A medical equipment division of one of the world's largest publicly traded medical products companies needed to improve its gross margin. After completing an analysis of the business issues, executives concluded that one of the areas responsible for the decline was the sales team. While the sales team was highly skilled in the capital product they sold and had an impressive record of past sales successes, over the past few years the market had begun to mature. Furthermore, the doctors and hospital administrators saw all competing products as essentially the same.
This led to the issuance of RFPs and competitive quotes. The sales team became hagglers. They would submit a quote and then haggle from there with the administration. The sales team had great relationships with the doctors but not with the operational and executive level of the hospital. They were not equipped to handle the business end of the sale and therefore sold on value to the doctors and other users, then negotiated on price with the administration. While the pieces of capital equipment sold continued to rise slightly, the gross margin of the average sale was falling. The company had to improve gross margins for the year in order to meet its obligations to its parent.
The executive sales team decided that they needed to develop stronger negotiation skills. Through our partner, GrowthSource, Inc, they discovered the Accordence® negotiation model and determined that the process was suited to the high-stakes, high level negotiation required by the complex selling and market environment within which the company operated. The Accordence model gives teams a shared, proven negotiation framework they can use to guide their negotiation approach, create a common language with in the organization and identify and capitalize on the value drivers within each specific account. It also integrated well with their sales process.
After creating a highly customized version of the Accordence flagship program Just Negotiate, senior consultants trained the entire selling and negotiating support teams. First they began by working closely with the senior sales management team to learn the specific selling and negotiating challenges the faced. Using deep knowledge of the market environment, the group identified areas of potential improvements that could be made. Then they spent time interviewing senior management for insights, analysis, and identification of the scope of personnel that should take part in the negotiation sessions. In addition, custom cases were developed around the issues identified to work on in the sessions. The program was launched at the National Sales Meeting with a two hour introduction and goal setting session. Finally, they analyzed the current selling and negotiating processes and identified gaps and communication challenges that needed addressing in the negotiation sessions.
The current sales team was fairly skilled in negotiation but was missing some fundamental approaches that could lead to an increase in gross margin. These approaches were integrated into the sessions and addressed in webinars following the sessions. As a motivator, teams participated in a two day boot camp for the company where sales divisions competed against each other for the best negotiating outcomes with the winner being announced at the following National Sales Meeting.
Using the approach to negotiation and implementation strategy outlined above, the medical device company achieved their business result. At the National Sales Meeting the following year, the Senior Vice President in his opening address thanked the sales team for exceeding their placement goals for the prior year and announced that they did it while improving their gross margin by five points over the prior year. He attributed it directly to the negotiation strategy and training the sales team executed during the year. The company continues to use the Accordence methodology to improve the quality and quantity of their equipment sales.