1. Jonathan Honiball ● Senior Director, Customer Research New Market Research Techniques to Improve Product Acceptance February 20, 2014

2. February 2015 1  Speaker Introduction  Agenda –Don’t Do Market Research?!? –Learning from Outside the Industry –Learning from Within the Industry –New Market Research Techniques –Case Story –Why Invest Early in Research? Introduction

3. February 2015 2  “If I had asked people what they wanted, they would have said faster horses.” –Henry Ford Don’t Do Market Research?!?

4. February 2015 3  Launch and refine is risky for medical devices given FDA approval requirements and product reputation “Speed to Market Strategies” are Risky  Get prototype product in front of customers as fast as possible, solicit feedback, and incorporate feedback in next prototype for customer evaluation Lean Process Pilot Testing  Introduce new product to a sample set of all customers (e.g., of the company’s customers in a region) and evaluate customer response

5. February 2015 4 Learning from Outside the Industry  In January of 2012, CEO Ron Johnson (ex- Sr VP, Apple) launched a new retailing strategy  JC Penney shoppers rejected the new model  JCP stock fell from $42.44 to $14.62 in 2012/13 and the CEO was fired (Δ Mkt Cap > -$ 5 B)

6. February 2015 5  Over the past two years, we have interviewed investors involved in funding medical devices  While we did hear about many successes, most of what we heard were horror stories  Many products fail because of technical issues – however, even if the product is exactly as intended, it can still be a commercial failure. Learning from Within the Medical Device Industry

7. February 2015 6  Charging the wrong price  Targeting the wrong specialty  Not understanding laggard behavior –A better product is not enough to cause a switch  Engineers, Sales and Marketers not being on the same page Typical Reasons for Commercial Failure

8. February 2015 7  Many companies lack sufficient information early enough to properly define “successful” new products/services where… “successful” = –correct mix of product and service features, benefits, price points and distribution channels –which provides a “total solution” to meet/exceed customer expectations –to meet/exceed company’s product financial targets The Problem

9. February 2015 8 Research Questions For Your New Products Product Acceptance How big is the market? What features and functionality to offer? What price to charge? How to position vs. competition? How to promote?

10. February 2015 9  “Sell” the product before you build it.  Gain customer feedback to understand their actual needs rather than focusing on pushing out a product –How to use market research to get this customer feedback A Solution: Sell - Build

11. February 2015 10

12. February 2015 11 …But Market Research has Changed Cheaper, Faster, AND Better Information

13. February 2015 12 Ethnography Mobile Ethnography Invited customers perform tasks, recording and detailing as directed by a researcher leveraging mobile technology

14. February 2015 13 Focus Groups Discussion Boards Invited customers respond to topics and questions presented by a moderator in an asynchronous online discussion boards

15. February 2015 14 Customer Satisfaction (VOC) CRM Integration Design a feedback loop within each customer interaction. Continuously field surveys and analyze data.

16. February 2015 15 1. Determine the product-brand-price mix that will appeal to the greatest proportion of the target market 2. Understand product expectations and purchase drivers across customer segments 3. Reduce the risk of over or under investing due to mismatch between product and customers’ needs 4. Limited number of questions create a forecast of future behavior Consumer Choice Model Consumer Choice Model (CCM)  CCM techniques to determine the most successful mix

17. February 2015 16 Consumer Choice Modeling Has Changed  Due to historically high costs, use was limited  With technology, the costs are 10% of what they were  Timelines are now weeks instead of months 1960s1970s1990s2000s 1970s Done using manual methods, regression analysis, mainframe computers 2000s More powerful, lower cost computers, more complex simulations using advanced analytical techniques 1990s More powerful computers, more sophisticated analytical techniques (e.g., advanced statistical methods) 1980s

18. February 2015 17 Product Acceptance What Attributes Define Product Acceptance? Product Features Aesthetics Performance Brand Price Financing Comparative Residual Value Switching cost Experience Expectations Function Emotion Social proof Access Channels Regulation Location Timeliness Service Access to service Customer care Warranty Purchase

19. February 2015 18  This matrix represents 21,600 possible combinations CCM: Example Attribute Table

20. February 2015 19  Divides a product into key attributes/product features and then combines these attributes/product features into a selection of “hypothetical products”  Testing the boundaries and not just focusing on current features CCM: Question Example Which of the following medical devices would you be most likely to purchase?

21. February 2015 20 Market Simulator Sample Market Configuration Preference Share Simulations Add products to the marketplace Change product attributes “What if” scenarios for any possible market changes External metrics can be calculated

22. February 2015 21 Market Simulator Sample Market Configuration Preference Share Simulations Add products to the marketplace Change product attributes “What if” scenarios for any possible market changes External metrics can be calculated

23. February 2015 22 Simulator Demo

24. February 2015 23 Simulator Snapshot

25. February 2015 24 Can Be Analyzed for Any Sub-Segment

26. February 2015 25 Running a Simulation

27. February 2015 26 Running a Simulation – Selecting Options

28. February 2015 27 Running a Simulation – The Output Increase from 35%

29. February 2015 28 Running a Simulation – A Better Solution Increase from 35%

30. February 2015 29  Helps avoid costly, distracting and time-consuming missteps  Aligns and engages customers early  Makes sure that attributes are those that matter to buyers and influencers  Better aligns your engineering and sales teams Why Invest Early in Research?

31. February 2015 30 For more information or a demonstration, please contact: Jonathan Honiball Senior Director, Customer Research jhoniball@pcgfirm.com Direct: 650-223-8228 | Office: 650-327-8108 | Mobile: 267-992-6730 Pacific Consulting Group | 200 S. California Avenue, Suite 200 | Palo Alto, CA 94306 www.pcgfirm.com

32. February 2015 31 Challenge:  A life science company launched its brand in the US two years earlier as the first and only product indicated for two different conditions.  Competitor launched in select overseas with plans for a US rollout. Research objectives:  Determine the sales impact on existing markets from competitive launch, as well as the likely impact in yet undeveloped markets. Case Story: Competitive positioning and timing

33. February 2015 32 Methodology:  Choice Modeling was used to evaluate current and future competitive situations  Market Simulator calculated a "preference share” enabling comparison of current and future market share. Results:  Simulator gave the client dozens of scenarios to plan investment. Client accelerated R&D efforts in order to launch 1 st in other markets.  Actual market share in all markets measured are in line with model predicted preference shares. Case Story: Competitive positioning and timing