Dr Constantine Constantinides looks at supply and demand in the medical tourism industry and draws some lessons from the automotive industry. With the supply of medical tourism services exceeding patient demand, healthcare providers need to consider market segmentation, stratification and diversification strategies if they want to succeed.
Freud described “Denial” as a state of: knowing but not knowing.
Often, the difference between how things are and how you want them to be is so great – that you do nothing – or continue to do the same thing.
This message is aimed at both medical tourism service providers and destinations (note that I make a distinction between Medical Tourism and Health Tourism).
healthCare cybernetics is best known for “thinking and doing” – but we do a considerable amount of “watching”, as well.
And one issue we have been watching (with some bemusement) is the continuing growth of the medical tourism industry (the “supply” side), which we believe is out of step with the rate of growth – and expectations - of the market (the “demand” side).
New players continue to make forays into the industry, with the same (and now “tired and irrelevant”) slogan: "Top Quality – Bottom Price".
We have been pointing out (at least for the past two years) that quality can go no higher and prices can go no lower.
A lesson from the automotive industry
…a story goes with it
Today, every product or service has two components:
In every industry, over time, the balance between the core and the augmented, shifts (sometimes, back and forth).
Until now, medical tourism was about selling a “core service”. i.e., the Top Quality – Bottom Price Service, and admittedly, a lot of sales and profits have been made on this basis.
But let us look at the “Core Product” analogy in the Automotive Industry (and its history).
The Ford Model T was introduced in 1908. Over a period of twenty years, more than 15 million Model T cars had been sold.
But by 1927, demand started falling. Henry (and this is where the word “denial” comes in) dismissed this (and the advisor who brought him the news), insisting it was just a market “blip”.
Of course, Ford up to then, had been right in insisting that all that people wanted was a “core product” (“Model T gets you there and back”).
“Core Medical Tourism Services”, likewise, get you there and back (think Tourism” – which means a there and back journey).
But by the 1920’s, the world was changing. People were no longer hungry, they were getting enough of staple food. And they now also had more ”disposable” money and time. It was inevitable that they would start wanting their car to be something more that a utilitarian machine. They wanted a car to be a differentiating status symbol, as well.
By the time Henry Ford came out of denial, and shut down production (for several months) to retool his factories, he had suffered a loss of $250 million.
GM, his competitor, had already predicted the imminent demand for an “Augmented Product”, and provided it, in a variety of colors with regular model changes.
A timely and humourous article appeared in Fortune Magazine entitled, “Consumer Segmentation and Stratification”:
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Chevrolet for the hoi polloi (from the Greek meaning the many – or the masses)
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Pontiac for the poor but proud
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Oldsmobile for the comfortable but discreet
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Buick for the striving
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Cadillac for the rich
By 1927, demand had swung decidedly in favor of the “Augmented Product” (both in style and size).
But even here, history teaches us that there is no “last word”.
Stagflation and the “oil shocks” in the 70’s created a demand for more “modest” cars – but ones which would still provide “distinctiveness” (read Japanese).
A healthy (rational) balance between Core and Augmented Product came into being – but even so, a viable demand for extremes persisted, and persists to this day (see the talk about fuel economy and the do, where people buy an eco-friendly car, but do not, at the same time, voluntarily, get rid of their Hummers) .
And note that not all five US car brands have survived (we have something to say about the inevitable “shake out” in Medical Tourism as well).
Health consumer segmentation and stratification
…the Chevrolets, Pontiacs, Cadillacs etc, of Medical Tourism
The demand for “Core Medical Tourism Services” is not going to disappear, but do not expect it to be the inexhaustible El Dorado that several misguided experts continue to predict.
With experience and mounting awareness, consumers are daring to be more demanding, choosy and more discerning.
Medical tourism consumers are no longer “one size fits all” (in fact, they never were, it was the popular media which portrayed them as such).
People are already restlessly looking for “that something” which lies between top quality and bottom price, what we refer to as the Deal Clincher.
And as they become more comfortable with the idea of “travel for health” they will start enquiring about the availability of other than Model T medical tourism.
What are we getting at?
…to cut a long story shorter (and give you the bottom line)
The demand for “Core Medical Services” is not likely to grow as much as predicted as a result of:
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The West’s Revenge (local providers are competing aggressively to keep patients at home)
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The Recession (contrary to simplistic thinking, people are not rushing to get cheaper treatment abroad – they are staying put and deferring treatment.
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Consumers take “top quality and bottom price” as a given (they will decide amongst those who give them the essential differentiating factor – a tangible or perceived added value).
Consumer Segmentation and Stratification
One size does not fit all.
And it is unrealistic to expect all providers to be able to satisfy the peculiar needs of all consumer segments and strata.
Thailand, for example, realized this early on and ceded the lower-end market to India.
Regionality vs Globality
Although we talk of Medical Tourism and think “Globality” (anywhere is the same) we are definitely seeing Regional and even National Preferences emerging, based on cultural affinity – and even on where a particular consumer group is made to feel more welcome and “at home”.
Diversification
What if for some reason – even for one year – the demand for Medical or Dental Tourism drops?
We have been encouraging Destinations to develop into ht8 Destinations (aiming to offer services in the 8 Health Tourism Segments – and more and more are doing so).
This approach has the following advantages:
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Insurance Policy (if for some reason demand for one segment drops, you still have 7 others to rely on)
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The Long Tail Effect (increased choice leads to increased demand – a “Thank You” to Chris Anderson – Editor, Wired Magazine)
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Creates a broader industry to address a broader market (meaning more business for all)
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Cross Selling and Cross Referrals (your client can also be my client – I refer to you and you refer to me)
Alliance formation
In some industries, up to 25% of revenue can be directly attributed to established alliances (same sector, trans-sector, national and trans-national).
Alliance formation can also be a less painful and simpler way (as opposed to mergers and acquisitions) to attain “scale”. Scale is an important factor in shaping perceptions and inspiring confidence.
And with Medical Tourism, forming alliances – even with your supposed competitor – becomes inevitable (think after-care / follow-up, back home).
Be reminded of the neologism “co-petitor” (competitor and collaborator, at the same time).
Innovation
Innovation is the last competition-busting tool still available to all – provided they have the industry and market knowledge & understanding required to Innovate.
And innovation does not simply mean “differentiation” or invention. It has to be something which the consumer sees and wants – no matter what.
And finally, sophistication
What is missing – and is subconsciously missed by the discerning consumer (at destinations and provider facilities) - is the element of sophistication (and even flair).
And we do not mean kitschy opulence, marble fountains and the hanging gardens of Babylon.
Sophistication is a much subtler quality that is sought out and recognized by the wise, knowledgeable, worldly and discriminating / discerning consumer.
The word comes from sophist – Greek for wise man.
