How To Increase Your Medtech Growth Trajectory In Indirect Markets
By Nicolas de Ricou, head of Italy, Central Europe, Russia, and Eurasia at Echosens*
In the past years, the medtech distribution market has become more crowded and more competitive than ever. In emerging as well as mature markets, we have seen the rise of smaller, more agile partners specializing on a specific sector or market segment — from endoscopy to lenses.
Last year, an article in The Economist underlined that “few industries have whipsawed in the COVID-19 recession as violently as medical device makers.” The impact of the COVID-19 crisis highlighted channel partners’ roles and responsibilities in their respective markets, pushing them to the first line of medtech’s success across many geographies. Although forecasts differ on the pace of recovery from the pandemic, it’s taken for granted that 2021 will see a global improvement in the medtech industry. One of the key questions that boards currently focus on is: How do we make the best out of it?
Since the vast majority of the growth in sales is expected to happen overseas, it is obvious that having an optimized indirect sales strategy will be instrumental to deliver results. Indeed, more often than not, going indirect – through a channel partner – is the easiest way to expand to international markets. Clarifying what we can expect from channel partners overseas is the bread and butter of export managers. Usual metrics to evaluate their performance are key indicators such as annual turnover in value and volume, gross and net margin, and level of stock by product line, country, and partner. It is essential, but only a first step.
The 3 Levels Of Channel Partner Relationships
Having a more comprehensive and refined analysis in order to better approach and manage your partners will ultimately help you better calibrate your tackling of specific markets. For the sake of simplicity, let’s distinguish three different levels of relationships.
- The EU’s Medical Device Regulation (MDR) defines the agent (or importer) as “any natural or legal person established … that places a device from a third country on the market." It is the lightest form of collaboration, the contract is minimal, and it usually leads to occasional sales.
- The MDR defines the distributor as “any natural or legal person in the supply chain, other than the manufacturer or the importer, that makes a device available on the market, up until the point of putting into service.” In this case, business relationships are more frequent and the contract is more thorough, involving marketing, logistics, finance, and sometimes servicing. For the largest markets, the distributer can occasionally become a meta-distributor with many sub-distributors or agents.
- The hybrid distributor, already quite frequent in highly competitive markets such as fast-moving consumer goods (FMCG) markets, is rapidly gaining importance in medtech. A distributor can be considered hybrid as a result of a process in which both partners invest superior resources – time, human, money – and align their organizations at different levels, developing a strong sense of ownership to achieve their common goals, noticeably sales, without the creation of a common legal structure (such as a joint venture).
With that in mind, you start to have a better idea of what you can ask of/expect from your partner. For example, while relying on your agents to advance your registration process can prove a risky bet, expecting good marketing insights for your next product launch from a strategic/hybrid distributor feels just right!
The 7 Pillars On Which To Evaluate Your Partners’ Capabilities
In parallel with classifying your international partners into one of the three categories above, you may want to dig deeper, assessing your channel partners on each of the following precisely defined topics.
- Financial solidity
- Organizational skills
- Marketing and digital marketing know-how, collaboration with expert centers and key opinion leaders.
- Sales capabilities (headcount, reach, CRM)
- Logistics
- Service
- Regulatory, quality, and environment
To be more concrete, if we take the example of marketing: What is their level of engagement? The percentage of time spent on your product line or brand? Is there a dedicated (or partially dedicated) brand manager? How is your brand represented on their website, in their booth, on their social media pages? At how many events (national, regional) have your device or service been concretely represented? How has it been presented to local key opinion leaders and scientific societies?
Best Practices For Aligning With Your International Partners
For the exercise to be complete and achieve maximum efficiency, you also need to step back and take a look at your current international practices: What tools are currently available for your channel partners? What resources are available to your strategic partners only? Is it enough to reach your tactical and strategic goals in your top five distribution countries? In carrying out this step, it is essential to differentiate your market potential and partner capability evaluations. You may, for example, proceed in three steps as follows:
- Examine each partner: What do you expect from them this year? In three years’ time?
- What is your understanding of their trajectory and strategic vision?
- Examine each market and specific segments: Where do you stand today? Where do you want to be in three to five years?
These tasks are time consuming, and a collaboration with the marketing teams within your organization will help you to address the most relevant questions in your specific business. Once it has been done, it is natural to look at the conclusions about your partner and your market analysis next to each other:
- Which resources should we invest with whom?
- Which partner is best positioned to accelerate growth in segment X?
- Do we need to find a new partner to develop the product line we will launch in Q2 2022?
- Could a non-exclusive partnership in large countries be more profitable in the long term, and upon which conditions?
The main goal of this exercise is to identify the gaps and fill them. Proceeding in a systematic way can lead to redefining missions, focusing a partner on a specific market niche. It has a strategic meaning.
You might sometimes find a skill that your channel partner has developed above and beyond your own. You are used to training your channel partners at various levels on your products, services, and sales tools. Your micro-surgery technologies hold no secrets from your distributors? Great.
Still, sharing best practices is a two-sided process. When you find out that a creative Latin American partner has developed a mobile marketing tactic that could be leveraged on several emerging markets, it would be valuable to invite the company to your next global marketing review.
Call To Action: Refine And Balance Your Export Strategy
A key challenge for export managers and international sales directors is to find the balance between short-term demands – in order to deliver quarterly (sometimes monthly) results – and a mid-to-long-term analysis of their market opportunities and to adapt their strategy consequently. In a period of uncertainty across many medtech segments, questioning your international expansion practices to level them up is essential if you want to ride the next growth wave as fast as you can. By refining your analysis right now and distinguishing between channel partners, you will uncover fresh insights, ideas, and best practices that will not only enable sales acceleration when the markets recover but also lead to a more granular allocation of resources and, ultimately, a more astute sales and marketing strategy.
References
(1) If you want more insights on this precise topic, you may want to read R. Blakeman’s The Hybrid Sales Channel: How to Ignite Growth by Bridging the Gap Between Direct and Indirect Sales.
About The Author:
Nicolas de Ricou is head of Italy, Central Europe, Russia, and Eurasia at Echosens, where he leads a mixed team of territory managers and channel partners across 35 countries. He holds a master’s degree in business from ESSEC Business School and a master’s degree in history from Paris’ Sorbonne University. Early in his career, he was a consultant for Izsak Grapin & Associés with Roche Pharmaceuticals as a notable client. He joined the consumer products division of L’OREAL as a territory manager and then joined L’OREAL’s marketing team in Paris to reinforce the Matrix haircare brand. After two years working at Septodont, where he managed and developed the international distribution channels in the CIS region, he joined Echosens in 2017.
---
*The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position, opinions, or views of Echosens.