Medical Device Link .

Moving beyond product differentiation to gain competitive success. Today's medical technology companies are under increasing pressure from customers to reduce prices. Hospitals are becoming ever more price sensitive, group purchasing organizations (GPOs) are pushing for price reductions, and the government is legislating to reverse the escalation of hospital healthcare costs. Moreover, with approximately 15,000 medical product companies in the United States alone, product and price competition are intensifying. The resulting price pressures are driving down revenues and making productivity more important than ever. Medtech companies also face diminishing customer loyalty stemming from both increasing market competition and growing customer expectations. Complicating this problem is the fact that the medtech distribution channel is intricate and highly fragmented, with multitiered relationships involving distributors, GPOs, hospitals, physicians, and clinics. To this complication add the evolving yet still-undefined role of the Internet. The resulting channel complexity can make it exceedingly difficult to establish durable customer relationships. Another challenge comes from increasing industry consolidation. As large companies have acquired smaller ones in order to expand product lines and create cost synergies, operational inefficiencies have resulted. A lack of integration among merged business processes—and the resulting information-system and database "silos"—is largely to blame. Traditionally, medical product companies have relied on product differentiation to achieve market position. But in today's pressure-packed competitive environment, product differentiation alone is insufficient. Companies need other methods of ensuring success over the long haul. If medical product companies are to become market leaders, they must strive not only to differentiate their products but also to maximize value for their customers (see Figure 1). To accomplish this, companies need to think strategically about customer relationships and customer value. Increasing customer value depends on medtech companies becoming more customer-centric, which means: A customer relationship management (CRM) strategy can help a company achieve customer-centricity. CRM is