USA 502 Mace Blvd, Suite 15 Davis, CA 95618 United States Tele: (+1) 530-792-8400 BACKGROUND CHALLENGE IMPACT A dominant market-leading Client was challenged to identify an optimal pricing strategy for a new product launch in an increasingly competitive market. Recognizing that the new launch would cannibalize existing product sales, elicit substantial competitive responses, and create an opportunity for customer brand-switching, the Client sought to identify profit-maximizing price and pricing models. Nearly $1B in business was at stake. Critical to the identification of optimal pricing was understanding the customer purchase decision process and the relative influence of key stakeholders, including outside influenc- ers like GPOs. Additionally, non-product pricing attributes such as lease-vs.-buy and maintenance plans would change the involvement of different decision-makers. There was also internal debate about the objectivity of the Client’s own sales force perspective. SOLUTION The MarkeTech Group (TMTG) recommended a combination qualitative and quantitative study. TMTG completed 23 qualitative interviews which provided objective assessment of buying decision factors. A quantitative survey was designed and fielded with 442 decision-making respondents, including clinical, economic, and operational stakeholders. Data was used to collaboratively develop a market simulator to represent real-world market movements.. Results were used by the Client to identify a preferred combination of profitability and market share. TMTG’s simPRO™ preference share model, Reactor™ market share model, and strategic analysis demonstrated: • Brand equity and switching costs are worth a 4% price premium to Client • Client did not need to price-match or discount to retain and gain business • Attribute importance was different than anticipated, prompting change to product messaging • An ideal mix of service and support options would incentivize upgrades and reduce Client cost-of-sales • An optimal portfolio of a single legacy product and the new product allowed segment- specific offerings and premium pricing of the new product • Optimized pricing of product and service plan were presented Overall, the models provided optimized pricing for either profit or for market share, but not both. For example, a profit-maximizing price would reduce market share by 6%, while a market share-maximizing price reduced profitability by $51M. EUROPE / FRANCE 3 rue Emile Péhant 44000 Nantes France Tel: +33 (0)2 72 01 00 80 www.themarketechgroup.com MARKET METHODOLOGY MIX South America Europe Qualitative Research Strategic Consulting Quantitative Asia PROFILE CLIENT TYPE PROJECT CATEGORY PRODUCT CREATION LAUNCH PREPARATION Medical Device Medical Imaging Medical Diagnostics Medical IT/eHealth Biotechnologies Pharmaceuticals Technology Assessment Opportunity Analysis Customer and Product Requirements Product Concept Testing Segmentation Analysis Brand Positioning Packaging and Materials Testing Go to Market Planning Pricing PRODUCT MONITORING Customer Satisfaction and Loyalty Post Launch Acceptance MARKET AND BUSINESS PLANNING Pricing Optimization Business Model Optimizing Pricing Strategy from a Market-Leadership Position TECHNOLOGY GO / NO GO North America

Case Study: Optimizing Pricing Strategy from a Market-Leadership Position

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Visit us on the web: http://www.themarketechgroup.com/?utm_source=SlideShare&utm_medium=Social+Media&utm_campaign=Case+Studies About Us: With offices in North America and Europe, The MarkeTech Group provides a unique combination of extensive marketing research methodology expertise, deep medical technology domain knowledge and value-added strategic marketing consulting to medical technology companies who seek high quality marketing research studies and professional marketing strategy consulting. The MarkeTech Group's team of marketing research and strategy experts take pride in integrating their leading voice of customer (VOC) research expertise and strategic consulting into their clients' marketing and R&D departments to help successfully launch and maintain profitable products in healthcare. The MarkeTech Group, LLC 502 Mace Blvd, Suite 15 Davis, CA 95618 Tele: (+1) 530-792-8400 Fax: (+1) 530-792-8447 The MarkeTech Group, SARL 3, Rue Emile Péhant 44 000 Nantes Tele: +33 (0)2 72 01 00 80 Fax: +33 (0)2 40 48 29 40 Contact Us: http://www.themarketechgroup.com/index.php?page=Contact_TMTG&utm_source=SlideShare&utm_medium=Social+Media&utm_campaign=Case+Studies

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Page 1: Case Study: Optimizing Pricing Strategy from a Market-Leadership Position

USA502 Mace Blvd, Suite 15Davis, CA 95618United StatesTele: (+1) 530-792-8400

BACKGROUND

CHALLENGE

IMPACT

A dominant market-leading Client was challenged to identify an optimal pricing strategy for a new product launch in an increasingly competitive market. Recognizing that the new launch would cannibalize existing product sales, elicit substantial competitive responses, and create an opportunity for customer brand-switching, the Client sought to identify profit-maximizing price and pricing models. Nearly $1B in business was at stake.

Critical to the identification of optimal pricing was understanding the customer purchase decision process and the relative influence of key stakeholders, including outside influenc-ers like GPOs. Additionally, non-product pricing attributes such as lease-vs.-buy and maintenance plans would change the involvement of different decision-makers. There was also internal debate about the objectivity of the Client’s own sales force perspective.

SOLUTIONThe MarkeTech Group (TMTG) recommended a combination qualitative and quantitative study. TMTG completed 23 qualitative interviews which provided objective assessment of buying decision factors. A quantitative survey was designed and fielded with 442 decision-making respondents, including clinical, economic, and operational stakeholders. Data was used to collaboratively develop a market simulator to represent real-world market movements..

Results were used by the Client to identify a preferred combination of profitability and market share. TMTG’s simPRO™ preference share model, Reactor™ market share model, and strate-gic analysis demonstrated: • Brand equity and switching costs are worth a 4% price premium to Client • Client did not need to price-match or discount to retain and gain business • Attribute importance was different than anticipated, prompting change to product

messaging • An ideal mix of service and support options would incentivize upgrades and reduce Client

cost-of-sales • An optimal portfolio of a single legacy product and the new product allowed segment-

specific offerings and premium pricing of the new product • Optimized pricing of product and service plan were presented

Overall, the models provided optimized pricing for either profit or for market share, but not both. For example, a profit-maximizing price would reduce market share by 6%, while a market share-maximizing price reduced profitability by $51M.

EUROPE / FRANCE3 rue Emile Péhant

44000 NantesFrance

Tel: +33 (0)2 72 01 00 80www.themarketechgroup.com

MARKET

METHODOLOGY MIX

South AmericaEurope

Qualitative ResearchStrategic Consulting

Quantitative

Asia

PROFILECLIENT TYPE

PROJECT CATEGORY

PRODUCT CREATION