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Second only to “I need a job,” the most frequent request I get managing this 145,000-member(!) group is, “My company needs distribution.”
Last month I went to HIDA … that’s the Health Industry Distributor’s Association’s annual conference (see http://medgroup.biz/HIDA-2012). I told distributors I met, “Our most popular conversation is a huge list of manufacturers looking for distribution. It has more than 800 comments now. How can I help these members?”
And back came the sobering but enlightening reply.
“We carry thousands of products. For us to consider carrying a new product, it has to have three things. First, it has to be noteworthy. We don’t need more ‘me-too’ products. Second, it needs to come with solid marketing support and training. We can’t expect our reps to know everything about every product we carry. And third, there has to be a healthy margin and reasonable sales volumes in it for us.”
Makes perfect sense to me.
But what to do with the 800+ comments at http://linkd.in/MDG-distribution? We have a serious need and I’m not sure how the group can help.
Your ideas, please on
A side note: Group member Perry Mykleby http://linkd.in/Mykleby specializes in go-to-market strategies and medical device distribution. Drop him a note and tell him I sent you.
Hot discussions this week:
What did you see at Medica 2012?
Is iPad mini the device healthcare providers have been waiting for?
What is the best way to explain the 2.3% medical tax increase that people outside the medical manufacturing industry can understand how it affects them?
Tomorrow marks the first anniversary of Group Founder Chris Taylor’s premature death.
On behalf of his wife Janet and daughter Charlotte, thank you for keeping his legacy alive in this vibrant group. I’m grateful for the opportunity to lead it.
Read about Chris and consider a donation to “Charlotte’s Fund” at http://bit.ly/Chris-Taylor
Happy Thanksgiving to All.
Todd Staples, MBA
The sales volume expected to drive through each market is always a factor. Managing 5Mil in revenue through a distribution channel is quite easy. Managing 50Mil is something different. I worked with a company recently that was at 28Mil in North America alone and they had 7 regional managers alone just trying to manage and direct the activities of 40 different independent distributors. Challenging to say the least!
The point is no channel or route to market will provide the same share vs opportunity in every market, and each and every single unique market should be evaluated to determine which approach will yield the most fruit and best support the needs of the end customer.
Very cogent comment! My experience with international distributors mirrors yours and in several organizations I was with they were were one of the pillars for our success!
I work for a manufacturer that uses many distributors around the world who are local to their market and have immense knowledge of how these countries / areas work that we couldn’t ever hope to learn. Most of our relationships are long standing and both sides recognise the importance and benefits of these relationships.
As a manufacturer we don’t sit back and expect our products to sell without any input from us. These distributors are our partners and have to be supported. This support can range from training either at our head office or in the distributor’s country, visiting our distributors a few times a year and going on customer visits with them, having a technical team on hand to deal with enquiries via e-mail or phone quickly and efficiently, carrying out competitor analyses to help our distributors argue our products’ case, translating brochures into the local language, to listening to new ideas for additional marketing materials that could work in their region or even globally.
We haven’t always had the size of company or budget to be as supportive as we are now but through nurturing these reciprocal relationships and listening to the feedback on our products and what the various markets are looking for going ahead we have continued to grow despite these tough economic times.
We haven’t always chosen the right partner and have sometimes had to cancel agreements and find new distributors in an area but on the whole it is a method that works for us. I agree that there is no one answer for all products and all companies but when you chose a route you have to do what you can to maximise its potential. Even some of the small things I have listed above are valued by our distributors.
Additionally, reps and distributor members “rate” products offered through the network; peer to peer discussions on products are also encouraged.
Jerry Robinson is right to say it’s time to look at the medical device distribution through a different pair of glasses. There is still way too much focus on pushing commodity items through classical sales organisations, be it direct or through distributors.
From a european perspective I can say that not much has changed in the world of medical device distribution since the invention of the world-wide-web. Granted, nowadays we’ve gotten more efficient in moving goods around and its easier to access information, but the 101 in distribution still looks awfully familiar to one who’s been involved with it since the late 80ies (remember, that’s when fax machines were the ultimate in communication).
In addition, distributors are still clinging to their “natural pattern” which is to hang on to every company they represent and to punish any manufacturer who wants to take a different route. Why not devlop a distribution system where the “divorce” is already part of the “marriage”? Just like product life cycles, there are distribution life cycles. Certain organizations are more potent in getting concepts off the ground. Such organizations should offer the manufacturer various options to walk out, once a critical volume has been reached. They could even offer turn-key-projects to be taken over entirely when certain milestones are met. Manufaturers could group and set up joint operations to get their products up to speed, using synergies along the way.
After having set up and managed several distribution networks throughout Europe, some start-ups, some highly successful, some less and one an outright failure, I’ve come to the conclusion, that most products could be offered bulk to purchasing organizations, either through the internet, with all its commodities, and/or through box-moving agencies which put together a huge catalogue of products and promote those to the purchasing groups. This would mean that big corporations, selling big volume commodity items to hospitals would give up their own sales force and approach the customers much like major insurance brokers do theirs: through independent one-stop-shops, offering it all.
P.S: I just returned from two days at the MEDICA, trying to find some innovative products to sell on the Swiss market. How much real innovation was there? Impossible to tell, most of them drowned in the flood of me2 items…
Most distributors are not interested in me-too compared to unique products, of course, but a strong established brand or product is usually welcome. I’ve worked with big dealers that have 150K+ products and that is very tough and requires a lot of support, even another layer of manufacturers’ reps. This is very ineffective for new innovative products that may have conflict of interest with existing lines. I’d rather go direct than with a big dealer like that for such a product.
There is a real need to hook up distributors with manufacturers as the discussion has shown. I’ve been monitoring the distributor discussion for a few months and have reached out privately to help a number of the bloggers as a service, since I’ve done it many times. Some are interested, but most expect something to just happen for free or very quickly with a success fee….good luck with that! It takes work, experience, and frankly just some good timing.
One thing I HAVE learned – with repeated examples – is that there is NO ONE SOLUTION… it takes a mix of stuff….
The “hammer rule” also applies. “To a hammer, all the world’s a nail.” and that just isn’t so…..
An example of the hammer rule is that there are many, many things that do not need to be sold via traditional medical channels – and are…. Why, for example, is a blood sugar monitoring device with alarms and wireless tracking so expensive? does it have to be? If you are someone like the FDA, then you MIGHT see that all devices need to be “certified” – even though this really isn’t so.. So they “might not” care that a monitoring devices would cost $10K – thus pushing it out of reach of 99.5% of all humanity. It’s a problem…
My point is that there are many channels that could be utilized for med product sales that have not been used in the past.. and that will dramatically increase product sales – reduce costs – and improve lives worldwide. A lot of products don’t fit this model – but a lot do…. High cost and limited availability cost lives. There is the balance – and it most certainly is dynamic…
It may mean that multiple types of distributors will emerge- – or already have.
In our opinion, it’s essential to be able to work as a team, as true partners and not as separate businesses.
I think this group could act as a facilitator in order to help manufacturers and distributors get closer and establish common goals.
If anyone is interested in the opportunities of the Latin American market, you can contact me directly at firstname.lastname@example.org or visit our site [http://www.micalay.com|leo://plh/http%3A*3*3www%2Emicalay%2Ecom/BA84?_t=tracking_disc]
Grant Senner, MD, DABRM
Its almost like a showdown between nations when he who blinks first loses.
When the need to make a sale crosses the line of reasons not to make a sale
You make some excellent points and I generally agree with everything that you have said. With the consolidation of hospitals, the continuing evolution of GPOs, IDNs and RPCs, the increasing strength of value analysis committees and the centralization of supply chain management the challenges for new product entry are enormous regardless of the channel type. The end result is that we are going to see longer sales cycles for new product adoption.
Distributors have and will continue to be successful if they evolve with the market. Many distributors categorize their products as “focused and unfocused”. Focused products are those that they actively promote by giving it the majority of their selling time. This is usually new innovative technology. Unfocused products are those that they take orders for or mention when the need arises. In my experience the major distributors have a robust CRM system, great understanding of the buy-sell process, excellent knowledge and rapport with their customer base, a better than average sales organization and contracts with all of the major buying groups.
In the end manufacturers that are looking for distribution need to understand the advantages and disadvantages of each channel type along with the availability of each type in their market space and country. If an organization wants total control then going direct is the answer. For most start-ups this is not a viable option unless they have investment capital.
I welcome continued dialogue and insight! Hopefully this exchange is useful to the group.
Todd Staples, MBA
To add to that, large distributors in some cases manage sales teams the same way a direct hire manufacturer would, but in many other cases distributors employ independent agents and training, accountability, sales process, and professional development are all out the window in that scenario so outcome or results delivered by the channel are going to be anyone’s guess.
To make it worse a manufacturer is generally forced to repeat this process (of screening, checking references, and then training, after which the collective management holds their breath and waits for the first order to come in) over and over again in every market they wish to sell into, which in the US alone would be anywhere from 20 to 40 or more distributor relationships to follow, all without any real CRM input either. It is a lot of work for any manufacturer, especially those working with minimal staff and no travel budget and the risk is palpable.
My hope is that through these discussions innovative changes will emerge and the channel will evolve as all of healthcare is evolving. Sustainability isn’t just a fancy corporate word, we should all be practicing it daily. Great discussion!
Please allow me to add a few points to this excellent discussion. There is no easy answer to this question because we don’t have all the facts. For example will the channel partner be required to stock inventory, purchase demo equipment, carry receivables, handle product service etc?
Generally when a manufacturer is looking for distribution they believe that they have a unique and differentiated product that is priced appropriately. Because they are looking for distribution what they are really saying is that they have ruled out an OEM arrangement and they cannot afford to go direct so they need to consider a general distributor, specialty distributors or manufacturers reps.
At a minimum, manufacturers with new product entrants need the following from a channel partner:
Channel partners want:
Before anyone can recommend a channel partner type much more information is required. We have done this for years, especially with respiratory products, and would be willing to discuss our approach with interested parties.
Todd Staples, MBA
The comments your distributor made in your opening monologue are typical of all that is wrong with this sales channel in my view. Allow me to go through them one by one.
Distributor: “We carry thousands of products. For us to consider carrying a new product, it has to have three things. First, it has to be noteworthy.”
Manufacturer: Wow That is alot of products to distract your reps….I wish I could find a group that just carried a handful of products so they could focus on mine more and do it justice!
Distributor: “Second, it needs to come with solid marketing support and training. We can’t expect our reps to know everything about every product we carry.”
Manufacturer: Marketing support with literature sounds fine, but I would love to have a team that can actually sell solutions and understand how my product does that – We have spent alot of time developing an innovative solution to a complex need so we want a PARTNER that can carry those solutions to customers. It sounds like this distributor is looking for “me too” commodities despite their first point that they didn’t.
Distributor: “And third, there has to be a healthy margin and reasonable sales volumes in it for us.”
Manufacturer: After just telling me all the things you AREN’T willing to deliver, now you say you need top dollar in exchange? I am getting the feeling this is more about the distributor than it is about the products, solutions, customers, or advancing medical care. When do we get to talk about what you can offer ME since I will be providing you with a means to make a living?
If you have a product coming to market soon that has significant first year opportunity and a national team of specialized, focused, trained and armed to deliver individuals is what you need, reach out to me and let’s talk.
Normally, it is me, when representing a manufacturer, that is not interested working with a Distributor selling too much product lines. They normally come to me and proudly say, “Hey, you must be interested in me, WE distribute more than XY companies in exclusive”.
‘I don’t believe, that there is a “best strategy”,.. it all depends on the product,..
Perhaps there’s a way to go through that intimidatingly long list and offer help. Pairing members with opportunity is, at its heart, what the group is about. I’m just here to facilitate.
Darren, I do see an opportunity for members though. Many of the manufacturers on that long list seem, at a glance, on shaky footing from a strategic and marketing standpoint.
At the same time, I’m confident the group has many underutilized strategy and marketing experts like Perry who could help them. I would be willing to invest some of my own resources figuring out how to effectively pair them. But how?
For one family, paid work. For another, a go-to-market strategy that works.
That *is* something I would be willing to “stake my reputation” on!
You absolutely hit the nail on head with this topic..
It’s the critical topic that EVERY new company and every new manufactured device faces… It is not an easy one to answer – and traditional answers may not be enough…
Some solutions are “out of the traditional box” marketing.. out of the box traditional funding… and such…
Selling in traditional channels involves ALREADY having established sales – and tremendous capital resources. You buy your way into the sales stream, in other words…
As someone who looks at start-ups and startup issues, I think part of the answer may be in relying in more direct sales and “on hand funding’… you see this even on TV adds where “just call and you may be qualified” type solutions. You may not like the products – but then again the solution type might work… There are a lot of these solution types..
Setting up a direct relationship with insurers or hospital groups – ie, bypass the middleman – (because you HAVE too)…
Selling international – and taking advantage of ex-im financing….
there are a lot of alternate solutions…
By every means, consider alternate methods of product startup – and startup finance…
Rules change about public financing this next year.. . that is a possibiltiy…
Consider Crowd Funding… (have you??)
Consider Amazon/Newegg/and other internet solutions…
Consider other countries health network chains.. Canada, UK, France… etc, etc. etc….
TOO MANY great ideas get hung up on the traditional sales marketing channels and ideas. You can not rely solely on traditional schemes – and this matters a lot…
There was a GREAT product that diabetics could use – some while ago. Company crashed because they could not close this gap… I think everyone really had a loss from this crash…
Great ideas need to find a way to market – often by going around traditional sales solutions…
I think the “sobering reply” is spot on, in an increasingly regulated market globally it’s vital that you carry the right products, furthermore ethically I’d like to think that the majority of distributors would choose to carry products with a proven record that deliver reliably what’s expected for the patient. Add to that the fact that none of these companies are charities, margin is a given and the robust scientific and marketing support are directly linked to the proven record and reliable delivery of results.
I think that the only thing you or the group can do for the members is offer the forum for sharing their information, but other than that I would not consider it the groups “responsibility” to help or to link distributor seekers with distributors. I would consider that a dangerous game, especially where unknown products are concerned. I’d be seriously concerned were it my reputation that was behind the connection.
Sorry but spades are spades and you’ve taken firm grasp of the handle of yours here and wacked a hornets nest!
Jim Krupp, CFPIM
You are absolutely right! There is a huge need for distribution, and there’s also the problem that usually manufacturers have trouble getting along with distributors and many times this ends in bad relationships and worse business performances.
This is why we created Micalay Healthcare Solutions. We are an information and consulting company focused on helping manufacturers access or improve their performance in the growing Latin American market.
We not only help the manufacturers get local distributors, but also help them manage this relationship.
Please feel free to ask any questions you may have!
I also invite everyone to check out our site and blog at [http://www.micalay.com|leo://plh/http%3A*3*3www%2Emicalay%2Ecom/BA84?_t=tracking_disc]
Regards and happy thanksgiving!
The device company, for their part, wants a clean relationship with the hospital for follow on product sales and reps that perform with minimal supervision. What I have seen on this forum are a lot of off shored “me too” products. If you are asking here for help on a truely breakthrough device, it probably isn’t a break through.
Synthia Laura Molina
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