Planning for success: a check list for meeting Japanese customer needs
The medical device industry is a technology driven business. Companies spend millions of dollars on R&D to turn scientific concepts into functioning products. For most US companies, this product development process is focused on Western markets. As a result, the devices that they create are best suited for the West and may or may not be a perfect fit for Japan.
Over the last 10 years, I've observed numerous failed medical device launches in Japan. In many cases the underlying technology addressed significant unmet needs and should have been poised for success; however, the manufacturer didn't fully understand and adapt to differences in Japanese customer needs and requirements. As a result, what could have been a blockbuster product ended up being a niche product or had to undergo an expensive re-launch which could have been circumvented by better understanding the market prior to launch.
In my experience, there are seven key differences between Japanese and US / European customer needs that account for the majority of the problems faced by foreign manufacturers. Although this list is not exhaustive, it should provide a helpful check list for evaluating a product prior to launching it in Japan. Key differences include:
1. Reimbursement dynamics
Japan does not have a DRG/PPS system or other significant form of capitated reimbursement. In fact, most products and procedures are reimbursed under a fee-for-service model in which the amount received by the caregiver is directly linked to the number of products used and procedures preformed. As a result, a cost saving benefit that is valued in the US or Europe may actually undermine the economics of a hospital or clinic in Japan. This does not mean that cost saving devices can't be successful; however, it does mean that the importance of this cost savings must be recognized in the reimbursement rate awarded for the product. Manufacturers may also need to emphasize other benefits that resonate more strongly within the Japanese context.
2. Product quality expectations
Japanese caregivers and patients are extremely detail oriented and discerning. Expectations regarding product quality are often much higher than what is customary in other markets.
Japanese customers have a much lower tolerance for product defects and may view minor cosmetic defects to the product or packaging to be a defect even when the defect does not impact the safety or efficacy of the product. Common ways that successful companies address this need is by:
- establishing rigorous in-bound inspection procedures to ensure that defective products do not enter the supply chain in Japan
- improving overseas quality assurance (QA) and quality control (QC) based on the insights gained in Japan
- maintaining separate production lines for Japan that operate at a higher quality standard than the production lines used for other markets
3. Service level expectations
Established companies that have achieved scale in Japan devote significant sales and marketing resources to their Japanese customers. As a result, Japanese customers have become accustomed to high service levels that may exceed those offered in other markets. To be competitive, foreign manufacturers must develop a competitive service offering. Some of the more crucial service needs include:
- relatively frequent visits and procedural attendance
- manufacturer sponsored education and training (often in lieu continuing medical education)
- around the clock availability to respond to information requests
- rapid maintenance and claims handling support
- frequent information provision
- assistance with physician research
4. Purchase process influencers
The key influencers of the purchase decision for many products differ in Japan. Generally speaking, administrators, nurses, and patients are less influential in Japan than they are in the US. The relative influence of key decision makers differs by product. For most therapeutic devices, product benefits that appeal primarily to administrators, nurses and patients may not be significant enough to trigger adoption. Foreign manufacturers should also be aware of differences in patient flow and treatment settings as these also impact the relative importance of decision influencers. It is critical for foreign manufacturers to do their homework and understand who the real customer is and what they value.
5. Size preferences
Japanese hospitals, patients and caregivers tend to be smaller than their counterparts in the US. Manufacturers may wish to offer "J" (i.e., "Japan") sizes or emphasize the range of smaller sizes that they are able to offer. If a product or its instrumentation is considered too large for the Japanese clinical setting, it will be critical that other benefits outweigh this perceived negative. Foreign manufacturers should be ready to answer the question "does this product fit smaller Japanese patients?" In addition, they will need to assess whether or not their products are compact enough to be functional and desirable in smaller hospital rooms, operating rooms, and storage areas.
6. Human factors
Japanese caregivers and patients often prefer to interact differently with a device than their counterparts in other markets. For many patients, these differences are due to relative age and/or differences in lifestyle. Differences in preferences are common with respect to:
- colors used
- size (see #3)
- layout of user interface
- quality and configuration of packaging
- perception of what constitutes "ease of use"
- acceptance of product complexity (i.e., more features and functions is not always better)
- ability to use while bathing
Japan has its own regulations and standards for electrical systems and wireless frequencies. Products will need to be designed and manufactured to meet these requirements. In addition, foreign manufacturers may find that complementary products are designed to different standards making them incompatible. It is critical that foreign manufacturers fully understand the specifications used for complementary devices so that their products may be easily integrated within current clinical practice and purchasing habits.
Each of these seven factors is addressable and should not create a significant obstacle to success if the manufacturer understands Japanese needs and is able to adapt to meet them. To maximize the likelihood of success, companies should consider:
- incorporating Japanese needs early on in the product development process
- developing a clear reimbursement strategy as early as possible to ensure that the structure and level of reimbursement is likely to complement product benefits
- establishing appropriate levels of sales support, quality assurance and quality control (or tempering growth expectations to match capabilities and infrastructure)
- making "must have" adjustments on existing products when the cost is justified by the market potential
- adjusting the marketing strategy and messaging to emphasize those needs that will resonate with Japanese customers