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Pricing Strategies

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Introduction

Coming up with the correct price tag for a medical or biotech product can be one of the hardest decisions a company will ever make in the process of developing a new product. The price placed on this product sends a message to major stakeholders about the value of an innovation. Stakeholders include private and aggregate investors, organizational workers, public and private health insurance companies, company clients (hospitals and pharmaceuticals), health practitioners, and final patients. The managers’ dilemma will always lie in the fact that each of the above individuals has different price suggestions, which of course are in constant conflict.

Pricing Challenges and Alternative Considerations

Medi-Cults’ Chief Executive Henrik Krogen (Rogers, 1999) found himself in such a situation as scouting for the right price for In Vitro Maturation. In Vitro Maturation is a new medium the company had developed, aimed at significantly reducing ova maturation period by 93 percent. He had to put into consideration a number of stakeholders waiting for his quotation. First, private and public investors (such as Amdex A/S) would view IVM as the solution to Medi-Cults’ profitability and overall returns. They looked forward to a pricing policy huge enough to facilitate future IVMs’ development, trials, constant production, and still make a sales killing just in time to execute product market exit. He knew that to value his company, they would go for the price of IVM and the expected company position as an industry leader in biotechnology.

Medi-Cult also had marketing agencies such as pharmaceuticals and independent distribution stores who saw IVM as a gold mine for their businesses. Too high prices (Rogers, 1999) would have a threat of scaring away customers, suffocating the existence of a rather positive business environment. Lowly quoted prices would, on the other hand, not only put into question a quality of the product but also limit their sales returns relative to the cost incurred during transportation and marketing. As for the nurturing, development, and production of IVM, Medi-Cult workers wanted this medium of the market to be taken by storm. Positive product reception (Rogers, 1999) by the target market would mean considerable pay rises, career security and better working environments. One common characteristic about the above-mentioned groups of individuals was anticipation for the high prices and huge sales volume for IVM.

Contrastingly, unfertile couples, public and private health insurers, and involved governments (the US, Denmark, the UK, and France) wanted low prices to be able to finance health care costs. No single responsible government (Rogers, 1999) wanted to spend more on a new expensive technology, because an acquisition would involve a number of heavy decisions. Other users of IVM, health care facilities and medical practitioners, found low prices attractive enough for profit generation. If IVM sold at high prices, they would have no incentive to make purchases for fear of a reduction in their profit margins over time. This challenge was particularly applicable to public health institutions which rigid financial departments and tight budgets.

Solutions

To be able to overcome the above challenges, here are some tips for Henrik Krogen as regards pricing. First, his sales and marketing division should have practiced value based pricing to take care of contrasting stakeholder expectations. As a new technology, IVM tested positive for both efficiency and consistency. When hit with a pricing question from a stakeholder, the marketing team should choose the way to create space for feature attractiveness and benefits in response. Since IVM (Rogers, 1999)was a first one of its kind, Medi-cult had an upper hand over her competitors, and therefore, should have been able to develop a pricing structure aimed at price reduction; competitors should develop an equally rival medium. Lastly, due to rising cases of infertility among couples, IVM was bound to create strong waves of product demand. In even, insurance companies and other caregivers would respond by charging higher premiums and hospital prices respectively. With time, the Medi –Cult family, investors, governments, couples with babies, insurance companies, and hospitals would be happy for obvious reasons.

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