Setting a pricing strategy for a medical device is not an easy job.
Many factors impacting the pricing of medical devices are in continuous evolution; therefore, companies that expect to effectively manage profitably in changing markets need a clear pricing strategy governing how they will set prices to earn revenues.
If you’re in doubt as to the essential factors to consider when setting a price strategy, this guide is for you. Keep reading to learn what to do and what to avoid.
The pricing strategy
The pricing strategy is a critical part of the overall marketing strategy. For the pricing strategy to be effective, it must align with the marketing strategy and the business strategy.
If the business strategy is where to play and how to win, in my opinion, it is clear that the business strategy plays an important role in shaping the marketing and price strategy.
Despite its importance, the pricing strategy is too often decided last minute and not clearly determined leading to poor profitability.
The goal of a well-constructed pricing strategy is achieving remarkable profitability.
Therefore, considering the concept of the marketing mix, which includes Product, Promotion, Place (distribution), and Price, the pricing strategy will not be able to compensate for poor products, ineffective promotion, and mismanaged distribution.
However, a poor pricing strategy can surely prevent a good product and a promotional and distribution strategy from producing significant financial success. Unfortunately, this is not an uncommon occurrence.
Pricing strategy: factors to consider
In setting the price level of a medical device, internal aspects like the costs and external factors like market dynamics are equally important. In fact, a company cannot sell below the cost of production and cannot sell at a price that is considered unacceptable in the market.
These are the key factors to consider and explore in deciding the pricing strategy of a medical device:
- Reimbursement: Understanding how and who will be paying for the product is essential. Likewise, how the price will impact the ability to be reimbursed or not
- Competition and alternatives: Defining the competitors and their price policies. Examining all the possible alternatives available on the market and their costs.
- Demand: Scrutinize the nature of the demand to understand how the demand for the product is generated in the healthcare system. For example, if the demand is determined by other activities like surgeries, emergency room visits, accidents, etc.
- Buying process: Comprehend the buying cycle and the buying centers.
- Customer value: Identify the drivers of value and define how the stakeholders assess the value of the technology.
- Clinical evidence: The impact of clinical evidence must be estimated in terms of marketing messages, ability to gain reimbursement, and market access.
- Life cycle: The position in the product’s life cycle is a key element in defining the pricing strategy.
- Production capacity: Assessing the production capacity and possible constraints.
- Selling channel: How the pricing strategy will impact the channel partners and their profitability.
- Costs: Definition of the costs fixed and variable and how costs will change over time.
This list is not exhaustive but it’s a good base to start, although not all these elements apply to every situation.
What other factors should be considered in a pricing strategy? Let me know your thoughts below. If you enjoyed this post, share it with your friends and suggest they subscribe or follow me on LinkedIn.