This is the powerpoint version of the content from my latest article posted on LinkedIn: https://www.linkedin.com/pulse/discussion-pricing-concepts-easy-recipe-healthcare-marketers-tangun

2. A DISCUSSION ON PRICING CONCEPTS
AND AN EASY PRICING RECIPE FOR
HEALTHCARE MARKETERS
Diane Demet TANGUN, Healthcare Marketing Expert

3. What is PRICE
The monetary value a
customer pays to acquire a
good or a service.
What is PRICING
The terminology marketers
use to define the choice
regarding the
determination of the price
of a product that is being
commercialized.

4. The goal of marketing in a PRICING exercise is
to find the maximum
price that the customer
will be willing to pay
Who likes leaving money on
the table?

5. PRICING is about finding the balance between
what
YOU, the SELLER
is willing
what your BUYER
is willing to pay
to accept
what your
COMPETITION
will allow

6. In healthcare, limitations exist
In some geographies, the
equation gets further
complicated by
government intervention
and regulations that
determine either
product category or
procedural maximums

7. Pricing Concepts
1. Cost Based Pricing
2. Demand Based Pricing
3. Competition Based Pricing
4. Value Based Pricing

8. Cost Based Pricing
• ABSORPTION (FULL COST) PRICING used to be the traditional pricing
strategy of manufacturing firms
• Discounts would be given for volume buys
• From this initial concept, TARGET RATE OF RETURN thinking was born
to ensure the level of profitability of a certain product or product line
Cost ProfitPRICE
STRENGTH: Ensured profitability at the very beginning of the product
lifecycle
WEAKNESS: Functioned as if in a void where the customer &
competition were inexistent

9. Demand Based Pricing - Skimming
• STARTING HIGH or SKIMMING is typically used in
high-tech launches. Can also be used by:
• market leaders in any industry
• in monopolistic niches in healthcare
• Launch item in high demand is proposed at a very
high price. As new product generations appear,
older product ranges are proposed at lower prices.
• Beware the BOOMERANG EFFECT in healthcare:
• Monopolies do not last long
• Your “what the traffic can bear” approach will be
remembered with a bitter feeling
• Market share loss highly likely as soon as competition
enters your niche

10. F l i g h t
E x t r a l u g g a g e
I n - f l i g h t m e a l
S e a t c h o i c e
L o u n g e a c c e s s
I n - f l i g h t w i - f i
I n - f l i g h t
e n t e r t a i n m e n t
T r a v e l i n s u r a n c e
Demand Based Pricing – Loss Leadership
• LOSS LEADERSHIP is typically used by budget airlines
• A specific product in high demand is proposed at a
loss to attract a high number of customers, only to
sell additional items at more decent profitability
levels.
• Works only if you can bundle additional goods and
services together without competition being able to
steal those more profitable pieces of the package
from you.
• Some strong healthcare players started trying out an
elaborate version of this strategy, using their size and
range to create win-win situations for large hospital
accounts.

11. Competition Based Pricing – Tender Management
▪ Lowest price sells, so: competitive analysis is extremely important
▪ Differentiate by lobbying the value added, CREATE CATEGORY
Sell an APPLE!
It is different from all
the “other” fruits!
CATEGORY CREATION in healthcare may require significant investment,
but could be worth the effort

12. PRICE will unmistakably move as a factor of
VALUE PERCEIVED BY THE CUSTOMER
One size does not fit all
a new answer needs to be reasoned for every case and geography
Nevertheless, one fundamental truth remains unchanged:
VALUE PERCEIVED
BY THE CUSTOMER
PRICE

13. Customer perception of value added depends
on what is already available
Low Medium High
Your Product’s Differentiation
Competitor
Pricing

14. what the SELLER
is willing
what the BUYER
is willing to payto accept
The more DIFFERENTIATED your product &
your VALUE PROPOSITION, the more
competition will become irrelevant to your
pricing strategy

15. Therefore,
PRICING should
always be
developed in
line with the
VALUE ADDED
as objectively as
possible
PRICE ADDED VALUE

16. VALUE BASED PRICING RECIPE - Ingredients
Insights
Voice of Customer & insights on what performance and
characteristics your customers look for in your product category
in order of importance
Information on your product & competition
Product Specifications
All bench testing on product performance, preferably comparative tests
All available clinical proof
Any customer feedback on performance

17. DIGEST
the information well
until the most impactful
value drivers
emerge.
VALUE BASED PRICING RECIPE - Instructions
Using the input from
customers & your insights,
CREATE THE LIST OF
VALUE DRIVERS.
TRANSFER to an
excel table in order
of importance for
further processing.
Studying the input from bench
testing, clinical studies and
performance feedback gathered
from customers, MAP THE
PERFORMANCE OF YOUR
PRODUCT AND ITS COMPETITORS
against each value driver.
STANDARDIZE
performance values
for easier comparison.
PLOT IN A GRAPH
for easier reading.
OBSERVE the information TO
UNDERSTAND in which case you fall

18. Case 1: Your product has an objective, provable added
value on all the identified value drivers
Value Driver 1
Value Driver 2
Value Driver 3Value Driver 4
Value Driver 5
YOUR PRODUCT COMPETITOR
Perfect Case for
PREMIUM PRICING STRATEGY

19. Good differentiation,
you can still go for
PREMIUM PRICING STRATEGY
Value Driver 1
Value Driver 2
Value Driver 3Value Driver 4
Value Driver 5
YOUR PRODUCT COMPETITOR
Case 1: Your product has an objective, provable added
value on the majority of identified value drivers

20. Value Driver 1
Value Driver 2
Value Driver 3Value Driver 4
Value Driver 5
YOUR PRODUCT COMPETITOR
Some differentiation, no
supremacy, so opt for
PARITY PRICING STRATEGY
(Match competitor price)
Case 3: Your product has an equivalent performance to
competition on identified value drivers & you can
differentiate with additional benefits or services

21. No clear differentiation vs.
competition, so choose
PRICE LEADING STRATEGY
(Best price in market)
Value Driver 1
Value Driver 2
Value Driver 3Value Driver 4
Value Driver 5
YOUR PRODUCT COMPETITOR
Case 4: Your product has equivalent performance to
competition on the identified value drivers but you
cannot differentiate or bring any additional value

22. What if your product does not have equivalent
performance compared to competition on the
identified value drivers
Should you should
be launching this
product at all?
Value Driver 1
Value Driver 2
Value Driver 3Value Driver 4
Value Driver 5
YOUR PRODUCT COMPETITOR

23. Final words
Develop your clinical strategy to
support the differentiation you
want to communicate
Provide substantial evidence in
favor of your added value
CLINICAL
STRATEGY

24. Always consider
PRICING as part of
a bigger strategic whole,
composed of all the factors that go
into POSITIONING a product
Final words

25. Hope you enjoyed the discussion and the recipe!
“Bon appetit” or happy selling
& do not hesitate to reach out to me if you need that outside
eye during your next pricing exercise.
Diane Demet TANGUN, Healthcare Marketing Expert