Four Major Points for Success
At present, the healthcare sales cycle is a marathon that can last up to 24 months. As the figure below demonstrates, there is a significant amount of variability in the length of the cycle with 43% of purchases being made within 6 months, with as many as 8% being made at within 19-24 months!
The ambiguity in the length of the cycle creates countless headaches for any startup looking to get their product adopted by an enterprise health system. While there is a limitless amount of potential obstacles, let us focus on Four major factors creating barrier to entry:
- Decreasing budgets
- Hospital administrators are getting smarter
- Increased number of vendors
- Complex organizational structures
1. Hospitals are Tightening the Belt
The present economic environment in healthcare demands that leaders spend each dollar judiciously and that the goods and services purchased will increase both efficiency and overall quality. In a 2013 study commissioned by Google and HIMSS Analytics, over 740 administrators were interviewed and it was shown that 60% of decision makers are looking to improve clinical outcomes (i.e. quality) when deciding to purchase. In addition, the study found that nearly half of these same administrators are also seeking to lower total costs. These findings indicate that in order to be competitive, a startup has to not only highlight the advantages of their product, but also be able to lower overall cost in doing so- thus greatly benefiting the company.
2. Administrators are Getting Smarter
There was a time when a medical sales representative with a good understanding of “clinical jargon” could talk shop with and easily make sales to physicians. At that time, there was a belief that the technology was simply better was more important than to understand the economics of the sale. While this mindset was effective in the past, the emergence of the digital era has resulted in hospital administrators having unlimited information right at their fingertips. Vendors have to not only know their product, but also its clinical benefits sales are required to be skilled in selling by using clinical data) and the economic advantages. Furthermore, the ease of access to digital media has empowered administrators with substantial information placing additional pressures on the vendor to know their product from all angles and be able to rapidly cite supporting and/or countering data. The era of only product knowledge is over.
3. Too Many Vendors
With increasing globalization and information availability, hospital purchasing administrators across the globe have become sales targets for vendors. Administrators have to limit the number of vendors with which they directly interact with and they have been able to do this through internet research. Considering this, the importance of a startup developing and maintaining a robust website is higher than ever before. In the aforementioned Google study, the researchers found that over 50% of hospital administrators go online to research products before they even encounter a sales representative and 81% of administrators directly contact a vendor as a result of their search. In addition, 77% of potential buyers do some degree of product research on their mobile devices (either tablet or phone), thus necessitating the need for at least some sort of mobile platform. This is not to say that a mobile platform is essential, however, in a marketspace that is becoming increasingly competitive. Considering this reality, anything you can do to distinguish yourself or be seen first could be the difference between getting a purchase order and waiting another year.
4. Complex Organizational Structure
Who is in charge?
In the figure above, the Google study demonstrates the wide variety of job titles that key decision makers possess. For a startup trying to make a sales pitch, finding where to start and with whom to start can be confusing. Sometimes a startup make a presentation to an interested administrator only to wind up discovering that they ultimately do not have the final authority on purchasing decisions. Unfortunately, if too much time has elapsed in discovering the lack of authority, unfortunately, your sales team may have to wait for the next cycle. The figure at the top-right is a typical organizational chart of a US Academic Medical Center in which there are numerous administrators at various levels and with multiple ties who ultimately can influence whether or not your product will be utilized. Navigating this structure not only takes time on your end, but also on the hospital’s end- contributing in part to the long length of the sales cycle.
How can You Succeed
1. Maximize your digital footprint
Decision makers are always looking and a good website is like having a 24/7 sales rep. Even the most basic media platform provides a significant advantage in getting your product noticed. This is an area to maximize, where money put in translates to increased value.
2. Avoid the budget cycle all together
If the purchase is under $5k you can bypass budgets altogether. You can also try to package your offering so that it can be bought with money from the capital budget.
3. Know your product inside and out
may sound obvious but know everything from the clinical data to the economic impact your product will have. In order to stand out, you need to know your competitive edge and justify why your product is the one that needs to be acquired.
4. Know the cycle
Find out the fiscal year of the institution you want to sell to. For starters you can go to Guidestar.org – search the hospital and find the financials tab. By finding the fiscal year end, you can subtract 4 months and determine your target close date. With this information on hand you can maximize your window of opportunity.
5. Know who is in charge
Find the procurement/purchasing department of a hospital and use that to see who the key decision maker is. You may also be able to learn the hospital’s specific timeline for accepting new products.
Continue to explore our blog for more guidance on the hospital and healthcare sales process.