Medtech Sales Staffs Feel Economic Pressure

The sales forces of many medical device companies have seen setbacks recently thanks to the economic downturn. As a result, medical device executives may need to cut their sales representatives some slack, according to new market research.

Executives cited setting fair sales quotas as their top concern, according to a recent study from market research firm ZS Associates. But only a fraction of the companies are making changes to quotas to mitigate the effects of the current economic climate. Albrecht warns that companies that stick to unrealistic national forecasts may face trouble.
“Companies that retain quotas tied to unrealistic national forecasts in 2010 may not only see their sales decrease and their sales forces grow more apathetic, but will probably also see increased turnover,” says Chad Albrecht, an associate principal with ZS Associates and the lead researcher on the study.
With the economy still mired in a recession, the report found that medical products companies have tried to lessen its effect on product sales. For example, 36% of the firms surveyed have decreased sales quotas for their workers. However, the report also found that involuntary turnover among sales forces has increased four percentage points (from 3% to 7%) over the past year. Sales employees that have not been let go are staying put, however. The voluntary turnover rate has declined to 9% (from 12%) over the same period.
Albrecht says that certain segments of the device market face more challenges. For example, the markets for products for necessary medical procedures have not experienced significant declines. But spending on consumer-driven procedures such as cosmetic surgery has dipped.
But even manufacturers of equipment for common medical procedures have felt a pinch. For example, hospitals are reducing capital spending by holding off on big MRI and CT scanner purchases. Consequently, device firms are adjusting quotas for sales reps and tweaking their incentive programs to corral costs.
Although healthcare reform is still in its infancy on Capitol Hill, observers say industry can expect further medical reimbursement reductions. If that goes as planned, downward pressure on product prices will continue, the market research firm says.
ZS Associates' study surveyed employees from 42 U.S.-based medical companies. For an executive summary of the study, e-mail [email protected].

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