Winning with a Customer Focus in Medtech

Winning with a Customer Focus in Medtech

In response to tougher market conditions, successful medtech companies are changing their go-to-market approach by embracing key account management.

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Winning with a Customer Focus in Medtech

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Many industries have developed a more successful approach to sales by putting the customer first. But medtech companies have been slow to follow suit and reap the same benefits. Faced with slower organic growth, leadership teams are looking for a new approach to increase sales in a rapidly consolidating customer landscape. The number of hospitals that make purchasing decisions locally is dwindling, and medtech companies now sell mainly to large, integrated delivery networks (IDNs) that centralize purchasing decisions.

In response to these tougher market conditions, successful medtech companies are changing their go-to-market approach. After decades of relying on product-centric, territory-focused sales teams, they are creating sales organizations highly attuned to the customer and embracing key account management.

It’s not a simple shift. An overly complex sales and administrative model risks collapsing under its own weight. Bundling higher-value and lower-value products risks eroding margins. And implementing a key account management model requires sustained leadership focus and change management. But leaders who invest in an effective key account management model are more closely connected to the needs of their customers. That can deliver big benefits, including above-average market growth.

Build partnerships

As IDNs consolidate and grapple with uncertain reimbursement prospects, they are transforming their own operations and demanding more from their suppliers to manage costs. Bain’s 2017 U.S. Front Line of Healthcare Report shows three important shifts in how IDNs are making purchasing decisions: greater purchasing centralization, joint commitment to patient outcomes, and a new role for suppliers as partners, not vendors.

More purchasing centralization. Forty-five percent of IDNs make centralized purchasing decisions for capital equipment and consumables for the entire network, and physicians and procurement officers expect that figure to continue rising over the next three years. Notably, procurement officers and physicians increasingly share decision making, assessing clinical and financial benefits together. As a result, medical equipment purchases that physicians previously controlled also are increasingly centralized. While about 30% of healthcare systems centralize decisions on surgical implants and instruments today, that figure is expected to rise to more than 40% in the next three years.

Joint commitment to patient outcomes. Product quality and patient outcomes remain the most important purchasing criteria for surgeons. However, proof of the patient outcomes matters: 71% of procurement officers place a priority on shifting to outcome-based payment models in which manufacturer payment is linked to specific outcomes, up from 54% in 2015. Health systems are looking for suppliers that deliver value.

Our research points to an important market shift. What surgeons most value from medtech sales reps differs from their traditional job description. Surgeons say the two most valuable roles for sales reps are providing technical support in the operating room and on-call support. By contrast, they rank the traditional role of communicating medical device benefits fifth in importance. Medtech companies that act as partners benefit from greater customer loyalty and advocacy. In a separate Bain study, the medtech suppliers identified as having the best partnership received a Net Promoter Score® of 30, compared with a score of 6 for all others.

Key account management: Focus on the customer

Leading medtech suppliers are adapting to this new landscape in two ways. They are shifting from product-oriented sales teams with multiple contact points across the health system to a key account management model. And they are focusing the sales pitch on outcomes and solutions, not product features and benefits.

Managing this transition requires both structural and cultural changes. Most medtech companies structure their business around product areas, and sales teams have been trained and given incentives to sell specific product categories. Putting in place a key account management team, even for select customers, is challenging. Successful companies take a step-by-step approach, creating key account management teams for their most important customers first. They also focus on change in five areas:

Structure and roles. Enable the key account manager to act as a team leader coordinating across business units and the entire sales organization. IDNs want a central point of contact and a partner who is a strategic problem solver, but they also expect product expertise when deciding what to buy.

People. Choose a skilled team leader as key account manager. Companies often move their best salespeople into this role, but that isn’t always the ideal fit.

Performance and incentives. Focus incentives on the right behaviors: teamwork and long-term gains. If companies encourage teamwork but fail to align incentives and performance metrics across the entire salesforce, sales reps will continue to put their own interests first.

Processes and information. Develop a transparent sales performance pipeline and review the data with the leadership team regularly. Product-centric organizations with regional sales teams tend to focus on data by territory or product instead of a comprehensive overview by customer.

Leadership and culture. Make a strong case for key account management and link expected financial results with behavioral and organizational changes. Leadership teams and business unit leaders play a critical role in reinforcing behavior change.

Medtech companies face ongoing change as providers continue to consolidate and IDNs evolve. Those that embrace a more customer-centric approach to the market will have a valuable compass to navigate the path ahead—and a strong edge in generating above-average market growth. What starts with a few key accounts today may transform the entire commercial organization in five years.

Casey Carey is a principal in Bain & Company’s Healthcare practice. David Burns is a partner in Bain’s Customer Strategy & Marketing practice. Julie Coffman is a partner in Bain’s Healthcare practice and leads Bain’s Organization practice in the Americas. They are all located in the firm’s Chicago office.

Net Promoter Score®, Net Promoter System®, Net Promoter® and NPS® are registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.


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