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"Escaping the Discount Trap"

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sushant abraham

on 26 November 2013

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Transcript of "Escaping the Discount Trap"

"Escaping the Discount Trap"
A medical device company ponders how to change its relationship with a key customer by Eric T. Anderson

Introduction to the case study
*The resolution of the pain is what constitutes a true "solution“.
*People don’t buy products or services  they buy results. So today’s salespeople can only succeed by selling solutions which address their customers’ priorities.
*Adopted it for its specialized, wealthier customers, but Augusto had a view point it could work with all kind of customers.
*Discounting- sinkhole – just like other opened on the roads of brazil during rainy season.
*Sales rep have given “bigger and bigger discounts to sell products , and the prices & margins have dropped steadily
*Director wants to increase the margins by 3%
*Solution selling is the only way which has persuaded specialized hospitals to spend more on an array of products & services.
*Cora said the other general hospitals lack resources.
*The solution selling idea had come from a customer cardiology dr. who had keen interest in the manufacturing device business.
*He complained that the sale reps lack engagement.
*Augusto said tell him to name product and we would sell
it to him.
*“Bosi e faora” to sell inexpensive blood pressure cuffs.

Facing the challenge…
Bosi e faora’s service of an app and equipment aimed at preeclampsia.
-The company’s research found out that it is one of the vital thing that a patient needs to have to avoid any discrepancies at delicate times.
- Fatal conditions signaled by high blood pressure was often caught too late.

Augusto Tolentino

Officially the head of operations
Right hand of company’s director presidente.
Head of customer satisfaction

Group Members
Jagriti Budhia Sagar Chore
Namisha Malvi Sushant Abraham

Subject : Fashion Marketing Management
Presented to :Mr. Sameer Sood
Date of presentation: 26th November 2013

Bosi e faora
Sao Paulo – based Medical Device Manufacturer.

Sergio Lins
Purchasing Director
Very Economical
Negotiates for low prices.

Cora Milano

Sales director
Santa casa de Misericordia Hospital

Philanthropically funded general hospital.
Aims to serve patients as reasonable as possible

Solution selling is a sales methodology. Rather than just promoting an existing product, the salesperson focuses on the customer's pain(s) and addresses the issue with his or her offerings (product and services).

Pilot Course Survey
is the chairman and group medical director
of Columbia Asia Hospitals in India.

*Conducted by course instructor within course
*Findings and recommendations reviewed by project evaluator
*Implemented in subsequent course offerings

The Experts Respond
David Mok- is the worldwide director of pricing for DePuy synthes spine, a Johnson & Johnson company.

Price-Only Customers like sergio lins can be brutal. But Bosi e Faora shouldn’t abandon solutions selling, no matter how daunting the path might be.

He clarify this by saying many u.s. medical device companies face similar pricing battles. In the old days, a salesperson simply told the medical director that prices would rise, say, 5% next year. The physician typically did not argue, because he knew the sales rep well and trusted the products. this type of “relationship selling” was routine.

Purchasing manager of power said, the health care industry, like any other, aims to minimize costs in the supply chain. medical directors can no longer order expensive devices that they happen to like.

Creating a series of learning apps for patients mobile phones .. That could be used at homes.

Costing of product

The cost of equipment is a crucial consideration.
Hospital and medical practices are severely constrained by limited revenue streams, whether they originate from private or government insurance, or, as in many parts of India, patients’ own pockets.

The best Indian hospitals have been so successful in driving down costs.

A coronary artery bypass procedure that might cost $50,000 in the united states can be had for one-tenth that price in India.
Diabetes patients, can now receive automated reminders to check their blood sugar. The technology is furnished by a device maker, which also provides training and ongoing education for patients and the hospital.

Another manufacturer has started to work with a finance company to offer patients the opportunity to pay for their cardiac stents in small monthly instalments.
Programs like these not only give device manufacturers a chance to expand their business and improve their margins

They also allow hospitals to offer services that they cannot provide on their own.

sales rep
The sales reps, in particular, must identify the value proposition on a
particular account and know precisely why each customer wants to buy from them. For some of most important accounts, established cross-functional teams—pricing and marketing staff, as well as
technical experts—charged with identifying and addressing each customer’s greatest needs. It takes structure and planning.

He further analysed that the customer’s main worry is losing money.

First step might be to help the institution’s executives understand their costs (many as find, are not sure where money is being spent). It might help them implement activity-based costing so that they can focus squarely on reducing the cost of caring for patients. sales reps still interact directly with the customer, of course, but the work of the cross-functional teams helps them do their jobs better.

As augusto learned, some customers don’t care about the solution or
value—just the price, that’s when you think about trade-offs.

He concluded by example- if one grant one hospital a big discount to avoid losing its $500,000 of business, it may end up eroding $2 million more when other customers find out (and they will—consultants are deft at uncovering price discrepancies). so, instead, one offer the customer products that fit its price range. But never lose sight of value-selling strategy.

In the long run, it will allow you to help your customers serve their patients, to improve margins, and to climb out of the price-only sinkhole.

Value over price ...
Full transcript