Market Analysis Summary
Sunapto intends to target the 65 and over age group. Growth in this age category is expected to be high over the next several years, as baby boomers approach and exceed age 65. U.S. Census Bureau population projections estimate a 13.3% overall growth from 2001-2010 in the 65 and over age group.
Medication compliance in home settings to insure proper drug administration is a major unsatisfied need. As medication usage and life expectancy increase, and the shift towards more in-home healthcare proliferates, this need will only be accentuated. The MedCabinet will surpass the challenges imposed by this unsatisfied need and serve as a major asset to the target market.
4.1 Market Segmentation
The potential customers of Sunapto are both domestic and foreign. This plan focuses on Sunapto’s potential domestic customers. Once established, the expansion into foreign customers becomes potentially rewarding.
Individuals 65 and over residing in the U.S. that are using medications in an independent living situation are the main customer group for the MedCabinet. About two-thirds of the 65 and over age group use prescription and over-the-counter (OTC) medications, and account for about one-third of all prescription drug use. At any time, an average elderly person uses four to five prescription drugs and two OTC drugs and fills 12 to 17 prescriptions a year.
Secondary customer groups for the MedCabinet are those under the age of 65 that need assistance in medication compliance. This group includes individuals ranging from those taking multiple medications to those needing help remembering when to take their medication. Some of these individuals would include patients recovering from brain surgery, patients taking a drug cocktail to combat HIV/AIDS, or Parkinson’s Disease.
The following chart illustrates projected U.S. populations for various age segments; the numbers in the table are in thousands. Many are potential buyers of the MedCabinet, but Sunapto will initially concentrate on the 65 and over age group.
|Year 1||Year 2||Year 3||Year 4||Year 5|
|65 years and over||1%||35,303||35,676||36,052||36,432||36,816||1.05%|
|55 to 64 years||4%||26,113||27,229||28,393||29,607||30,872||4.27%|
|18 to 54 years||0%||147,955||148,625||149,298||149,975||150,655||0.45%|
|Under 18 years||0%||70,935||71,153||71,371||71,590||71,810||0.31%|
4.2 Target Market Segment Strategy
Sunapto’s choice of target markets is strategic. The 65 and over market have difficulty with memory and in dealing with complicated dosage instructions for multiple medications. They have a large unsatisfied medical compliance need. This is an expanding age group. The U.S. Census Bureau estimates the 65 and over segment of the population will grow 3.7% from 2001-2005 and 9.2% from 2005-2010.
4.2.1 Market Needs
The elderly often have multiple disease states and/or chronic conditions. They consume over one-third of the prescription medications in the United States. The average individual in Sunapto’s target market consumes four to five prescription drugs and two OTC drugs per day. The risk of hospitalization due to adverse medication outcomes in elderly patients is estimated at 17%, almost six times greater than that for the general population.
Cognitive impairment may play a major role in drug-related problems in the elderly, making it difficult or impossible to correctly follow directions of appropriately prescribed medications. Other factors include the lack of primary care provider help with medication management; financial considerations that affect the purchase and regular use of medications; and decline in vision that impairs the ability to correctly read directions. Nearly 67% of all patients fail to follow important dosage instructions for their medications. Thirty-three percent of patients take all their medicine, 33% take some and 33% do not take their medication at all. Some of the negative outcomes resulting from drug-related problems are:
- Additional healthcare encounter.
- Additional medication.
- Emergency department or Urgent Care visits.
- Allied health professional visit (e.g. dietitian, physical therapist).
- Additional laboratory or radiology procedure.
- No treatment.
The main customer need is medication compliance. In order for compliance to occur, medication needs to be more easily organized and administered. The MedCabinet will address this need.
4.2.2 Market Trends
The population in the United States is generally becoming older and is projected to continue to do so. The reason for this is three fold. First, improvements in medication (both numbers and types) and general healthcare has extended the average life-span of Americans to 79.5 years for women and 74.1 years for men according to a 2001 report by the National Center for Health Statistics. The United State’s average life span has increased by approximately eight years over the past half-century, and it is expected to continue to increase in the future (at a lower rate). Second, people have taken more self-interest in their health, and thus found ways to prolong and enhance their lives. Finally, the baby boomer generation, the largest single group in the U.S., is approaching 65 years of age.
4.2.3 Market Growth
There is little doubt that the population in the United States is aging. The U.S. Census Bureau estimates that the mean age of the population will increase from 36 to 36.7 years during the period of 2001-2005. This increase can be partially attributed to their estimates that the 65 and over segment of the population will grow approximately 1% each year from 2001-2005. This amounts to approximately 350,000 individuals per year entering this age group, all potential MedCabinet users.
Although the population is aging, more of the population is leading independent lives. Merck & Co., Inc. reports in their Manual of Geriatrics that the percentage of elderly persons residing in nursing homes has decreased to 5.2%
4.2.4 Market Concept Test
Sunapto’s preliminary concept test showed a market penetration potential of 10%. While they realize that this cannot be translated into actual market share, it does provide solid evidence that their product would be viewed favorably. Sunapto estimates an initial market penetration of 2%. This market penetration rate was estimated using the following formula.
Market Penetration = Market Share1 x Awareness2 x ACV3
1 Market Share is determined using the top two box method. It is the percentage of people who indicated in a product concept test that they “definitely would buy” or “probably would buy” the product under concept testing. In Sunapto’s case, this number was 10%.
2 Awareness is the percentage of the target market that is aware of your product. This number is a measure of the effectiveness of your advertising and product recall by a consumer. Sunapto used a conservative 45%.
3 ACV (All Commodity Volume) is a measure of distribution reach. 70% ACV, for example, means that a product is distributed in stores which represent 70% of sales volume of all products in the same category in that area. Sunapto used a conservative 45%.
4.3 Service Business Analysis
The medication compliance industry is extremely fragmented. The market consists of small companies selling both electronic and traditional pill dispensers and organizers. There are no major medical device companies making or distributing devices similar to the MedCabinet. The consumer is generally unaware of available options, especially electronic products. These consumers rely on expert advice from their physicians and pharmacists when making a purchasing decision.
4.3.1 Distributing a Service
The majority of electronic devices in this industry are sold over the Internet with a few also being listed in medical order guides. Non-electronic devices are sold in major retail outlets, pharmacies, and through mail order. In general, distribution patterns in the healthcare industry are such that the large buying and influencing groups dictate what products are used throughout their sphere of influence. Thus, Sunapto’s products could be mandated or forced out for thousands of patients due to their health plan or hospital group. Other buying and influencing groups recommend several alternatives that require physician and pharmacist education and intervention, similar to pharmaceuticals.
4.3.2 Competition and Buying Patterns
In the home medical device market, buyers rely on expert advice when making a purchasing decision. These experts are their primary care physicians, their pharmacist and their healthcare insurance provider. Buyers are concerned about cost outlays and whether their medical insurance carrier will bear any of the cost of products purchased.
Consumer awareness of automated pill dispensers is very low. Sixty-seven percent of the respondents in Sunapto’s market research indicated that the MedCabinet was unique. Consumer awareness of the plastic pill holders (the seven compartment ones marked Sunday through Saturday) is high. These holders are sold through a variety of means including mass retail outlets like Wal-Mart.
4.3.3 Main Competitors
Sunapto faces competition on three main fronts in the medication compliance market. These fronts are reminder devices, automated medication dispensers and compliance services. The most important competitor to be considered is Home Medical Services LLC. Its strength is that it has a similar product in the automated medication dispenser and compliance service market. Its weaknesses are its cost, limited dosage days, and its weak marketing and distribution channels. This makes it vulnerable to a new, improved entry.
4.3.4 Business Participants
Currently, there are no major medical device companies making or distributing devices similar to the MedCabinet. The market is very fragmented and is made up of smaller companies selling both electronic and traditional (non-electronic) pill dispensers and organizers. Many of the companies compete in the electronic compliance/reminder device arena; few compete in the automated medication dispensers and compliance reminder service arena.