ZS Interview: Why Leading Medical Products Companies Value Value-Based Selling

Marshall Solem

Marshall Solem,
Managing Principal,
Evanston
Read bio ( /about/leadership-team/marshall-solem.aspx )

 

In medical products, the sales process used to be straightforward: Offer a superior product and leverage personal relationships with clinicians.

Today, the sales process for medical products is not so clear. Cost pressures have hammered hospital systems and other buyers of medical products, who no longer evaluate their purchases based on clinical superiority alone. Instead, buyers are looking for both efficacy and economic value—and companies are finding that value-based selling can deliver both messages to the right people.

According to a new study ( http://info.zs.com/medical-device-aberdeen-report ) sponsored by ZS Associates, leading medical products companies present a compelling

economic message to customers, and are able to effectively deliver that message to the right decision makers. Conversely, lagging companies are struggling to sell their products based on the clinical benefits their products deliver.

Marshall Solem, a ZS Associates Principal who has worked extensively with medical products companies’ sales forces, says that value-based selling has become essential to medical products companies’ success. In an interview, Marshall talks about the study and how the findings validate the need for medical products companies to embrace value-based selling approaches sooner rather than later.

Why is value-based selling crucial to medical products companies?


MARSHALL SOLEM: There’s several reasons, ranging from cost pressures to the pace of innovation slowing to the rise of economic decision makers over clinical decision makers.

Cost pressures are not new, but it’s reaching a crescendo. If medical products companies don’t have a real value story, they’ll fall into a downward price spiral. Second, innovation has slowed, and there are many “me-too” products that are “good enough” to get the job done. That trend isn’t new either, but if you can’t articulate value and differentiate your product economically, then you’ll get dragged down in a price-per-widget that nobody wins.

What about the rise of non-clinical decision makers?


MARSHALL: There’s no doubt that clinical decision makers are less influential today in the final buying decision. Even in areas like cardiology and orthopedics, administrators have more clout. And when people in the purchasing department get involved in the buying decision, they’ll focus on the price part of the equation, not the overall economic value.

The survey showed 85% of leading companies use value-based selling, but only 34% of laggards do. Why aren’t all companies doing so?


MARSHALL: First of all, before bringing a new product to market, a company may not evaluate or understand the true economic and strategic value of its products, so the sales model is set up to sell clinical value, not total value. How do you sell total value when you don’t know what that value is?

And not only will a broader value discussions be new to salespeople, they need the skills and capabilities to have these discussions, and build relationships with a new set of decision makers.

Why is it hard to come up with a compelling economic value story?


MARSHALL: You need to understand the overall usage of the product, both the upstream and downstream implications of using it.

For example, look at wound-care products. If a patient without a lot of mobility can’t get ambulatory and the hospital doesn’t prevent pressure ulcers, there’s a good chance of a longer stay and associated wound treatment, which payers aren’t likely to reimburse.

So if your product works better than the competition’s in preventing hospital-acquired wounds, it’s going to have long-term positive effects on the length of stay and wound-management costs, which is a tangible value message.

If not with value-based selling, how have companies responded to market conditions?


MARSHALL: We’re seeing companies implement “deal desks” to cope with pricing pressures, negotiating unique deals instead of using a standard contract. These seem great, because the deal often involves the hospital buying a broader portfolio of the company’s products. But then, the provider gets an even better offer several months after the first deal is done, which forces the initial company to renegotiate contracts. We also see large investments in account management teams. The question is if these teams add value. Companies have to consider what information and services they put around these products with these teams to actually make account managers a part of the value proposition.

What does it mean to “put services around products”?


MARSHALL: It means adding value beyond the product itself. It might be a consulting service or creating value in the sales process itself—you can see this in the past, especially in orthopedics and cardiovascular, with reps observing surgery and helping doctors to understand the product’s nuances in different situations. Companies must take that concept outside of the operating room.

One way is to help providers achieve goals beyond costs and quality of care. If a hospital wants to be known as a leading provider of cardiac care, a medical products company can offer the services of a cardiac service-line specialist. The company aligns its available resources and skills with its customers’ needs, which adds tremendous value in the sales process.

How can companies determine how to add value in this manner?


MARSHALL: You have to ask your customers what they are trying to accomplish. It’s not complicated, but you may not be asking the right questions about the customers’ objectives. What core issues are customers trying to solve? Do they have operational and logistical issues? Do they have quality issues in certain areas?

How hard is delivering a value-based message to diverse stakeholders?


MARSHALL: Conceptually, it’s not difficult—you need to find out who is involved in decision making, meet with them, understand their needs and tell a compelling story. But in practice, if you don’t really have a well-honed value proposition or don’t understand how the decision-making process has evolved, you might find yourself spinning your wheels. The sales force must also understand the evolving language of the customer. It’s like traveling abroad. Even if you have a map, without knowing the local language, it can be difficult to get around effectively.

Do too many reps still rely upon personal relationships to sell?


MARSHALL: We see some of that, but it’s going away quickly because it just doesn’t work anymore. Delivering value doesn’t mean you’re a good old boy and take customers to a baseball game. That doesn’t mean relationships don’t matter, but the relationships can’t be built on a baseball game or a few beers. The most productive relationships are when the sales rep has added value in the sales process itself.

Ultimately, how can value-based selling improve relationships?


MARSHALL: Health-care providers are looking for partners who can deliver predictable outcomes—and not just clinical outcomes—cost-effectively. With all the value that medical products companies can bring, providers will build a partnership with the companies that show they can serve the providers’ needs far into the future. Medical products companies don’t have to sell widget-by-widget at the lowest price. Instead, they can develop long-term contracts based on the value they’ve shown, and selling costs can actually go down.

The survey makes it clear that the relationships developed through value-based selling improve financial success—companies that offer customized solutions showed year-over-year deal-size growth of 7.7%, with no growth for companies that didn’t do so. That’s a significant difference, and clearly delineates the difference between success and lackluster performance.