Cardiology: Accelerate Growth by Evolving Sales Compensation Plans
Best practices in developing sales compensation plans for cardiology sales reps.
Cardiology companies offer numerous technologies that save and improve the quality of life. Products include heart valve replacement, arrythmia monitoring, electrophysiology and ablation technologies that diagnose and treat a variety of heart and vascular conditions.
As such, cardiology companies require sales teams with a high degree of clinical knowledge to support customers. Surgeons rely on cardiology sales teams to provide in-depth product support before, during and after cases. Cardiology sales roles have been one of the most sought-after specialties in the MedTech industry. The level of clinical knowledge exceeds most other therapeutic areas, which justifies their high total pay levels. Sales rep pay levels in cardiology exceed most other medtech segments. However, cardiology sales compensation plans have failed to evolve as quickly as other MedTech specialties. Some cardiology companies are left with insufficient returns on their sales compensation investment.
Sales compensation plans are a key tool for motivating and rewarding sales representatives who sell cardiology products and services to physicians, hospitals and other customers. A well-designed sales compensation plan can align the interests of sales representatives with the strategic goals of the practice, such as increasing market share, enhancing customer loyalty and improving quality of care. In this article, we will share some of the best practices and common challenges in developing sales compensation plans for cardiology sales representatives. We will also share some examples of how different cardiology practices have approached this issue and what results they have achieved. Adopting these practices will yield an improved return on sales compensation investment. The transition, however, must be made delicately to avoid disruption and turnover. When done correctly, the result leads to accelerated growth.
Cardiology Sales Team Challenges
- Unclear differentiation between high and low performers. Commission-based plans allow sales reps to accumulate volume, and incentive compensation, over time. But MedTech companies require year-over-year profitable growth to expand their enterprise value. Sales reps compensation plans don’t align with the organizational objective.
- Low motivation to achieve year-over-year growth. Upside pay (incentive earned by the 90th percentile performer) trails industry benchmarks of 2.5x – 3x of target incentive. This results in relatively low motivation to achieve year-over-year growth.
- Attracting next-generation sales representatives. Cardiology pay levels are more aggressive than the rest of MedTech, meaning they have lower base salaries as a percentage of total target compensation. The younger generation of sales representatives is demanding higher base salaries. Many MedTech segments are evolving their pay structures to adapt. Cardiology is still behind that evolution, leading to challenges in attracting the next generation of sales talent.
Many segments of MedTech have already evolved their incentive plans to address these challenges. Cardiology must adapt. There are three core initiatives cardiology companies can undertake to ensure they drive better results with their sales compensation plans.
Three Key Sales Compensation Growth Levers in Cardiology
- Adopt quota-based incentive plans. Quota-based incentives, when structured correctly, increase sales organization motivation to exceed yearly goals. This mentality aligns with what investors demand from the cardiology company in aggregate. The challenge is how to make the shift. There are several ways to make the transition from plans with minimal quota impact to those where annual quotas matter significantly. Consideration must be given to recent actual pay, transition plans and high-performer pay. But when the plan is modeled and implemented, sales organization motivation to drive annual growth is impactful.
- Increase upside; reduce phantom salary. Sales reps need to clearly see the differentiation between high and low performance to give the extra effort. First, cardiology companies must define high performance–tied year-over-year growth, not just long-term accumulation of accounts (see adopt quota-based incentive plans above). Next, incentive plans must be structured so there is a highly apparent difference between the incentive pay high performers and low performers earn. The use of thresholds is an unpopular but necessary component. And when combined with significantly higher pay above quota, the sales organization will see this as an opportunity. Further, when modeled correctly, cardiology companies can achieve this without increasing total sales compensation costs.
- Evolve pay mix. The next generation of sales talent is demanding reasonable base salaries. The days of zero-base salary, all commissions are numbered. And even cardiology companies with base salaries but aggressive pay mix (e.g., 30/70) are struggling to attract the next generation of sales talent. This is not an argument to increase base salary, cost and drive complacency. When structured correctly, a higher base salary mixed with thresholds and higher upside pay provide a win-win situation. The opportunity for higher pay is substantial and the cardiology company’s total cost remains the same. Cardiology companies must evolve their sales compensation philosophy to avoid losing talent to other segments of MedTech.
At Alexander Group, we have seen many challenges and opportunities facing cardiology practices and clinics. Our experience in the cardiology segment uncovers common challenges and provides proven ways to improve sales compensation plans that yield improved results. By applying our best practices and industry insights, we can help you improve your performance and profitability by designing and implementing effective sales compensation plans. We can help you assess your current situation, identify gaps and opportunities, design and implement solutions, and measure and improve outcomes.