Medical Device companies globally are experiencing pressures on their margins.
Decreased government and private insurance reimbursements.
Medical Device tariffs, or the threat of them.
Medical device companies are understandably concerned. These accelerating disrupters are adding to the complexity and risk already associated with regulatory concerns, R&D development costs, and competitive market pressures.
Under these circumstances, driving organic new profitable revenues, or even organic margin accretive new revenues, sometimes seems far off.
Often, the path to greater revenues feels like a choice between lowering prices in exchange for volume, trying to reduce costs without becoming uncompetitive, or making riskier bets on innovation.
A frequently overlooked part of medical device portfolio are aftermarket parts and service.
SKU’s such as consumables, replacement parts, and add-on components are often forgotten.
These ancillary products are usually ordered on-demand when equipment wears out, breaks down, and needs to be replaced. Sometimes, Customer Service may engage with ordering these parts more than Sales itself does, as customers call in to customer care with urgent and specific needs.
These aftermarket parts are typically high profitability SKU’s, even if they are lower in price per unit versus core product SKU’s.
A complex assortment of medical device aftermarket products are highly conducive to being cataloged and sold online, making them easier to find, and therefore easier to purchase.
This also opens up new possibilities for driving profitable revenues, including:
- Consumeable subscriptions: are there individual aftermarket parts where it makes sense to offer them on a recurring subscription for the customer’s convenience, so that aftermarket parts are always available?
- Repair and Mainfenance BOM’s: Can sales BOM’s be created to make it easier to solve common repair and replacement issues consisting of multiple SKU’s. Can these Repair & Maintenance BOM’s be put onto subscriptions also?
- Service and Warranties: Can prepaid service and warranties be sold along with core devices to generate additional revenue?
Example candidates for this kind of Medical Device offering could include:
- An EKG manufacturer with a large catalog of aftermarket and replacement parts
- A heart monitoring device company with various consumeables and replacement parts
- A respiratory diagnostics company with B2B consumeables necessary for ongoing repair and device maintenance
- An ultrasound manufacturer whose products require ongoing maintenance and recalibration parts and services.
This “razor and razor blade” model can help drive new profitable revenues from the installed base, make it easier for customers to repair and replace, and create a competitive advantage against less digitally-transformed organizations.