Market Research in the Chinese Hospital markets: A Misty Affair Full of Potential or a Waste of Money?

China, due to its sheer size, presents a large volume market which continues to expand, as its healthcare standards increase and its population continues to grow. Inevitably it must harbor a range of demands and medical opportunities that extend beyond its borders. However, China remains a tricky and even unattainable market for many foreign parties, as reliable healthcare market intelligence is difficult to obtain and verify.

In this article, Bart Van den Mooter explores the inherent challenges of business intelligence gathering in China, identifies some of the market’s critical complexities, and reveals three key components that will guarantee reliable and constructive market research. In 2010, Bart started the China branch of TforG and since then spends a substantial part of his time assisting global companies to grow and develop their business in China and the ASEAN markets.

The Context

Economic expansion is slowing down, yet the Chinese market still shows a real growth of 4 to 5%.

The HC (Healthcare) market and especially the MedTech segment expanded by 3%+ during the last 2 quarters of 2015, or 6%+ on a yearly basis. TforG expects the same 5-6% growth will be maintained throughout 2016 and at the beginning of 2017.

This evolution is fueled by the continuous improvements of coverage by HC insurance programs, the ongoing modernization of hospital infrastructure (especially ‘level 3’ hospitals), and by the rapidly growing investments in private healthcare provision.

Over the last year TforG asked over 30 business managers how they measure the opportunity and threat indicators of the Chinese market for their business. The majority felt that China will continue to be a relatively stable honeypot, within an uncertain and restless global context.

At the same time, the position of international providers is successfully challenged by the local Chinese manufacturers, turning the growth opportunity in a major competitive battlefield. This is one of the reasons why in 2015, MedTech companies spent almost €1.5 billion on market research to improve their understanding of market sizes and shares, decision processes, market trends, segmentation, customer needs and requirements, competitive strategies, etc.

When asked about the quality of their market intelligence of China, we learned that 4 out of 5 companies feel their knowledge of the Chinese market is below standard and that the information is insufficient to effectively plan and act. Most of them feel that the available market data is unreliable and incomplete, and that market research efforts have often been a waste of money.

The complexity

Each year TforG executes over 100 Business Intelligence projects in 50 different countries worldwide; since 2010, 10 of these projects took place in Greater China.

We identified a number of elements which make market research more complicated in China (and India) than in most other countries.

  • Regional segmentation goes further than just the differences between provinces, and tier 1 and tier 2 cities.

Evidently there are major differences in economic activity, purchasing routines and decision power spectra between provinces and parts of provinces.

More importantly however, is the map of HC insurance coverage. The penetration and the scope of insurance programs in the recruitment area of a hospital substantially impact the investment levels of said facility.

In addition, even within the fairly uniform segments, important differences occur. Level 1 hospitals in the center of a large city have very different purchasing patterns than level 1 hospitals in the immediate suburbs, and are also very different from level 1 hospitals in the more remote suburbs.

  • Second tier cities and regions will contribute more to future growth.

Tier 1 cities and regions are typically better documented, easier to understand and larger in market potential. In terms of future expansion however, they will contribute less to growth than the next block of cities.

Today 70% of the market is concentrated in 5 or 6 provinces and municipal territories. We expect the growth in tier 1 regions and cities to remain below 3-4% in the coming 3-5 years, whilst tier 2 and 3 cities and regions are expected to expand by 7-10%.

  • The private sector is one of the most promising segments.

An increasing number of financial groups invest in acute hospitals, diagnostic and rehab centers, both in the domestic market as well as in the neighboring countries’. Hospital groups are emerging; by 2017 they will represent a substantial component of the Chinese and ASEAN market. Today they are the least transparent and the least accessible sector.

  • Data collection processes are not up to the challenge.

In China it is easy to build a huge database with care providers and administrators willing to participate in market research, if they are rewarded for their time and effort. It is often unclear and difficult to verify whether these contacts really have the information required, and whether they are able and or willing to provide the full picture.

Careful selection of the sources and quality assurance of the collected data is undoubtedly a very complicated and tricky part of the BI process.

Because of these complexities many companies turn to big data collection. One may spend huge amounts of money trying to capture the market data with fine granularity – sometimes at hospital by hospital, or deal by deal level. The consequence is overinvestment and a lack of guarantee on structural insights; an analysis of the recent past with a rather limited support to maximize future value. In addition, this approach focuses on large volume segments, neglecting the new opportunities and profitable niches, which will carry the growth in the coming 3-5 years.

What might help

In the projects TforG conducted in China, we learned that three components are of critical importance to arrive at information that is structured enough to empower your organization and action plans, and that is sufficiently accurate and complete to derive actionable conclusions from for future success. These are:

  • Invest in Segmentation-and Market-Models

Invest enough time and consult adequate (re)sources to select a segmentation model which matches the characteristics of the products/business at hand and complies with the active market dynamics.

The model has to take into account the criteria we mentioned earlier (HC insurance mapping, tier 2 and 3 regions and cities, strength of local competitors, etc.)

  • Carefully select and qualify the sources

Use knowledgeable HC professionals who will – based on the product, application, and BI targets – identify and qualify the respondents who are able and willing to provide the required information.

  • Design a data acquisition process matching the Chinese context and capturing the future

Questionnaires adequate for a European or US context might be ill-adapted for Chinese respondents or markets; keeping in mind that a respondent will almost always answer the question he/she is posed, regardless of whether they fully or accurately understand the context or purpose behind it.

Measuring today’s market data is documenting the past, and not necessarily providing insights into what will happen tomorrow.

There is no magic formula, yet these 3 components will avoid overinvestment, will provide you with real information from knowledgeable people, and allow you to assist planning for tomorrow.

About Bart Van den Mooter

Bart is the founder of TforG and works closely together with over 50 global companies such as Abbott, Baxter, GE, J&J, Medtronic, Philips, Stryker and Covidien. In this function, he spends a lot time with Key Opinion Leaders and Health Policy makers in Europe and in Emerging Markets. He graduated at the Polytechnic University of Leuven with a Master of Engineering and has an MBA (Flanders Business School).