Internal profit pressures are sending medtech companies in search of ways to reduce their cost of sales. In most cases, medical device prices are dropping alongside revenue because of two factors: Providers are negotiating stronger contract positions and using or stocking medical devices more efficiently. To maintain the same level of profitability, many medical device firms are considering or testing out lower-cost sales deployment options to reach the same level of success that field sales teams have achieved in the past.
But how can we achieve a lower cost to serve our customers without negatively impacting sales? Of course, the easy answer is that you probably can’t because a lower cost to serve typically means lower service levels. However, that doesn’t mean we can’t try to reduce the impact on our top-line revenue.
Medtech companies encounter a number of potential pitfalls when changing their deployment models to reduce costs. Here are five steps companies can take to ensure that everyone involved is happy when adjusting to a lower cost-to-serve model:
- Manage the transition carefully to prevent disrupting the customer relationship. A staffing change—such as bringing in a new rep to make calls—can disrupt hard-earned and valuable relationships with physicians. The key is for the two reps to conduct a “warm hand-off” visit with the physician to discuss the change. In addition, the organization should prepare for staff turnover by tracking information, notes, physician preferences, etc. in its CRM system. This helps in all staffing situations, but when shifting to a lower-cost model, the team is prepared to help the new resource understand the physician’s needs faster.
- Establish internal communication channels with the field. The biggest pitfall I’ve seen is the failure to communicate the purpose and long-term vision of new field force models. Without a proper introduction to the new way of working, companies can create a sense of fear and unhappiness among sales reps and managers. Sales reps already have a high sense of caution with headquarters as they likely have seen many changes pushed on them. And existing reps may be unhappy with working alongside or sharing the work with “less skilled” sales reps when they’re accustomed to working with colleagues who are at the same level. Another concern that sales teams need to address is learning how to leverage a different type of sales rep now assigned to their territory. For managers, the challenge comes in properly managing the new resources, which could run the gamut from mediocre to effective and necessitate a different way of working.
- Communicate proactively with customers. In addition to the importance of internal communication, companies also need to create an external communication strategy. You can’t fool your customers. They’re accustomed to a historical level of service and will notice that changes have been made. When you swap out a lower-cost—and potentially less impactful—resource in any setting, you can’t expect the same result. Therefore, you need to be prepared to communicate the changes and adjust customer expectations accordingly. And instead of waiting for them to notice and respond to the changes, it’s best to be proactive in your communication with customers.
- Consider different contract structures. Since the purpose here is to reduce cost, you can potentially get ahead of the pricing changes that customers will ultimately ask for. Prices may already be going down and, at some point, the customer will notice the change and ask why he didn’t get better pricing for less costly resources. The best strategy is to get ahead of this scenario by offering pricing in exchange for sole-source contracting or an increased commitment to sales.
- Improve the training and resources available to new hires. Hiring lower-cost employees likely means you’ll challenged by lower skill levels and, quite possibly, lower motivation. Though these sales reps may cost less, your customers’ expectations of the role are unlikely to change. Therefore, the new sales reps need to receive effective product and clinical training before going in front of the customers. The most impactful way to gain the customer’s support is to continue to provide valuable service through well-trained resources.
Lower-cost sales reps aren’t new to the life sciences industry, but they’re getting more air time in today’s evolving healthcare ecosystem than in the past. In the future, lower-cost resources ultimately will help drive cost out of our challenging and bloated healthcare system, but medical device manufacturers need to be sure that the strategy benefits both themselves and their customers now and in the long term.