Information

Strategic Pricing based on Value not Cost

Introduction

Pricing is one of the most powerful levers to increase profitability. Studies have shown that on average, a 1% increase in price leads to a 7-8% increase in profits–making optimal pricing more effective than improving volumes or variable and fixed costs.

HBS Medical supports clients in aligning their pricing strategies with corporate and business unit objectives, to provide superior returns for shareholders.

Strategic pricing based on value, not cost

By combining the vision and objectives of our clients with the needs and price sensitivities of their customers, we help develop adaptable, executable and sustainable value-based strategies across pricing tiers:

• Healthcare industry sector
• Product/marketing
• Transactional and e-pricing

Segmentation is a key part of pricing and profit optimisation, since 'value' varies across customer segments and channels to market. Our diagnostic analysis methodologies enable our clients to segment their markets, identify quick wins and exploit variances between micro-segments, to provide their customers with tailored price/benefit advantages.

HBS Medical evaluates the profitability of alternative launch strategies and examines solutions which increase customers' willingness to pay, such as product/service bundling.

HBS Medical helps clients to control price, increase profitability of transactions and implement effective pricing processes, by identifying and eliminating pricing inconsistencies and actively managing the price waterfall.

HBS Medical enables clients to realise objectives such as increased profitability and market share, by creating and communicating an enhanced product positioning, price perception and value offering to all healthcare customers, including purchasers, stakeholders and end users.

Pricing challenges in the medical technology sector

Developing and implementing pricing strategy in the medical technology sector presents a number of challenges: Any plans must consider:

• The diversity of 'customer' endpoints: Physicians, patients, medical technicians, purchasing managers etc... all of whom are looking for different sources of value...
• That users and purchasers are often two distinct groups, end-users are often detached from the commercial decision to source a product, each group may also perceive value in different benefits of the product (clinical vs financial)
• The pressures and dynamics of the reimbursement environment (Especially relevant for new technology / Procedures)
• The implications of a tender driven market on pricing strategy
• Price referencing initiatives (country to country)
• Government and institutionalised purchasing, e.g. PASA in the UK
• Significance of clinical and financial studies in the approval processes
  

At HBS Medical we have developed a proprietary approach to pricing projects in the medical technology sector. Our approach draws on programmes of analysis across 4 key areas:

1. Client analysis
2. The reimbursement environment
3. Competitor pricing strategies and tactics
4. Measuring willingness to pay and perceived value

Our 4-pillar approach centres on helping our clients define, measure and communicate their products' sources of value, as defined by their customers, to ascertain the maximum price their customers are prepared to pay for the benefits they receive.

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