How to Make Value-Based Selling a Competitive Advantage for Medical Products Companies

Transcript – Marshall Solem, Managing Principal

It’s no surprise that hospitals and health care providers’ margins are under extreme pressure—with reimbursement cuts coming down from payers and the government, they have to make the most cost-effective decisions they possibly can for the products that they’re going to use in delivering care to patients. And so without a reason to do otherwise, they’re going to make that decision based on price.

The differentiation of products has really diminished. The rate of innovation has slowed, and the rate of competitors building up their products to match leaders in the industry has increased. So the product differentiation has shrunk. And this has even happened with complex products.

Value-based selling is understanding the value of your product beyond just the price of your product, but the true value of your product in use for a particular hospital or provider.

What does it do in terms of clinical benefits, for sure, but what is it do from an economic perspective downstream in terms of where that product is used and other people that are impacted on it? What is the value of that product to help the provider drive their strategic goals and objectives?

In fact, the sales force can even be part of the value that you bring by helping the provider understand where this value accrues to them in the organization. But it’s not just enough to have the message, you’ve got to deliver that message to the right people.

And there’s a lot of new decision makers that are coming out in the marketplace today—economic decision makers, administrative department heads, all these different types of people. So if you have the message but you’re not getting it to the right people, it doesn’t really matter.

Today, payers are not reimbursing hospitals and other health providers for hospital-acquired infections or hospital-acquired wounds. Now, if you have a product that perhaps is undifferentiated from others in many respects and perhaps is even a little more expensive than others—but if you can prove that your product will reduce hospital acquired wounds or hospital acquired infections—that is gold.

And that will help you drive the success of that product in the market because what you’re going to do if you communicate that message effectively is prove to the provider that you are helping them achieve a quality objective and a standard of care objective that they’re being mandated to achieve.

If you don’t have a strong value proposition that you can take to the marketplace and if you can’t articulate that value proposition clearly to the right decision makers, you’re going to find yourself in a price squeeze and a price spiral that you don’t want to be in.

But this whole thing doesn’t need to be negative. Actually, at ZS we’ve shown clients that within this negative environment of pricing pressure, there actually exists a great opportunity for those companies that are able to differentiate themselves and show where the real value is throughout the entire continuum of care—there are very strong financial returns to your shareholders to be had.