Originally Published MX November/December 2002
INFORMATION TECHNOLOGIES
Strategic Customer Relationship ManagementMoving beyond product differentiation to gain competitive success.
David Salazar
Today's
medical technology companies are under increasing pressure from customers to
reduce prices. Hospitals are becoming ever more price sensitive, group purchasing
organizations (GPOs) are pushing for price reductions, and the government is
legislating to reverse the escalation of hospital healthcare costs. Moreover,
with approximately 15,000 medical product companies in the United States alone,
product and price competition are intensifying. The resulting price pressures
are driving down revenues and making productivity more important than ever.
Medtech companies also face diminishing customer loyalty stemming from both increasing market competition and growing customer expectations. Complicating this problem is the fact that the medtech distribution channel is intricate and highly fragmented, with multitiered relationships involving distributors, GPOs, hospitals, physicians, and clinics. To this complication add the evolving yet still-undefined role of the Internet. The resulting channel complexity can make it exceedingly difficult to establish durable customer relationships.
Another challenge comes from increasing industry consolidation. As large companies have acquired smaller ones in order to expand product lines and create cost synergies, operational inefficiencies have resulted. A lack of integration among merged business processes—and the resulting information-system and database "silos"—is largely to blame.
Traditionally, medical product companies have relied on product differentiation to achieve market position. But in today's pressure-packed competitive environment, product differentiation alone is insufficient. Companies need other methods of ensuring success over the long haul.
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| Figure 1. Medical companies must strive to differentiate their products and maximize value for their customers to become market leaders. (click to enlarge) |
If medical product companies are to become market leaders, they must strive not only to differentiate their products but also to maximize value for their customers (see Figure 1). To accomplish this, companies need to think strategically about customer relationships and customer value. Increasing customer value depends on medtech companies becoming more customer-centric, which means:
- Gathering customer intelligence and leveraging it in real time.
- Improving field communications.
- Focusing on the most profitable customers and product lines.
- Improving customer satisfaction.
- Expanding service offerings.
- Shortening sales cycles.
- Collaborating with customers on product development.
A customer relationship management (CRM) strategy can help a company achieve customer-centricity. CRM is an integrated sales, service, and marketing strategy for capturing, organizing, and leveraging customer information. A comprehensive CRM strategy helps companies increase customer value by improving customer satisfaction and strengthening customer loyalty. In turn, such a strategy makes it easier to market to, sell to, and service customers across all channels, and translates directly into an improved bottom line.
Creating an Effective CRM Strategy
To be effective, a CRM strategy must encompass and integrate all company activities that involve interaction with customers, including marketing, sales, customer service, and field service. It should ensure that no matter where, when, or how the customer comes in contact with the company, the response is personalized and consistent and demonstrates that the company knows and values the customer. Achieving this goal requires a high level of interaction among the various departments and functional groups within the medtech organization.
Information Sharing and Collaboration. Above all, such groups need to gather and share up-to-date customer information. All interdependent business processes, especially those that cut across functional boundaries, must therefore be carefully orchestrated and monitored. The appropriate managers must be notified whenever there is an interruption in smooth work flow. Effective CRM also provides the analysis that gives instant insight into important customer trends and patterns. The information sharing and collaboration enabled by effective CRM benefit all functional groups.
The sales organization must be fully aware of any current service problems in order to manage accounts intelligently. Consider a sales representative for a magnetic resonance imaging (MRI) equipment manufacturer calling on a hospital whose MRI system has been down for several days. If the rep has access to up-to-the-minute service information pertinent to this hospital prior to making the visit, this advance knowledge could turn a potentially disastrous call into a productive call.
For their part, field service engineers and customer service representatives need to know which product configurations particular customers have already purchased. A field service engineer dispatched to a radiology center to repair a malfunctioning x-ray machine can carry exactly the right spare parts to ensure fast repair if he or she knows the specific configuration of the machine in question. Bringing the machine back on-line quickly minimizes lost revenue, and speedy repair of critical-care devices such as ventilators minimizes the chance of complications being attributed to the unavailability of the equipment. These capabilities solidify the equipment supplier's reputation. In addition, with detailed knowledge of machine configurations in place at customers' facilities, a medical product manufacturer can better predict spare-parts demand and optimize field inventory.
The marketing organization needs familiarity with customers' buying patterns in order to target marketing campaigns for maximum success. Say a manufacturer introduces a new pacemaker product and needs to alert all physicians that may be interested in the product. To do so requires segmenting the company's customer base. The marketing group can use the customer purchase his-tory available through the CRM system to analyze the customer base and target those physicians most apt to buy the new product.
The group can also create focused promotional campaigns by identifying customers with relevant equipment installed and mining that base for prospective purchasers of upgraded accessories, options, disposables, and services. The group can then use the CRM system to automatically create a campaign for telesales to prospect and pass qualified leads to the sales force.
The organization should make certain that its product development function is customer-centric—that it develops products that customers want and need. This requires that the product development teams receive continual feedback from customer-facing departments. For example, the field service group needs to keep the development department informed about servicing issues. Such information enables developers to maximize product quality and minimize service costs by correcting reported product deficiencies. Feedback should also include customer requests for product changes and enhancements that can guide new product development and speed the time to market for needed features.
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| Figure 2. Through information sharing and collaboration, a comprehensive CRM strategy helps address the typical business challenges encountered by medical product companies. (click to enlarge) |
The CRM strategy should ensure that information is gathered from all customer
interactions with the company. The information collected on a customer should
include such items as sales contact history, sales orders (including order history
and current order status), products purchased, product pricing, account affiliations,
contracts and compliance, entitlements and warranties, service history (including
service order details), and responses to marketing campaigns.
Employees in all functional areas should be able to obtain a unified, global
view of the customer without having to consult several data repositories. The
view should consolidate information garnered from marketing campaigns, sales
calls, field service calls, and customer service inquiries. The view should
include information acquired from all communication channels—the call center,
Web site, e-mail, sales and service, and distribution partners (see Figure 3).
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| Figure
3. Information consolidation across channels. (click to enlarge) |
CRM Program Implementation
Implementing an effective CRM program is no trivial task. Both organizational and technological issues need to be addressed. Diverse groups throughout the enterprise must be induced to participate and collab-orate, the organization's business processes may have to be rearranged to bring about a more customer-centric orientation, and information technology will have to be deployed to support the CRM strategy.
Phased Implementation. Many organizations have opted to implement their CRM programs by stages, beginning with the most critical functional areas of the enterprise. Implementation might focus initially on the direct sales force, providing sales representatives with account, contract management, and reporting tools.
Next, the customer service center could be included. Service representatives would be equipped with tools to monitor and manage service issues. They could tap into the customer information already accumulated by the salespeople, while adding their own service-related information to the customer database for use by other company groups.
The marketing organization could then be brought into the system, followed by distribution partners. As the presence and use of CRM spreads across the enterprise, its value constantly grows.
Selection of CRM Software. The complexity and multiplicity of customer interactions in the medical technology industry make it essential to support CRM activities with information technology, particularly CRM-specific software. Numerous vendors offer a wide array of CRM software products, many of which are point programs that address only specific CRM areas, such as sales automation, help desk automation, or marketing program management. While such products provide a means for collecting vast amounts of information, there is no mechanism to synthesize the data to provide true business intelligence. Another problem is the fact that typically these products do not integrate easily with one another, resulting in fragmented islands of customer information.
Effective CRM requires a comprehensive and integrated solution that supports the entire spectrum of relevant business processes. A complete software package will include functionality pertinent to sales automation, field service and customer service automation, marketing program management, contracts and pricing, distributor and channel management, and decision support. Such functionality should facilitate interaction and information sharing. Only an integrated, multichannel system can make possible the tight collaboration necessary for successful CRM.
A CRM software solution should also include functionality that automates the tracking of work flow, helping to enforce best practices and ensuring that critical processes are completed in a timely fashion. In addition, the software should offer comprehensive analytical tools that enable company employees and representatives to gain valuable knowledge from the aggregated data.
Ideally, the CRM software solution would be designed to allow phased deployment to support organizations that wish to implement a CRM strategy gradually. This requires that the solution be highly modular, so as to simplify the addition of functions, divisions, and organizations to the CRM system. Each module should readily share and communicate with external applications and legacy systems via a common, standards-based integration network.
CRM for the Medtech Industry
A medical technology company planning a customer relationship management strategy should select a CRM solution that is designed specifically to accommodate the distinctive characteristics of the medtech industry—including complex distribution channels with multitiered supply-chain relationships, complicated contracts and pricing structures, and stringent government regulation. Generic solutions cannot meet the specialized requirements of medical product manufacturers without extensive and costly customization. Therefore, a medtech company should search for a vendor that offers not only a comprehensive and integrated CRM package, but also one designed to meet the specific requirements of the medical industry.
Data Model. The data structure employed by the CRM solution must accommodate the complexity of the medical product distribution chain, encompassing customer profiles, contracts and pricing, product configurations, complaints, assessments, sales forecasts, and incentive compensation.
Customer Relationships. A core expectation of the CRM software package is that it enable the user to visualize complex customer relationships. This means tracking affiliations and memberships, and monitoring who does what to whom, so that sales representatives know where to focus their efforts. The software should help the company manage relationships with distributors, GPOs, hospitals, clinics, and physicians—both operationally and strategically.
Sales Cycle. Medtech sales reps are involved in the entire sales cycle. Salespeople for surgical-product companies, for example, make surgery visits. Therefore, it is important that the CRM solution support them in managing such follow-up and other facets of the sales cycle.
Regulatory Compliance. A signature characteristic of the medical technology industry is the extensive government regulation to which it is subject. Part 11 of 21 CFR defines the regulatory framework for medical device manufacturers using computerized systems as repositories of product quality data, and the Safe Medical Devices Act of 1990 mandates the reporting of adverse device-related events by user facilities.
Government regulation complicates product development, customer support, and field service with its requirements to maintain detailed product and service data. Violations of these recordkeeping rules can result in expensive recalls, and even criminal prosecution. Consequently, any CRM solution must maintain product data in full compliance with regulations.
The Internet. The Internet is evolving as an important channel for customer interaction. Consequently, a CRM solution should encompass aspects of its use, and integrate the Web with other communication channels.
Conclusion
Through CRM, companies can become far more customer-centric and increase their competitive edge by moving beyond product differentiation to maximize customer value. By selecting and deploying a comprehensive and integrated CRM software solution that meets the unique requirements of the medical technology industry, a company can ensure the effective implementation of its CRM strategy. As a result, the company can build far stronger customer relationships for improved performance and increased profitability.
David Salazar is general manager of Siebel Medical, a vertical segment of Siebel Systems Inc. (San Mateo, CA) that provides CRM technology to the medical products industry.
Copyright ©2002 MX
