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Brian Chapman
Principal,
ZS Associates
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Tobi Laczkowski
Principal,
ZS Associates
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Roz Lawson
Associate Principal,
ZS Associates
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Matt Scheitlin
Associate Principal,
ZS Associates
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Andy Kach
Associate Principal,
ZS Associates
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Bhargav Mantha
Associate Principal,
ZS Associates

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Groundhog Day: Planning for the Demise of Clinical Sales

Posted by Dan Frey on September 29, 2016




shutterstock_250859194.jpgTobi Laczkowski co-wrote this post with Dan Frey.

In the movie Groundhog Day, Bill Murray has to repeat the same day over and over again until he finally gets things right. For veterans of the medical device industry, this may feel familiar. Every so often, a breakthrough category emerges—such as pacemakers, drug-eluting stents, diabetes pumps—which has a unique ability to transform treatment behaviors for the better. But physicians need help in understanding when and how to use the product before mass adoption can occur.

Manufacturers hire an army of clinically focused reps who can speak physicians’ language. In many cases, their clinical orientation gives them access to operating theaters, where they assist with procedures that may be unfamiliar. These individuals’ value and effectiveness are very high, as the reps are instrumental in changing physician behaviors. Strong relationships between the reps and the providers form over time, and via meaningful support. 

Manufacturers recognize this value, leading to cultural power dynamics heavily favoring the sales force. Commission plans understandably lead to a focus on driving business. Sometimes, competitor reps are pulled into the organization with compensation guarantees as a way for a new entrant to “buy share.”

But suddenly, everything changes.

As the category matures, the teacher becomes superfluous. With hundreds of procedures under their belts, practitioners begin to feel as though they don’t need the hand-holding any longer. With more competitors jockeying to be the clinical assistant, they may try to restrict access to avoid conflict and influence. If the feature sets or outcomes of competitive products converge, decision-making power may shift from the physicians to the hospital administrators, making the presence of the clinical rep even less valuable.


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Sales begin to flatten out or even decline. Companies are left with highly paid clinical reps who are driving far less value than it might appear. Often, their managers may overvalue the relationships, looking at what they once were rather than at their present value. Leadership teams, recognizing that the game has changed, look for solutions, but sadly, like Bill Murray’s character, Phil, their choices fail more often than they succeed.

Searching for Solutions

A common plan is to find lower-paid field sales associates, or junior reps, and gradually shift the resources to this team through attrition. Without the decades of clinical experience, these reps may be brought in to handle basic account functions, such as inventory management, but management often lacks a good understanding of where—both geographically and within accounts—the game has truly changed and where it hasn’t. As a result, they offer up the junior reps without any role clarity, letting the district managers decide where and how to use them.

This rarely works. Without role clarity, there’s no organizational support, such as learning and development, which could help these junior reps become effective. There may be disconnects between the expectations for their role and the skill sets hired. And the plans to simply manage a de-escalation of expensive resources by attrition amount to a “fingers crossed” exercise in which leadership hopes for quick departures and that junior reps have been hired in the right places. 

Another solution tends to be to look at the compensation plans to identify a way to step down compensation, which goes over about as well as you’d expect. Massive resistance from a sales-driven culture emerges, and even basic territory realignment decisions can become a battleground when organizations have plans that reward volume. 

A Better Way Forward

These reactive approaches rarely work, but there’s a path that companies should embark on long before the problems emerge. Given that we can almost always anticipate the category evolution, we can plan for the transition early enough that the organizational disruption is minimized and long-term costs are managed more effectively. Here’s what medtech companies can do: 

  1. Plan for the evolution of value, and consider the implications for the skills and mix of customer-facing resources. As product differentiation becomes less profound over time, have a clear plan for how your value proposition will evolve, and understand the implications on the clinical team. You might identify more complex procedures and create programs around them that clinical reps can deliver, as with Boston Scientific's CTO (coronary Chronic Total Occlusion) program for its drug-eluting stents. The training and education offered helps physicians “understand how to manage patients and optimize radiation during coronary CTO intervention,” according to the company’s website, creating a perception that Boston Scientific’s clinically minded reps know how to help with these more complex procedures. There may be other vehicles to add value—service, information, financial programs—that aren’t equally suited for delivery by a clinically minded person. 
  2. Track the market carefully. There will be clear signs that the market is shifting: more dual-source contracts, stabilizing market volumes, stabilizing share, price pressure, reduced access, etc. When the leading indicators emerge is when it becomes important to act. Set guidelines for how attrition is to be managed when these shifts arise.   
  3. Ensure that junior reps have role clarity and are deployed before they are needed (as the leading indicators start to shift) to learn the trade. Make sure that there’s an effective apprenticeship plan, which could include sharing account responsibility for a time. Be sure that the training function prepares them for success.
  4. Segment accounts. Matching the resources to the market needs requires a clear-headed approach to your accounts. Accounts that still value clinical support should keep it. Accounts that don’t can get different resources. Understand that these decisions will never be crystal clear and are likely to be resisted, so it’s all the more important to agree to guidelines up front.
  5. Ensure that the compensation plan isn’t thwarting change. Commission-based plans will encourage account hoarding, making any realignment of accounts painfully difficult. Moving to pure quota-based plans as the category matures could help as performance becomes more dependent upon outcomes relative to whatever your base is. 
  6. Communicate what’s happening early and often. No one will be happy when their compensation is cut. Communicating that the early days aren’t the norm, but rather an exception, may be the honest talk that will earn you more flexibility later. It sends a signal to your people that they shouldn’t enter mortgages that rely on a $500,000 annual income. Those commitments, which people make in the absence of clear communications, are what create the pain later on.
  7. Consider offering financial planning support. Alongside such communications, organizations could offer resources to back up what they mean. If you help the reps plan for a longer-term income level that might be lower than what they presently have, it may be easier for them to settle into a lower level later. 
  8. Innovate and make portfolio-level decisions. Perhaps the best way to avoid this trap is to continue to launch new products and services that require your field teams, and shift from areas of the portfolio where the reps aren’t needed. This requires portfolio-level thinking, as what’s best for one brand might not be ideal for the other, and a compromise solution—for example, a redeployment rather than hiring people from scratch—may be best for the business.

Successful companies have people, processes and tools to operationalize the elements shown above. In particular, they proactively pulse the market to understand where the products are in the life cycle, and then they execute the appropriate strategy based upon that knowledge. The combination of internal elements (hiring profile, compensation planning, communication, etc.) as well as external elements (customer segmentation, value proposition, education programs, etc.) help avoid the feeling of Groundhog Day when the market inevitably starts to shift. 

 

Topics: Dan Frey, medtech, Tobi Laczkowski, Groundhog Day, product adoption, clinical reps

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AUTHORS
Brian_Chapman_thumbnail
Brian Chapman
Principal,
ZS Associates
Tobi_Laczkowski_thumbnail
Tobi Laczkowski
Principal,
ZS Associates
Will_Randall_thumbnail
Will Randall
Manager,
ZS Associates
Matt-Scheitlin-London_thumbnail
Matt Scheitlin
Associate Principal,
ZS Associates
Andy-kach_thumbnail
Andy Kach
Associate Principal,
ZS Associates
Bhargav_Mantha_thumbnail
Bhargav Mantha
Associate Principal,
ZS Associates
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