Healthcare Technology Vendors choose between Market Share Gains or Advancements in Customer Satisfaction

In observing the trends of the past decade, Black Book Research examined the longitudinal relationship between market share and customer satisfaction as the marketplace has proven (contrary to popular thought) market share has no impact on future customer satisfaction, and both the two variables are actually negatively correlated.  

According to Black Book’s survey results throughout the last decade, customer satisfaction and increased market share are convincingly negatively correlated - as market share increases, overall customer satisfaction decreases and vice versa.

The race for health system IT clients has been gained by advanced market share at the cost of lower user level satisfaction. Among the largest market share owners in Q1 2020, a decline has been noted in client experiences at the user level by physicians, clinicians, nurses, and financial and operations staff. Meanwhile, the five vendors with losses in EHR market share have shown the largest increases in customer satisfaction.

Market share and customer satisfaction have long been used as key performance indicators not only in relation to sales and marketing, but also in broader economic and management contexts. Over the years there has been a widespread assumption of a positive relationship between the two in the healthcare IT world - that customer satisfaction drives more purchases and that great user reviews positively influence and secure a vendor’s growth in market share.

Vendor leaders have generally believed that enhancing customer satisfaction is a central strategy for improving market share. Conventional logic suggests that improved customer satisfaction should lead to both retention of a HIT company’s current customers and positively demonstrate reputation effects that will attract new customers. However, the empirical evidence of Black Book Research suggests that market share and customer satisfaction either are unconnected or have a negative relationship.  One exception would be when HIT customer switching and/or acquisition costs are low, it is possible to use customer satisfaction to predict market share when benchmarked against other low cost rivals.

In examining why there was a negative relationship between customer satisfaction and market share, Black Book Research determined that brand choice was the key influencing factor by 91% of CIO decision makers from 2011 to 2017 for broad system purchases.  This supports earlier suggestions that satisfying an HIT customer’s needs will not necessarily result in higher market share when top level approvals on purchasing decisions are based on brand choice.

It was important to view the relationship between market share and customer satisfaction over a period of time to establish the effects of time on both satisfaction and market share.

The higher the HIT customer replacement or switching systems costs, the weaker the positive effect of customer satisfaction on future market share. This means the heterogeneity in a firm’s customer base mediates the negative relationship between current market share and future customer satisfaction. In turn, the number of new products and brands marketed by the EHR/HIT company is mediated by preference heterogeneity in the market share-future customer satisfaction relationship.

Vendor marketers need to evaluate the nature of the demand for the customers they target before investing in improving customer satisfaction. The more disparate their clients’ make up, specific operations and needs, the lower the impact of customer satisfaction on the company’s overall market share.

Vendors also face increased levels of heterogeneity in their customers preferences and needs to investigate just what their customers draw value from. Only then can they rebalance customer satisfaction and maintain a valuable proposition.  

Alongside this, it is essential to carry out market research to monitor competitors and evaluate the customers perception of switching costs, as well as what drives buying behavior among hospitals and physicians.

As in all industries, larger companies are unable to satisfy a large customer base, especially those required in a diverse network of users with differing needs and requirement. This results in dissatisfied customers, ultimately. Once a market is saturated with vendor products, dissatisfaction becomes more noticeable as reported in studies between 2018 and 2020 by Black Book.

A quickly growing strategy is to counteract the dissatisfaction of large provider network clients by breaking a company down into numerous more niche brands and product names which can target particular segments of the market.  

Black Book stresses the importance of vendors to monitor their nearest rivals’ actual published and perceived satisfaction by independent surveyors, in addition to internal polling. It is vital to conduct client segmentation to ensure one can meet the requirements of your appropriate target groups as purchasing decisions are increasingly selected by the users affected and not the central IT administration.

In 2012, less than 7% of major IT purchases were made outside the CIO’s office. Customer satisfaction was reported as the "satisfaction of Chief Information Officers", largely ignoring the experience and usability feedback of clinicians, physicians, nurses, technologists, financial staffers, and ancillary departments needs and recommendations. This trend is persisting today in terms of hospital IT satisfaction reporting - 95% of non-IT management respondents in a Q2 2020 study they feel their hospital administration that are surveyed on client experience would not represent their individual concerns or consider a product switch based on their user-specific needs.

Market share and customer satisfaction are linked in certain limited situations. Black Book studies have found that increasing customer satisfaction can increase profitability, and ultimately some market share (given a 1% increase in customer satisfaction, a vendor company can typically expect a 12% increase in profitability).

The solution to keeping up with customer satisfaction as market share grows is to segment customers according to similar needs. This is easier to do with smaller customer numbers in health system EHR markets, but much more difficult a task in extensive health systems and academic medical networks offering one-solution-fits-all thinking to hospitals, physicians, and ancillary providers alike. Every client experience cannot be significantly enhanced without added vendor expenses or impacting overall satisfaction.

If the vendor has focused on satisfying their core customers, and the product has a great appeal among customers in the same market segment which have the best product-market fit, customer satisfaction may rise but the market share can appear to be decreasing even when the product range doesn’t change.

Bottomline: If vendors are still looking to increase corporate market share, they must be prepared to sacrifice customer satisfaction in meeting that goal.