Capital Contracts: The Good, the Bad, and the Ugly

by News 23. March 2009 10:00

When I was in contract management at a GPO, I was constantly told by capital manufacturers how difficult it was to see value using a GPO.  I was also told that there was no benefit that they could see from even having a contract with them.  As I heard the naysayers complain about GPOs and their relationships with them, I quietly drove the sales for my other capital manufacturer agreements off the charts. 

I have to emphasize a point very clearly.  Getting a GPO contract in any category guarantees you a license to hunt, not a guaranteed catch.  Believe it or not, most of the manufacturers complaining about sales to me never once visited my office.  They considered attending the single annual alliance conference as the only thing they were willing to invest in the relationship.  Some did not even attend the alliance event. 

I believe that some capital manufacturers think that it is the sole responsibility of the GPOs to market and grow sales for them.  Heck, that’s why they get paid fees, right?  Wrong.  I realize that capital contracts are not the easiest things to move, but I promise there is a way.  It requires buy-in from the manufacturer to position their agreement in a slightly different way. 

You may be asking yourself, “So, how do I position my agreement?”  And my answer to that is that there really isn’t one single answer that will solve the problems for all capital manufacturers.  Each capital manufacturer has things that make them unique, so there is not one catchall approach for everyone.  If I had to come up with a few strategies that could apply to most capital manufacturers, I can name three very quickly.  And to be honest, they really apply to every manufacturer, big and small.  In reality, they could even build upon one another.  Here is my short list:

1) Create good, solid relationships with your GPO.

2) Identify what marketing options are available at the GPO.

3) Market your agreement as if you didn’t have an award with the GPO. 

Now, let’s go into detail for each one of the strategies. 

Create good, solid relationships with your GPO.  Believe me when I tell you, having a good working relationship with your GPO is critical.  This means that you will show up for quarterly business meetings with material prepared to talk about.  Sure, your GPO may very well drive that quarterly meeting, but be prepared with numbers and specifics about how your contract is performing outside the GPO.  Strategize during each session about how you can market and grow sales.  But please, remember this one thing:  If you come into the meeting stating your sales are “off the charts,” make sure that they really are.  Manufacturers lost a lot of credibility with me when they did that because many of them were either lying or under-reporting sales to the GPO.  Neither one of those gaffs makes you look very good.  Take the necessary time to attend the GPO events, participate in regional meetings, and make sure to contact your GPO contract manager a minimum of once a month, preferably more.

Identify what marketing options are available at the GPO.  When you have good relationships with the GPO, do quarterly business reviews, and stay in contact with them, more than likely, new options will arise that will benefit you.  For example, the GPO launches a new capital program that you can participate in.  Most, if not all of the GPOs have a capital business area.  Are you in direct contact with them?  Have you asked your contract manager about how you can participate in their programs?  Maybe the GPO is launching a new custom contracting solution to an IDN, and there may be an opportunity for you to provide value to the GPO.  Very rarely did a capital manufacturer ask me those questions, but some did.  And guess what?  I worked diligently to help them market their agreement to our members, which ultimately benefited the members, the manufacturer, and my GPO.   

Market your agreement as if you didn’t have an award with the GPO.  Please do not ever tell your contract manager that it is their job to market your agreement.  If you do, chances are your sales will not be as strong as they could be.  Most contract managers have 20-40 agreements that they are responsible for, and they do not have the time necessary to give full attention to every single one of them.  You just need to make sure you are one of the manufacturers that they do spend the time on.  I personally believe that when you work together, you can accomplish great things.  I recall a time when I was trying to come up with a unique solution on how to get hospitals to use the GPO’s competitively bid awards versus bidding each project separately.  I tried to sell this idea to several manufacturers, and most declined.  The ones that agreed to listen met with me, and together we came up with a revolutionary strategy that brought in huge amounts of incremental sales.  One year alone we accounted for approximately $12 million in incremental sales. 

Not a bad ROI for a couple of strategy sessions.  I bring this example up because I only approached manufacturers that I had good working relationships with.  Even then, most were used to operating a certain way and were not open to new ideas.  The end result was they missed a huge opportunity to bring in incremental sales. Lastly, I would like to say that there are lots of different ways to grow sales available to you from the different GPOs.  Each GPO has unique concepts and strategies when it comes to capital contracts, but you may find out that what applies to one, also applies to the other.  I have always believed that if something works, repeat it as often as you can.  This philosophy certainly applies to strategies to grow GPO contracts.  Build good relationships with them, visit them regularly, stay in touch with them, be open to ideas that stretch your normal way of doing business, and watch your sales soar.

Bill King - Formerly with Novation 


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