3 ms·

“Finally, someone took me aside and said, ‘We could make cheaper technology, but it wouldn’t support the cost of our sales force, so we have no motivation to do

“Finally, someone took me aside and said, ‘We could make cheaper technology, but it wouldn’t support the cost of our sales force, so we have no motivation to do so.’” I don't understand. Isn't the cost of the sales force built in to the cost of the product, so if the hardware cost went down the end price would be reduced somewhat but still include the cost of sales? Is there some retailer or consumer psychology at play where people don't want a cheap breast pump?

prutschman 12y ago
> Isn't the cost of the sales force built in to the cost of the product, so if the hardware cost went down the end price would be reduced somewhat but still include the cost of sales? Yes. He was saying that, sure, they might be able to reduce their manufacturing cost by a factor of ten, but not their prices. If the goal is to massively price-reduce medical devices--we're talking by at least a factor of 10 or more--that's a big problem.
bkolko 12y ago
That comment wasn't originally about breast pumps, so I can't speak to that specific market. But the comment about sales force costs was about selling products like ultrasound into emerging markets. And if you have products that require lots of training and servicing, and lots of high-touch sales to get to acceptability -- yup, that's gonna cost you! And regardless of the price point of the product, you still have the associated overhead with reaching those markets. There are things you can change about that 'associated overhead' but that's a totally different story. My gut instinct is that I don't think sales costs are really a huge driver of how companies have been approaching innovation in the breast pump space. There is indeed consumer psychology around how to price products, but the thing that really came across during the hackathon was the frustration people felt about the design and engineering of the pumps -- not the price point.
bunderbunder 12y ago
This wasn't for breast pumps, it was for fetal monitors. Fetal monitors exist in a fractally broken market. The people delivering medical devices have little motivation to be price-conscious because the people making purchasing decisions about their products have limited motivation to be price-conscious. The people making purchasing decisions have little motivation to be price-conscious, because they just pass the costs on to patients. Patients, in turn, do not ask about costs associated with fetal monitoring up-front, are not in a position to do any negotiation regarding fetal monitoring in the moment, and in any case aren't too worried because their insurance company picks up the cost. Sort of. The insurance company, in turn, doesn't worry too too much about the cost of the fetal monitors that the hospital chooses, because they still figure out how to pass the cost back to the patient - which they can do successfully because in the United States it's exceedingly rare for consumers of health insurance to comparison shop. Instead, they just go along with whatever option is chosen by some HR folks who are mostly spending other people's money and therefore have all sorts of incentive to not worry too terribly much about the best interest of the consumer. So yes, there is some weird consumer psychology at play. The weird psychology is that we've got this crazy aspect of our culture where it's not just OK for our employers to be meting out important and expensive health care decisions to us (a bizarre proposition if you look at it objectively), it's actually desirable, so desirable that many people are unwilling to consider taking jobs where a health plan isn't included in the benefits package.

prutschman 12y ago

> Isn't the cost of the sales force built in to the cost of the product, so if the hardware cost went down the end price would be reduced somewhat but still include the cost of sales? Yes. He was saying that, sure, they might be able to reduce their manufacturing cost by a factor of ten, but not their prices. If the goal is to massively price-reduce medical devices--we're talking by at least a factor of 10 or more--that's a big problem.

bkolko 12y ago

That comment wasn't originally about breast pumps, so I can't speak to that specific market. But the comment about sales force costs was about selling products like ultrasound into emerging markets. And if you have products that require lots of training and servicing, and lots of high-touch sales to get to acceptability -- yup, that's gonna cost you! And regardless of the price point of the product, you still have the associated overhead with reaching those markets. There are things you can change about that 'associated overhead' but that's a totally different story. My gut instinct is that I don't think sales costs are really a huge driver of how companies have been approaching innovation in the breast pump space. There is indeed consumer psychology around how to price products, but the thing that really came across during the hackathon was the frustration people felt about the design and engineering of the pumps -- not the price point.

bunderbunder 12y ago

This wasn't for breast pumps, it was for fetal monitors. Fetal monitors exist in a fractally broken market. The people delivering medical devices have little motivation to be price-conscious because the people making purchasing decisions about their products have limited motivation to be price-conscious. The people making purchasing decisions have little motivation to be price-conscious, because they just pass the costs on to patients. Patients, in turn, do not ask about costs associated with fetal monitoring up-front, are not in a position to do any negotiation regarding fetal monitoring in the moment, and in any case aren't too worried because their insurance company picks up the cost. Sort of. The insurance company, in turn, doesn't worry too too much about the cost of the fetal monitors that the hospital chooses, because they still figure out how to pass the cost back to the patient - which they can do successfully because in the United States it's exceedingly rare for consumers of health insurance to comparison shop. Instead, they just go along with whatever option is chosen by some HR folks who are mostly spending other people's money and therefore have all sorts of incentive to not worry too terribly much about the best interest of the consumer. So yes, there is some weird consumer psychology at play. The weird psychology is that we've got this crazy aspect of our culture where it's not just OK for our employers to be meting out important and expensive health care decisions to us (a bizarre proposition if you look at it objectively), it's actually desirable, so desirable that many people are unwilling to consider taking jobs where a health plan isn't included in the benefits package.