As the saying goes, “that’s why they get paid the big bucks.” All kidding aside, a recent study published in the American Heart Journal confirms and quantifies what most industry insiders know intuitively: there is no substitute for a live salesperson at the point of use.
Many cardiac catheterization (“cath”) labs either stock or make available more than one brand and more than one type of coronary stent. Since there are many different indications and technical features among the various offerings, it’s difficult for hospitals to standardize on just one brand. So instead of “converting” a physician or a hospital to permanent purchase of the company’s products, the sales rep gets to convert each case she or he attends.
Hospitals and physicians are aware of the influence a rep can have over the selection process. Many limit rep visit frequency in an attempt to be “fair.” Another factor is that some reps are technically and clinically more competent than others. They perform a genuinely valuable service for the physician by reviewing diagnostic information and making informed recommendations about the ideal product for the clinical situation.
On a darker note, some reps (and some companies reinforce these behaviors) have personal relationships with physicians, complicating the goal of unbiased product selection.
Some hospitals have even banned certain sales reps or even instituted blanket bans of every sales person from point of use contacts.
The study reported that the presence of a sales rep increased the per-case price of stenting by up to $230. One investigator also said that the company’s market share was increased by the rep’s presence, meaning that the physician used that rep’s company’s products over the equivalent competitive product. This choice occurred apparently because the rep was present and able to inform and/or persuade the cardiologist to use the rep’s products.
Some cocktail napkin math: say a typical rep makes $150k per year in cash compensation. That’s about $3,000 per week or $600 per day. It doesn’t take many cases per day selling high margin stents to pay the rep’s salary and make a tidy profit for the company. And that’s why successful reps will do everything they can to spend the day in scrubs instead of a business suit.
Takeaways: While good sales reps are costly and rare, and a direct sales force is insanely expensive, you get what you pay for. Of course there are other options such as manufacturers’ reps, distributors, telesales, and partnering/sales force sharing. In all of those alternative approaches, you give up control and access compared with the direct sales rep model.
The key in marketing and selling high value, high price, high margin products is to recruit, hire, and maintain the highest quality sales force possible and to design an incentive compensation program that encourages desired behavior while dissuading undesirable behavior. Easier said than done, and probably merits the hiring of an experienced sales executive to create and manage the sale team.
Keep in mind that sales reps pay for themselves more directly than any other employee. Budget appropriately if you decide that a direct sales force is right for your venture. Plan for longer sales cycles and reduced market share if you decide that direct sales is a luxury your company or startup cannot afford.