Born from necessity during the pandemic, healthcare providers changed the nature and mix of their interactions with both patients and those organizations supporting their patient care efforts. Shifting provider priorities and expectations directly dictate investments and actions necessary to thrive as a supplier of devices, services and/or technologies within the healthcare ecosystem. In recent research, nearly 80% of physicians reported a permanent change in their third-party vendor interaction preference.
In 2020, Alexander Group observed expense to revenue ratios for healthcare companies fall to historic lows. As an example, the average expense to revenue ratio for medical device companies declined from nearly 20% in 2010 to a low of 11% in 2020. This low expense to revenue ratio is likely not sustainable long-term and should stabilize around 13% as T&E associated with travel, meetings and conferences return. This pressure on expense to revenue in the face of supply chain cost increases, the need for technology investments, and rising labor costs brings an associated increase in rep productivity expectations. In 2014, the average revenue per sales resource was $2.40 million and by 2020 it had increased by 33% to $3.20 million.
Failure to adjust to these ongoing and lasting changes will lead to commercial obsolescence, under-served customers and market share degradation. Making the necessary changes to your commercial organization means shifting your investment profile, increasing rep productivity expectations and augmenting traditional selling motions with the necessary tools, capabilities and auxiliary roles.
Second, organizations are supplementing the traditional rep field force with non-traditional auxiliary roles including inside/hybrid sales roles. Given that recent Alexander Group research suggests only 42% of physicians prefer in-person interactions with existing suppliers, inside sales is no longer optional. While there are countless ways to deploy inside sellers, individual ownership, where the inside sales team covers a specific set of accounts based on revenue, is the most common form. However, they can also be used for lead generation and own a specific set of products or to drive post-sale utilization and engagement. A healthcare sales organization needs to consider the growth stage, clinical intensity, primary site of care and level of GPO contracting when selecting and deploying an inside sales model. A properly deployed inside sales team can be a driver of efficient revenue growth.
Third, it is becoming more critical than ever to actively evaluate, and maintain, a comprehensive understanding of buyer needs and preferences (often referred to as the buyer journey). Executing regular customer research and updating buyer personas provides the basis for calibrating your commercial GTM tactics to best meet specific customer needs. Particularly with the increased prevalence and preference for digitally connected products, the buyers, and associated selling motions and messages, differ significantly from those of traditional medical devices. Frequently, such tactics demand a high level of coordination and planning between the sales and marketing organizations.
Finally, the fourth lever is proper planning and execution of a digital strategy with a focus on customer engagement and seller enablement. The term “digital” can have many different definitions. For our purposes here, we are primarily referring to digital tools and technologies used to improve customer engagement and seller enablement. Customer engagement includes elements such as digital marketing, customer service portals and e-commerce platforms. While seller enablement is focused on lead generation automation, behavioral targeting and account intelligence. These tools remain underinvested within the healthcare sales community, but the most progressive organizations are beginning to invest in this area. Begin now to create and execute a multi-year investment plan and roadmap to achieve your digital strategy.
Experience shows that these leaders can miss untapped potential unless they have a clear GTM strategy, backed by aligned sales motions and appropriate compensation. We’re ready to help you build a solid GTM model.
Alexander Group understands your revenue growth challenges. Since 1985, we’ve served more than 3,000 companies across the globe. This experience gives us not only a highly sophisticated set of best practices to grow revenue—we also have a rich repository of unique industry data that informs all our recommendations. Aligning product, marketing, operations and finance efforts behind a successful sales organization takes insight and hard work. We help the world’s leading organizations build the right revenue vision, transform their organizations and deliver results.