Data and technology are fundamentally changing the way customers buy and engage with you.
Alexander Group conducts ongoing research using surveys, industry studies, executive interviews and project work to provide medical industry leaders with the quantitative and qualitative data to help shape their commercial strategies.
Our recent research points to five key trends:
- Increased revenue growth in an SG&A-constrained environment
Revenue growth has returned to the U.S. med tech industry. Year-over-year revenue growth topped 5 percent last year, rebounding from a low of 3 percent in 2014. However, significant gross margin pressures have forced medical device companies to rethink their existing commercial models. Sales organizations are increasing revenue growth and investment, especially in their solutions and product portfolios. Those companies that embrace innovative commercial models can produce sales growth that is 3X the industry average and commercial investment levels well above average. Central to this kind of success is an agile go-to-customer model.
Financial objectives and market forces continue to place downward pressure on expense-to-revenue ratios, a trend that shows no sign of relenting with margins expected to continue dropping by 100 basis points per year. In this environment, companies must find resourceful ways to maximize “feet on the street” while at the same time deploy highly technical sellers to launch their new products−all in a more budget-constrained world than ever before.
- Deployment of intelligently specialized and efficient customer-facing models that drive growth in core businesses while introducing innovative solutions
Due to the changing environment, sales and marketing organizations are moving beyond traditional sales representatives, especially as it relates to the core of medical device companies’ solutions and product portfolios.
Companies are deploying agile go-to-customer models that intelligently specialize and deploy the right job roles at the right resource levels in the right places. These new go-to-customer models decrease emphasis on the traditional field representative and include increased emphasis on the following roles:
- Expanding key account management to innovate and differentiate at large accounts
- Deploying software and IT sales specialists to sell connected devices and help hospitals leverage data analytics
- Expanding field marketing to sharpen value propositions and messages
- Deploying lower-paid junior reps to expand field coverage and execute routine (fulfillment) activities while decreasing traditional selling costs
Additionally, the industry has begun to shift from products focused on clinicians to products and solutions that provide tangible outcomes for doctors, health systems and products. Investment in the industry is focused on novel devices that treat complex diseases, diagnostic solutions that focus on early detection, and leveraging data from connected products to influence treatment algorithms. These connected devices will provide data on patient outcomes which will help justify the products’ benefits. The challenge comes in communicating these key value propositions. Our research found that 72 percent of study respondents felt it was important to offer connected products in their solutions. However, only 42 percent believed they had the ability to sell them. As a result, many sales leaders are considering investing in a support role to help communicate with IT departments. These types of solutions and competitive landscape are quickly changing in the industry.
- Targeting non-acute sector via revenue motions that focus on economic benefits rather than clinical ones
While hospitals remain the main source of revenue for medical device firms, post-acute care continues to gain importance. In fact, Alexander Group’s research shows 67 percent of organizations recognize the shift of procedures from acute to post-acute and other outpatient facilities as important to their go-to-customer model. But only one-third of those companies feel they are ready for this shift. The top trends that are causing the industry to stand up and take notice of the post-acute sector include:
- Significant growth opportunities exist in post-acute care
- The cost of revenue growth is lower than acute care
- The post-acute sales motion is unique
- New agile go-to-customer models to manage across all revenue motions: along with the deployment of the right job roles in the right proportions and places
Identifying and leveraging revenue motions in the development of commercial models is becoming more critical. Growing solution complexity and differentiated customer demands across the portfolio drive the need to develop jobs with revenue motions in mind. Three significant revenue motions require consideration.
- Fulfillment -Selling to resolve well-defined and industry-consistent processes or issues
- Advocacy - Selling to differentiate between multiple process approaches from which each customer selects a “flavor” based on the belief that it imparts an advantage
- Innovation - Selling a new process or way of doing business (e.g., has not been automated or done before) to secure a strong competitive advantage
All commercial models require all selling motions. One is not better than the other. For most companies, their core offerings belong to the fulfillment family of revenue motions while advocacy selling is often most associated with the key account function. But the industry’s legacy is focused on innovation, which continues to act as an important motion and growth lever for companies.
- Rising total sales compensation due to increased turnover and the challenging talent acquisition and retention environment
Increased industry growth and renewed commercial investment have begun to create a war for talent. For many years, sales compensation levels were depressed and sellers had limited options. Now as millennials become a larger portion of the workforce, they are increasingly seeking higher base salaries and enhanced benefits. Our research found that base salaries have increased by 15 percent since 2014. There is an increase in turnover among high performers. As one vice president of sales put it, “There is always someone willing to pay more.”
Visit the Alexander Group’s medical industry research findings page to view our library of resources or contact us to request a complimentary briefing.
To hear more findings from the Alexander Group’s latest research study, please stop by booth 207 at The MedTech Conference 2018.
Join Craig Ackerman, as he shares additional insights and findings around the latest industry trends during The MedTech Conference’s Solutions Showcase on Tuesday, September 25 at 10:00 am – 10:20 am in the exhibit hall (200 aisle).
By Craig Ackerman, Principal and Medical Practice Leader
About The Author
Craig Ackerman is a principal in the Atlanta office and the leader of the firm’s Medical Device practice. Areas of focus in his consulting work include market segmentation, customer coverage models, sales process effectiveness, sales job design, quota setting and incentive compensation design. Craig works with sales organizations to develop actionable go-to-market strategies across many industries, including medical devices, biotechnology, financial services and high technology.
Prior to joining the Alexander Group, Craig held leadership positions in sales and marketing with major telecommunication and distribution companies, and as a management consultant with a Big 5 firm. Craig has extensive expertise in business process improvement, operational support systems and customer acquisition strategies. Craig has a B.S. from Florida International University and an MBA from the Goizueta School of Business at Emory University.