Is it Time to Ditch Your Legacy Product-Oriented Life Sciences Sales Model?
Life sciences and analytical technology companies traditionally grow out of a hot new technology. The innovation is often ground breaking and advances science. These companies have origins in a single product brought to market by a highly technical product-oriented commercial team supported by the very folks who developed the technology. As the building scales, application specialists are added to gain traction in new market segments and to provide pre- and post-sales support. The growth equation is simple – add headcount until diminishing returns set in and then farm the installed or user base. Then what? You now have new pressures – you have to keep customers and grow the business. At this point, these technologies are either acquired or scale into a real business with multiple product lines and more complex growth challenges. No matter what side you may be on – acquiring or growing the business – the platform is faced with some key questions.
Do we continue forward with the legacy model or evolve?
How do you know it’s time to make a move? What are the triggers?
What alternatives should be considered?
Whether you are acquiring the platform or scaling a business, these questions remain. Keeping resources locked in product-oriented teams represents an opportunity cost that should be regularly evaluated. Do you keep the resources where they are to retain the business and go after incremental growth; or do you repurpose the budget to R&D, market development, emerging product or vertical sales teams or others?
Below are some telltale signs that it’s time to challenge your legacy product-oriented sales team:
The Market Understands the Technology – Product-oriented sales teams deliver commercial focus to the platform and educate the market on its features and benefits and the impact of its application. Customers prefer this resource when they need answers to the technical questions or the price point is high enough that there is significant risk associated with the purchase. As products become better understood, customers do not want to pay higher prices and look at expensive direct reps as a key contributor.
Margin Is Under Pressure – Dedicated product specialists are typically the most expensive coverage option. When customers have more choice and the offering becomes less differentiated, they gain negotiation leverage. Competition contributes to the market force by driving down price. As the reality sets in, business unit leaders begin putting pressure on the sales organization to maintain price, gain incremental growth or reduce cost of sales to help sustain margin.
You Aren’t Gaining Market Position – If your product is a number 3 share player or below and your product-oriented specialist team has not been effective at gaining position, it’s time to challenge the model. Alternate routes to market such as agents, distribution, OEM or franchising may represent a more cost effective way to maintain position and access niche growth opportunities.
Once you have determined that it is time to change, how do you evaluate your options? Which future state is the best fit for your current customer, product and geographic growth challenges?
Below are some alternatives and considerations as a new model is explored:
Account Management – Generally a wide product portfolio is required. This means multiple different platforms bought by the same customer type or a mix or instruments, consumables and services. When you need to better protect and defend market position while cross-selling, account management is a strong alternative. A shift to account management is a new selling motion dictated by needs of the customer and a products life cycle. Sellers need to be effectively trained and enabled or a new profile hired.
Combined Sales Bags – If you have one or more separate specialist teams, it may be time to combine bags. This does not mean a move into account management but a move toward a more efficient deployment of resources. Job content does not change. Instead sellers simply have more products in their bag. Often times this can be done with little to no incremental headcount. You can retain and penetrate opportunity with the same calls being placed today, with only incremental headcount required for any increased workload associated with closing deals more often and ongoing account maintenance activities.
Hunter Farmer – Separate blended specialists teams can be scaled down to the critical core required to acquire new business or serve as overlays to support sales pursuits (hunters). A farming team is then formed based on the number of calls or sales time required to retain and modestly grow revenue. Shifting to this model can be done with less disruption to existing team members as some likely fit one of the two profiles. It is most effectively deployed when new business opportunity is well understood and hunters can be precisely directed (vs. canvasing the market).
Inside Sales – This often criticized model works well for small and geographically dispersed accounts. It can also be a strong complement when shifting to a consumable-oriented sales motion. Migrating accounts to this model allows you to reduce the cost profile on core products and migrate it to those that are emerging. It works best when programmed by a directed field marketing effort – call campaigns on the heels of marketing outreach (promos, offers or to accounts likely at risk). When paired with a field model, the inside team can address limits of face to face contact. Avoid the mistake of hiring a lower profile rep – while the model is more efficient, the right talent is needed to be effective.
Indirect (Distributors and Agents) – This channel provides great reach (access to a large number of accounts) and frequency (potential calls to those accounts). Moving products to indirect coverage requires the ability to effectively manage the channel. This means enabling partners to identify and qualify leads and providing them support from direct resources to close more complex sales (well understood, low price or commodity products require less support).
It can be hard to part with the model that got a business where it is today. You’re comfortable, it has a track record and maybe you’ve seen others fail.
Making a move like this has many layers of risk.
Will the new model be as successful? Does it address all our product, customer and geographic needs?
Will there be revenue disruption? How quickly can we rebound if we are wrong?
Can we train and enable the team to execute a new model or can we recruit new talent?
None of these risks are greater than not evolving with the realities of the business.
Matt Greenstein is a principal based out of the New York and Stamford offices. He works with clients across technology, life sciences and healthcare. He has responsibility for leading the firms Life Science and Analytical Instrument, Health Insurance, and Digital Transformation practices. His areas of focus include large scale transformation and integration across all commercial functions–tactical marketing, sales and service. Matt has global consulting experience and is known for his fact-based, hypothesis-driven, problem-solving style.