Sales Performance Management Challenges & Technology: Considerations for the Medical Device (MedTech) Industry

SALES PERFORMANCE MANAGEMENT CHALLENGES & TECHNOLOGY: CONSIDERATIONS FOR THE MEDICAL DEVICE INDUSTRY

By: Jon Clark, Sales Compensation Expert

The Medical Devices (MedTech) sector has experienced significant change over recent years, which has impacted almost all aspects of buying and selling. The sector is predicted to grow substantially. In the United States, this industry is expected to grow from $426B to $613B between 2018 and 2025¹ with the key growth areas being in vitro, cardiovascular, and diagnostic imaging solutions. This industry is crowded and competitive. The complexity of the sector has also increased significantly due to changes in regulations, a more sophisticated and multilayered buying process, and a shift from a product functionality-based sales approach to a value-based one, requiring clearer and definable ROI. Costs are increasing, and margins are being squeezed. The challenges for Sales Performance Management (SPM) are many, as sales teams are being redesigned to an account-based model, incentives are becoming more complex, and target-setting is becoming less predictable.

This paper provides an understanding of how SPM technology solutions can resolve common challenges for managing and paying sales incentives within the MedTech sector. By identifying specific challenges, this paper provides feedback on how software can support organizations to be more competitive and operationally effective. These issues provide considerations when reviewing SPM technology options to ensure a good fit, highlighted in the “SPM Technology Alignment & Considerations” boxes in each section of this paper.

Outlined below are the key sales challenges faced by companies in the MedTech industry today and how technology can be used as a means to improve sales results, efficiency, and return on an SPM technology investment from a strategic and analytical perspective. These challenges include:

1. Market Trends – Growth, Cost Pressures, & Buying Complexity
2. Incenting the Sales Channel – From Individuals to Team Sales
3. Integrating Compensation, Territory Alignment, & Quota Management
4. Increased Plan Complexity
5. Data Analytics & Insights

CHALLENGE 1 | Market Trends – Growth, Cost Pressures, & Buying Complexity

The Medical Devices sector is forecasted to continue to grow significantly. In addition to the growth in the sector, Fortune Business Insights¹ forecasts that M&A activity will increase, driven primarily by the demand for patient data. The full impact of COVID-19 on industry growth forecasts is currently unknown.

The sector is experiencing significant cost pressures because of increased regulation. This adds costs, particularly for global players. Specific regulations include:

• ISO 13485:2016 which necessitates an evaluation of and update to an organization’s Quality Management
System (QMS)
• European Union Medical Device Regulations (EU MDR)
• In Vitro Diagnostic Regulation (IVDR)
• Medical Device Single Audit Program (MDSAP)

The buying process has also become more complex. The process no longer entails single sales representatives building relationships with individual clinicians. The sector has moved to a value-based model where sales reps and key account managers must build contacts with non-clinical commercial buyers, clinical buyers within hospitals, Integrated Delivery Networks (IDNs), and academic research institutions. Medical Devices companies need to demonstrate ROI faster, with better outcomes, at a lower cost.

CHALLENGE 2 | Incenting the Team – From Individual to Team Sales

MedTech companies are adapting to the more complex buying environment by shifting resources to a key account management approach. The structure of sales becomes multifaceted. There is typically a wide range of SKUs associated with any technology sales as well as service contracting. To meet this challenge, MedTech companies are developing Key Account Models that not only segment clients by size and geographical scope, but also incorporate several roles in the selling team from Commercial Lead to levels of technical specialists.

In the past, the sector relied on individual relationships for successful selling. A cross-functional selling team is important with a range of roles represented to address specialized needs in the process – Sales Manager, Account Manager, Inside Sales, Field Sales Specialist, Field Sales Specialist Manager, Application Specialist, Field Sales Engineer, and Technical Support Manager

CHALLENGE 3 | Integrating Compensation, Territory Alignment, & Quota Management

SPM in MedTech is a complex process. The integration of wider SPM functionalities – incentives, territory design, and quota setting and management – is critical for effective motivation of the sales force.

The territory landscape for MedTech companies is generally complex, depending on multiple attributes like account segmentation and the volatility of the sector. Small to mid-market accounts are more likely to be volatile with monthly changes of account base and quota adjustments to maintain a fair, achievable challenge for the sales force. Large, strategic or global accounts tend to be stable. For these accounts however, there may be multi-stage KPIs that need to be tracked and draw-down payments calculated against significant quotas.

Sales organizations are relatively complex with lead sales roles at the center, supported by specialist presales and machine specific technical support. In addition, there are lead generation roles and layers of sales management. MedTech organizations set quotas based on geography but also customer segmentation and by potential myriad product groups. Changes to quotas can ripple through the sector as new products, for example, create additional competition.

CHALLENGE 4 | Increased Plan Complexity

Developing trends in the MedTech sector have led to more complex incentive designs. These trends include the increasing complexity of the offering, growing number of decision makers involved, longer buying process, and fluctuating demand.

Consider these scenarios:

• Multiple sales roles combining to accomplish a sale: In this case, there needs to be role-specific pay mixes but common metrics.
• Account managers leveraging the specialized knowledge of other roles: In this case, there must be either split crediting or multiple crediting.
• Carryover leading to thresholds: When customers buy expensive equipment from an account manager with whom they have developed a strong relationship, they are more likely to buy another unit from the same salesperson. As a result, a percentage of the quota is already won at the start of the year; this creates the need for thresholds.
• Presales incentives for technical sales support roles: This means more people will be credited for the same sale.
• Analytics-based quota setting methods: Quota setting is difficult in a landscape where sales are unpredictable, so more MedTech companies are using analytics-based quota setting methods such as weighted index and time series trending.

CHALLENGE 5 | Data Anaytics & Insights

The challenges posed by manual or spreadsheet incentive plan administration affect not only the accuracy and efficiency of the program, but they also limit the utility of the sales and product data embedded in the transactions. MedTech companies often find it difficult to assess the effectiveness of their programs in driving the right behaviors. To effectively analyze the efforts of the salesperson on overall sales performance, as well the influence of the incentive program on year-over-year plan performance, there must be access to current and historical sales and payout data to establish baseline performance benchmarks.

Missing data or the ability to analyze this data can create specific challenges when it comes to developing and designing sales compensation plans. Without readily accessible data, companies are left to manually extract and compile this information which can be time consuming or costly if you are depending on an outside consultancy to support this effort. Missing data can also create challenges in understanding territory performance and product performance, which should feed back into sales strategy design and territory or quota development efforts. Given the complexity of the sector, this insight is invaluable.

It is virtually impossible to manually appraise overall program efficiency on a regular cadence without some form of performance automation that supports data and performance analysis.

SUMMARY

There are clearly unique sales-related issues and challenges facing the MedTech industry. SPM systems enable MedTech sales organizations to meet the challenges set out in this paper including designing, managing, administering, reporting, and overseeing the incentive compensation program in a way that delivers superior sales results – key inputs to developing a world-class sales organization.

Further, SPM solutions incorporate data that is essential for MedTech companies to evaluate their sales strategies. In an increasingly complex industry, those that can motivate the right selling behaviors through transparency and strategic design will ultimately be successful.

Additionally, it is recommended to document the current state issues and challenges as well as to articulate future state needs. Solution providers need to show how their tool can integrate incentives with territory and quota requirements, calculate relatively complex incentives, and provide transparent and compelling reporting to end users, administrators, and managers. All of this calls for the automation made possible by SPM solutions.