When Demand Patterns Go Wildly Off-Script: Strategies for Life Sciences and Medical Distributors

By Mick Naughton

Jun 09, 2020

Table of Contents

  1. About the Author

Thelifesciencesand medicalconsumablesindustry spans a very broad continuum of players and businesses with ultimately the same goal.That is, developing curesfordiseasesandimproving health outcomes for patients.This effortstartswith basic research, typically at largeuniversities, and thendevelopment and manufacturing of pharmaceuticals/medicaldevices,andfinallythe clinical setting where care is administered in hospitals and physician’s offices.The network of suppliers, regulatory agencies and funding sources is extraordinarily complex and companies working in these industries need to be perpetually adjusting their strategies to changes in the environment and innovations in the field.

Distributorsworking in this space are often managing demand for products that potentially have real life-and-death consequences. Critical research work can fail if essential materials aren’t available and,as we have seen so recently with the COVID-19 pandemic,demand forpersonal protective equipment (PPE)in the clinical setting can savethelivesof patients and workers. Sales teams need to be aware of the needs of their customers,effectively communicateto maintain supply, educate on innovative new productsand be timely in their responsesto quote requestson essentialitems.As the pace of commerce has increased,tools and technology that assist in this environment have become essential.

The COVID-19 pandemic has added another layer of complexity to this already challenging environment by creating an incredibly wide range of supply and demandfor products. Across all dimensions of the industry the demand for PPE, gowning, hand sanitizers, testing kits and face shields has skyrocketed. One leading PPE manufacturer/distributor cited thatithad shipped 15 million more face masks through the end of March than they had in all of 2019. This demand will remain strong fora period of time, but as vaccines are developed and the spreadisabated, there will certainly be a shift in that demand.

Simultaneously,other areas within the industry have seen anenormouscontraction. The university systems have been shut downfor the pastthreemonths, eliminatingthedemand for many of theproducts used in basic research. In the clinical setting,non-COVIDrelatedtreatments have seen a dramatic decline with most elective surgeries being postponed.One source estimatedthat 28 million surgeries would be cancelled as a result.

Developing a commercial strategy in this environment is daunting. It requires the integration of leadership, field expertise, tools and technology that can enhance an organization’s ability to efficiently execute.Appropriatelysetting price pointsto avoidover-or under-respondingto demand is critical.The ability to pass along cost increases,tied to challenges in the supply chain,hasbecome more complex than ever.

There is also an increased need to serve customersremotely. Sales teamsand buyers alikeare working from home,withless accesstoface-to-face communication. A strong eCommercestrategy isacompetitive advantagein this current environment and customers are demanding apersonalizedexperienceonline.

This combinationoffactors hascreated an opportunity to leverage technology to help model scenarios, anticipate needs, automate responses and more rapidly communicate insights to sales teams.In fact, as demand remains uneven during the crisis and expects to rise and fallunexpectedly during the recovery, a modern toolset driven by data science is fast becoming a requirement.

Managing Price and Facilitating Sales of High-Demand Productswith Deal Management

Distributors that are selling PPE and vaccine-related lab equipmenthave never seen so much demand for these products. This demand, combined with an often-dwindling supply, has created an environment of scarcity. First and foremost,it’scriticalto avoidoverpricing in the market, while still accounting for cost increases and properly adjusting price for different customer segments.Easier said than done, right?Like any high-wire act, the trouble comes whenyou lose confidence and start to panic.To avoid slipping off the tight ropeinto misaligned market pricing,you need a system that accounts for all the factors that influence price,measures price sensitivity and delivers real-time guidance based on market trends.

With Zilliant’s price optimization and management solutions, distributors in this industry have been able to:

Test different strategies and model out what-if scenarios based on revenue or margingoals, andpredict the effect of price changes before they happen. Account forall ofthe factors that influence priceto build a strategic and statistically relevant price segmentation structure. Automate the management of incoming cost increases, and more efficiently decide how much to pass along to their customers.

High demand, low supply environments also create intense competition. Many of the life sciences and medical distributors we talk to tend to have an arduousquoting process, sometimes churning through more than a thousand quotes per day. Without the right governance or price guidance, this process takes up valuable time andcan lead to lost deals.

A reimagined approach to deal management, powered by cloud-native data science-driven applications, allows distributors to:

Automate workflows and approval processes. Provide sales reps and managers with a deal score. Provide sales repsvisibility into the profitability of each line item. Provide an optimizeddeal envelope thatraises alarms when prices get too close to the floor.

Finally, we must address eCommerce, as it’s quickly becoming the dominant mode of purchase. Imagine you work as a buyer for a hospital and you’ve been working from home since March.An email comes in from the nursing staff at the hospital’s COVID wing, urgently seeking morePPE. You can’t meet with yourdistributor in person due to social distancing andin fact,youdon’teven have time to set up a meeting if you could.You’re aware of the scarcity of supply and yet you want to order as much PPE as you can withoutblowing a hole through the hospital’s budget. The distributor that ends up booking this order(and securing goodwill for future business)will be the one that:

Providesa seamless online buying experience, with rational and market-aligned price pointsthat are consistent across other sales channels. Allows for automatednegotiationvia AI,machinelearning,and a robust REST-based APIso the customer can self-serve rather than wait for a counteroffer.Speed of reply is paramount,and the technologyexiststoconsistentlyautomatequotesatmutuallyacceptable prices. Providesrelevant product recommendations based on similar customer transactions.

Of course, the winning distributor will need toactually holdtheinventoryin stock, something that is no longer a guaranteeinthese high-demand categories. As some hospitals have even begun sourcing their own PPE,it’s imperative that distributors act swiftly to reestablish themselves as the reliable supplier of choice.

Strategiesfor Low-Demand Products

Distributors thatstockproducts with little to no demand right nowmust firstquantify their exposure.By determiningwhat percentage of revenue those products representin the overall business, companies can measure their risk. If a disproportionate amount of inventory is negatively affected, thetemptation maystrike to drastically drop pricein an effort tostimulate demand. This is usually a mistake. In our current environment, demand is not necessarily tied to price, so this strategy not only won’t magically result in more business, it also will cut profits on the small number of deals that do get done.

Instead, a strategicprice increase campaign on in-demand inventory can help compensate for the lagging stockandgive cushion to the top and bottom line for as long as it takes for the market to recover.Price sensitivity awareness at the product and category level will ensure that these price increases don’t come at the expense of market share.

In addition, distributors musttake advantage of their full portfolio of products and services to make the most of each order, byprovidingcross-selland upsellproduct recommendationsat the point of sale.The technologyisavailable that can deliver this informationto an online customer at checkout ordirectly to asalesor customer service rep.

In uncertain times, sales teams need everyadvantage. There is majoropportunity, throughpredictive sales analytics,to sellnet-newproducts toexistingcustomers.Withcustomerpurchase patternprofilesthat compare each customer’s purchasepatterns to that ofideal customers, insightscanbesurfaced that point sales reps to the specificitems a customer shouldbuying, but currently isn’t.Additionally,it can identify when customer purchase volume has dropped indicating partial or outrightdefection,empowering reps to retain more customer revenue and combat churn.Closed loop reportingshows the win rate for these cross-sell and churn insights, givingsales managementdefinitiveinsight intowhich products’ demand is coming backduring a turbulent recoveryand at what rate, rather than waiting on word of mouth from rep to rep.Theclosed-loopreporting also feeds directly back into the system, allowing it to grow smarter over time.


The eventual recovery will be uneven. Different geographies, customer segments and product categories will come back online at their own pace.Organizationswithin this industry will need to be highly responsive to their customers, mindful of the dynamics of cost and price changes and agile in their ability to offer alternative product options.

The life sciences andmedicalconsumablesindustryison the front lines of this pandemic.Researchers, pharmaceuticalcompaniesand medical professionals areworking tirelessly to developinnovative testingkits, life-saving equipmentanddrugsto fight COVID-19. The commercial organizations that support this industry need to be as dedicated to working efficiently and intelligently as their clients.A crucial part of this fight includes usingthe latesttools and technology that providecriticalinsights.

If you would like to learn more, please reach out to me atmichael.naughton@zilliant.comor connect with me on LinkedIn!

About the Author

Mick Naughton, M.S., MBA, is a sales director at Zilliant where he helps global B2B companies realize improved financial performance using advanced technology. Prior to joining Zilliant Mick spent 20 years in the life sciences industry in a variety of pricing, sales and technology roles.

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