Yet a 2012 Aberdeen Group study
commissioned by ZS Associates
showed that the small subset of
companies that do focus on understanding and effectively communicating the broader value and
economic impact of their products
far outperform others in revenue
and profit growth, market share
and customer retention.
Companies that do focus
on communicating the
value and economic
impact of products far
outperform others in
revenue, growth, market
share and customer
retention.
In addition, providers’ heightened
focus on system economics has
brought many new faces—mostly
administrators—to the purchase
decision-making process. These
and other types of new stakeholders, both at the individual healthcare facility and at IDNs, are not
just participants in the decision
process. They may often have
significant influence over the final
purchasing decision.
The slowing pace of innovation
in medical technology has also
made economics more important:
The clinical differentiation across
many products is often insubstan-
tial, making economics the pri-
mary decision criterion. (This has
been true in low acuity products,
like supplies, for years.) Many
providers feel the technology gap
has narrowed so significantly that
even high acuity products, like
implantable cardiovascular prod-
ucts, are largely undifferentiated
clinically, making economics the
critical factor for these as well.
Manufacturers traditionally have
not carefully studied the economic
impact of their products. While
pharmaceutical companies know
all sorts of drug interactions and
counter-indications for their
products, most manufacturers have
little understanding of their products’ economic impact on the patient, the institution, or the payor.
The same can be said about most
medical device manufacturers.
So we have to change to navigate
the landscape
In order to deal with these challenges, industry leaders are making adaptations:
Understanding &
communicating
economic value
• Industry leaders are conducting
comprehensive health econom-
ics studies on both their in-line
and all-new products. One major
manufacturer has taken a strategy
of launching new products only
after it has developed an economic
story as strong as its clinical story
• Companies are highlighting the
economic impact of their prod-
ucts in marketing messages. We
all know that nobody wins a price
war, and leading firms in the Aber-
deen study were more than twice
as likely as other respondents (85%
versus 34%) to communicate their
product’s or service’s broad, long-
term economic value and visible,
customized benefits clearly to their
customers
• As an example, if a product
reduces hospital-acquired in-
fections or hospital-acquired
wounds (which payors no longer
reimburse), this translates into
improved quality and financial
outcomes for the hospital. Or a
product may result in lower cost
of ongoing care, or lower hospital
readmission rates. In either case,
manufacturers need to calculate
and communicate those economic
benefits to the right decision mak-
ers at vertically integrated IDNs,
ACOs and payors
Reconfiguring sales
forces and targeting
new decision makers
• Leading manufacturers are targeting sales force efforts on administrative decision makers at both
the individual facility and IDN
level. This often involves reducing
the size of traditional field sales
forces that call on clinicians while
emphasizing Key Account Managers (KAMs) who have the business
skills and training to call on the
new provider stakeholders and
communicate about economics
and financial issues
• Because the KAMs cost more
than the traditional field reps they
replace, companies are also replacing some of their traditional field
activity with alternate channels,
like inside sales and digital marketing tools. In essence, we’re seeing the traditional field sales force
get squeezed by KAMs on the high
end and lower cost channels on the
low end
