Marketing strategy step 1: Pick a target market, then consider the costs

Target markets can be broad or narrow, patient- or condition-specific, but include referral sources.

Issue: April 2006

ByEric N. Berkowitz, PhD

Marketing your Practice [logo] In part four of our “Marketing your Practice” series, Eric N. Berkowitz, PhD, suggests ways orthopedic surgeons can select target markets appropriate for their practices. He is associate dean for professional programs, Isenberg School of Management, University of Massachusetts and author of Essentials of Health Care Marketing.

To survive and prosper in today’s competitive health care marketplace, orthopedic practices need to develop an effective marketing and business strategy. A key piece of the effort involves specifying a target market.

What makes up a target market? It varies, but typically includes the patients, referral physicians, insurance contracts and companies — even specific clinical problems — a practice wants to attract. Deciding on the target market becomes the essential first element of developing a marketing strategy because it creates the framework for all future marketing and promotion tactics, large and small.

For example, a practice’s target market dictates the scope of clinical services ultimately offered. Targeting general adult orthopedic patients means offering a fairly broad range of services, vs., say, a practice focusing on foot and ankle. Beyond such broad strokes, however, choice of target market also directly informs advertising, Web site design, sales call efforts, even office décor, with each posing its own cost/benefit challenge.

Who’s in, who’s out

Deciding on the target market becomes the essential first element of developing a marketing strategy.

Practices should also identify groups they do not want to attract. Banks quickly grasped that concept and stopped trying to attract groups outside their target range: passbook savings customers who carry small deposits and use relatively few for-fee services. Some groups of patients could similarly drain practice resources.

One often overlooked hole in orthopedic practice marketing plans: failure to adequately address a crucial target market — physician referral sources.

When assessing whether referral sources fit with the targeted market strategy, don’t give each one equal weight. Instead, find out how well each referral source attracts the type of patients a practice really wants — whether or not those patients fit the group’s target market definition. How? Through a personal visit based on a pre-planned referral-call strategy or by using a grand rounds program at outlying hospitals, depending on circumstances.

Information about referral source suitability can even be gleaned in more subtle ways from messages the group conveys at its Web site or in promotional materials.

A helpful way of defining a target market is by type of clinical problems a practice wants to treat. Here’s an example: The Tennis Elbow Institute, in Houston, Texas, run by two orthopedists, targeted a very specific medical condition: lateral epicondylitis or tennis elbow (tenniselbowinstitute.com/aboutus.html).

Another orthopedic group that established the Hand University also targeted its market by clinical diagnosis.

Orthopedist Michael T. LeGeyt, MD, at Connecticut Hand Specialists, took a similar tact for identifying his customers (cthandspecialist.com/modern.html).

Broad or narrow market?

Such examples highlight the importance of deciding how broad or narrow a target market to choose. Setting that market scope will prove integral to overall marketing strategy since each approach carries a unique cost/benefit profile. Broad scope, eg, a “general adult orthopedic practice,” offers the obvious advantage of many potential patients with a host of maladies. But what about the offsetting costs?

Properly promoting to many markets can quickly become difficult. Do you really want to treat everything? Is it accurate to say the practice has a total package of clinical expertise in-house to meet every possible adult orthopedic need? If not, what is the message? The answer: Promote the expertise the partnership has in house.

Most any challenge can be met with the right plan. But it’s easy to see why some practices find it simpler — and less costly — to work with more narrowly defined target markets.

Business influence

One common hole in orthopedic practice marketing plans is a failure to adequately address a crucial target market: physician referral sources.

Defining target markets can help practices make better decisions in many strategic and operational areas. For example, medical practices in major metropolitan areas often find it tricky trying to decide whether or not to open a satellite location. Construction requires significant investment — and risk. Yet medical practices lack the sophisticated decision-support tools used by leading retailers such as Ann Taylor and Talbot’s that can analyze demographic characteristics from mail and phone sales, and judge when a potential market warrants a new store. They can even project a new store’s revenues fairly accurately.

Historically, medical practices locate satellite offices based on a combination of affordable lease terms and generally favorable neighborhood traits. Practices that take time to reach a more refined target market definition will find they can answer new-location questions with more precision.

Parting advice

Finally, practices should know how competition and finances, two interrelated factors, might affect target market choices. Broad-spectrum practices must defend against all comers, including those with a more narrowly defined market. Beware: Niche groups, like pediatric orthopedists or foot and ankle specialists, may carve out a market segment for themselves.

While broad-based practices are not defenseless against encroachment from more narrowly focused ones, they do need to more carefully position themselves in the market. One way might be to emphasize the full-service concept — many clinical specialties under one roof. Fending off threats from smaller competing practices through effective marketing takes great business acumen, focus and investment.

As “customers” become more sophisticated, requiring greater value from their health care dollar and having greater access to medical information from the Internet, expect target marketing to become increasingly important.

For more information:
Berkowitz EN. Strategic positioning and marketing ICL#328. Presented at the American Academy of Orthopaedic Surgeons 72nd Annual Meeting. Feb. 23-27, 2005. Washington.
Berkowitz EN. Essentials of health care marketing. 2nd ed. Jones and Bartlett, 2006.