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FindArticles / Health / Medical Laboratory Observer / Sept, 1987

A guide to marketing your lab's services:laying the groundworkby James Fantus

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A guide to marketing your lab's services: Laying the groundwork

I owe my success to honesty and wisdom. Honesty means that when you promise a customersomething, you'll go to any length to deliver it, no matter what the cost. Wisdom is never promisinganything you can't deliver.

Promise and deliver--that's the world's shortest marketing lesson. Laboratories should abide by thiscreed if they want to market their services successfully to a larger clientele.

Suggestions in this article and the one that will follow next month rest on the success of a marketingprogram in use at our company. From its start as a hospital-based laboratory that moved off-site sixyears ago, the company has grown into Arizona's largest independent laboratory chain, with morethan 210 employees. Our company's position continuously improves due to responsiveness toclients and entry into new markets.

When marketing programs fail, the reasons often can be traced to vague goals or lack of a soundmarketing plan. You must have clear achievable goals, defined strategies, an action plan, financialanalyses, and contingency plans if strategies do not work effectively.

Marketing goals fall into three categories: Don't lose existing clients, get more business fromexisting clients, and locate new clients. Limit your overall plan to 10 or 15 goals. Establish goals thatcan be reached--not pie in the sky hopes--and state each in a single sentence. If you can't say it in asentence, the goal may not be comprehended by everyone. For example, a goal might be to increase

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revenues by $1 million.

Next, define strategies to help achieve each goal. Strategies also should be stated if possible in asingle sentence. Break the goal into measurable strategy segments --for example, "The way we'regoing to increase revenues by $1 million is to set quotas for additional sales of $250,000 per salesrepresentative, raise test fees by 5 per cent, expand the sales force, and reduce write-offs of baddebt.'

Establish a plan of action to narrow down the who, what, and when. You must spell out when thestrategy will be implemented and identify the party who must see to it. The action plan for the goalof increasing revenues by $1 million is this straightforward: Sales quotas will be met by Dec. 31 andwill be the responsibility of the salespeople, a 5 per cent fee increase will occur March 1 and be theresponsibility of the marketing director, the sales force expansion will be completed by June 1under supervision of the sales manager, and the finance manager should act to improve bad-debtwrite-offs by April 1.

Financial analysis of the cost of implementing strategies and reaching goals is essential. Tocomplete your analyses, use pro forma income statements to demonstrate feasibility; perform abreak-even analysis to estimate the point at which revenues will equal costs; and construct budgetsto serve as the control mechanism. You can budget per goal, per group of goals, or for the totalmarketing plan.

Monitor the progress of strategies toward achieving goals by holding a quarterly review meeting,and form contingency plans that will maximize progress toward any goals that are not being met.Hold accountable those whose section of the plan is not meeting the target goals.

In addition to developing a comprehensive marketing plan, you must organize an effectivemarketing department and research the market carefully. The director of marketing should reportto the chief executive officer. If the laboratory doesn't have a CEO, as in most hospital laboratorysettings, the marketing director should report to whomever oversees the entire operation.

Avoid the mistake of having laboratory marketing report to the finance department. Marketingefforts might then be restrained because finance generally concentrates on controlling costs. It'salso a mistake to have the marketing department report to the chief technologist or technicaldirector of the laboratory. In this case, restraints on marketing would be based on operationalreasons: "We can't handle the work; you're making us work too hard.'

The marketing department monitors competitors' activities, performs market research forstrategies necessary to promote lab services, contributes to service design, and engages in publicrelations, advertising, and sales. If the sales force is large, the director of marketing supervises areasales managers, who in turn supervise sales representatives. Another essential employee in thedepartment is a marketing assistant who can keep up with all the day-to-day paperwork.

Once the marketing department is organized, market research can begin. The aim, to gatherinformation for decision making, can be accomplished by assessing patients, clients and prospects,the competition, and trends in laboratory service:

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Patient satisfaction surveys. Are patients satisfied with your services and will they tell theirphysicians if they aren't? I can guarantee they will. Distribute questionnaires to patients when theyvisit your lab (see Figure I).

Client satisfaction surveys. Also ask your clients--physicians, other hospitals, etc.--to rate yourservices (Figure II). Try to find out through these surveys what it would take in terms of price,turnaround time, or other factors, to sell a prospective service. I recommend that you mail thequestionnaires and ask clients to return them by mail. We got more candid responses that way thanwe did when our couriers distributed questionnaires and picked them up. Few clients evercomplained about service when they dealt face to face with a company representative.

Competition assessment. Identify competitors and their strengths and weaknesses. Salesrepresentatives can usually provide this information, but sometimes it helps to perform marketsurveys. Knowing what competitors have to offer should be a number one priority because thebetter their lab services are, the better your services must be.

A direct way to learn about the competition is to visit their laboratories --most organizations areeager to show off their place of business. In addition, contact their salespeople and have them try tosell you their services; then use some of the services so you can better evaluate competitors'operations.

Talk with customers of your competitors. If you hire individuals who formerly worked forcompetitors, interview them for information.

More oblique methods of gathering information include writing in for competitors' literature orpicking it up at meetings and exhibits. Two laboratory chains are publicly held at present, and youcan send for their annual reports and financial statements. Also review trade journals and attendtrade shows to see what others are selling.

Business trends. Keep up with trends in your area of business. Reading journals like MLO andbusiness and government publications can help you identify important regulatory and marketchanges. Talk to your own customers, vendors, and competitors, and attend as many laboratory andhealth care seminars, symposia, and conventions as you possibly can.

Once you have sized up the market and your competitors' operations, it's time to price yourservices. Be sure to price competitively --no other single factor will have as profound an impact onyour marketing program as your pricing strategy.

First, compare your fees with fees for the 50 most common tests offered by your biggest competitor.This involves the following steps: 1) multiply your average volume for each of the 50 tests by yourfee for each test; 2) take the same volume and multiply it by your competitor's fees for each test; 3)add up your column of revenue and your competitor's column of revenue, and calculate thepercentage difference between the two totals.

Using this method, we found we were charging 4 per cent more than our main competition. If wechose to remain even with that firm, we would have had to reduce fees for all tests by 4 per cent

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across the board or discount some high-volume tests at a level that brought total pricing down by 4per cent. As you will read in a moment, we did not choose either pricing option.

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