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May 1, 2006 (Vol. 26, No. 9)

Advice on How to Survive the Taq Wars

Insights on Purchasing Preferences & Analysis of Price Sensitivity and Elasticity of Demand

  • As the engine that fuels the polymerase chain reaction (PCR)—one of the most important inventions in molecular biology—Taq DNA polymerase has transformed how life science research is conducted. This powerful technique for DNA amplification relies on the amazing processivity of the DNA polymerase enzyme from the thermaphilic bacterium, Thermus aquaticus (Taq DNA polymerase). Because its enzymes are thermostable, the bacterium thrives in blistering hot environments. The thermostability of Taq DNA polymerase is the critical feature that facilitated the development of PCR and ensured its commercial success.

    Since March 28, 2005, researchers in the U.S. no longer need a license to practice the basic PCR amplification process, which was covered by U.S. Patents 4,683,195, 4,683,202 and 4,965,188.

    This much-anticipated opportunity has opened the door for an influx of suppliers hoping to provide Taq DNA polymerase to scientists for this specific application without the associated royalty burden. Once Taq DNA polymerase has been incorporated into a scientists toolbox, it likely remains there for many years, if not for their entire research career.

    A report, “The Taq Wars: Competitive Intelligence on How to Survive,“ released in November 2005 by market research firm BioInformatics, LLC (www.gene2drug.com), provides insights into whether access to less expensive Taq DNA polymerase will change the purchasing preferences of the 600+ scientists who participated in the study. It also presents a detailed analysis of price sensitivity and elasticity in regard to the demand for Taq DNA polymerase in different market segments. The report profiles the top suppliers of Taq DNA Polymerase and what product attributes contribute to their brands success.

    By understanding how their products are used, suppliers can better position Taq DNA polymerase to meet their customers needs. For example, standard Taq DNA polymerase (either recombinant or native) is used in the majority of all PCR reactions performed by study participants.

    However, industrial respondents who were surveyed use hot start Taq polymerase or Taq polymerase plus a proofreading enzyme about 8% more frequently than their colleagues. By offering multiple reagent formats such as kits and master mixes suppliers can appeal to industrial scientists who are more amenable to real-time PCR, willing to utilize both DNA and cDNA templates, and inclined to use specialized (and more expensive) versions of Taq DNA polymerase.

  • Leading Suppliers

    In aggregate, respondents identified Invitrogen (www.invitrogen.com), Applied Biosystems (www.appliedbiosystems.com), and Promega (www.promega.com) as the leading suppliers of Taq DNA polymerase.

    While all three market segments ranked Invitrogen as first, there were variations in which suppliers came in second and third. Very high volume Taq DNA polymerase users (more than 100 µL of enzyme per week) preferred Applied Biosystems. This preference also correlated with a trend that as the amount of enzyme used per week increased, Applied Biosystems rivaled Invitrogen as respondents favorite brand.

    Slightly more than half of the respondents, regardless of market segment, would consider switching to a different primary supplier of Taq DNA polymerase. (Conversely, approximately half of the respondents would not consider switching.) For the 8% of study respondents who recently selected a new supplier the majority were attracted to the lower unit pricing offered by their new supplier.

  • Factors Influencing Selection

    In a fragmented market due to low barriers to entry (i.e., expiration of Hoffman-La Roches U.S. Taq DNA polymerase patents) and the lack of economies of scale (i.e., obtaining native or recombinant enzyme is a relatively straightforward process although process improvements can increase to some degree yield and profitability), competition for remaining the top supplier will likely be fierce.

    Suppliers who specialize in value-added (e.g., specialty kits or enzymes with enhanced properties) or product specialization (i.e., target enzymes to a specific customer segment) will be in a better position to attract and retain a loyal customer base.

    The primary reason many respondents decide to purchase Taq DNA polymerase from their current supplier is familiarity, i.e., they are already using the product.

    Academic scientists tend to be more influenced by unit pricing than industrial or governmental scientists. In contrast, industrial and governmental scientists are likely to be swayed by a combination of factors including: favorable unit pricing, ease by which the product can be obtained from the supplier, and the use of related products from the same supplier.

    While a smaller percentage of the whole, institutional mandate plays a distinct role in modifying the purchasing behavior of industrial respondents. Suppliers who negotiate sole source contracts with pharmaceutical and biotechnology companies will help sway industrial respondents choice of enzyme—to a greater extent than such contracts would in an academic or governmental lab.

  • Impact of Patent Expirations

    To determine whether brand preferences would be affected by the expiration of the U.S. patents governing the use of Taq DNA polymerase for the basic PCR amplification process, study respondents were asked if they knew about the change in patent status. The majority of respondents did not know. Nonetheless, 14% more industrial than academic or governmental respondents knew that researchers no longer need a license to practice the basic PCR amplification process.

    Once informed of the patents expirations, many respondents were somewhat ambivalent as to whether they would purchase Taq DNA polymerase from another supplier. On a 7-point scale, asking whether respondents were going to change their brand of enzyme because a license is no longer required to use Taq DNA polymerase for amplification applications, the mean response was 3.4. In fact, the vast majority of respondents (92%) have not changed their brand of Taq polymerase in the last six months, suggesting that suppliers have not been able to immediately capitalize on this off-patent opportunity to expand market share.

  • Measuring Customer Satisfaction

    Because very high levels of satisfaction create an emotional bond with the brand (i.e., rather than just a rational preference), it is important for suppliers to identify customers with especially high levels of satisfaction. These researchers are the most inclined to continue repurchasing a specific brand.

    In this study, approximately 10% more academic and 12% more governmental respondents are very satisfied (7 on a 7-point scale) with their particular brand of Taq DNA polymerase compared with industrial respondents. This elevated level of satisfaction directly translates into more product recommendations: 52% and 56% of academic and government respondents, respectively, would gladly recommend their brand of Taq DNA polymerase to colleagues as compared to only 42% of industrial respondents.

    To better understand what factors contribute to satisfaction, a statistical analysis was performed to assess the relationship between the importance of a products attributes and the respondents overall satisfaction.

    In general, all three market segments value their brand of Taq DNA polymerases lot-to-lot consistency, unit concentration, and yield. Industrial respondents also appreciate their suppliers protocol clarity while governmental respondents are happy with their products buffer formulation. The only critical area of lower satisfaction that bears noting is industrial respondents disappointment with pack sizes.

    To determine how responsive demand would be to a change in price, respondents were asked if the price they paid for Taq DNA polymerase was at least 20% lower, how would the number of reactions they perform change.

    The majority of respondents indicated that they would not perform more reactions. Those respondents that would increase the number of reactions they performed would do so by 10-20%. This inelasticity, i.e., demand hardly changing with a drop in price, is likely due to respondents slowness in changing their buying habits rather than price insensitivity or lack of competitors.

    Scientists tend to be conservative when considering ramping up their experiments unless a specific need, based upon a specific line of inquiry, arises.

    Understanding a customers price perceptions is an important marketing priority. Purchasing decisions are based upon how customers distinguish prices and what they consider to be the current actual price—not the suppliers stated price.

    Scientists may have a lower price threshold below which prices may signify poorer quality, as well as an upper price threshold above which prices are seen as exorbitant. These limits are often influenced by a respondents reference price, i.e., the price they are currently paying per unit of Taq DNA Polymerase.

    For example 50% of respondents currently paying $0.05 to $0.20 think $0.02 per unit is too cheap, while 51% of respondents currently paying $0.41 to $1.00 think $0.10 per unit is too cheap.

  • Conclusion

    The decision to switch Taq DNA polymerase brands is therefore not based upon price alone. A combination of factors influences a scientists decision to use a specific supplier. These factors include familiarity with the product and company, ease by which the product can be obtained from suppliers, and, especially for industrial customers, institutional mandate.

    While the market might appear to be almost glacial in its slowness to change, half of the respondents indicated that they would consider switching suppliers. As a result, top suppliers might be faced with a shrinking customer base as scientists look toward other suppliers that can better meet their needs.

    Already in its maturation phase, the expiration of the Hoffman-La Roches U.S. Taq DNA polymerase patents will open up new opportunities for suppliers who decide to either achieve profits through high volume and low cost or go with a niche strategy to achieve profits through low volume and high margin.

    As high-volume users, industrial respondents are poised to increase their level of Taq DNA polymerase consumption over the next 12 months. This projected increase—combined with their interest in enhanced enzyme formulations, specialized pack-size requirements, and decreased price sensitivity (as compared to academic respondents)—suggests that a niche strategy might be effective in this market segment.

    Since only 17% of these respondents are very satisfied with their current supplier, companies might have an easier time convincing industrial scientists to consider their new product offerings. Suppliers hoping to embrace this customized approach can also achieve another level of differentiation by looking beyond the basic PCR applications and combining Taq DNA polymerase with novel chemistries to offer unique kits for the next generation of molecular technologies.



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