Bain & Co. published a Bain Brief: Creating a new commercial model for the changing medical device market. In the Brief, Bain introduces several key points:
1. The traditional sales success formula – sell innovative, clinically beneficial products to surgeons and “pull” these products through hospitals and others providers that ultimately will pay for them – is changing. The net result is that pricing and product margins are facing increasing pressures. Why?
- Today, economic influence is a much greater portion of the device-selection decision, with CFOs, materials management, and even physicians placing greater emphasis on the price of devices and the total cost of treatment as they make device choice.
- Another factor accounting for deviation from the traditional formula is that genuine clinical differentiation is diminishing in many product categories. Simultaneously, the hurdle for achieving innovation is rising because customers no longer reward incremental improvements. This is especially true with medical devices that provide the largest profits – cardiac rhythm management, cardiovascular, orthopedics and spine-related devices.
2. The medical device market is not homogeneous. Rather, the criteria used for device selection can range from purely clinical to purely economic. And account sophistication in the buying process varies too – from sophisticated buyers using more formal processes for assessing clinical and economic efficacy, and looking at optimize total costs to less sophisticated purchasing systems looking to reduce device costs through RFPs, pay to play, etc
3. The Brief also offers several insights for training. Two were particularly interesting: Add “science” to the “art” of sales force management. Second, medical device companies must continue to improve the art of relationship-building, capturing best practices to refine relationship building skills.
Take a read – it’s an interesting brief.
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