In an industry focused on value, how is it possible that price seems to be the primary focus for purchasers?
In most cases, the price of a medical technology is by far not the major driver of healthcare costs. In addition, all surveys, demonstrating what is important to consider when making buying decisions, will indicate price after other factors like value, quality, service and training. So, what is going on here? There are three reasons that could explain this phenomenon:
1. Price is the first figure the provider sees.
Any lesson in negotiation will stress how important it is to explain your solution, its benefits and value before talking about price. Unfortunately, for most of medical technology products, the price is the first message to reach purchasers.
Official price list and tender requests are two of the many mechanisms hospitals, clinics and other providers use to obtain the price of a medical product. Most often, this price is obtained much before anyone is around to explain how the item was priced. Also, let’s be realistic, purchasers know it is a list price and already expect a significant discount.
2. There is no perceived value.
Value is a perception, not a statement.
In many situations, the decision-maker will not perceive much difference between your solution and the next best alternative. Thus, price becomes the immediate decisive factor.
This does not mean products are equal, it only means your customer does not perceive any value aspect/differentiation in your product and instead focuses on the easier statement, which is price.
Almost any medical company will promise cost-savings and quality improvements to healthcare providers. The fact that you do it as well does not make your products our services more special in the eyes of your customers.
3. Talking to the wrong person.
It can be that the healthcare provider you contact has the goal to cut prices. Although extremely rare, this situation does occur and means you are talking to the wrong person.
Any professional purchaser has goals to accomplish which go beyond cutting price. Value and quality are even more important metrics, so it could also be that your contact may be playing a negotiation game.
It is always important to explore what your customer wants. As value is a perception, how can you deliver it if you do not know exactly what is needed?
So how do you help purchasers focus on value and less on price?
Can you demonstrate Value?
These days we see several sophisticated value models and tools in the hands of unexperienced sales reps that barely have had any contact with purchasers or other decision-makers. Although models and similar tools do make a difference, there are two essential points to have in mind: 1) the simpler the tool, the more effective it will be, 2) a trained sales person with a simple Excel will make a far more positive impact than a regular sales person with a tablet and modern app.
Image credit: nw10photography
Medical companies should first understand what is important for purchasers, what exactly do they want to obtain. Instead of assuming they want to reduce price, ask them WHY. Why do they want to reduce price? Is it to invest into other materials to increase quality, or to reduce workload, maybe to increase patient throughput?
You may be surprised with the number of ways you can reduce costs for purchasers without even touching the price of your products.
Then, and only then, you should work on your new negotiation app.
Value selling is a new concept that is gaining more strength across markets? How are you preparing your sales teams to sell value and justify prices? Are your teams talking to each other? Contact us at [email protected] and we will be happy to share relevant case examples.