5.8 Sales & Distribution Strategy

Intuitive Surgical: Choosing a Sales and Distribution Model

Dave Rosa, Chief Scientific Officer of Intuitive Surgical, and other members of the commercial organization describe the company’s blended sales model and why it makes sense for the organization.

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Value Analysis Committees

John Hernandez, Vice President of Global Health Economics and Outcomes Research at Abbott Vascular, highlights a few important points about working with value analysis committees.

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EarLens: Choosing a Sales & Distribution Model

Bill Facteau, CEO of EarLens, describes how his company thought about choosing a sales and distribution approach.

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Getting Started

Although the “last mile” is characterized by complex decisions, it is an exciting step in the biodesign innovation process because it signals how close the innovator is getting to the launch and commercialization of an offering. The following steps provide an overview of the issues and questions that should be considered when choosing a sales and distribution model.

Evaluate the Impact of the Business Model on Options for Reaching the Customer

What to Cover

Assess the characteristics of the company’s business model and product against the following dimensions (high/low): relative complexity, differentiation from competitors, price/value, and expected sales volume. Determine customers and end users.

Where to Look

This assessment is subjective and can only be made relative to other products in the field. Therefore, research should be grounded in the evaluation of competitors and proxy products (see 2.4 Market Analysis for information about assessing the competitive landscape) and 6.1 Operating Plan & Financial Model for an approach to proxy analysis). Refer to 4.4 Business Models for key sales and distribution considerations related to each business model type. In addition, seek the counsel of other innovators, experienced sales representatives and distributors, and other advisors.

Assess the Impact of Intermediaries on Sales and Distribution

What to Cover

Become familiar with the various types of GPOs in the U.S., including large national GPOs and smaller specialized physician purchasing groups. Read through websites and review online bidding calendars to get a sense of products purchased by that organization. Consider contacting select GPOs for a phone interview to assess the contracting environment for a specific device. Learn more about IDNs and ACOs, as well as their associated purchasing teams. Read available literature on purchasing trends within the medical device field.

Where to Look

Choose a Sales and Distribution Model

What to Cover

Define how the sales process would ideally work, taking into account the unique characteristics of the medical field, business model, customer, and product, as well as the interaction the company hopes to create with the buyer. Take into account the effect of intermediaries and any special considerations for the product that mandate a particular type of distribution. Consider how devices will be shipped, stored, and serviced. Select the sales and distribution model that provides the best fit. Vet the model against the company’s current financial position and projections (see 6.1 Operating Plan & Financial Model).

Where to Look

Refer back to figures within the chapter for high-level decision tools to help make this decision. To better understand the sales process with a direct model, try setting up a field visit with sales representatives in the selected therapeutic area, or attend trade shows/conferences and visit the exhibit halls to talk with representatives in that environment. To understand the process for an indirect model, it may be helpful to contact the following entities:

Coordinate Marketing, Training, and Support Activities

What to Cover

Determine which resources and activities will be required to support the chosen sales and distribution model. Key issues to consider include sales training, customer service, and the linkage between sales and marketing activities. If an indirect model has been chosen, determine how to balance responsibilities and costs between the company and the distributor, taking into account internal resources as well as need for long-term control over the direction of product. Use the output of this assessment to inform the selection of one or more distributors/partners with complementary strengths and capabilities. Then create an internal marketing, sales training, and support plan designed to work in concert with the chosen distributor/partner(s). Develop a plan to ultimately recruit a VP of marketing and sales (this position is relevant in both the direct and indirect model).

Where to Look

Refer to 5.7 Marketing & Stakeholder Strategy and 6.1 Operating Plan & Financial Model. Examine similar industry partnership examples for best practices on how to divide sales operations, marketing, and customer service functions. Work with consultants and colleagues to validate brand support requirements and the feasibility of outsourcing each component of these functions to distributors/partners. Look to partners, as well as consultants, to coordinate a cohesive plan.