The Pacemaker

AUTHORS

Andy-kach_thumbnail
Andy Kach
Principal
Bhargav_Mantha_thumbnail Brian_Chapman_thumbnail
Brian Chapman
Principal
Maria_thumbnail Matt-Scheitlin-London_thumbnail Tobi_Laczkowski_thumbnail Will_Randall_thumbnail

Latest Posts

Improving the Sales Force Requires More Than Just Throwing Money at the Problem

Posted by Tobi Laczkowski on February 16, 2016



shutterstock_175977041There’s a great scene in The Wolf of Wall Street in which the sleazy main character ends a meeting with FBI agents by tossing hundred-dollar bills at them. Predictably enough, the tactic fails to register. It’s a neat depiction of how throwing money at a problem—literally, in this case—won’t make the problem go away.

There’s a parallel for medtech companies (minus the illegal activity, of course). As the healthcare market becomes more complex, companies know that they need to invest in sales force effectiveness (SFE). Many still have a sales model that was built for the 1990s, and the cracks are starting to show, but as they make investments to improve SFE, some companies don’t know which areas to focus on, or what kind of returns they can expect.

ZS Associates recently conducted the Explorer Study, which tracked the typical payout from SFE initiatives. A few key findings stand out. First, medtech companies have spent less on SFE than other industries have, but they’re planning to catch up. SFE investments are likely to increase from 11% of sales and marketing budgets to 13% over the next two years.

Second, these investments pay off. A single sales-force initiative can lead to bumps in revenue and profitability of 2% to 8%. To put that in dollar terms, consider a firm with annual sales of $1.5 billion that invests $3 million on an SFE program. Even a conservative revenue increase of just 1% works out to a one-year cash-on-cash return of 175% (assuming 35% margins).

Third—and most importantly—not all SFE investments are the same. Historically, medtech has focused on traditional areas such as territory alignment, targeting and compensation. (In the Explorer data, medtech companies were far more likely to focus on these areas than the overall universe of industries that ZS studied.)


RELATED CONTENT

ARTICLE: Boosting Sales Force Effectiveness in Medtech

INFOGRAPHIC: How Medtech’s SFE Investments Stack Up


Today, however, data is the new priority and the biggest opportunities lie in analytics and data management. Thus far, medtech is still underinvesting in these areas.

That’s understandable. Because such tools are so new—and the underlying technology is changing so fast—many companies either haven’t jumped in yet, or are limiting their efforts to small-scale pilot tests. But medtech has an opportunity to become a leader in data and analytics, provided that it targets its SFE investments in the right areas.

For example, we recently worked with a molecular diagnostics company in which the challenge wasn’t access to data, but making sense of it all. The company had reams of information coming in from its network of distributors, to the point where all of that data was clouding business decisions. Teams from finance and sales operations spent much of their time simply sifting through it all and trying to link it to the company’s management systems.

To fix this, the company invested in a master data management system that can boil that data down into real insights that improve how the company manages its sales territories. The company still needs to do some manual processing—all data requires some grunt work to clean it up—but the system is designed to learn over time, so that the amount of manual work goes down each month. Best of all, the information goes straight to the field force through an intuitive interface. The result is that the sales team is freed up from the drudgery of processing data and, instead, spends its time generating new business.

The bottom line: Throwing money at a problem rarely works. Medtech companies are spending more on SFE, but they need to spend smart, making targeted investments in the areas most likely to pay dividends.

Topics: sales force effectiveness, Analytics, data, medtech, Tobi Laczkowski, explorer study

Click here to subscribe to The Pacemaker

Leave a comment

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
SUBSCRIBE

Get 'THE PACEMAKER' Updates

Subscribe to receive email notifications whenever new blog posts are published.

×

Subscribe by Email

Search by Topic

see all