The benefits of offering your product for free

Tech companies offering free trials is nothing new. A free trial has long been a great way to introduce your product to potential customers, and hopefully, they’ll then like it enough to start paying for it when the trial ends. At the start of the pandemic, Endomag offered its support to the NHS by donating free Magtrace® lymphatic tracer vials to help surgeons in the UK continue to carry out essential breast cancer treatments.

Here, Eric Mayes, CEO of Endomag shares its experience of offering its groundbreaking product for free, and offers advice for other scaleups seeking to explore the strategy themselves.

Like a lot of people at the beginning of the pandemic, we were thinking as a company, what can we do to help out? Initially, we'd redirected our office fruit deliveries to NHS workers but that didn't feel representative of what we could really contribute.

When we discovered that the NHS was stopping breast cancer surgeries because ICU beds were needed, we found our purpose. There was still a huge flow of cancer patients that needed treatment and those patients were being moved to ‘cold sites’ that were separate from the main hospitals. And those cold sites didn't have the facilities to deal with radioactive materials required for surgeons to find and remove cancerous tissue.

As a bit of background, the current ‘gold standard’ in breast surgery procedures relies on radioactive materials to provide a distance sensing method and a blue dye to provide a visual guide for the surgeons. This presents a few downsides.

For a start, radioactive solutions have a limited shelf life and therefore a complex supply chain, which means not all hospitals have access to them. There’s a regulatory burden on top of that. And, probably the most important issue: there's a risk of anaphylaxis with blue dyes —patients can suffer allergic reactions.

Our product, Magtrace, provides surgeons a two-in-one benefit. With one injection, it gives a reliable magnetic signal that can be detected from outside the body and has a dark colour that assists finding lymph nodes during surgery. Combine that with a three-year shelf life, a negligible risk of allergic reactions, and being clinically equivalent, and you’ve got a compelling case for a new gold standard. When a patient is injected with Magtrace, the surgeon then uses a device, which acts a bit like a metal detector. It’s moved across the patient’s breast, and the surgeon received feedback through increased signal pitch as they get closer—hunting for that magnetic tissue.

What’s more, Magtrace had been approved in the market since 2012. It had been used at that stage in over 80,000 procedures globally. We realised that this unique and unforeseen crisis presented us with an opportunity to help more UK breast cancer patients: it's what we designed Magtrace to do, to make a non-inferior, comparative technique available everywhere.

The NHS certainly had a lot on its hands, but we began reaching out to breast cancer surgeons, our current customers, to see if we could help them get started at the new cold sites - or potentially support new customers by providing the product to treat those patients in need. Obviously, there would be a cost to it and plenty of other issues to think through, but it seemed intuitively right that providing free Magtrace and supporting these hospitals remotely was one thing that we could do to really make a difference.

Set limits early on

One of the biggest concerns about giving away one of your signature products is the economics side of it. The cost of doing business, whether we can do this in a meaningful way without tanking our company.

We asked ourselves several questions: What did it imply about the value of our materials? We all thought at the time that the pandemic would provide a natural end-point, and considered using it as a natural limit. But it certainly raised concerns that we'd have difficulty with managing pricing when the trial was over.

The truth was, we didn’t know what the uptake would be. We didn't know if every hospital would simply order stock up on free vials to last them beyond the pandemic. If that were the case, we might not be selling anything to these customers for the next five years.

So we decided to set a limit. We had to build a new model, for a set time, to understand our limits and marry that with what would be meaningful to help get the NHS and these patients through, what we thought would be, another six months’ worth of activity.

Get your partners on board

Probably one of the hardest challenges for us is that as a company, we don't sell directly to our market. We use distribution partners for all of our sales globally, including the UK. We had to go to them and say 'Hey, we're giving this stuff away for free' - and our distributors obviously had questions about the margin on that!

We had to get them on board, to help them understand how it would benefit their business but we also had to continually manage that demand and distribution through them to make sure we had enough to deliver to the market and could do it in a timely way. This all whilst operating in the context of a pandemic, which was providing difficulties in the logistics of getting materials moved around.

Don’t underestimate your legal team

Another challenge we found was when you’re giving something away for free, you need your legal team to make sure you’re not breaching any ethics guidelines around medical devices. Those guidelines are tight on incentives or providing benefits to surgeons that may affect their purchase decisions. There was a lot of paperwork, but we got it done. I was just really pleased that our team worked so hard on overcoming these hurdles—we were all so very enthusiastic to find something for good that we could do as a group.

Measure the results, beyond the numbers

We soon realised there were some additional benefits to simply feeling good about ourselves. Firstly, we found the benefits enjoyed by the freemium business model that a lot of internet startups employ. More people begin using your products and you acquire customers.

Of course, there's an altruistic benefit: we're helping to support hospitals during a pandemic. It’s hard not to feel good about that. But in terms of figures, Magtrace sales at the end of 2020 in the UK had grown by 250%. Magtrace sites increased by about a fifth in terms of who we were working with before the initiative.

On another level, our initiative helped us with exposure and immersion. It helped surgeons realise that Magtrace could be a great solution beyond the pandemic. It’s not just for times of crisis: it’s simply a better way of doing things. They can use Magtrace wherever and whenever, it's highly available, and can be adopted without worrying about supply chain disruptions associated with the radioactive alternatives.

Hospitals fed back that, had it not been for this initiative they wouldn't have been able to offer the best standard of care to their patients. Because of that, there were a number of surgeons that became champions of our product, in ways that we didn't expect. And now, we have this network of highly-respected surgeons that advocate for us on a global basis. That’s invaluable.

Look for opportunities beyond the trial

Before the pandemic, we had been discussing developing a set of online interactive training assets to help physicians with using our products. However, this was sped up considerably as it became clear that our free model provided an opportunity to build a decentralised platform to bring new sites up and running: ensuring that hospitals are trained and that we could validate the systems we'd put in place.

In that sense, it was the perfect storm experiment. In many cases, we couldn’t travel to hospitals to train the surgeons and nurses and so, for the first time, we were training and retraining these operating teams remotely.

We introduced a Netflix-style platform on our website— videos that provided tips and tricks on how to use the system and how to use the product. We also developed a training module for nurses and surgeons who had never used the system before, so we could evaluate them and sign them off to use the system.

This gave us valuable insights as to how well they responded to digital assets, which was a big benefit. It also validated the fast-tracking of those digital training resources and showed that it could work. And, like many digital businesses in the Draper Esprit portfolio, we realised there's value in digital, because it's inherently scalable. You can make it available everywhere.

At that point, we had a lot of interest from South America, Chile in particular, who wanted to use Magtrace with their patients. We didn't have a distributor or any assets in South America but we did have our training assets. It turned out that we were able to open that market, train surgeons in Chile and get them using our product—even though we had never set foot in the country.

How to end a free trial?

We’re often asked: how on earth do you stop a free trial, particularly when that trial is saving lives. The truth is you can’t, without a bit of flexibility. We weren't hard and fast about those limits. Deadlines were used more as guidance, and we treated each site individually, dependent on their needs. There might be some sites that wanted the product upfront, but then we’d find they wouldn't very responsive and so we let their trial wind up.

There were other NHS sites that would reach their limit but tell us it was really working for them. They would have been happy to pay for it, but it was too much for the hospital administration to manage at the time. We reviewed those on a case-by-case basis, but more often than not, we extended the trial for hospitals under certain conditions.

There was a lot to consider: we were getting good engagement, we were learning from them and on balance, it was worth the investment. But we were aware of the risks. It was clear by then that this pandemic wasn't going away anytime soon. If we went too deep with our support, were we going to be stuck doing this for free for years? The solution to avoid heading down that slippery path in most cases is good communication.

We were very open with these sites, the surgeons and hospitals. We told them the obvious: that we couldn’t continue running as a business, giving away our product for free. They all understood. We were able to have a clear dialogue about how we could transition them into paying customers, how we could help, and finding what we could do to help in terms of administration or payment structures. That sort of engagement was invaluable: that level of communication enabled us to persuade these new customers to become deeper, long-term customers.

Would we do it again?

Absolutely, we’d do it again. In a way, we already are. If we’re talking to a hospital site that wants to use our product but can’t get their hands on the capital needed to install the system for another six months, we can often work out a deal. If we had that system installed now, the consumables revenue would have paid for that capital in six months. Why wouldn’t we make it as easy for them as possible?

It’s not the same sort of free trial of course but again it solves the customer need. It does come at a cost for us, so one piece of advice I’d give is to make sure you have the capital. We're paying for these things upfront, and yes we get paid in time through consumables but it’s still a burden. Had we not had the financial support that we have – through ongoing strong sales and Molten Venture's (at that time, Draper Esprit) investment last year – it would have been impossible to be able to support sites in this way.

Beyond that, it’s just given us confidence for growth under that model. Last year's investment supports initiatives like these, which help hospital sites get their hands on our products quicker. We’re now using digital assets to scale our business around the world, and it was the validation through the NHS initiative that helped give us the belief that it was worth trying.

Now, we’re looking to increase the accessibility of our products to more places around the world, and bring in a whole new line of products. This consists of the next generation of our main central platform, the Sentimag, as well as new and improved versions of our highly popular consumables, which are currently with the regulators to be approved for initial launch in the US next year.

Would we do it again? The Magtrace trial has transformed us as a business. It’s grown our advocates. It’s seen a 250% growth in the sales of our product in the UK. It’s increased by a fifth the number of sites where surgeons can use Magtrace. It’s given us access to new markets, new contacts and deepened our relationships with our customers. Who wouldn’t?