Dental Insider Blog

Observation and Commentary On the Dental Industry

Payola Up Please

Posted by dentalinsider on November 14, 2006

Back in the 1950’s and 1960’s record companies paid money for the broadcast of records on the radio. On influential stations payola can become so commonplace that it became difficult for artists to get their records played without offering some sort of payment. Early disk jockeys Alan Freed and Dick Clark, yes you read that right, were caught up in payola scandals. Why bring this up you say? Well, it appears that the dental industry has its own version of “pay to play”.

Over the past few months I have spoken with several manufacturers who have reported “strong arm” tactics being deployed by dealers to gain discounted pricing, to get them to advertise in their sales flyers or even to “coax” them to attend their national sales meetings. So is this capitalism at its finest or just downright unfair business practices? They have been debating that in other industries for years, so I am sure we will debate it in this one for some time as well. Here are some of the grumblings I have been hearing from manufacturers.

One manufacturer told me about the Sullivan-Schein National Sales Meeting. They said that the cost just for attending the meeting and accommodations runs from $8K – $20K depending on what type of manufacturer you are. The suppliers that are there for Zahn pay less but get less, if you are there for Sullivan-Schein the cost is more and if you cover both sides of the show you pay the high price.

Now this is where it gets tricky, more than one manufacturer has told me that when they initially decline to attend the show that they are then repeatedly called by Schein employees, until they get the final call from the Director of Sales. Once it got to this point they said things got strange. They said at first the director told them all the great stuff they wanted to hear., like “It’s the only time to see all our reps together”, “You are part of our team right?”, “We want to make sure we support you in the coming year” and other all the other smoke these guys blow. But after they again declined to attend they received a call a week or so later from the Director. This time it got pushy and borderline threatening. They were told that their attendance would “be in your best interest” and that “we want to support your products, but” and “you do know that ABC Company, your competitor, will be there”. They said they hung up the phone and felt like they had just spoken with a loan shark with whom they owed money to.

The costs for manufacturers are not only limited to the price for the attendance price. The cash register keeps ringing all the way until the end of the show. Another manufacturer who was willingly attending the show and has for several years told me of another story of how the dinners are “Sponsored”. Basically the same tactics as above, but for this they hit up the big manufacturers, since that is where the money is at. They said that they were pretty much told they would be “Sponsoring” the dinner, as if it were an honor. Any idea how much these dinners cost? Well let’s just say they don’t serve off the 99¢ menu from Wendy’s. Funny thing too, it was pointed out to me that SS White sponsored quite a few dinners at this years meeting, so will you have SS White Burs with your salad, or Dentsply’s Midest Burs?

It seems that Schein likes to have extravagant meetings and does not like to pay the bill. I guess there is nothing wrong with that, unless you are the small manufacturer who is getting pressed into attending, even though you don’t see the need to spend $20K to get limited results when you do attend. And how dare you not attend? If not your products may be blacklisted and the sales reps will not sell them. You will never get a return call from anyone in the organization, which is until you decline to attend the next years meeting.

But why is this really a problem? Well in this industry it is probably a good idea that the best products are given a fair shake. The best equipment, the best restorative materials and whatever it is that can make dentistry better. I know this is a startling concept but there is this person in the chair, who in the end, pays for everything, they are called the patient. Don’t they deserve the highest levels of service and the highest levels of materials that will be placed in their mouths for years to come? Dentists should be given a full choice of what is available to them, not an edited version based on who attended their dealer’s sales meeting that year. And certainly they should not be switched away from products, by whatever means the dealer’s choose including product bashing, to another product just because the manufacturer either chose not to or could not afford to attend the dealer’s meeting.

When you read this you have to keep in mind that although we all know Dentsply, 3M, Kerr, Kavo and the other big names. But this industry is full of smaller manufacturers who spend less in one entire year on marketing than some manufacturers spend in one issue of a magazine.

We were able to obtain a copy of the invitation to the Sullivan-Schein/Zahn National Sales Meeting. Take a look for yourself.


Associate Q

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11 Responses to “Payola Up Please”

  1. Anonymous said

    As a denist who has recently sold his “small” company of dental manufacturing, I can do nothing but agree 100%, based on the truly difficult nature of trying to get our industry leading product into dentist’s offices. We dominated sales for the first 2 years of our business plan, but as soon as Schein began this “featued product” pitch to manufacturers we had to say “NO” to the back breaking costs associated with it (nat’l sales meetings, multiple flyer adverts, etc etc). It was basically a ‘one way’ exclusive, which meant that Schein was the only dealer we could sell to, yet they could and would carry competitor products at low/zero commission. If we took a lesser position in their product line up, we would have our product rendered to a zero % commision and the risk of account reps sbsequently not recommending our equipment (ie minding their own wallets, not theirdentist cusomers), even though our was less expensive and far superior. What a ball buster!
    Thank God we sold our product line to a larger competitor, the deals that dealers were forcing was like eating a shit sandwich.

    As a dentist, I NOW ask every acct rep who comes by trying to sell a product if he or she gets gets a ‘spiff’ from the manufacturer or has competing products set to zero % commission…I like to know why I’m getting pushed this product

  2. Anonymous said

    A couple of quick thoughts on this issue. First let’s all be honest. The jockeying for a position of power in the relationship between the manfacturer and the dealer is a two way street. A manufacturer applies just as much pressure to the dealer to promote their product lines.
    As a rep in the industry I would not ask my doctor to switch to a lesser product. However in the case of two comparable products, why would I promote the product from a manufacturer I know won’t support the doctor or me in the future.

    The second issue I would like to bring to light focuses on the end user themselves. What happened to personal accountability? Since when does a customer have to blindly follow a path their salesperson (key work salesperson) sets them down? Shouldn’t the actual doctor be looking at the product and evaluating its wothiness? They are the ones with the degrees, right?

  3. Anonymous said

    Just out of curiosity….which dental schools provide degrees with courses in “Spiffs, payola and shills: A current state of the dental trade industry”…or should this be a course only offered at large trade shows for business savy wannabe (read AACD!)dentists to attend?
    While I fully agree that dentists MUST be cautious consumers and execute dilligence in product choices, there are simply too many behind the scenes deals made that the consumer is totally blind to. But, hey, that’s business!
    Let’s face it, it’s the added cost to the dealer, manufacturer and dentist (and ultimately patients) that suffers from crap like this. Too much of our nation’s currency is being inefficiently routed / squandered by this path of business.
    Chinese manufacturers are laughing their asses off at us as we fatten up. This has absolutely nothing to do with dealers steamlining their operations as they would have us believe. It hurts competition in the manufacturing sector and unless trade shows resist the exclusivity demanded by the big dealers small dealers may not get the exposure required to promote marginalized manufacturers with really good product.
    Alas, a they say in China..”Long live the flea market economy”…as long as it is truly free…

  4. Major said

    I would like to reply to some of the comments above. First there is no two way street with these dealers, they want it there way or the highway. If was some give and take that would make things a little easier, but it is take, take, take and no give.

    To the person above who said they were a sales rep in this industry I ask if you are a rep at a dealer, a manufacturer or where. Obviously that would shed some light on where you are coming from. But generalize and to say that manufacturers apply pressure to dealers to promote their products is false. The larger manufacturers may play those games, and as we have seen with the recent Dentsply situation will take it to extremes. Most people think that decision had more to do with their dental office products, when in reality that decision focused more on the laboratory business. Sure they covered it up with all the gray market mumbo jumbo, but it all comes down to plastic teeth.

    But that is for another day. The point I am trying to make is that manufacturers don’t call up dealers and threaten them if they do not do what they want, at least the manufacturers I speak with. It is not to say it does not happen, but it is not as nearly as prevalent as dealers pushing manufacturers to do the things they want.

    My second problem with the sales reps statements are that he acts as if he is “in the know”. This is not a put down, but unless you are either working for a small dealer or are corporate you are being spoon fed what they want you to know. You might know some of the manufacturers, but if you sell to offices then there is no possible way you could know everyone of your manufacturers. That is why the decisions are made on a higher level and then filtered down to you. If you are corporate then you know exactly what I am talking about. So please spare me the righteousness and get real, you sell what you make the most money on and what your sales manager tells you to sell. I am not blaming you, you are just trying to keep your job. How do you know what products are better? Have you tested them, have you read the reports, who were the reports prepared by and so on.

    As for the end user being knowledgeable enough to make all these decisions, then why do you have a job? You are supposed to support them, to help them, and all those great things. At least that is what the marketing says. So you are accountable for helping them make their decision, right? Because again you act innocent. What if the doctor is buying a superior (key word superior) product from a manufacturer who sells direct. Let’s say he did his studies and everything said that the product he chose was the best. He loves the product and so does his staff. But you don’t like it do you. You are not making commission on that product. So what do you do? You take a product in that is similar but we all know is not better. Do you sell it to him as a better product? Let’s say he is buying some brand of endo products that have been proven by numerous studies to be superior to any other brand. The brand you sell is just not as good. Do you expect me to believe that you go in and say “well this is not as good as what you are using, but I want your business”. Because if you are saying anything else than you are contradicting what you said.

    Don’t take this as an attack, although it does seem to be one. It is not your fault. I am not blaming the reps, yet. But to close with something more relevant to my original post. These meeting cost manufacturers tens of thousands of dollars. I can personally tell you they do not pay off. They are not worth it. The reps don’t listen, they are liquored up by mid-morning and the management is to busy patting themselves on the back to even acknowledge any of the smaller manufacturers. So if a manufacturer chooses not to go, why are they penalized? If a company has limited products and if they feel going year after year is a waste then why should they be threatened when they choose not to go? Because this is what is happening. Smaller manufacturers are being fleeced and being forced to shell out big bucks just to “maintain” their current sales. You see the keyword in that sentence was maintain, because these manufacturers are not seeing growth.

    And just FYFI the reason there was so much pressure this year because many manufacturers had pulled out, and Schein was positioned to lose money. So they sent everyone on a mission to sell spots. They were given authority to give tradeoffs. This deal is run separate and the numbers have to be there or heads roll. So they gave discounts, gave away marketing, etc to try to bring people in. And further in detail it was explained to me that the Zahn side was falling very short of there “quota”. See they have to pay Mother Schein back for their part of the deal. So the laboratory manufacturers got it even worse than the operatory dealers. These people don’t answer to their customers, they answer to their shareholders. So whose best interest are they really concerned about?? (Besides their own rear ends)

    Associate Q

  5. Anonymous said

    One last post on this issue. I am the rep. spoken about above by “major”. I can certainly appreciate the questions raised and would like the opportunity to respond.
    To answer the question- I work for a 2nd tier distributor, and am employed in a dual role (management & rep). So I am lucky enough to have a perspective of the rep:doctor and distributor:manufacturer relationship.
    Let’s go down the points raised one by one:
    1. I can’t speak for the largest distributors, but please believe that pressure is applied by the manfacturers as well.
    2. While I do make every effort to keep up to date with product, I do not nor have I ever professed to be the doctor. I provide info on the product I can offer- it is the end user who is responisble for taking it from there. However, I would not knowingly switch a client to an inferior product, and have in fact already turned away such business. Even us dumb reps can still have morals. Additionally, my clients appreciate this honesty thus securing my business.
    3. I seriously hope you are not crying poverty on the part of the manufacturer. The same manufacturers that sell their product for half the price overseas. The same product half price- still making money. Who does this hurt? Not the manufacturer, they still sell their product. The distributor bears the brunt of this burden when this grey market material comes back into the U.S. being sold below our cost.
    4. Lastly- I agree that the big boys may not be playing fair. However the people to blame for this are the same two groups complaining. Manufacturers- you allow your reps to favor the big boys, and choose not to support the smaller dealers (who are not employing the same tactics). Doctors blindly trust a face walking into their office. How about some personal ownership for the state of your practice. If you don’t like paying through the nose keep an open mind to alternative options.

  6. Major said

    To the post about “just saying no”. Sure they won’t stop selling your product, but each company has preferred products they sell and all of this stuff goes into that list.

    But let me ask you this. If the points I am making were not true, a concern to many manufacturers, a problem or potential issues then why would the DTA have been discussing forming a co-op distributor that would order taking, collection of AR, handle the shipping and basically act as a dealer (but without all the BS?? This is a serious problem that many, many manufacturers are struggling with. You see the problem is that you have trusted certain dealers for so many years and they know where your product is going better than you. (WHY DO YOU THINK DENTSPLY CALLS IT INTELLIGENCE???) So in essence they could, before you even knew what was going on, switch many of your customers or at least attempt t switch many of your customers. This is a problem for all manufacturers, big or small, ethical or unethical, 1000’s of product or just 1. There will be more to come on this topic.

    I agree with your portrayal of the perfect sales rep. the problem is that they are hiring disposable reps, they don’t want them around for long because then their pay has to increase. I know this because the whole thing was explained to me. Plus they bring these guys in fresh out of college, no dental experience – Why? Because they want pure sales and nothing else. They want an army of clones that go out and do as told, sell what they are told to and not ask any questions. Then when they grow the sales and hit a plateau, they are discarded.

    Good sales reps are few and far between. They exist, but in small numbers. Most sales reps could not carry a bucket of water much less any message about a product, unless they have their cue cards.

  7. Anonymous said

    Major………….from your comments and explanation that you used to be a sales person I am unable to discern whether or not you have sold for a manufacturer or a dealer distributor of products. You have mentioned that someone explaned to you the process of disposable representatives and that when their sales “reached a plateau” they were then discarded for less expensive representatives. This may apply to the manufacturer representative that , on occasion, has a reduction in sales territory size to gain “better market penetration” or the dental dealer who emphasizes “better client commitment” and reduces a sales territory of accounts not currently buying and wants to effect a new sales emphasis. You’ve obviously heard of the 20/80 formula whereby analysis of most sales territorties, manufacturer, direct and/or dealer related, show that 20% of the accounts called on provide 80% of that sales person’s sales. Management is constantly struggling with the question” “What’s going on with the other 80% of the assigned accounts?”
    You may not come from the management side of this discussion and your comment regarding “disposable representatives” because their pay has to increase is not accurate when it comes to the dealer distributor. If you choose…………let’s take the example of Benco, HSIC, PDCO and Burkhardt dental companies. Their market penetration approach is to have individual territory sales representatives to promote their distribution, repair service and management services. This can only be accomplished by hiring “new” individuals into the dental industry and “training” them in the “business”. The cost to do this can approximate in excess of $100,000.00 per individual before that individual begins to sell enough product to offset expenses. Let’s not forget that these individuals are “guaranteed” a salary draw against commissions earned, expenses paid and benefits that approximate 35% of the salary. The goal is to grow a professional and dedicated sales group. The “only” reason the representative is terminated is if they do not progress in their sales abilities and begin to offset the invested cost of their hiring! Dealer representatives have no limit on what they can earn……………..their income is predicated on their ability to establish a “committed” client base by providing an ethical business relationship with their clients. You say that there are few of these individuals in the marketplace………………then you are sorely misinformed. There are hundreds, if not thousands, of these individuals bringing their positive professional knowledge to thousands of dental clients! As I have mentioned prior to these comments………the successful dealer sales representative, and there are thousand of them, only recommend product “best” for their clients and not based on earning a few percentage points more in commission. A successful dealer field sales representative only needs approximately 70-80 “committed” clients to create a multi-million sales territory which, in my opinion, will provide ample income to support family and children. There is nothing more satisfying to a dealer field representative then to have appreciative, successful and committed clients!

  8. kp said

    the last commenter is right on.
    I am finding however, that what I had originally thought was an informative, non biased blog is becoming a bashing forum for hard working professionals that try day in and day out to earn a living for their families.

    Dentists who read this blog get quite a nasty picture of dental supply reps and manufacture’s reps
    who are portrayed to be “out for a buck”.

    Major, how the hell do you know about good sales reps and how few and far between they are? What is your background?

    I know that each day that I go out and make calls truly trying to help and assist dentists to build better practices (read- make them more money), offer their patients the best possible care, and continue to educate them in the unbelievably fast paced advancements in technology, product, and procedures.

    It’s no wonder they are not willing to listen, they are probably reading these blogs that make me out as a money grubbing monster.

    Stick to reporting the facts, if that is what you propose yourself to be. Otherwise you are merely a low grade gossip columnist.

    pay for play goes on in every major industry.. and will continue to do so. Why is is such a shocker that the little guy is getting squeezed by the big guys?
    Wake up and smell the disinfectant.

  9. Dental Insider said

    DI here, there have been alot of good points made. I truly believe that the dental industry is a relationship based industry and the major mfg’s havent gotten that through their heads. I think that there are a few “snakes” in any profession and I can name a couple in this industry, but it doesnt make everyone bad. The industry is going through some major changes right now and should stabilize soon. I still believe that there will always be a place for the independents, the doctor’s will in some ways dictate to the mfg’s, who they want to deal with. I think it will be evident in the next few months in regards to Dentsply.

    KP…we are not trying to bash the hard working dental sales rep, everyone has opinions and sometimes we cant agree. Heck, we are all a part of this great industry.

    Thank you to all for your comments.

    DI

  10. Anonymous said

    To DI who states that “the dental industry is a relationship based industry and the major manufacturers haven’t gotten the message”………………I think that they have gotten “the message”! For years, the manufacturers, small or major, have attempted to increase their market share by expanding their distribution to “almost any distributor” that possessed a storefront and/or a vehicle in which to carry product. When questioned by their “long time” dealer distributors there were the common answers such as: “we’re trying to reach the new ethnic marketplace in your area or your sales people aren’t calling on all the dentists or we need to add more distributors in your area.” The real answer really was that the particular manufacturer was not happy with their individual products’ growth and thought they could increase market penetration by opening up more distributors, many of whom, backdoored product to other unauthorized distributors, did not protect the integrity of pricing in the marketplace and attempted to gain a client base on “price” and not necessarily service. Now we’re back to that 20/80% business factor that simply showed, after a period of time, that 80% of any manufacturer’s distribution base only produces 20% of the total sales! Any business consultant will tell, anyone who will listen, that the cost to produce that 20% in sales is prohibitive, at best, and needs to be reevaluated. The major manufacturers have come to understand that their best opportunity to grow their product base is through a “relationship based” sinergy with their “committed” distributors that provide value-added support to their manufacturer partners. There is a growing emphasis in the marketplace today by manufacturers and distributors in defining “partnership commitments and guidelines” that are mutually dedicated to sales and market growth. The recent decision by Dentsply to promote their product through 28 key distributors representing over 200 sales outlets is an example of this activity. We’re again, back to the 20/80% factor. Is their decision a correct one? Only time will tell if their market growth advances or declines…………….but history indicates that growth is on their side through their aggressive new product introductions and their well-defined distributor partners. Other manufacturers are effecting similar distribution strategies in an effort to establish “relationships” that will prove mutually beneficial. The manufacturers have gotten the message and they will continue to invest “hundreds of thousands of dollars” promoting their products, through aggressive advertising, directly to the doctor client and distributing those products through their value-added distribution partners. But………….in order to distribute the product their needs to be a mutual value-added component between manufacturer and distributor.

  11. wayne said

    Im an independent in norcal, ive been doing this for over 27 years, i think most merchindise reps for the houses are the hardest working people out there, they inventory, sell, educate, promote, work endless hours, go to multiple funtions to educate themselves in order to talk to doctors and staff about thier products there selling, god bless em and all the Lexus’s they can buy, they deserve them….equipment guys on the other hand….money money money, why does Schein lead with pelton and Patterson lead with Adec, money, do you think they have a concern about overselling a new kid out of school, if you do not roll out a 4 millon year here then you will not be workin for the house, you can not sell that much and keep an eye on your jobs,sign and move, hand it off to the next guy in line, the equipment cordinator, the install team, the local tech, as far as the invite that Schein sends out, that is the industry joke,they even send those things out to guys who are not on thier “prefered list” and if you dont except, well then you dont want to be part of the family,these guys cringe over these invites, they hate that corperate crap, and if you have ever been finincace thru schein then know that they tacked on another 5% thru the company that paid….yeah its ok to make money I rekon, they taught me how, and i take pride in the fact that i can beat thier prices and not touch a dime of someone elses money doin it, not the archticat who did your drawings or the contractor or the cabinet guys, the money man,I remember one of the biggest dippers in this market tell one of his dentist that he would treat him like he was his lil brother, then dipped everyone all the way thru the job, he made more money on the edges then he did thru the company…..big companies they aint to big to always try and screw the independent or for that matter thier own clients…

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