Pricing Presentation - MassMedic Ignite

MedTech IGNITE: What’s it Worth? Pricing strategies for innovative medical devices. Part of MedTech IGNITE resource series, an initiative of the Massachusetts Medical Device Industry Council (MassMEDIC)

Transcript

1. “The worship of premium pricing always creates a market for the competitor. And high profit margins do not equal maximum profits… Closely related to this first sin is mispricing a new product by charging 'what the market will bear'. This, too, creates risk- free opportunity for the competition. The third deadly sin is cost-driven pricing.” Excerpted from Management: The five deadly sin, by Peter Drucker in The Independent 11/93 www.freemanb2b.com
2. Price Setting vs. Price Getting • Tools: – Buying Group Surveys surveys: Reveal pricing biases, buying process, competitive/alternatives landscape, inputs for segmentation – Quality Function Deployment (QFD): Tools to translate user needs into cross-function product requirements, including comparative value – Reference Pricing: Useful for comparisons to alternates – Conjoint analysis: Helps determine the relative importance of product attributes, performance levels & make share predictions – Van Westendorp: Determine share at different price points for the value received – Test marketing! Test pricing in specific markets • Critical Next Step: Determining your strategic intent www.freemanb2b.com
3. Strategic Intent • Skimming: Particularly for new, differentiated products, where the goal is to exploit a price-insensitive segment • Premium pricing: Consistent with high-end, leadership position. Typically in med devices, can garner +15% • Value-based Pricing: Customer-centric pricing, where value is measured in customer’s terms • Penetration Pricing: Following skimming or for new, disruptive innovations, price is traded for share • Generic/Commoditization: Useful for off-brand products where moving up the price/volume curve gives you advantage • Freemium: Medical apps? • Rental/Lease: Via operating budget (vs. capital), linked to utilization Rarely useful: Cost-based or Loss leader pricing strategies www.freemanb2b.com
4. Price Getting Considerations Hospital Dynamics: – Buying Group dynamics – Capital Equipment Review Boards – Total Cost of Ownership – Must impact cost, quality or outcomes – Payor dynamics • Shift away from procedure-based payments • ACOs • Bundled payments Price Getting: – Initial price/Portfolio pricing/Segment pricing – RFQs & Bids – Contracts – Discounts – Total Cost of Delivery – Channels & CPOD www.freemanb2b.com
5. Recommended • The Strategy and Tactics of Pricing, Thomas Nagle, John Hogan & Joseph Zale • Michael Porter – Anything on strategy and competition – Competitive Strategy: Techniques for Analyzing Industries & Competitors – Redefining Health Care: Creating Value-Based Competition on Results • Crossing the Chasm and Inside the Tornado, by Geoffrey Moore • The Essentials of Marketing High Technology, William Shanklin & John Ryans www.freemanb2b.com
6. Focused on Accelerating Client Growth Through Targeted Strategy, Marketing & Branding Initiatives David M. Freeman 781-864-0389 david@freemanb2b.com www.freemanb2b.com