A Value-Based connection: Aligning Commercial Strategy with Sales Execution
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This document discusses how companies can better execute on delivering value to customers. It notes that while many organizations say they focus on value, price often still dominates discussions. There are two key challenges: conventional methods focus too much on pricing, and sales teams need better training to sell value rather than just price. The document advocates taking a holistic approach that aligns commercial strategy with sales execution, considers the full value proposition including benefits beyond price, and embeds value management into organizational processes from strategy to contract negotiations. This will help companies better meet customer needs while also achieving their own objectives.
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A Value-Based connection: Aligning Commercial Strategy with Sales Execution
- 2. As a leader of Industry Solutions at Model N, James works with our customers and partners to propose, architect and deliver transformational revenue management initiatives. He has over 15 years of experience in consulting, product management and sales roles. Presenter Slide James Robinson Director of Industry Solutions, Europe E: jrobinson@modeln.com
- 3. A Value-Based Connection! Aligning Commercial Strategy with Sales Execution
- 4. Presentation Topics Market readiness for value-adding services and partnerships Two dimensions of executing on value Sources of “value-gaps” in the chain Principles of a holistic approach Embedding value and revenue maximization into the organization
- 5. The Market is in Transition... Independent Buying Group Negotiation Integrated Purchasing Power Selling Independent Selling Corporate Accounts Manufacturer Customer • Highly Differentiated, New Products • Pricing power = pricing consistency • Limited analysis of competitive or consumer behavior • Physician/Surgeon Preference • Sophistication often prized over Efficacy • Purchasing lock-ins with established vendors • Focus on Cost = price erosion • Voluntary utilization = non- compliance • Dual/Multi-Source = loss of mkt. share • Returns for ‘Sole-Source’ • Utilization mandated and monitored • Partnership Contracting approach with win-win approach to structuring deals • Relationships extend value beyond sourcing to ‘other areas e.g. operational excellence’ • ‘Price’ is not the starting Point • Commoditization of Products and customer relationships = loss of customer loyalty • Runaway Rebates and Discounts to meet demands ‘for higher return = margin erosion’ Fragmented Buyers Rise of the Aggregators The Partnership Model Increasing Commercial Complexity & Controls + 3-5 years
- 6. …sometimes “Value” isn’t for Everyone!
- 7. “Anti-Value” Payer Purchasing Practices International Reference Pricing Procurement via Tenders
- 8. Some Recent Statistics… 32% of organizations believe they fail to consistently communicate value. 52% of organizations agree that value & services are the full package 43% of organizations believe end user attach importance to value added services – the remainder still feel price prevails
- 9. Creating Value in the New World…. Old World New World Comparative analysis vs reference drugs Negotiate once Higher burden of proof Drive to transfer risk away from the payer Payment related to outcomes Revisit and review Dominated by clinical benefits Wider definition of value Pre-launch trials Economic studies and quantification of outcomes
- 10. As evidenced by… Planned budget increases / decreases in marketing instruments - Booz & Co (2009)
- 11. Challenges to Execution are Two-Fold The two most important challenges to resolve before implementing Value-Based Initiatives are dominance of conventional methods of pricing and up-skilling sales team’s ability to sell value - Macdivitt & Wilkinson (2012)
- 12. Part 1: Translating Strategy into Sales Execution STRATEGY EXECUTION VALUE Creation, training and communication Results, feedback and adjustment Marketing Sales
- 13. Components of Value Value RPG RPG: Revenue or Performance Gain CR: Cost Reduction EC: Emotional Contribution CR EC Better patient outcomes I like you! It costs me less overall RPG ECCR The Value Triad A Unique Customer Combination
- 14. Communication & Alignment Marketing Sales Buying Unit Patient Fails to translate into local setting Created “top- down” Defaults to type (PRICE) Value not maximised Blames product or market conditions Builds mistrust Goes back to the drawing board?
- 15. How do we “sell” and “capture” this added value?
- 16. Part 2: The missing link in Value Delivery… VALUE Creation, training and communication Results, feedback and adjustment Marketing Sales STRATEGY EXECUTION
- 17. STRATEGY EXECUTION Part 2: The missing link in Value Delivery…. VALUE Marketing Sales PRICING CONTRACTS Segmentation, targets and commercial best practice Performance measures, exception approvals
- 18. Contract Planning and Development for Value Discounting Rules Pricing Approaches Performance Criteria Links to Product Strategies Customer Targeting Goals & Objectives Contracting Strategies 1 2 3 45 6 The financial and non-financial objectives the organization hopes to achieve Specific customers with whom the organization wishes to develop a contracting relationship Consistency of overall brand strategies to contracting strategies regarding pricing, competitor focus, customer focus and product portfolio management The types of discounts and value-added services offered in contracts The amount of discounts and value-added services offered in contracts The contractual performance requirements that customers and suppliers must meet
- 19. Working at “The Sharp End”…. • What is the best deal strategy to use for this offer? – What matters to this stakeholder – How should I bundle products and services? – What commercial structures should I use? • Where should I create and set the performance thresholds? – How can we ensure a win-win? – ….and change behaviours • What discount / incentive for each commitment? – On and off-invoice – Ancillary performance obligations
- 20. ….requires an Integrated End-to-End Process Value Management Life-Cycle Performance Measurement Agreement Settlements Deal Management Financial Compliance Analytics $¥€ Value & Price Strategy
- 21. Embedding Value Management Annual Operating Plan Quarterly Business Review Strategic Plan Quarterly Business Review Review Cycle Monthly Contract Reporting Global Value Policy Committee Overcome internal barriers Track results and refine strategy Advise on best practices Put in place controls Disciplined Process Analytics Account Engagement
- 22. Redressing the Balance The Innovator • Cash-flow to invest in R&D • Predictability of revenues • Access to emerging markets • Appropriate price differentiation • Fair return on capital The Customer(s) • Make budgets stretch further • Value for money • Equality of access to healthcare • Patient centric solutions • Support and education for clinicians
- 23. Thank You!