Self-monitoring Blood Glucose market is an oligopoly. These companies have committed to acquire smaller 24 Ibid. ATTACK
  64. 64. 66 companies in the market in order to maintain or grow their own market shares. Although these four companies are dominating the market and acquiring their competition, there are still smaller firms in the market but their market share is only about 23% combined. The pie chart shows the market share of each company in terms of percentages. As shown on the pie chart, LifeScan’s market share is about a quarter of the market, followed closely by Roche Diagnostics. These two companies clearly have the largest shares of the market and continue to maintain their control over the market. In 2014, Roche acquired Ariosa Diagnostics, a firm that makes non-invasive prenatal testing equipment25 . While this is not directly related to the market that the company is trying to enter, the fact that they are acquiring firms that are in different industries means that they are not focusing as much of their resources in the development of more sophisticated testing equipment for blood glucose levels. This acquisition is a demonstration of how unaware Roche is of the emerging market trends in the SMBG industry, and how its products suffer because of it. Johnson and Johnson, who own LifeScan, acquired Animas Corporation in 2005. Animas Corporation, an insulin delivery company, 25 Forbes, Roche's Expands Diagnostics Position With The Acquisition Of Ariosa
  65. 65. 67 was a barrier to LifeScan’s ability to enter the market. This shows that they are committed to the blood glucose market; however, they have not shown the desire to move away from the conventional, painful methods of checking blood glucose levels. The team concluded that these acquisitions are beneficial to the QuickCheck because as companies grow, it becomes harder to manage every part of the company as easily as when the company was smaller. Furthermore, companies such as Bayer and Johnson and Johnson are involved in so many different markets that they simply cannot devote as many resources to a single market. This causes them to become slightly disconnected from the consumer, thereby providing an opening for the QuickCheck to take over a piece of the market. 3.4 Life Cycle Analysis Upon the development of the industry profile and Market Share Analysis, the company analyzed the life cycle in the SMBG industry. This chart further emphasizes that the QuickCheck is superior to other types of blood glucose testing. Because there are so many products on the market that are so similar, this chart focuses on each specific category of blood glucose testing method.
  66. 66. 68 Figure 3.4.1: Market Life Cycle Analysis As shown on the diagram, almost every type of monitor is in maturation or decline. The only other product not in maturation or decline is the Cygnus GlucoWatch, which is no longer manufactured because of the many defects that the product had. Companies in the introduction or growth phases have the ability to take shares of the market away from their competitors. Companies in these phases still have the opportunity to adjust and tailor their products to fit the needs and wants of the consumers.
  67. 67. 69 The team concluded that the competition is in the maturation stage because their products are no longer differentiated from other companies’ products. The oligopoly’s trend analysis ratings are all extremely low, meaning that their products do not fulfill consumer needs and they are not adapted to current market trends. This makes their products unsatisfactory to consumers and makes these companies vulnerable to attack. This is already the case, since there are many substitutes already on the market. This means that the oligopoly’s products lack differential advantage, unlike the QuickCheck. The QuickCheck has a high trend analysis rating, which means that it has the ability to steal market share from its competitors that are in the maturation phase. Consumers are no longer satisfied with having to prick their fingers when they want to check their blood glucose levels and want something new. The market is saturated with products that all require some level of pain. Since CNOGA is aware of these and other emerging market trends, the company can adapt the QuickCheck to real consumer needs and market trends. The product, therefore, has a high amount of differential advantage of the oligopoly’s products and makes the QuickCheck one of the most improved and best products in the SMBG market. This makes the QuickCheck much more satisfactory to consumers than the traditional oligopoly products, and will help the QuickCheck to steal market share
  68. 68. 70 from the oligopoly’s products. The competition’s demonstrated lack of awareness of current consumer needs and market trends and drive to improve their products to fit the needs of the consumers allows the QuickCheck to take over a portion of the market. 3.5 Linear Evolution Analysis The Marketing Stage Analysis brings together the data from the life cycle analysis and the comparative trend analysis. This chart looks at the different marketing modes of the companies in the market. These modes range from production to selling to marketing. Because there are so many similar products on the market, the team analyzed the market by type of product. This chart lets the company easily decide which portion of the market should be attacked in order to maintain the QuickCheck’s market share.
  69. 69. 71 Figure 3.5.1: Linear Evolution Analysis All of the QuickCheck’s competitors are either in the production or selling phases. The production and selling phases indicate that a company is simply focused on making or selling its product, and are not attempting to market it to a wider audience than its current customers. Companies in the production and selling modes are less aware of consumer needs and industry trends, and are more focused on making and selling as many units as possible. Since the QuickCheck’s competition has low trend analysis and product scorecard ratings, its competitors are in the production and selling modes. The fact that the QuickCheck’s competitors are in these modes means that they are already maturing and have not made their products to satisfy the general public and adapt to market trends. This gives the QuickCheck
  70. 70. 72 an advantage in marketing the product. Part of the reason that the other firms are in the later phases is that there is not a lot of differentiation between the products. They are all very similar to each other. The QuickCheck is new and trendy compared to all of the other products. The competition does not show signs that they are trending towards trying to innovate, as is evidence by their being in the production and selling modes. This hampers their ability to compete with superior products like the QuickCheck, giving CNOGA another advantage in the market. Because of the information shown in the chart, the QuickCheck has the potential to be successful immediately upon entering the market. It is currently the only blood glucose monitor on the market that does not require that the consumer prick him or herself. 3.6 Geographic Location Analysis The company researched the areas of the country that would be most likely to use the QuickCheck often. This essentially came down to which areas of the country had the highest incidence rates of diabetes. Since the QuickCheck is a necessary product for diabetics, these areas will be most likely to have more people that will need and purchase the QuickCheck.
  71. 71. 73 Figure 3.6.1: Median Diabetes Rates per US County While there are definitely other areas of the country with high instances of diabetes, the team found that the American South had by far the most cases. As shown on the map, this area had a very high prevalence of diabetes, especially in Alabama and Mississippi. Using this map and the general area, the company determined where to best market the QuickCheck. The team determined that CNOGA would start marketing the QuickCheck in middle to large sized cities in the South. These cities represent areas where there are a large number of diabetics, as well as where diabetics can get expert health care and diabetes treatment. In addition, the residents of the rural areas around these cities also get health care in and around these cities. The team decided that the best
  72. 72. 74 cities in which to launch the QuickCheck would be cities such as: Atlanta, Georgia; Raleigh-Durham, North Carolina; Tallahassee, Florida; New Orleans, Louisiana; Birmingham, Alabama; and Jackson, Mississippi. These cities are all large enough that there are healthcare services widely available but small enough that CNOGA would not face strong competition from the market oligopoly. 3.7 Product Distribution Once the team determined the ideal geographic location to launch the QuickCheck, the last step was to find distributors. The SMBG market is unique in that most of its sales to diabetics occur directly through company representatives at hospitals and clinics. SMBG product manufacturers often will establish relationships with healthcare groups and health insurance providers in a certain region. These groups and providers will then exclusively prescribe or recommend a certain brand of SMBG products. The graphic below demonstrates this distribution chain.
  73. 73. 75 Figure 3.7.1: SMBG Market Distribution Methods Due to the distribution practices common in the industry, the company determined that the retail and ecommerce distribution channels are currently underutilized by the market oligopoly. This leaves these channels widely open to attack and quick success by emerging companies and products. Therefore, the company determined that it would aim to make about 80% of sales primarily health retailers like drugstore and pharmacies, with about 20% of sales on the Internet. Since the industry oligopoly is not extremely present in these channels, the QuickCheck is unlikely to face a high amount of competition and can quickly gain a majority of the share in sales through these channels.
  74. 74. 76 Because of the medical nature of the QuickCheck, CNOGA decided that establishing relationships with health insurance providers in the targeted cities would be a good way to get the product to the people that need it. This would mean that getting covered by major health insurance providers (such as Humana and Blue Cross Blue Shield) would be crucial in order to increase the availability of the QuickCheck. Hospitals and individual doctors could prescribe or recommend their patients to the QuickCheck over other invasive methods. These patients would then be able to purchase the QuickCheck at little to no cost to them. This coverage plan would therefore increase the market of individuals that are able to purchase the QuickCheck, and will help the company to rapidly gain market share from the industry oligopoly. 3.8 Summary 3.2 Industry Profile The SMBG market’s structure is currently an oligopoly. The companies in it are no longer concerned with making sure the products suit the customers’ wants and needs. 3.3 Market Share Analysis The SMBG market currently has an oligopoly of 4 firms controlling almost 80% of the market. Since these firms are focused on continuing to produce products that their
  75. 75. 77 users do not enjoy or want, all oligopoly members are vulnerable to attack, particularly LifeScan. 3.4 Life Cycle Analysis The industry is in the production and maturation phases. This is due to firms producing outdated and unpopular products. CNOGA is in the growth stage, meaning that it has a superior product and can quickly steal market share from traditional producers and testing methods. 3.5 Linear Evolution Analysis This industry is full with testing methods and firms in the production and selling modes. These firms are not interested in innovation and developing new and exciting products. The QuickCheck can easily enter and take over the market, since it is in the marketing mode. 3.6 Geographic Location Analysis The company decided that it would market the product in the American South because it has a high prevalence of diabetes. Medium- to large-sized cities such as Atlanta, New Orleans, and Tallahassee would be ideal places to launch the QuickCheck, since they are large enough to have great numbers of diabetics, but small enough that CNOGA could quickly saturate the market with the QuickCheck.
  76. 76. 78 3.7 Product Distribution Due to market practices, the majority of SMBG product sales occur directly through hospitals, healthcare groups, and health insurance providers. In order to compete with established brands, CNOGA decided to route a majority of sales through small retailers. The remaining sales would occur online, since ecommerce transactions for SMBG products are increasing rapidly. 3.9 Conclusion In this chapter, the team at CNOGA explored where the company would market the QuickCheck, and against whom the company would compete. Through a series of analyses, the team determined that the SMBG market is currently in an oligopoly, with four major firms dominating the industry. These firms were found to be in the production and selling modes, meaning that they are not focusing on the consumer’s wants and needs. Therefore, these market players are vulnerable to attack from firms that focus on the consumer. The team also determined that, because of the high prevalence of diabetes there, the South would be the best place to launch the QuickCheck. After performing this analysis, CNOGA has a better idea of how and where the company will market the QuickCheck.
  77. 77. 79
  79. 79. 81 4.1 Introduction In this chapter, CNOGA will focus on defining all aspects of the consumer. Targeted marketing efforts will be more successful if the team has an extremely detailed and thorough understanding of the QuickCheck’s consumer. The team employed several analyses to help identify and describe the potential consumer, including: the Decision Matrix, several demographic analyses such as PRIZM, and psychoanalytical tests such as VALS and Maslow’s Hierarchy of Needs. These tests will identify the what the QuickCheck’s target consumer will be like, and how the marketing team can best appeal to these consumers through marketing efforts. These analyses, however, might have identified incorrect information about the potential consumer. This faulty information will work against CNOGA’s efforts to target the consumers that will be the most likely to purchase the QuickCheck and will not grow sales effectively. 4.2 Buyer’s Decision Matrix The buyer’s decision matrix identifies the major components that contribute to the buying decision made buy a consumer. Factors that contribute to the decision include patient demographics, age and ethnicity, as well as external influences such as access to health information and income.
  80. 80. 82 Figure 4.2.1: Buyer’s Decision Matrix Target Age and Ethnicity Group The percentage of Americans who suffer from types 1 & 2 diabetes has increased from 5.1% in 1997 to 9.3% in 2013. Since obesity is the leading cause of type 2 Diabetes, the obesity epidemic that has been sweeping the nation in recent years correlates directly with the increase in diabetes. However, some demographic groups are more likely to be diagnosed with type 2 Diabetes than other groups. The chart below exhibits the demographic trends of people who suffer with diabetes according to age and ethnicity. Data Source: Mintel
  81. 81. 83 Figure 4.2.2: Diabetes Percentages by Age and Ethnicity The most common demographic populations with diabetes are those aged 55+, African Americans and those with a household income of <$50K.26 The US population is aging; the number of those aged 55- 64 is expected to increase by 33.7% and of those 65-74 years of age is expected to increase by 44.7%. People of 65+ years will make up 16% of the population.27 Since aging corresponds with increased diabetes incidence, an aging population points towards more diagnoses in upcoming years. Additionally, according to the extensive study, Lifestyles of Baby Boomers- U.S., October 2009, health and wellness are particularly important to older Boomers (ages 55-64).28 26 Mintel, Executive Summary: Diabetes, US August 2014 27 Mintel, Self Diagnostics-US- February 2010; An aging population 28 Mintel, Lifestyles of Baby Boomers- U.S., October 2009
  82. 82. 84 The United States’ population is shifting towards more multicultural groups as well. African American populations are expected to increase by 5.4% and Hispanic populations by 11.9% (compared to the 2.7% increase for white populations). 29 These populations tend to have a higher incidence of diabetes compared to their white counterparts. This is further factor contributing to proliferation of diabetes. Finally, a low income is correlated with increased chance of getting diabetes.30 Since median income has been declining since 2008, this also may be a factor that increases diagnosis rates. Influencers According to several studies performed by Mintel, doctors are the top choice for diabetes information and have an overwhelming influence on a consumer’s decision to buy the QuickCheck. The chart below shows how information on diabetes is shared according to age. 29 Mintel, Executive Summary: Diabetes, US August 2014 30 Ibid.
  83. 83. 85 Figure 4.2.3: Diabetes Information Sources by Age The oldest group of consumers, who also happen to make up the largest consumer demographic, relies most heavily on doctors as their primary source of information. Baby Boomers ages 55-64 are the most likely to follow doctors’ orders. 31 This makes doctors the most important influence in consumer decision; their support is essential to the success of the QuickCheck. Other influencers include social sources such as friends, family, support groups and other educators. Younger diabetes sufferers are beginning to use new technologies such as online recording systems, management software and mobile applications to monitor their 31 Ibid.
  84. 84. 86 disease. Baby Boomers like computers and technology and are interested in using them to assist with the management of their disease, but they are also more likely to find gadgets confusing. These new technological innovations surrounding connectivity and communal support attract new market participants.32 A blood glucose monitor with a simple interface and educational marketing on how to use it may help close the technological gap between age groups and make the product more attractive for consumers. Gate Keepers and Other Influences About 60% of people with diabetes use monitors and testing supplies.33 This means that there is significant room for growth in the industry within the existing diabetic population. The three major factors that are gatekeepers to the purchase of self-monitoring glucose devices are as follows: income, the desire for health and wellness and education. A large percentage of the diabetic population has an annual income of $50K or less. This means that ability to pay is a huge determinant of whether or not the consumer buys the QuickCheck. In May 2014 the market showed increased sales of private label and 32 Ibid. 33 Frost and Sullivan, US Self-monitoring Blood Glucose Market December 2014
  85. 85. 87 smaller, niche brands compared to their larger scale competitors such as Life Scan, Abbott Laboratories Inc., Bayer AG and Roche Diagnostics. The sales indicate that consumers are looking to save money in this category. When asked, two-thirds of those with diabetes believe that living with it is expensive. Nearly half also believe that the Affordable Care Act will drive up their costs. However, this healthcare reform has introduced more people into the healthcare system, and despite reimbursement cuts, the increase in potential consumers keeps the market afloat. The second influence is the desire to self-monitor. Current devices require constant finger pricking which is painful. The QuickCheck, which requires neither blood sampling nor testing strips, will revolutionize the entire industry in this regard. Other factors that influence consumer decision are the time-consuming nature of taking glucose measurements and difficulty to create a balanced diet within the blood glucose level limits. Finally, education dramatically influences decision. Diabetics that understand the disease, receive guidance for how to keep it under control, and recognize the consequences of not monitoring their blood glucose will be more likely to buy QuickCheck. It is a life-altering disease, and the decision to face it head-on instead of ignoring it requires support from family, friends and other sufferers.
  86. 86. 88 4.3 Type of Decision Consumer decisions can be divided into two broad categories: programmed decisions and complex decisions. A programmed decision is one that is routinely made, or is determined based on structured, pre-determined procedures and rules; it does not require much use of judgment. Conversely, a complex decision is one that is made based off a problem-solving strategy. It requires the integration of research, experience and personal preferences. The decision to buy the QuickCheck is twofold; type 2 diabetics first must decide whether or not to pursue the involved practice of consistent self-monitoring. Once they decide to pursue this avenue, they must choose a glucose-monitoring product. Self-monitoring blood glucose (SMBG) levels is a choice; there is agreement among researchers, clinicians and patient organizations that all patients who use insulin should perform SMBG, but there is no agreement on whether patients not using insulin benefit from SMBG at all.34 A study performed by the National Center for Chronic Disease Prevention and Health Promotion in North America found that among the U.S. adult diabetic population, 63.4% test their blood-glucose daily and 86.7% for those treated with insulin. Based on these studies, 34 Ibid.
  87. 87. 89 CNOGA concludes that purchase of a glucometer is a complex decision based on customer evaluation of its likely affects on their health. Within the population of consumers who have decided on the necessity to perform SMBG, there are a variety of different monitors to choose from. The figure below analyzes the type of decision made by consumers of the QuickCheck against competitors. Figure 4.3.1: Types of Decision-Making CNOGA analyzed competitor products and found that, based on the trend analysis performed previously, the majority (62%) of the consumers using these monitors are experiencing cognitive dissonance, meaning they are dissatisfied with current products on the market and looking for alternatives. These are the customers who are making complex decisions about the type of glucose monitor to buy, and
  88. 88. 90 ultimately are the target consumers of the QuickCheck. The other 38% of customers using traditional, competitor products are satisfied with their purchase. These consumers make programmed decisions; it is possible that their doctor referred them to a certain product and they are unaware of other options. Once a consumer purchases the QuickCheck, CNOGA estimates a 90% approval rate; this means that a vast majority of purchases will become programmed. 4.4 What’s Wrong List If CNOGA plans to target SMBG consumers experiencing cognitive dissonance, it is essential to understand the shortcomings of competitors’ products. This list will also provide a basic framework for criteria that the QuickCheck must meet. The list below was developed based off the most common complaints made by consumers in blogs and reviews on ConsumerSearch, Amazon, and the ADA review site.
  89. 89. 91 Figure 4.4.1: What’s Wrong List There are two main subcategories in which QuickCheck excels over all other competitors: invasiveness and cost. The invasiveness of other products is caused by the fundamental nature of their technology: they require a blood sample to test blood-glucose levels. The best products on the market, according to ConsumerSearch, are evaluated based on amount of blood needed and number of alternate testing sites allowed. These criteria are used to demonstrate the level of pain associated with product use. The QuickCheck surpasses all current products because no blood sample is necessary for monitoring. The second aspect in which glucometers are evaluated is cost. The Accu-Chek test strips by Roche Diagnostics are $35 per box of 50 CNOGA QuickCheck Cygnus GlucoWatch Traditional Alternative Site Glucose Pump 1 Painful X X X X 2 Invasive X X X X 3 Non-reusable X X 4 Only works for a single type of diabetes X X 5 Awkward to use X 6 Requires frequent blood samples X X X X 7 Requires expensive test strips X X 8 Requires test strip coding X X 9 Requires proprietary test strips X X 10 Consistency Issues X X X X 11 Doesn't interface with technology X 12 Can cause bodily harm X X X X 13 Does not calibrate quickly X X X 14 Creates biowaste X X 15 Not in development X 16 Old / outdated technology X X X X 17 Untested in the wide market X X 18 Difficult to use X X X 19 Not covered by most health plans X X 20 Not user-friendly X X X X TOTAL 4 11 14 14 10 PERCENTAGE 20% 55% 70% 70% 50%
  90. 90. 92 strips. A leading consumer research group estimates that if consumers test their blood four times a day using the Accu-Chek Aviva Plus and other similar products, their yearly cost will be about $1,710. 35 The QuickCheck will become a one-time purchase with no additional hidden costs; the product will essentially pay for itself in a few years based on how much consumers are saving on test strips. These many problems with competing products only indicate further that the customers of the competition are in a complex decision mode. Many of them are dissatisfied with the products that they use and therefore have high levels of cognitive dissonance. These consumers will be easy to market to and steal away from the competition. They are clearly unsatisfied with their current products and will gladly switch to another, superior product like the QuickCheck. 4.5 Attitude Scale The Attitude Scale is a measurement of consumer satisfaction based on percentages generated from CNOGA’s What’s Wrong List (Fig 4.4.1). The figure below shows the Attitude Scale for the QuickCheck in comparison to top product competitors. 35 Frost and Sullivan, US Self-monitoring Blood Glucose Market
  91. 91. 93 Figure 4.5.1: Attitude Scale On average, 80% (TA: 0.8) of the trends in the Trend Analysis benefit the QuickCheck based on an Industry Trend analysis by Frost and Sullivan. Additionally, 20% of the problems that consumers list for current products apply to CNOGA’s product. These are the best numbers in both categories indicating the superiority of the QuickCheck to satisfy the needs of the customers over other current competitors on the market. This attitude scale indicates that many consumers have negative attitudes towards the products currently in the market and are thus in a complex decision mode. These customers will quickly switch to a more positively viewed product like the QuickCheck.
  92. 92. 94 4.6 Maslow’s Hierarchy of Needs Maslow’s hierarchy identifies the primary areas of need experienced by most humans. According to his theory, man must meet the needs of the bottom levels before achieving success of the top levels. Since Maslow postulated that behavior and decision-making are strongly influenced by the five need levels on the hierarchy, the theory can help tailor a marketing plan around the key motivational drivers of the target consumers. Figure 4.6.1: Hierarchy of Needs Analysis
  93. 93. 95 The QuickCheck satisfies all needs in Maslow’s hierarchy to varying degrees. However, CNOGA has marked Safety, Esteem and Self-Actualization as the three fundamental needs that the QuickCheck fulfills much better than other products according to the utility bundle and product scorecard analyses. At the base of the pyramid, the QuickCheck provides health safety by reliably detecting blood-glucose levels for monitoring. According to a study on Self-Diagnostics, more than a quarter of respondents who have tested blood sugar are concerned about the accuracy of test, particularly 18-44 year olds. Marketing messages that assuage accuracy fears are a necessity in a competitive market where invasive devices may take prestige over their noninvasive counterparts if accuracy is called to question. Ultimately, the device is bought and used for health security. Once health security is validated, consumers have room to choose amongst products that fulfill their higher needs. The QuickCheck excels in helping users achieve the need for esteem, and higher yet, self-actualization. The need for esteem can be defined as the need for independence, achievement, status and high self-regard. CNOGA found that the portable, lightweight configuration of the device and the lack of test strips increase independence by making traveling easier. Additionally, because the QuickCheck does not
  94. 94. 96 require testing strips, consumers are free to spend the time and money on purchasing this costly equipment on other, more important endeavors that result in self-fulfillment. The QuickCheck gives its user freedom from their diabetes! 4.7 VALS / PRIZM / LOV VALS Profile The VALS Framework divides the US population into eight distinct types, or mindsets, by using a specific set of psychological traits and key demographics that drive consumer behavior. Using the VALS approach will provide the team with a unique perspective of the consumer identity that may indicate primary purchasing motivations. With this perspective of the typical consumer, the research will help the team determine strategic marketing and communication goals tailored to best reach consumers. Below is a list of the 8 consumer types of the VALS Framework, along with the segments the team selected as most likely to purchase the QuickCheck.
  95. 95. 97 Figure 4.7.1: VALS Framework CNOGA indicated “Innovators” as the target customers of the QuickCheck because of their receptiveness to new technology and their active consumer role. This type of person has an abundance of resources and will make decisions by evaluating current products based on careful research. Consumers primarily motivated by ideals, namely “Thinkers” and “Believers” were also classified as targets. Thinkers are reflective people who value order, knowledge and responsibility. As a subcategory of Innovators, these are the consumers who especially seek out information in the decision-making process. CNOGA found that this type of consumer will decide to self-
  96. 96. 98 monitor based on the extensive research, and will choose the QuickCheck based off its painless technology and cost-effective nature. Since Thinkers also have respect for institutions and authority, they are likely to listen to doctor’s recommendations. While Believers tend to be low resource, low innovation customers, CNOGA regards them as an important subset of target consumers because of their deep rooted values organized around home, family, community and social organizations to which they belong. Thinkers are likely to self- monitor because they see it as an obligation to friends, family and even themselves. They are also apt to follow advice from others in the diabetic community, including which products to use. These two groups will be most likely to purchase the QuickCheck, since the product is highly superior to the other products currently on the market. Thinkers and Believers are both groups that are more likely to seek out better products and ways of life. Since the QuickCheck represents a vast improvement over current market products, these groups are the likeliest future users of the QuickCheck.
  97. 97. 99 PRIZM Profile The PRIZM Profile is an alternative segmentation approach that CNOGA used to understand its customers and their prospects. Through market awareness, CNOGA will reach a specific clientele by messages and products designed explicitly for them. PRIZM has 66 segments; the 9 segment populations CNOGA indicated as most likely consumers of the QuickCheck are shown below. Figure 4.7.2: PRIZM Segments for the QuickCheck These groups were chosen because of their increased incidence of type 2 diabetes. The 6 segments with blue headings comprise part of the US population age 55+, while the 3 green headings are middle- aged. The numbers located in the upper left-hand corner indicate socioeconomic rank, which takes into account income, education, occupation and home value. All 9 numbers fall within the mid to higher range of the spectrum indicating mid to low socioeconomic rank, consistent with data that diabetes type 2 incidence increases for a
  98. 98. 100 household income (<$50K). 36 Other factors that influenced the segment selection were the population’s primary area of residence, the Southeast United States, where diabetes is much more prevalent, the diversity of the group, because a higher percentage of non-Caucasians are diagnosed diabetes type 2, and their low-key, sedentary lifestyle, which may promote obesity, the leading cause of diabetes type 2. PRIZM analysis of segmentation groups provides behaviors that include leisure activities like shopping, dining, favorite magazines and TV shows. These are places CNOGA may consider for advertising. The PRIZM analysis will help CNOGA to further segment its potential market and target customers that will most likely purchase the QuickCheck. The company will target the segments indicated in the analysis in marketing efforts for the QuickCheck. LOV Profile The List of Values (LOV) profile measures the life values that are central to individuals, drawing distinctions between internal and external values and self-perception. The LOV measures values of life’s major roles such as work, leisure, and ability consumptions. Studies suggest that the LOV is predictive of consumer behavior, and therefore CNOGA used it to evaluate the QuickCheck against consumer values. 36 Mintel, Executive Summary: Diabetes, US August 2014
  99. 99. 101 Figure 4.7.3: LOV Profile Value The QuickCheck… 1. Sense of Belonging Give users the feeling of normalcy and complete health 2. Fun and Enjoyment in Life Lets users live normal, everyday lives with noninvasive testing methods that eliminate scarring and bruising 3. Self-Respect Helps users manage their health effectively while still being discreet 4. Security Give users accurate data that they can rely on in managing health 5. Warm Relationships with Others Makes it easy for users to share data about their disease with doctors and other supporters 6. Sense of Accomplishment Allows users to feel accomplished in knowing that they are saving time and money 7. Self-Fulfillment Provides users with an easy and better way to monitor their disease 8. Being Well Respected Others, especially family, respect the user for effectively managing their disease 9. Excitement The QuickCheck’s innovative method of blood glucose monitoring is exciting! CNOGA notes that QuickCheck excels in two values that other self-monitoring devices do not: Sense of Belonging and Fun and Enjoyment in Life. These are two values that CNOGA wishes to highlight in future marketing ventures. The QuickCheck gives users a feeling of normalcy due to the nature of its noninvasive technology. This eliminates scarring and bruising on testing sites that calls attention to the users condition. Additionally, the QuickCheck brings
  100. 100. 102 fun and enjoyment back into life by eliminating painful testing methods, while still allowing its user to feel in control of their diabetes. 4.8 5 W’s Analysis Figure 4.8.1: The 5 W’s Who Diabetes type 2 is a disease that affects all people, from all different socioeconomic backgrounds. However, some groups have higher incidence rates than others. As was concluded from the Decision Matrix Data (Chapter 4.2), the most common demographic populations are those aged 55+, African Americans and those with a household income of <$50K.
  101. 101. 103 While incidence of diabetes type 2 is not discriminatory across gender,37 CNOGA has investigated satisfaction with current products based on gender. A survey produced by Mintel about interest in SMBG products showed the following results. Figure 4.8.2: Interest in Blood Sugar Testing by Gender Data results show that 26% of males and 27% of females are experiencing cognitive dissonance with regards to the technology of their meter.38 This is where the QuickCheck differentiates itself from all other competitors; these dissatisfied customers will provide the foundation for CNOGA’s clientele base. CNOGA has concluded that the 1 percentage point difference of dissatisfaction between males and females is too insignificant to differentiate the product to appeal to a certain gender. However, according to the same survey, men are more likely to have meters with a range of features, including those that 37 Mintel, Diabetics: Attitudes and Behaviors- US- August 2010 38 Ibid.
  102. 102. 104 automatically track blood sugar levels, track blood sugar levels online, and are capable of uploading results to physicians.39 What One of the strongest selling points of the QuickCheck is that the monitor itself is the only product needed to self-monitor blood glucose levels. Other products require testing strips, lancets, test fluids, gauze and alcohol swabs. QuickCheck users save money, time and energy and avoid bio-waste production by purchasing the QuickCheck over other competitors. Market trends have indicated increased interest in software that allows for tracking of blood glucose levels across time and sending the results directly to physicians.40 Why As stated previously, monitoring blood-glucose levels allows users to be constantly aware of their condition and prevent deterioration of health. Diabetes type 2 can lead to heart disease, blood vessel disease, glaucoma, kidney failure, damage to nerves and gum disease, along with a host of other health complications. Keeping blood glucose levels in check is an essential to healthy living. 39 Ibid. 40 Mintel, Self Diagnostics – US – February 2010
  103. 103. 105 Additionally, research has shown that patients with pre- diabetes can reduce their risk of developing diabetes type 2 by almost 60% by monitoring blood glucose levels and changing lifestyle behaviors accordingly. It is never too early to begin monitoring, especially if it causes no additional pain to the user. Where Current products are sold from a variety of outlets. The figure below outlines the different outlets for sale in the Self-Monitoring Blood Glucose Market. Figure 4.8.3: Distribution Channels in the SMBG Market Currently, the SMBG market is dominated by indirect sales of products, for both Meters (M) and Strips (S). However, online sales of meters and strips are increasing. The Frost and Sullivan analysis
  104. 104. 106 emphasizes the importance of focusing on ecommerce channels to increase sales.41 CNOGA’s distribution strategy in the SMBG market is essential to maximize the company’s sales or marketing efforts. When There has been no connection found between diabetes incidence and season. Therefore, CNOGA concludes that QuickCheck sales will be consistent throughout the year. 4.9 Summary 4.2 Buyer’s Decision Matrix The target consumer demographic is those aged 55+, Non- Caucasian, with a household income of <$50K. Doctors are the top influencers as 81% of people receive diabetes information from them. There is significant room for growth within the existing diabetic population as only 60% self- monitor. Education and cost are major gatekeepers in the buying decision process. 4.3 Type of Decision The decision to buy the QuickCheck is dependent on decision to self-monitor and then product selection. The decision to self-monitor is complex; all consumers must determine if self- monitoring is for them. 62% of 41 Frost and Sullivan, US Self-Monitoring Blood Glucose Market