Facing Down Industry Consolidation

The frank Agency Branding
Fall 2017

If there’s one overarching trend that can be observed within the healthcare industry, it’s consolidation.

A rapid uptick of mergers and acquisitions in the 1990s, mainly attributed to the managed care movement, cooled slightly in the early 2000s. But, in more recent years, the 2010 Affordable Care Act has contributed to a second swell of consolidation.

With 102 deals announced in 2016, mergers and acquisitions have seen a 55% rise since the ACA passed in 2010 (according to Health System Management). The types of consolidation vary from hospitals acquiring other hospitals or medical practices, to the dental realm where dental service organizations (DSOs) are buying up private practices. However these consolidations occur, their impact is far-reaching – and presents challenges for the supply and technology companies that sell into practices.

The Consolidation Movement

Practice consolidation has been on the rise for nearly 30 years, with many practices submitting to purchase by hospitals or large medical groups. This is due to many factors, most of which could be boiled down to one root cause: cost concerns.

Rising education costs mean younger doctors are graduating with overwhelming amounts of debt. With overhead and administration costs to consider, private practice is far less feasible for practitioners already saddled with what amounts to a monthly mortgage payment in school loans. Thus, many doctors are seeking to unburden themselves of their practices by selling to a hospital and becoming an employee – no longer strapped with the hassle and heavy costs of running their own business.

Additionally, the ACA offered a number of tenets that encouraged mergers (albeit indirectly), in the hope that larger health systems would have an easier time defraying patient expenses and providing more efficient services. For example, one such tenet of the ACA offers Medicaid and Medicare disbursements only per medical condition treated – not per service provided. This is an incentive to provide better, more efficient care for Medicaid and Medicare, but a byproduct was increased risk for the practices and hospitals, which spurred more consolidation to help limit these risks.

Though it’s happened more slowly than the mergers of the medical field, the dental industry, too, has seen a consolidation swell for similar reasons. According to Dentistry IQ, the costs of running a practice continue to rise as revenue either flatlines or declines, and crippling dental school debt is yet another obstacle many practitioners struggle to manage. Thus, growing numbers of private practices find a reprieve through a DSO handling administration and costs.

This rapid acceleration of consolidation throughout both the medical and dental fields has had a ripple effect through the technology, equipment and supply industries. Hospitals and practices are trying to cut costs wherever possible, and this, combined with the smaller number of practices due to mergers, has created a market where there is simply less sales opportunity.

The lack of sales avenues has in turn created its own consolidation movement – consolidation of supply and technology companies. Unable to keep up with the pricing pressure and the stiff competition that comes from having fewer sales targets, now tech and equipment companies, as well as suppliers and distributors, are joining forces to ease the tension. Yet, even with merged resources, equipment and supply industries struggle to adapt to the limited, heavily cost-conscious target market now facing them.

Overcoming the Challenges of a Sparse Audience

Not all tech or supply companies have the resources or desire to form mergers in order to compete.

In such a limited and fiscally-minded landscape, medical companies must look beyond mergers and price dropping to accommodate for the shift in priorities.

Rather than continuously lowering equipment and supply pricing to meet the desires of practitioners or other decision makers, companies should instead be focusing on the overall value of their products – and using this perspective as the focal point to drive sales.

Products that are less expensive don’t always yield the best value. Often they break more easily, require more maintenance, and don’t offer as much versatility. The move for tech, equipment, and supply companies now needs to be toward innovation: creating products that are one step ahead of the technological advances, and are built to last and deliver the most use with the most efficiency. Products that can render these benefits will increase practitioner revenue, as improved efficiency and a slower replacement rate mean more services performed over longer time periods.

Messaging that consistently emphasizes this expansive lifetime value will leave a much greater (and longer-term) impact on a practitioner audience than merely dropping the bottom line. Thus, your marketing from beginning to end needs to state and restate: There is no product like ours – and with it, you can advance your practice and obtain the value you need to move forward.

But it’s not just the message that matters – how it is transmitted is just as critical.

Creating brand preference in a consolidated market requires the kind of innovation and thought leadership that make your company stand out from the rest.

Digital Strategy for the Modern Device and Equipment Marketer

While many aspects of equipment and supply sales are still in-person endeavors, an increasing number of practitioners and other decision makers perform their own online research prior to speaking with sales reps or making purchase decisions. This gives a unique opportunity to reach your target and influence them before they even know specifically what they’re looking for.

To accomplish this, you first need to have a robust content and SEO strategy in place. Your target will be searching for answers to particular pain points; anticipate their questions, offer expert answers, and in so doing, you provide a low-key yet highly impactful first impression of your brand.

Even if you have top-notch SEO standards in place, organic search should always be accompanied by paid search and display. A recent study performed by Google showed that even if you’ve earned a first place ranking for organic search, omitting paid search ads will still significantly decrease your click rate, as a higher organic ranking does not necessarily make up for paid search. The two combined, however, keep your brand at the forefront of searches and increase the likelihood of clicks and eventual lead generation.

Yet a third tier to your digital strategy is data driven retargeting. When your search efforts have succeeded in driving traffic to your site, your job is to then keep your brand fixed solidly in the target’s consciousness. The goal is to drive them back to your site so you can generate a lead which will turn into personal contact with a sales rep – and then, a lifetime customer. Retargeting gives you just this opening.

By making use of analytics tools to collect data on who’s visiting your site and where they focus their attention, you’re able to segment your leads according to level of interest, geographic location, pain points, and so forth. Then you can retarget them with ads tailored to these specifics – a constant reminder of their need, and how your brand can resolve that need.

There’s Sales – and Then There’s Leadership

Industry projections tell us that consolidation isn’t going anywhere anytime soon. But equipment and supply companies don’t need to beat or join with consolidators; instead, adopting powerful messages and progressive digital strategies help you penetrate through the tides, rather than fight against them.

Invest in your own innovation and thought leadership to amplify your brand and make your company a voice that stands out, creating brand preference and value that far outweigh the pervasive cost concerns.

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