By Richard Hamer and Randall Herman, FSA, MAAA

Since the 1950’s the most successful firms have been able to balance a market driven philosophy with a sales philosophy. Market driven means the products and services offered have been based on the wants and needs of customers. Sales driven means the products and services available must be sold to the largest possible set of customers.

For the insurers offering Medicare’s Part D drug benefits, the program presents a challenge to this balance. Part D’s standard benefit design is based on the political compromises necessary to fill a gap in current Medicare coverage. So, the market driven-ness that Part D players may have preferred is compromised and they must swing into sales mode earlier than
they normally would have. Now that the program is set, within the limits of product innovation allowed, PDP’s and MADP’s must convince seniors that they have something desirable to offer.

Insurers are unclear about how to reach seniors. Most Part D players are focused on positioning the Part D package as insurance against future drug costs and on educational efforts such as the program of the Medicare Rx Education Network (http://www.medicarerxeducation.org).

But players know that marketing a product includes more than that. A marketing philosophy also includes knowing the target customer, understanding what satisfies customers, understanding customer issues and problems, pricing issues, and the best communication channels. And, even though the Part D program requires plans to compress about a year’s worth of work into 4 to 6 months, the marketing question looms large, “What motivatesseniors to act on a Part D offer?”

Researchers have established reliable methods for determining the chief concerns or motivations of seniors. This information can lead to better understanding of the reason why people buy products and to market segmentation based on groups of people
with similar concerns.

Studies have shown that senior concerns could orbit around price, health orientation, personal gratification, social approval, risk aversion, family, and other areas of lifestyle. These studies have shown us the variety of consumer motivation. The current focus on Part D as insurance and on education will only motivate a certain segment of the population. The remainder will remain indifferent or skeptical because their concerns have not been addressed. If a Part D package can be positioned as a remedy for these concerns, motivation is created to consider it. The PDP’s and MADP’s who use this kind of information to develop targeted marketing and sales campaigns should see a faster uptake in their offerings.

Market segments can be identified based on the set of concerns and past behaviors that suggest why action would be taken. Studies of this sort are usually done through telephone
interviews that link concerns and motivations with demographics (such as income, family status, education), and health conditions and utilization. These interviews produce a wealth of
reliable data that enables analysts to identify segments.

For Part D players to most effectively use consumer data, three steps are suggested. First, segments must be identified. The richness of the data allows players to create segments in different ways. Second, players must evaluate segments and decide which to target. Again the richness of the data will allow players to consider both the market and their own competitive advantages and disadvantages – there won’t be just one most attractive segment for all Part D players. And third, based on information about concerns and influencers, a marketing mix can be created for targeted segments: a message, selection of the most effective channels, selection of the benefit design, and other elements of a mix that has a much higher likelihood of gaining attention and interest, and sparking action from seniors.

Consumer motivation research is needed for Medicare Part D insurers to regain the market-driven orientation in which they are most comfortable and to lead to more productive promotional efforts.

Richard Hamer is CEO of Deft Research, LLC a new company offering syndicated consumer and competitive intelligence.