Smart Selling: Distributor Sales Strategies From HIDA
Elizabeth Hilla
By Elizabeth Hilla, Senior Vice President, Health Industry Distributors Association
Distributor sales reps have many responsibilities – introducing new products, growing market share for key manufacturer partners, finding new customers, and much more. I’d argue that your single most important job is to sell the value of your company’s distribution services – to differentiate your company from its competitors, and to ensure that your customer understands the value of using a distributor vs buying direct.
For this month’s Smart Selling column, I thought it might be useful to review all that ways that distributors add value – real, measurable financial gains – to healthcare customers.
The value of reduced transactions
Reducing transactions is at the core of a distributor’s value and it drastically reduces costs for your customers. Imagine how many transactions a hospital or nursing home customer would incur by buying products from several hundred manufacturers in a world that had no distributors. Imagine how many full-time employees would need to be hired just to manage the processes that the customer would have to take on.
Consider accounts payable as one example. Industry averages show that the full cost of paying an invoice is around $15 per invoice and can run as high as $40. (It’s less if payments are all done electronically, but that’s less common when a healthcare provider is paying a small direct-selling manufacturer than when paying its prime vendor distributor.) These estimates are based on the time required to process the payment and the cost of that time in staff wages. Whatever the actual cost for your customers, they save substantially when they deal with just one distributor rather than with hundreds of direct-selling suppliers.
This same type of savings is repeated in the customer’s purchasing department and in the receiving process.
The value of reduced finance costs
Cash flow is essential to most healthcare providers, who depend on third-party reimbursement for the majority of their revenues and often must wait weeks or even months to receive that reimbursement. By providing a reliable source of products, and delivering on short notice, distributors reduce the amount of money providers must dedicate toward inventory, thereby improving cash flow. Inventory reductions also reduce costs for storage space and lessen the risk of loss from product obsolescence or damage. In addition, distributors offer favorable credit terms that allow customers to better manage their cash flow.
The value of efficiency
Distributors work with their customers to evaluate how medical supplies are purchased and to find ways to improve the processes related to ordering, receiving, redistributing, and paying for medical products. In physician offices, for example, doctors and nurses see hundreds of patients and don’t have time to order medical supplies. Distributors solve this problem by managing inventories, developing standard orders, and offering customized ordering platforms.
Hospitals have more people and more expertise in supply chain, but often, too much staff time is spent on activities like breaking cases and redistributing supplies. Distributors can significantly help these customers cut costs through redesigning processes to reduce or eliminate staff time required to order, distribute, or use products.
The value of information
Distributors help their customers make better decisions by providing them with accurate data and information related to purchase history, product characteristics, product alternatives, and more. For example, a nursing home customer might use purchase history data from its distributor to determine its highest-dollar product categories, in order to develop standardization goals and save money. In the physician setting, distributors are a valued source of information on new technologies and products. For example, they often show their physician customers how they can attract more patients or increase efficiency by investing in new types of equipment that allow them to perform more procedures in their offices.
The value of reliability
The value you provide starts with the things your company does every day such as delivering product and taking orders over the phone. Your customer may be so accustomed to your reliability in these areas that he or she may not even see these services as adding value, but they certainly do. Likewise, standard services such as prompt delivery, high fill rates, credit services, multiple ordering methods, and customer service all are valuable services that every distributor provides.
Although you don’t control the services your company chooses to offer, you can control whether your customers are aware of their value. Know your services and use them as important selling tools to increase the value you bring to your accounts.