The New Commerce: How Sales Models are Changing in Medical Devices

Don Otterbein, Richard Lincoffand 1 more

August 3, 2012

5 Min Read
The New Commerce: How Sales Models are Changing in Medical Devices

An enormous change is on the horizon for medical device companies. For years many device companies have built their commercial models around a combination of innovative products and strong relationships with healthcare professionals (HCPs). These products and relationships have resulted in preferred product designations among HPCs, as well as comfort with single companies as suppliers. Thus interdependency has rewarded salespersons and their companies, and perhaps made both just a bit complacent.

But significant change is coming. This change will influence product perception, sales relationships, and ultimately, the revenue model that has been in place for years within the device marketplace. Medical device companies must consider major changes to the established commercial models to effectively compete in the marketplace of the future.
Dramatic changes in the commercial model are being driven by four factors: healthcare reform, sales and contracting models, promotion channels, and cost reductions and reallocations.

Healthcare Reform. Government and private payers are struggling to ensure clinical effectiveness while controlling costs across a healthcare model that is considered by many to be unsustainable. In response, governments around the world are introducing policies designed to control the cost of healthcare.

Complex Sales and Contracting Models. Hospital administrators and payers are exerting greater influence and increasingly focusing purchase decisions around clinical and economic value. These new economic stakeholders require different sales approaches, including comparative effectiveness studies, outcomes-based contracts, and bundled purchasing models.

New Promotional Channels. Medical device companies face an increasing variety of channels by which to promote their products, such as direct sales, customer support, e-mail campaigns, and wellness communities. HCPs and patients are increasingly using digital channels for medical information, offering device companies an opportunity to establish intimate, bidirectional connections with stakeholders, often at a low price.

Cost Reduction and Reallocation. Device companies have a substantial need to optimize their cost bases to address price pressures, shift resources to higher growth markets, invest in innovative solutions, promote products to a larger stakeholder base, and address continued performance demands from Wall Street.

Leading medical device companies are transforming their commercial models to respond to these new market realities. Commercial success must be driven by a holistic commercial model transformation that address key operating paradigms in sales and marketing.

The New Sales Tools

The medical device sales organization of the future is a lean, agile organization that aligns itself to provide effective clinical and economic information to a growing stakeholder community. It is focused on solutions and outcomes, not products. The new sales team considers the needs of individual decision-makers and their preferences for interaction, and then aligns the organization accordingly. To that end, new sales roles are being created beyond typical geographic model and include key account managers, inside sales, clinical specialists, administrative sales, and contract specialists. These new roles provide different skills and are available at a different price point, enabling leading medical device companies to optimize cost while effectively engaging with an evolving client base.

Promotion Optimization. Companies must determine the most effective channels of communications and promotions with key stakeholders. Multichannel promotional approaches can be used for a wide variety of purposes—from creating awareness to education to increasing brand preference. But success will be limited if each channel is operated in isolation from the others. The complex mix of promotional channels must be integrated to effectively support the pharmaceuticals buying process. Leveraging advanced multichannel analytics, MD marketers can optimize their promotional spend and improve performance by effectively integrating these new channels in their promotional mix.

Digital Marketing. Nonpersonal promotion opportunities are growing for medical device companies. Leveraging digital and social media, these companies can increase awareness, support diagnosis and treatment choices, and improve compliance with best-practice clinical approaches. Many companies have embraced product portals for providers and patients, but this is only the tip of the iceberg. Such tools provide a mechanism for these stakeholders to pull information about a product. However, they lack the rich, bidirectional communications of the emerging social networks. Leading companies are embracing wellness portals and other e-communities to engage in the decision dialog and ensure that patients, providers, and payers understand the value of their products. Using emerging social listening capabilities, companies can gain new real-time insights into market perceptions of their products and more effectively manage their brands.

Advanced Analytics. Emerging promotional channels are highly measurable and provide opportunities to better assess performance and react to the market. Collecting and mining the big data generated across channels about decision-makers, product perceptions and the competition offer new insights to guide brand strategies. Combining this new data with traditional data and analytics can offer a comprehensive view of the market and enable rapid response to changing market dynamics. Leading companies are taking steps to improve their data management and analytics to convert raw data into predictive insights. Over time, these companies will setup customer innovation labs that allow them to effectively analyze the data in near real-time and adjust their promotional approaches accordingly.

Comparative Effectiveness. With payer influence on the rise and concern over quality and efficacy, companies must better understand how their products fit within the procedures in which they are used and in the hospital ecosystems overall. Leveraging new health economics teams that are closely aligned with marketing departments, they craft effective messaging and consider alternative business models to ensure market success. In some cases, a stronger integration with the hospital ecosystem through remote monitoring or more effective patient intervention that reduces readmission may be more valuable to the hospital than the device itself. Leading companies will use comparative effectiveness and patient flow analysis to better understand their customer’s customer—the patient—and provide services that optimize the clinical and economic effectiveness.

Leveraging these new commercial approaches, leading device companies are positioning themselves to effectively respond to substantial changes in the healthcare marketplace. This commercial transformation offers device companies the opportunity to become more intimate with patients, providers and payers, and enhance their important role in healthcare innovation.

Don Otterbein is a vice president within Cognizant’s Life Sciences Business Unit and leads its sales and marketing practice. He can be reached at [email protected]. Richard Lincoff is the medical devices practice leader within Cognizant’s Life Sciences business unit. Richard can be reached at [email protected].
Bruce Carlson is a principal director in Cognizant’s Analytics practice, and manages the firm’s Midwest region. Bruce can be reached at [email protected].

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