Executive Summary
Cochlear Limited is a global company providing implants for patients with auditory impairment. It runs its worldwide operations from three locations, which are Europe, the Americas, and Asia Pacific. The current market segmentation for the company’s binaural hearing campaign is by age and location.
It seeks to promote all Cochlear implants in the process, since the company has several types of implants available for different clients. The company’s strengths lie in its fundamentals, record of accomplishment, and market confidence. Its weaknesses include slow innovation cycle, increasing business costs and attraction of too much government attention.
The company is selling the binaural concept well. However, some of the potential customers may find the campaign motto offensive. The stakeholders presently involved are too few and require increment to include government agencies and social workers.
The main competitors include Med El and Advanced Bionics. These two companies are aware of their competitive advantage and have leveraged on it. The three growth opportunities for Cochlear are strategic expansion to new markets to include Africa, which currently has a large young population, speeding up the innovation cycle, and tightening loose ends causing friction with the government.
The recommendations offered for the marketing campaign include enhancing the strategy to tackle competition, assessing the viability of beginning operations in Africa, improvement of the innovation cycle, expanding the target list of stakeholders for the binaural hearing campaign, and re-wording the campaign slogan.
Introduction
Cochlear Limited holds an important position worldwide as a player in the pharmaceuticals and healthcare industry. Its primary operations span at least fourteen countries lumped into three geographical locations, with substantial business activities in over one hundred countries across the world. The three locations are Europe, the Americas, and Asia Pacific.
The company does its marketing and distribution through subsidiaries. It produces and markets electronic implantable hearing aids especially suited for people with ear nerve damage. In light of the need to ensure that the products reach the intended persons, a marketing strategy remains necessary to provide the required direction. Sound Marketing is critical to the success of every organization” (Armstrong et al., 2011, p.5).
Mark, (2004, p.11) advocates for a comprehensive approach to the development of a marketing strategy which he says leads to “the surfacing and exploitation of multiple sources of attractive growth”. It is the goal of this paper to explore and critically evaluate Cochlear’s marketing strategy as a global player.
The critical evaluation will provide an interesting study into the marketing strategies available to global companies having a large product portfolio, with different brands. For this purpose, the paper focuses on binaural hearing and examines the marketing strategy associated with this particular campaign.
Current Marketing Situation
The marketing of binaural hearing aims at promoting the use of various Cochlear products to provide an opportunity for deaf people to experience the benefits of hearing with both ears. The target group for the binaural hearing campaign constitutes the market for this concept. Cochlear uses several ways of segmentation. They have segmentation be region, by age and by role played in the hearing implants delivery process.
Markets in each of the three regions as divided by Cochlear bear similar characteristics such as tariff environment, regulation, political system, and availability of financing. Cochlear Implants users, when segmented by age, fall into either the children category of the mature category. The rationale for children’s inclusion in the campaign is the benefits to the learning process associated binaural hearing.
The third method of segmentation is by designation either as a user or as a service provider. The campaign seeks to educate users on the benefits inherent in binaural hearing. To service providers, the campaign aims at making them active promoters of binaural hearing because of the “long range benefits” to their patients (Maromonte, 1998, p.7).
The binaural hearing campaign brings together players from the health care industry such as the ear, nose and throat specialists, surgeons, insurance agencies, and government agencies. The customers for this campaign are anyone who is in a position to influence the admissibility of binaural hearing as the care industry’s gold standard and as its best practice.
The campaign promotes the use of all Cochlear Implants to attain binaural hearing. This means that in addition to the professionals, practitioners and regulators, the actual users also constitute an important part of the market for the binaural hearing campaign.
Traditionally, marketing strategies recognize the four P’s of marketing. These are product, price, place, and promotion. The product in this case is not a physical tangible item on a counter for sale. Rather it is a concept, an idea and a way of looking at the quality of hearing, aimed at promoting the use of binaural hearing. The pricing of the product is tricky to determine in this sense.
This is because the campaign does not sell anything based on a price, but creates demands for other types of Cochlear Implants. The locations from which the campaigns run include places with health facilities, government agencies, and in places where there are regulators. The campaign promotion effort uses a mix of traditional methods and modern ones.
The avenues include online locations such as dedicated informative websites having information on binaural hearing, industry journals, webinars, and seminars for patients and practitioners, among others. Increasingly, online marketing strategies play an important role in marketing (Armstrong et al., 2011).
There is formidable competition in the binaural hearing market. While Cochlear Implants hold an enviable position in the implants market, rival companies aim at getting a share of the proceeds from the binaural hearing campaign.
Some competitors providing hearing implants provide their products as effective alternatives to Cochlear Implants hence affecting the market developed from the binaural hearing campaign. Some promote their products as substitutes for consequential implantation with no difference to Cochlear’s implants.
This approach is noted by Porter (1991) who states, the essense of strategy formulation is coping with competition (p. 11).The concept competes with a view such as, two implants are better off on two children rather than two implants on one child, and one remaining deaf. This has not stopped Cochlear from attaining market leadership.
The credit crunch, increasing cost of inputs, reducing cost of electronic equipment, and greater awareness of opportunities for improving hearing aids characterize the environment of the campaign. The international credit crunch that hit credit markets in the closing years of the last decade left many economies shuttered.
It eroded buying power of many consumers who sought to reduce their shopping expenses strictly to the essential items. This attitude of caution is still present and seems to have affected buying habits of many consumers. At the same time, the cost of inputs rose by a significant margin.
The cost of production driven by international oil prices reached new highs. This also contributed to the erosion of buying power from many consumers. The third effect on the binaural hearing campaign is the reducing cost of electronic components bringing down the overall product costs because of new improved technologies for the manufacture of electronic parts.
The fourth driver of costs was the costlier opportunities for increasing the patient’s awareness of the improved ways of restoration of hearing, partly due to competition in the market. This has produced a keenly aware group of stakeholders who demand the very best in hearing aids.
SWOT Analysis
The following SWOT analysis shows Cochlear’s, “critical success and its limiting factors” (2007, Morden, p.6)
Strengths
- Strong company fundamentals (financial and business prospects)
- Solid track record in production of hearing implants
- Market confidence in company’s products
Weaknesses
- Slow product innovation cycle occasioned by stringent regulatory requirements
- Increasing general and administrative costs
- Confidence erosion due to Government inquiries and investigations
Opportunities
- Increasing demand for binaural hearing especially by aging patients
- Large product portfolio that buttresses the company as it takes advantage of the windfall from the binaural hearing campaign.
Threats
- Competition from upcoming producers of hearing equipment
- Stringent regulations from government relating to health standards and environmental conservation
Conclusion
The binaural hearing campaign has a lot of promise in terms of expanding the auditory experience of patients. It has the potential of providing fresh marketing impetus for the entire Cochlear product range. This is because it aims at making bilateral hearing sets the industry standard in as far as hearing aids are concerned.
Concerns about the cost of having two implants per patient and therefore reducing the overall number of patients with implants require addressing. The solution does not lie in restricting access per patient to only one implant, but expanding access to the proposed industry standard featuring binaural hearing.
Critical Evaluation
One of the strongest points for the binaural hearing campaign is that through one campaign, Cochlear has put all its products at the shelves. It does not promote a single product, but a concept, which would require multiple products to address.
It is equally admirable that Cochlear, out of its belief that people with auditory impairment need to have hearing experiences that are as authentic as possible, have taken it upon themselves to define the future for care standards in the industry.
Identifying binaural hearing as the gold standard in healthcare and going ahead with a multi faceted campaign to promote it speaks of an admirable level of strategic thought and action inherent in the operations of the company. In this regard, the Harvard Business School (2005) states, “Strategy is about doing the right things” (p. xi).
The question of whether the concept is receiving proper execution is the first one to consider in an analysis of marketing strategy. Indeed, there is heavy support clinically and technically for binaural hearing. Through binaural hearing, patients have a better way of determining sources of noise, and they find it much easier to discriminate against various background noises, which greatly improve their auditory experience.
In deaf children, binaural hearing vastly improves the learning experience since the child has a better chance of understanding and responding to environmental stimuli. It is clear that Cochlear limited has developed a competitive technology in the field of hearing. It makes a lot of sense to develop a marketing campaign just for it to ensure it sells.
The motto chosen for the campaign is, “everyone should strive to hear with both ears”. The choice of this motto is appropriate since it covers the essence of the campaign. It is specific and it clearly summarizes the anticipated involvement of Cochlear in expanding hearing services to all its clients. It resonates well with Cochlear’s mission statement which states, “Supporting each recipient to reach their full hearing potential”.
The one drawback that it has is that it seems to order people into the use of their ears, which is a wrong way of dealing with a mass audience, part of whom may be sensitive about their hearing impairment and may end up irritated by this comment. It sounds a bit insensitive, and risks putting off potential clients.
Cochlear’s marketing effort aims to reach three classes of stakeholders. These are the patients, the ear, nose, and throat (E.N.T) Specialists and General Practitioners (G.P.), and Cochlear Implant professionals. While they form the basic persons without whom the whole project would fail, they are not representative of all stakeholders in the binaural hearing campaign.
This means that in terms of comprehensiveness, there is still need to expand the target groups for the campaign to include regulatory officials from government departments, and social workers who handle the persons with hearing impairment. This will provide Cochlear with a wider mandate and will make the projects more successful.
The competitors for the binaural market include Med El and ABC. Med El was the first to develop a marketable product in the binaural sector when it undertook the first binaural implant on record. It has acted to establish itself as a market leader based on this fact. ABC on the other hand has a variation of binaural products, which have bilateral accessories meant to control implant stimulation.
These two competitors are clear about what their competitive advantage is. They see it as Henderson (1991) who states, “Strategy is a deliberate search for a plan of action that will develop a business competitive advantage and compound it” (p. 5). They are not taking chances and are making the most of whatever advantage they have on the market.
While there is sufficient detail in as far as the identification and analysis of the threat posed by them, there lacks strong strategies for dealing with the threat they pose. This means that Cochlear remains exposed to competitive risk, unless new strategies to deal with the competition come into play. Indeed, as Davidow (1986) warns, “Marketing will determine the fate of companies” (p. xviii).
Cochlear has the background necessary to sufficiently deal with this competition based on its product range and length of years in the industry. Therefore, by pointing out that it is indeed the oldest and most experienced player in the industry, it may be able to soften Med El’s claim of pioneering the binaural hearing approach.
The binaural hearing campaign targets countries in Asia Pacific. This clarity shows that “Location is also important in marketing” (Levinson & Levinson, 2007, p.12). This area has a 3% penetration when it comes to binaural hearing. It is a high potential area for conducting the campaign. The specific parties targeted include professionals, past implant recipients, and candidates.
The reason for choosing past recipients of implants is that they can undergo consequential processes where they receive a second implant getting them to the binaural hearing level. New candidates mean people who have not had any hearing aids implanted on them but can find opportunity to have two implants put on them at once of within a short interval.
Targeting these three categories of people makes a lot of tactical sense. However, lack of targeting of regulators, insurance, and government agencies is a strategic blunder. With stringent rules governing the production and distribution of medical equipment, it makes sense to include them in the marketing plan.
There is need to include a track for lobbying this category of stakeholders to forestall any risks associated with stoppage of the dissemination of implants. This is especially important in light of the government inquiries into the operations of the company. Cochlear needs to come out as a cooperative company working for the utmost interest of its clients.
Growth Opportunities
Three areas that Cochlear Limited can grow its business include expanding operations to include Africa, development of more robust product innovation strategies and proactive participation on regulation. Cochlear does not have a strong presence in Africa and has just entered the Indian market in the recent years. While Africa presently has a young bulging population, it will be the where there will be a large portion of aged people who will need hearing aids in the next generation.
Ignoring Africa now may end up as a strategic catastrophe for Cochlear, especially if one of their competitors beats them to it. Cochlear will do well to listen to Robert, (2005) who states, “Strategy is about winning”, and in this case, winning the African market (p. 4).
The second area of growth evident from the analysis conducted is that Cochlear needs to speed up it innovation cycle. As the largest manufacturer of hearing aids, the company seems to have slackened on innovation such that other companies like Med El have been able to catch up and even beat Cochlear in the groundbreaking areas of binaural hearing.
Suzue (2002) states, “companies that achieve superior business results are those that continually implement various programs to lower cost, improve quality and/or shorten lead time-all in an ongoing effort to improve competitiveness” (p.1).
For a company of its size and age, innovation should remain a well-funded and prioritized process because this is the cutting edge of business in this generation. If Cochlear will remain a market leader, it is necessary for it to remain innovative. Otherwise, the company will suffer because of a “lack of strategic focus” (Daughtry & Casselman, 2009).
Finally, the third area of growth that Cochlear needs to address is in its operations. The run-ins with the government and other regulators on production standards and facility conditions were very bad for its public image. Instead of waiting for regulators to decide whether the company’s standards meet legal threshold, the company should instead develop proactive procedures to check itself way above required standards.
Cochlear will be able to demonstrate that it has “a coherent sense of direction” by doing this (Wall, 2004, p.4). This will go a long way in restoring and building market confidence is the company and its products. Regulation can only get tighter, so it is better to conform early to avoid embarrassment.
Recommendations
Development of a more robust strategy for handling competition
Cochlear Limited requires a more robust strategy for handling competition from the smaller but aggressive providers of binaural hearing solutions. Failure to address this challenge may result in loss of market share and loss of confidence in the company and its products.
Assess the viability of beginning operations in Africa
There is a case for conducting a feasibility study in order to establish the need to plan for the opening up of operations in Africa. Africa has a large potential market which if ignored now may become unreachable when it matures.
The best way to do this is by beginning operations through a subsidiary designed to operate in Africa. Montgomery and Porter (1991) observe, “Increasingly, both business units and corporations must compete globally” (p. xv).
Improvement of the product innovation cycle
Cochlear Limited stands to benefit more by improving on its innovativeness because it currently seems slow and is under the risk of losing business to the upcoming competition in the industry sector. The company has a strong heritage in the area of innovation so this should not be a challenge.
The difference is that it needs to move with speed for future products. In this regard, Howard (2004) states, “you must first wake up to the internal rules you are currently playing by and expand you field of possibilities” (p.xvii).
Include regulators, government agencies and social workers in marketing strategy
The company’s marketing strategy for binaural hearing seems weak in involvement of stakeholders from the regulatory and social services sectors. There is need to involve them to reduce discrepancies its operations and to get fresh input from them to ensure sustainable operations.
Reword campaign slogan
The wording of the slogan for the binaural campaign requires adjustment to make it less offensive since as it stands now, it risks offending some clients who may be sensitive about their auditory impairment.
This is the moment when, “marketing skills and marketing mentality becomes essential to continued success” (Shanklin & Ryans, 1987, p.66). The slogan seems to ignore this imperative. As the slogan stands, it may become the source of anger and resentment against the company, which may lead to loss of business.
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