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:
*
The “Core” Component (basic purpose or function)
*
The “Augmented” Component (additional functions and features)
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”: *
Chevrolet for the hoi polloi (from the Greek meaning the many – or the masses)
*
Pontiac for the poor but proud
*
Oldsmobile for the comfortable but discreet
*
Buick for the striving
*
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).
written by Dr Constantine Constantinides
Full article can be found here
