Redesigning Medical Device Commercial Models in Europe: Addressing the Rise of the Economic Buyer
Rohan Fernando and Roz Lawson
S A LES & M A RKE T ING INS IGHTS
This paper will outline the challenges medical device
companies in Europe face with their multiple sales force
structures, and will illustrate why companies should
analyze their sales force structures to make sure they correctly
reflect their strategy and the buying process.
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Table of Contents
3 Introduction
3 Current Challenges
5 From Strategy to Structure
7 Addressing the Rise of the Economic Buyer
10 Conclusion
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Introduction
Medical products and services companies are often saddled with cha-
otic sales force structures across Europe. Because of how they evolved,
a company’s sales force in one country may scarcely resemble its coun-
terpart across the border. This prevents them from effectively execut-
ing their commercial strategies and often leads to lack of alignment
with important stakeholders. Payers and buying groups are becoming
more powerful in Europe and many medical products companies are
struggling to address their needs in part because of their own chaotic
commercial structures.
While different country structures are not unusual, we have found they
are often unnecessary and reflect local historical evolution rather than
business need. With the increasing importance of commercial stake-
holders and with increasing cost pressure and need to drive margin,
there is no better time for device companies to purposefully look at
their sales structures. Redesigning these structures often requires a
new role focused on commercial stakeholders, such as a key account
manager (KAM).
Companies that adopt more ‘rational’ commercial structures—in which
differences across countries are driven by a clear business rationale
and meet the needs of economic buyers—are better able to execute
their sales strategies, and position themselves for changes in their
markets.
This paper will outline the challenges medical device companies in
Europe face with their multiple sales force structures. We will illustrate
why companies should analyze their sales force structures to make sure
they correctly reflect their strategy and the buying process.
Current Challenges
It is common for medical device companies to have a European sales
and marketing strategy. However, the same company often approaches
customers using different sales models, dependent upon the country in
which they are doing business. We have seen this often: For instance,
one medical products and services provider has separate sales rep-
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resentatives for two product lines in the United Kingdom, combined
representatives in France, an additional senior representative role plus
distributors in Spain and agents in Italy. As odd as this ‘chaos’ may
appear, it is common throughout Europe.
There are several reasons for this variability. Structures evolved over
time through local management decisions and acquisitions. In some
cases, the individual salespeople’s skills determined the approach.
Furthermore, rapid business growth meant that many such structures
went unchallenged. Because of successes in each country, corporate
management saw no reason to question individual country structures.
It is not that companies’ sales structures today are ‘right’ or ‘wrong,’
but the sheer diversity we see in the market indicates that companies
have not truly and objectively examined their sales structures.
What is the impact of this lack of purposeful assessment of sales
structures?
• Companies have difficulty executing their strategies. Most device
companies have regional strategies on the key commercial levers
like pricing, positioning and segmentation. By going to market
without a coordinated plan, companies struggle to execute these
strategies effectively.
• Companies’ sales structures may be a poor fit with their customers’
buying process, which results in lost opportunities. This is especially
true as there have been changes in the market, such as the increas-
ing power of payers like hospital buying groups in Germany.
• Companies miss out on the sales force effectiveness and efficiency
gains that a homogeneous sales structure across Europe can bring,
such as improvements in targeting and incentive plan design.
This is a common problem—of the many device companies we have
worked with in Europe, almost all had significant opportunities to
improve their commercial structures. The time is right for companies
to examine their disparate sales structures to take account of market
changes and their own strategies.
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Different structures in different nations can subvert a company’s sales
performance, as each country may have different structures, incentive
plans and sales processes. These differences become engrained in
how representatives interact with customers, and the results can be as
uneven as they are disappointing. For one company, their approach in
the United Kingdom—focusing on a specific product with a dedicated
commercial team—led to the highest sales in Europe. But in France, the
selling strategy meant that representatives discussed several products
with their customers in each call, and the company’s incentive plan did
not focus effort on one product over another. As a result, French sales
were well below those of the other big European markets.
From Strategy to Structure
Two key drivers—the customer buying process and company sell-
ing strategy—should inform decisions about sales force structure (see
Figure 1). If a company closely examines its strategy and end-user
buying patterns and finds them consistent across markets, then a con-
sistent structure also makes sense.
The customer buying process is often more similar than different, even
if the titles and positions of the customers vary by market. Although
mechanisms for evaluating products may differ, key usage and pur-
chasing drivers are similar across markets. Buyers in any market need
to make the same purchasing decisions. Health care funding is under
scrutiny in all markets, and some kind of cost-benefit analysis is re-
quired at every level. Purchasing drivers usually include whether the
CASE STUDY
Figure 1. The customer buying
process and company sell-
ing strategy should inform
the sales force structure
decision.
Customer Buying Process
Company Selling Strategy
Sales Force Structure
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technology delivers a clinical benefit, a decrease in costs or an increase
in value-in-use—whether the customers make that assessment in Spain
or in Germany.
Sometimes buying processes actually vary by country. For example,
companies selling ostomy products interact with different customer
groups in Germany than the United Kingdom. In Germany, ‘ban-
dagists’ sell medical and health care supplies that pharmacies do
not. In the United Kingdom, this group does not exist, and community
nurses largely manage ostomy home care. This observable and impor-
tant difference in the buying process may be a good reason to have
different sales structures in the two countries.
So if the buying process is often similar, what about selling strategy? This
is frequently consistent across countries because most device companies
have chosen to adopt regional sales and marketing strategies across the
key levers like pricing, positioning and segment strategy. They recognise
that there are more similarities than differences in customer needs, and
devise strategies to market their products in similar ways across countries.
Sceptics may accept that different countries’ buying processes are
similar, but may still question the need to restructure. Even if market
changes have occurred beneath their feet, what are the real benefits of
spending the time and money to establish a consistent sales structure
throughout the Continent? Hasn’t the current model worked well?
The biggest benefit of changing to a more consistent sales model is
being able to actually execute the strategy effectively. This is true whether
the company is launching a new product, defending market share or
targeting a different group of customers. A well-considered structure
allows companies to manage cross-border influences—key opinion
leaders, conferences and Web sites often transcend country boundaries.
A consistent structure also allows companies to improve sales force
effectiveness and focus their resources on the most profitable markets
and customers.
Finally, as economic buyers have become more important, companies
need the right structures to manage these stakeholders effectively. That
often requires a change in their commercial model to, for example,
add a new role such as a KAM, to focus on these commercial stake-
holders. This is the focus of the next section.
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One company was planning to launch a new, single-use surgical device
to different target customer groups in different countries. Through
market research, the company identified that the buying processes
of each customer group were similar across Europe, so the company
chose a common strategy.
As a result, it was able to position the new device consistently across
countries. By selecting a specific group of target customers, it was able
to minimise the risk of cannibalizing existing sales. The product was
launched consistently and successfully in each market.
Addressing the Rise of the Economic Buyer
We have argued that the customer’s buying process and the company’s
selling strategy should determine the sales structure. But the buying
process has changed in many device markets with the emergence of
important commercial stakeholders (see Figure 2), such as purchasing
groups, hospital administrators and, in Germany, buying groups.
How should companies alter their selling strategies to capitalise on
these changes?
One approach is key account management. The idea behind KAM is
straightforward: empower a single salesperson to lead a major (‘key’)
account, such as a government payer, hospital chain or buying group.
As they are charged with handling institutional accounts, KAMs can
help cope with the emergence of commercial stakeholders in making
purchasing decisions, as many medical products companies have
plenty of clinical representatives but few commercial ones.
A KAM has the experience, skills and gravitas to make a value-based
business case to senior decision makers. What makes the KAM structure
ultimately different is that it enables the medical device company to
offer its full value proposition to the client rather than a series of indi-
vidual product pitches. KAMs often work across a portfolio, bringing a
wider range of product and service solutions to the customer. The KAM
coordinates resources from within the organization as needed to meet
customer needs and to maximise the value of individual accounts.
CASE STUDY
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Figure 2.
Via KAMs, companies can develop a partnership with customers to
generate mutual benefits rather than working as independent (and
sometimes adversarial) entities. Since KAMs can represent a company’s
entire product portfolio, they bring clients a wider range of solutions,
and can coordinate corporate resources as needed to meet customer
needs in ways heretofore not possible. Salespeople with the right com-
mercial skills can unlock opportunities that clinical sales representatives
often fail to crack for years.
For example, one medical supplies company had relied on clinical spe-
cialists for each of its business units. These people were highly skilled,
often with a background in a hospital or nursing setting. However, they
lacked commercial capabilities—negotiation skills, analytical ability
or business acumen—and were losing out to competitors who were
engaging with commercial stakeholders more effectively.
Enter the KAM. The company decided to introduce KAMs to focus on
large hospitals and buying groups. The KAMs typically spoke to cus-
tomers who were one or two levels higher up in the decision-making
hierarchy. As well as discussing the whole portfolio of products from
across the different business units, they were able to discuss non-prod-
uct solutions. This opened the door to some innovative value offerings
such as taking over supply and logistics for an entire class of products.
This helped the customer by removing a time-consuming activity, and
helped the company better demonstrate its product benefits through
Figure 2. In the current European
Union environment, com-
mercial sales roles are of-
ten an essential component
of the sales force structure.
Customer Buying Process
Company Selling Strategy
Sales Force Structure
• Product expertise• Clinical benefits• Value-in-use
• Business expertise• Health economic benefits• Value proposition
ClinicalCommercial
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access to usage data. The clinical representative would not even have
been allowed to have this kind of conversation.
The KAM structure is not without challenges. Many device companies
(and pharmaceutical companies) have added KAMs but have struggled
to make them effective. Common issues include the following:
• Integration with the wider sales force. Many companies have
struggled to define how KAMs should integrate with representa-
tives, first-line managers and the local marketing department.
They need to define the positions’ respective roles, responsibilities
and coordination points.
• Recruiting and retention. Many companies have difficulty finding
and retaining the right people to be key account managers; a top
salesperson will often not succeed as a KAM.
• Pay and benefits. KAMs are often not given the same kind of
pay and benefits as a first-line sales manager, even though their
responsibilities may be similar or greater in scope.
• Resources and value proposition. Many companies make the
mistake of assuming that since KAMs are smart, they will figure
things out, rather than taking the time to understand what KAMs
require in terms of process, resources and support to be effective.
All of these problems are surmountable with adequate focus and
some patience—a successful KAM structure may take significant time
to fully develop.
In the end, however, the benefits of a well-integrated KAM structure
are enormous. KAMs are creating industry-leading business models,
influencing senior non-clinical decision makers and breaking down
traditional sales barriers. Resources need to be directed toward both
clinical and non-clinical customers, and getting this balance right will
be a differentiator of performance for medical products companies
in Europe.
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Conclusion
Leaders of device companies in Europe often inherit chaotic com-
mercial structures, with operations in one country bearing little resem-
blance to those of another. These structures are the result of historical
evolution that has often gone unchallenged for years.
These inconsistent structures inhibit companies from implementing their
strategy effectively and from capturing opportunities with important
emerging commercial stakeholders. Companies should examine their
commercial structures and make sure they reflect the buying process in
their key markets and their own strategy. This may often require some
restructuring and the addition of new roles like KAMs to interact with
important non-clinical stakeholders.
Companies that do focus on designing effective commercial structures
will be winners in the medium term. They will be able to better manage
the key customer stakeholders and better able to implement their own
strategies.
About the Authors
Rohan Fernando is the Managing Principal of ZS Europe and is based
in London. He has consulted with numerous medical device and
pharmaceutical companies in sales force strategy, integrations/mergers,
targeting, compensation, product launch strategy and customer seg-
mentation. Rohan received an M.B.A. from the Wharton School,
University of Pennsylvania, an M.P.P. from the Kennedy School at
Harvard University and a B.A. from Oxford University.
Roz Lawson is a London-based Manager at ZS Associates. She has
worked with medical and surgical products companies in Europe on
sales force strategy, structure and sales effectiveness projects. Roz has an
M.B.A. from London Business School and a B.A. from Oxford University.
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