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Five Ways for Device Companies to Compete with Small and Low-Cost Players

Five Ways for Device Companies to Compete with Small and Low-Cost Players
Here are five ways to innovate and re-engineer sales and marketing that can help medical device companies become more nimble competitors against low-cost players. 

Here are five ways to innovate and re-engineer sales and marketing that can help medical device companies become more nimble competitors against low-cost players.

Robert Boyce

The medical device industry is being forced to change, and change fast. The reason: the high cost of sales and marketing. In established medical device companies, sales and marketing accounts for about one third of the cost of a device, about double of what is found in other mature industries.

The business model was built decades ago when the sales rep was the preeminent expert that the surgeon leaned on to learn about the technical and clinical uses of a device. Reps created deep personal relationships with physicians and were by their side in the operating room. At a time when pacemakers and heart valves were novel and unfamiliar technologies, having a highly skilled, highly paid rep available made sense.

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However, a large percentage of implantables and physician preference items are now mature technologies. Lower cost competitors have emerged and buyers are no longer willing to underwrite the cost of the sales rep. As Medtronic Executive and respected industry leader Norm Dann is quoted as saying in the Minneapolis Star Tribune, "if the medical device industry is going to survive, the business model has got to change." Upending the business model is no small feat. Sales managers and leaders who started in the field have a lot riding on their sales team. They count on the rep to make sales numbers for the year and without their reps, there is little visibility into the pipeline of individual accounts.

You can't easily replace high-priced talent and slot in less expensive individuals without first rethinking how the entire commercial model aligns with the new realities of the industry. Namely, physicians are less often the decision makers. Decisions are being made based on both clinical and economic factors, particularly with the rise of hospital integrated delivery networks (IDNs). Hospitals are consolidating, placing decisions in the hands of fewer individuals and groups, who are looking to reduce the number of vendors and standardize what is purchased and supported, and looking hard for cost savings. If a lower-cost competitor can show a purchasing committee that their products work as well as the innovator, at a significantly lower cost, they will win.

The value customer is less interested in products with bells and whistles. They are also less interested in paying for high-cost product support in categories where innovation has stalled. Some established players have found themselves taking price concessions to compete with low-cost competitors to retain their key accounts. However, the low-cost competitors are not only manufacturing products for less, they have a go-to-market strategy that delivers a more nimble approach to sales and customer support.

How can established medical device companies adapt and survive in this competitive environment? It's more than a matter of cutting cost. Companies need to rethink their product line and go-to-market strategy. For some companies, this has meant developing a differentiated product line designed for the value segment and distributed through different channels. The differentiated product line has different costs associated with manufacturing, sales, and service. Taking this approach requires more than investment capital. It means a shift in the corporate culture where leaders are willing to use a lean approach to the business model, to experiment with new approaches for sales and marketing, and to confront and counter entrenched institutional thinking about the way things have always been done.

Delivering high value sales and customer support for less is a challenge that has been faced by numerous industries from the financial sector to consumer sectors. Digital and connected technologies have driven a fundamental shift in the service sector allowing for business model innovation. Medical device companies can look beyond the hospital wall to rethink their approaches. Here are five ways to innovate and re-engineer sales and marketing that can help companies be more nimble competitors against low-cost players.

1. Invest in enterprise sales support tools and technology

At the heart of the suggestions for restructuring commercial models is the use of digitally enabled tools. Sales is no longer a one-person pursuit in which a sales person's job begins and ends with closing contracts. Connected digital tools allow visibility into the process of sales, key individuals within the account, and the status of contracts and proposals. Cloud based systems have made enterprise-wide sales connectivity and intelligence indispensable tools of the organization. Forward-facing organizations have armed the field with the tools to access business intelligence, and have married outside sales with inside teams for follow-up and continuity. 

Consider:

  • Sales tools need to be enabled to work with both simple and complex sales environments. Selling to a large hospital chain may require dozens of key contacts, decision makers, and influencers. It may require meeting with numerous value committees and follow-up. On the other hand, sales within a standalone acute care facility might be far simpler. 
  • Medical device product lines are often complex and changing. Systems and tools need to be designed to reduce complexity and ensure that they are used consistently by all sales personnel in the same way.

2.  Use sales analytics to understand buying patterns

Once the organization has invested in bringing data into a central cloud based warehouse, data becomes a powerful ally in helping to uncover new sales opportunities. There are dozens of high power sales analytics tools that bring new functionality to both the field and management. They allow customer-facing personnel to see patterns in data and insights on the pipeline and allow management to more accurately forecast sales. Advanced analytic tools can provide the sales team with cross-sell suggestions for each customer based on the patterns of others customers who match the same customer profile.

Consider:

  • Choose tools that will really be used by the organization and deliver value. It sounds like an obvious statement, but it is easy to get sold on a specific analytics and business intelligence solution without understanding how well the solution will work in the field, or on the phone, or in a situation where decisions and data have immediacy.

3.  Segment customers and move some inside

Fundamental to having a nimble approach to sales and marketing is making decisions about sales presence based on an investment philosophy. Consider the cost of a live sales call and its necessity. Not all customers need a sales person sitting in a conference room in order to make a sale happen. Furthermore, if a sales person is required to show up at times to provide a hands-on experience for, say, selling a capital expense, they are not needed in person at every sales call.

Inside sales is the process of selling to customers virtually through voice or online channels, rather than through traditional in-person sales meetings. There are many different inside sales models that can be tried. One approach is to carve out smaller accounts, such as those that are currently white space, difficult to reach, or only purchase sporadically, and assign them to an inside sales team. Well-managed inside sales teams can create relationships with customers remotely. Using a combination of phone, Skype, and email, they can develop durable virtual presence and customer continuity. Other inside sales models match inside support with outside reps. These inside sales teams follow-up on opportunities and ensure that customers are receiving needed product information and support.

Organizations that want to remain competitive need to experiment with models of inside sales to determine which is right for them. The bottom line is that a highly effective representative on the phone can cost less than half of what someone in the field costs. That same person is far more productive and able to reach far more people in a week, simply because they aren't sitting for hours in their car.

Consider:

  • Use of inside sales certainly depends upon the product line being sold. No doubt that a high-priced piece of diagnostic equipment requiring capital expense approval may require an in-person sales rep. However, once the diagnostic has been purchased, inside sales can ensure that the diagnostic equipment is not being overlooked or sitting in a corner unused and that associated consumables and disposables are being purchased.
  • Inside sales teams have not been as widely adopted in medical devices as in other sectors. There are a number of reasons for this, but some of the apprehension comes from the belief that medical products are simply too complex to be sold over the phone. It is important to pressure test those ideas and determine if there are elements of product sales that can be brought inside and demonstrated virtually. After all, in other B2B sectors, such as software sales, where products are highly complex, much of the selling is being done with inside sales teams.

4.   Increase reach and frequency using multichannel marketing

We are all familiar with multichannel marketing in both B2B and B2C environments. Even before we have considered purchasing a car or new piece of equipment, we are aware of the options. Multichannel marketing provides a frequency of touch through email and direct mail that ensures that potential and current customers have the vendor on their short list when it is time to make a purchase.

Good multichannel marketing can fill both sides of the reach and frequency equation, supplanting some of the effort that was carried by field sales. For a sales organization to be effective, multichannel becomes an element that ensures that customers are being touched. Multichannel communication is based on delivering relevant messaging to customers--the right message at the right time, and through the right channels. This means that every piece of communication has a next action that a prospect might take if they are interested in an offer. In the overall sales and marketing model, multichannel communication can be thought of as the precursor to engagement with inside sales, or it might be thought of as the surround sound that accompanies inside sales as they work through an opportunity.

Sales and marketing agencies that work in the medical device sector can help support multichannel marketing efforts by designing campaigns that meet the short and long-term sales goals. They can bring approaches, data analytics, models, and marketing tools designed to easily integrate with other elements of the sales and marketing ecosystem.

Consider:

  • Multichannel marketing is a lead generation engine. As prospects and customers receive relevant communication, they will share with their colleagues who can opt-in for future communication.
  • In order for multichannel customer relationship programs to be useful, the content needs to be refreshed and be made relevant. Once again, this has been a barrier for some companies to jump into marketing with their customers, but it need not be. There are ways to take assets already developed and to retrofit or rework them.
  • Another barrier that device companies have faced is that they simply don't have a database of email addresses of their customers. Again, this can be remedied as there are ways to deliver digital presence to customers even without having their email addresses.

5. Build virtual in-service teams

In traditional established medical device companies, the field-facing sales representatives not only sold the products, but also taught the physicians and staff how to use them. The in-service function is meant to familiarize the clinical staff with a device so that they understand how and where it can be used. In-service may precede sales or may happen after a sale has been made. In-service can be delivered in addition to formal product training and certification or it can be done on its own.

Today's value buyer still requires the staff to be familiar with a new diagnostic or therapeutic device. The question is, how can that in-service be delivered to all customers, to all who might potentially need or use the device, and in ways that are scalable? Virtual in-service approaches have been piloted and found successful for a number of agile medical device companies. The concept is simple: provide either on-demand or scheduled demonstrations of products in situ, using tele-detailing. There are a number of easy-to-use screen sharing devices that allow nurses and technicians to view a demonstration from their mobile phone or desktop without installing special software. These virtual in-services can deliver product training to staff at odd hours (third shift, for example) in any location around the globe. Demos that are coupled with inside sales follow-up become a powerful approach to filling the shoes of a field rep at a fraction of the cost.

These are just some of the ways that medical devices can begin to shift their commercial model to remain competitive in an increasingly difficult market. Although many of these ideas require financial and time investment, what is really required of companies is to question and confront entrenched thinking about the way that business has always been done. Only through continuous innovation and agile change will the large medical device companies continue as major players in the decades ahead.

Robert Boyce is the general manager of healthcare at Modern Marketing Concepts

[Image courtesy of AMBRO/FREEDIGITALPHOTOS.NET]

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