ADVERTISING, DISTRIBUTION, & SALES
The sales environment for medical device and diagnostic equipment manufacturers is not only becoming more competitive, but also increasingly complex. Consequently, manufacturers are finding that their products often become commoditized in the eyes of their customers, particularly hospitals and health systems.
Much of this commoditization can be attributed to customers' growing skepticism regarding marketing messages and assertions made by manufacturers. They question the veracity of marketing claims dealing with perceived cost advantages, levels of reimbursement, "guaranteed" return on investment (ROI), comparative advantages to similar products, and anticipated longevity of products. Such reticence to accept marketing pronouncements, either in whole or in part, is leading hospital customers, group purchasing organizations (GPOs), and other purchasing entities to focus almost exclusively on securing what they consider to be the optimal procurement price from manufacturers.
While manufacturers need to recognize that price is and always will be an issue of paramount concern to customers, they must also be prepared to craft a compelling marketing and sales strategy that transcends a discussion based only on price. Those unable to do so face not only an increased likelihood that their products will become commoditized, but also an increased probability that their products will become irrelevant.
With more medical device companies competing in nearly every technology sector in the marketplace, it is increasingly difficult for firms to set their products apart from competitors in the minds of customers. Those customers who do not conduct comprehensive reviews of emerging products and who instead rely on marginal product promotional materials or less-than-compelling sales presentations perceive a lack of differentiation among devices in the same sector. This scenario is exacerbated when the manufacturers' promotional materials and sales presentations lack succinct, tangible, and credible messages that resonate with customers.
Manufacturers must look to develop and implement strategies for effective product differentiation. It is essential for manufacturers to understand what constitutes value in the eyes of their customers and to then tailor their messages to effectively address such concerns and needs. The success of a manufacturer's product marketing and sales strategy will depend on how the company addresses each of these factors.
Focusing on Provider Concerns
For both new and existing products, hospitals are increasingly scrutinizing the relative value of adopting and continuing the use of specific medical, diagnostic, and surgical products. Each hospital's assessment process differs in sophistication, and the depth of analysis depends largely on the cost and complexity of the device being evaluated.
Although each hospital and healthcare system evaluates devices according to a unique set of criteria, there are certain areas of interest that are included in the majority of healthcare providers' processes. In general, providers look to identify innovative products and technologies and assess their potential impact on the organization's operations. Each evaluation includes an estimation of the commercial availability and time frame for acquiring the new device, as well as an evaluation of reimbursement issues associated with the new product.
Hospitals and healthcare systems also consider the cost and economic impact of adoption and implementation. In addition, they will likely investigate new and emerging products to gauge the impact they might have on the technology being evaluated.
Providers are increasingly seeking benchmarks and comparing costs associated with manufacturers' products in relation to competitors' offerings. They are also examining manufacturers' costs and their own costs in relation to reimbursement for both new and existing products. As a part of this evaluation, many hospitals are revisiting the concept of gainsharing. Consequently, manufacturers must be prepared to respond when a hospital administrator or physician asks, "What's in it for me?" The increasing complexity of the manufacturer-provider relationship requires significant advance planning to ensure that both parties benefit from a transaction.
Key Points for Providers
In coming years, medical technology will account for a significant percentage of annual increases in per capita healthcare costs. In addition, high-technology medical supplies can represent 40% of a hospital's overall supply budget.1 In light of this figure, it is not surprising that hospitals and healthcare systems are increasingly concerned with the financial, clinical, and strategic value of new medical technologies, including devices and equipment.
Cost concerns, as well as other pressures, are prompting sophisticated healthcare providers to require some or all of the following when purchasing medical technologies.
When attempting to make technology selections based on the above criteria, many providers say they do not have the necessary financial, clinical, and strategic information to make sound buying decisions. This can be attributed in part to the increased number of parties who now influence the technology purchasing decisions within a given organization. Entities involved in such decisions can include senior management; physicians, both in surgical and medical subspecialties; nurses; biomedical engineers; directors of pharmacy, laboratory, radiology, and other departments; operating room managers; purchasing personnel; value analysis committees; and information technology departments.
Despite the increasingly crowded pool of decision makers, influencers, purchasers, and end-users, many manufacturers have not yet responded by enhancing the ways in which they communicate the value of new technologies when marketing and selling their products.
Reforming Marketing Tactics
Traditional selling techniques generally do not offer a comprehensive business case for the purchase of new or existing technologies. Although many manufacturers provide sufficient health outcomes research, they fail to deliver market and financial analyses to address the fundamental economic concerns of hospitals and health systems.
To address the complexity of the market and the increased demands for demonstrated value by providers, medtech manufacturers need to take specific measures. They can start by clearly enunciating the clinical, financial, and strategic benefits of their products in a clear and persuasive manner. Sales materials should be clinically and financially oriented and include sufficient, objective, and comprehensible information that enables a multidisciplinary management team to make informed decisions. Materials for a particular device should address the anticipated longevity of the product, opportunities for product enhancements, and the value that will be derived through the acquisition, adoption, and use of the product.
Financial and market analyses should be conducted and presented in a way that reflects the diversity found within the field of providers. Materials should acknowledge differences between regional and national reimbursement rates, practice patterns, cost structures, hospital infrastructures, and regulatory environments. They should also provide a clear representation of a device's current user base and testimonials to show how the product has benefited other providers.
According to feedback from hospitals and healthcare systems, only a small percentage of providers receive information and marketing materials from manufacturers that meet all of the above-mentioned criteria. The perception among providers that they are not being given complete information can lead to disenchantment with and distrust of medical device manufacturers. Medtech companies that are cognizant of these concerns and respond by developing marketing and sales strategies to address such issues will be able to effectively distinguish themselves from their competitors.
For every manufacturer marketing claim or assertion, it is possible to identify a number of reasons for skepticism by hospitals and health systems (see Table I). To overcome such skepticism, manufacturers must provide a comprehensive case that demonstrates the value of their products.
|
Manufacturer
Claims
|
Reasons
for Skepticism
|
Recommended
Analysis
|
| Easier
for physician or patients to use |
Insufficient documentation
of research, lack of information about current users |
Market analysis |
| Large
patient demand for product |
Lack of detailed
market analysis identifying optimal, as well as actual, population |
Market analysis |
| Significantly
increased patient satisfaction |
Lack of patient
satisfaction metrics |
Market analysis |
| Lower
cost than alternatives and opportunity for increased efficiency |
Incomplete pricing information, including necessary disposables, maintenance fees, service contracts, new instrumentation, and training costs |
Financial analysis |
| Improved reimbursement | Lack of financial
analysis identifying appropriate and accurate coding mechanisms, target payer mix, and managed-care contract coverage |
Financial analysis |
| Shorter recovery period | Insufficient documentation of training requirements and changes to follow-up care |
Health outcomes research |
| Reduced
time in the operating room |
Insufficient documentation of research, including sites early adopters |
Health outcomes research |
| Safer treatment option | Lack of results
in a practice environment, no monitoring plan to determine long-term safety |
Health outcomes research |
| Table I. Examples of typical manufacturer claims and possible reasons for skepticism among hospitals and health systems. Analyses required to allay such skepticism are suggested. | ||
Financial and Market Analyses
Financial and market analyses should create the foundation for manufacturers' marketing, messaging, and sales materials. Companies can begin building this foundation by reviewing and documenting their current sales techniques. Current and previous sales materials should be evaluated to determine their effectiveness and the areas where improvement is needed. Based on these analyses, changes to both sales materials and sales techniques should be developed. Areas where informational improvement is needed should be identified, and the identified information gaps should be ranked according to their impact on a sales campaign's effectiveness.
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Figure 1. A comprehensive marketing, communications, and sales plan can help a manufacturer differentiate itself as a business partner with hospitals and healthcare systems. In developing such a plan, a manufacturer must take several steps, as outlined here. (click to enlarge) |
As the manufacturer compiles the information necessary to address its marketing shortcomings, a process should be established for translating this information into a compelling product messaging strategy. With a strategy in mind, a comprehensive marketing and sales training program can be developed and implemented across all divisions within a company (see Figure 1). Ultimately, metrics should be developed to track and validate the new sales process.
Reevaluating marketing, messaging, and sales materials in this manner will allow manufacturers to differentiate their devices based on specific financial, clinical, and market criteria that can be tailored to an individual provider. Such differentiation can generate cross-functional support for a firm's products across a diverse array of decision makers. By using a thoughtful, objective, and deliberate approach to document claims of current and past customers, a manufacturer not only can better meet the needs of existing customers, but the company can also anticipate the demands of prospective customers. The comprehensive and substantive financial and market analyses underpinning this reevaluation will provide the manufacturer with solid empirical information with which to design or revise its sales strategy (see Table II).
|
Analysis
|
Key
Components
|
Subcomponents
|
| Market analysis | Market
demand and market share analysis |
Forecast market
demand Customer and market segmentation Early adopters |
| Product life cycle | Emerging
competitors and market maturity Obsolescence Alternative uses Substitutions |
|
| Competitive advantage | Product
penetration Trade-off analyses Major market trends and challenges |
|
| Chain linking | Complementary
products Product packaging Partnering opportunities |
|
| Financial analysis | Costing | Comparative
costing analysis Disposable expenses Maintenance and service fees Training requirements |
| Reimbursement | Coding
strategy and requirements Projected payer mix Reimbursement rates Managed-care carve-out guidelines |
|
| Financial support | Pricing
guidelines Return on investment Sensitivity analysis Cost-allocation mapping |
|
| Operational savings | Estimated
time savings Estimated cost savings Treatment and therapy process changes |
|
| Table II. Key components and subcomponents to be included when conducting market and financial analyses. An effective market analysis will measure the feasibility of a product in the current market and also forecast demand potential. A substantive financial analysis will enable a manufacturer to show the financial advantage of its products to the customer. | ||
Assessing Effectiveness
Too often, medical device manufacturers fail to monitor the success — or lack thereof — of their marketing and sales strategies and tactics when reaching out to providers. Continual monitoring can reaffirm a manufacturers' approach, but it will also indicate when a company needs to make adjustments or, in some cases, significantly change course.
Determining the effectiveness of sales materials and tactics can be a daunting task. Manufacturers can start by evaluating the components defined in their strategies. An effective marketing and sales strategy should include the following elements.
Manufacturers should evaluate their marketing and sales strategies to ensure each of the above-mentioned elements is included, and they should also assess the strength and comprehensiveness of each component on an ongoing basis.
Conclusion
As the negotiation element of marketing and sales interactions with providers becomes more predominant, increased pressure is on manufacturers to more effectively address the needs of their current and prospective customers. Manufacturers that compile accurate and defensible data and benchmarks are better able to satisfy the informational demands of providers, thereby differentiating their products that might otherwise become commoditized in the eyes of customers. By linking quantitative data with qualitative information on physician preferences, manufacturers can construct effective marketing and sales strategies that address and anticipate providers' needs.
1. Healthcare Financial Management Association (HFMA), "Linking Supply Cost and Revenue: The Time Has Come," (Westchester, IL: HFMA, 2004).
