This article is intended for startup & scale-up medical device companies with annual revenues less than $100MM. Economies of scale can hide inefficiencies in larger organizations. These ideas will be most useful for smaller companies that need to optimize their sales/marketing investments to maximize growth.
Gartner reports 83% of the B2B buying process now happens independently. Only 17% of the process involves vendors.
MedTech companies have been slow to adapt to these evolving buyer preferences, though they are likely feeling the affects of these changes in the form of lower salesforce efficiency in new customer acquisition. The result is slow sales cycles, low win rates, and exorbitant customer acquisition costs. The companies that experience the most profound effect are those using a field-based direct sales model. Smaller companies using a distributor model will feel the effects of slower revenue growth, but with less overhead and less control to fix it.
So why is this?
Buyers now have control of the sales process. Sales was previously the primary source of new clinical and product information for HCPs, but with the maturity of the internet all of that has changed. B2B buyers, including HCPs, now prefer to navigate a large portion of the buying process independently. They are armed with information and can complete many of the discrete buying jobs on their own.
Medical technology manufacturers have a big opportunity to align their go-to-market models with how HCPs prefer to research, evaluate, and purchase new medical technology. Implementing these changes requires a thoughtful reallocation of budget, where budget currently allocated to sales resources and outdated marketing activities is moved to support digital content and medical education. It may seem counterintuitive, but through this alignment, companies can expect shorter sales cycles and higher win rates with more informed buyers, a more efficient revenue engine with lower customer acquisition costs, and accelerated revenue growth.
Here are the 5 reasons MedTechs need to change their go-to-market strategy:
#1 | Online Research is the First Step in the Buying Process of New Medical Technolog
Online research is the first step in the medical technology buying process. Less than 10% of surveyed healthcare decision makers (n=166) prefer to speak with a Sales rep as the first part of the process.
How should you adapt?
Manufacturers that recognize online research is the first step in the HCP buying process are investing in their digital presence – to attract, educate, and convert prospects into new sales opportunities. This includes a modern website with extensive clinical and product information, a robust content engine to deliver ongoing information, and a marketing technology stack that guides visitors through the process. This survey data suggests we should minimize cold outbound sales efforts, and replace it with a variety of online and offline marketing efforts to educate prospective buyers and deliver qualified leads to sales.
To accomplish this, it often requires a re-balancing of revenue team resources. Typically sales-to-marketing budget ratios at MedTech companies with initial traction is 10:1 (e.g. $20MM Sales budget and $2MM marketing budget, which includes all headcount and expenses). We believe a more appropriate ratio in today’s landscape is between 2:1 and 4:1. A highly effective marketing engine has the potential to make each individual sales rep 2x-3x more productive.
#2 | Sales Rep Involvement Begins Far Into the Buying Process
HCPs generally don’t want to speak to a Sales rep until they’ve educated themselves and are ready for a conversation or product demonstration. In our survey, more than 55% of HCPs indicated they first want to engage with sales when they want a product demonstration. The take home point here is that buyers now have much more leverage in the sales process due to the accessibility and abundance of information on the internet. Utilizing traditional sales methods for an introductory in-person meeting can be highly ineffective for closing net new accounts.
How should you adapt?
Based on this data, your online marketing engine must be able to effectively guide a prospect forward to the point that they ask to speak with a sales rep about a quote or demo. Supplementing Sales efforts with a consistent flow of qualified inbound leads generated through marketing is critical to efficiently and predictably accelerating growth. Inbound leads close faster (typically 50-66% faster) and a higher rate (up to 20% better close rates), which can balance and stabilize your pipeline when implemented effectively.
#3 | Clinicians learn about innovations in medical technology and clinical approaches on YouTube, LinkedIn, and Facebook
Medical technology companies should be investing in education content that’s distributed through key social media channels. HCP decision makers surveyed indicate they use YouTube (63%), LinkedIn (51%) and Facebook (44%) to learn about innovations in medical technology and clinical approaches. Many companies utilize these channels only to promote their products, press releases, and company culture, but there’s a big opportunity to shift to a market-centric strategy that provides relevant clinical trial data and clinical education.
4 | Trade show marketing is no longer a cost-effective lead generation method
14% of MedTech advertising budgets is allocated to trade show exhibits, the largest variable marketing expense (source: Healthcare Marketers Trend Report).
Up until the mid 2000s, trade shows were a highly effective marketing technique for medical device companies. The conference attracted thousands of ideal buyers. At that point, the information about medical products and companies on the internet was still scarce, so this was an opportune time for buyers to discover and evaluate new technology innovations and treatment modalities. But with the evolution of the internet, there’s now an abundance of information on new medical products online and that’s where buyers go to discover them.
The average company we’ve worked with collects 50 leads at a major trade show and estimates costs (including booth fees, advertising, travel and lodging, etc.) to be between $25k-$50k. Therefore, the cost per trade show lead is between $500 – $1,000. The problem is that very few of them close to revenue. With the widespread usage of CRM technology, we can now track leads and accounts sourced from trade shows all the way to revenue. The truth is very few companies can attribute positive ROI for these events, but believe they must attend or it will damage their brand.
Note: As a point of comparison, Refine Labs has generated consistent online HCP lead flow for several medical technology companies using modern digital marketing practices at $50-$100 per lead, a 5x-10x better efficiency than trade shows, and with close rates of 20-30%.
How should you change you approach?
The most important takeaway here is to adjust your trade show strategy and objectives. Because exhibiting at trade shows is no longer a cost-effective revenue generation activity, the key objective of the event can’t be number of leads generated. Instead utilize conference events to:
- Further existing relationships with customers and prospects
- Create content with key opinion leaders that can be distributed digitally. Here’s an example of content created with KOLs at a medical conference.
- Attend relevant academic sessions to conduct market research and identify new HCP content partners
Reducing your trade show budget by at least 50% and re-allocating that money to online marketing infrastructure and lead generation can dramatically increase marketing ROI. An effective way to reduce your trade show expenses is by prioritizing only the top 2-3 most relevant trade shows to attend and exhibiting with a significantly smaller booth.
5 | 70% of Healthcare Buyers Say They’d Prefer to Purchase Medical Consumables Online if Given the Option
Once an HCP or Department has decided what to buy, typically the Purchasing department will complete the transaction. We surveyed hospital buyers (specialists, managers, directors) at hospitals sizes 25 – 600+ beds on their purchasing preferences, and 70% said they would prefer to purchase medical consumables online through e-commerce if given the option. This trend toward online purchasing will continue to evolve and could create significant disruption of distribution for medical device manufacturers.
Providing support for online purchases offers many benefits including:
- Saves Sales and Support rep time to focus on important activities
- Significantly improves quote-to-cash
- Reduces errors caused by order entry or miscommunication
- Provides customers with on-demand information on past orders, real-time shipping information, and easy re-ordering
- Opens up a variety of opportunities for analytics and automation by integrating ongoing purchase data into your CRM
How should you adapt?
If you’re trying to exit in the next 2-3 years, this may not be your top priority. For those that sell consumables with high order frequency and average order amount less than $10k, investing in e-commerce infrastructure can be a way to accelerate growth, improve customer experience, increase resource productivity, and potentially increase company valuation.