As we’ve heard many times, the traditional medtech operating model faces several headwinds: buyer consolidation, a focus on value and outcomes, increased cost-to-serve and a change in buying preferences. All these trends have dealt a blow to medtech’s traditionally high margins and to a commercial model that was primarily sales-driven.
To counter these headwinds, medtech must leap forward to a pricing 2.0 model that ties pricing closely to clinical, economic and psychological value (rather than a cost-plus approach). Medtech must also create a value communication strategy, customer incentives that increase share-of-wallet and a more robust and customer-centric contracting and offering strategy. These strategies are essential. But are they sufficient to ensure that medtech can maximize its margins? We believe the answer is no.
Unless you have the right governance policies, execution discipline and analytics, you won’t be able to realize your profitability goals. We have seen many clients make strides towards the right pricing strategy but continue to see price erosion and revenue leakage. These clients are struggling with tension between the pricing team and the field, BU or regional teams (which leads to limited governance); a lack of data and analytics about customers and products (which leads to limited visibility into pricing and contracting performance); and limited investments made in vital analytics and platforms (which leads to inefficient pricing and contracting operations.)
So, what can be done about it? I share my suggestions in my latest article for MD+DI.