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Digg It - Competitive Pricing: Set The Right Price for Your Product or Service
In any given market I expect to see a variance in price for the identical product X.
The variance should not be significant even when a volume factor is introduced i.e. more traffic reduces the price to
The variance should not be significant even when a volume factor is introduced i.e. more traffic reduces the price to
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
encourage even more traffic.
Aside: Wal Mart offers low prices but have higher margins than most of their competitors because they pay significantly less to purchase the identical product.
Margi
Aside: Wal Mart offers low prices but have higher margins than most of their competitors because they pay significantly less to purchase the identical product.
Margi
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
n
Margin is calculated as follows: Selling Price of Product subtract Cost of Product divided by the Selling Price.
Product X cost $10 and sells for $20 therefore the margin is 50%: $20-$10/$20.
Margin is calculated as follows: Selling Price of Product subtract Cost of Product divided by the Selling Price.
Product X cost $10 and sells for $20 therefore the margin is 50%: $20-$10/$20.
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
Setting Margins
Merchants want and need to be competitive to survive and thrive: competition is a good thing. Unfortunately many merchants competite only on pricing; in the process dest
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
roy their own margins and damage the local market.
Merchants should be in the market to make money:as much as they can. Reducing your margin without a good reason is foolish with the exception of clearin
Merchants should be in the market to make money:as much as they can. Reducing your margin without a good reason is foolish with the exception of clearin
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
out non-performing inventory (means you clear the item and not bring it back into inventory).
Margins should only be reduced to generate more revenue and profits for the merchant--typically because the
Margins should only be reduced to generate more revenue and profits for the merchant--typically because the
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
volume of sales goes up significantly or because you want to drive your competitors out of the market.
The ambition to undercut your competitors is not as easy as it sounds and requires a large bankroll
The ambition to undercut your competitors is not as easy as it sounds and requires a large bankroll
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
nd patience--it is not for your typical merchant.
The logic about reducing price to increase traffic is reasonably sound but the following question should always be answered before attempting any price r
The logic about reducing price to increase traffic is reasonably sound but the following question should always be answered before attempting any price r
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
eduction: 'What increase in traffic (volume of sales) is required to not only offset your margin reduction but to increase overall revenue?'
The following example is useful to demonstrate the folly of ma
The following example is useful to demonstrate the folly of ma
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
gin reduction.
You sell product X with a 50% margin (retail of $20) which is normal for your area. At that margin you sell ten units of X everyday bringing you $100 (daily net revenue). You want to incre
You sell product X with a 50% margin (retail of $20) which is normal for your area. At that margin you sell ten units of X everyday bringing you $100 (daily net revenue). You want to incre
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
ase your daily revenue by 20% for product X.
You decide to reduce your product X margin to 25% (retail of $15.00) to increase sales.
How many units of X will you have to sell to reach your 20% gain in d
You decide to reduce your product X margin to 25% (retail of $15.00) to increase sales.
How many units of X will you have to sell to reach your 20% gain in d
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
aily net revenue($120).
You would have to sell 24 units of product X to increase your daily net revenue by 20%. That is a significant increase in your normal traffic (240%).
Calculation: 24 x $15.00 = $
You would have to sell 24 units of product X to increase your daily net revenue by 20%. That is a significant increase in your normal traffic (240%).
Calculation: 24 x $15.00 = $
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
60 now subtract cost of the 24 units ($240) and you have the $120.
It is highly unlikely that your traffic will increase 240% just because of a price reduction:possible but not realistic. Now your custom
It is highly unlikely that your traffic will increase 240% just because of a price reduction:possible but not realistic. Now your custom
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
ers think that $15.00 is the correct price and you may not be able to sell X at the original $20--potential for a daily net revenue decrease!
To get the same 20% increase in daily revenue while holding t
To get the same 20% increase in daily revenue while holding t
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
your 50% margin, a simple customer reward program could be set up. While there is a cost to such a program it will be cheaper than losing $5.00 per sale of product x.
More effective price compet
More effective price compet
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
ition strategy.
The most effective thing a merchant can do is to find a better source for product X i.e. be like Wal Mart.
Price reduction, at the wholesale level, can happen because you purcha
The most effective thing a merchant can do is to find a better source for product X i.e. be like Wal Mart.
Price reduction, at the wholesale level, can happen because you purcha
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
e more units from your existing supplier and receive a purchase discount or when you find another supplier who sells the item for less.
Keep in mind the following. You do not have to decrease your price
Keep in mind the following. You do not have to decrease your price
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
just because you buy it at a lower price. If your market allows for product X to be sold at $20 then you should continue to sell it at $20 even if your costs go down to $8 (vs the $10).
Best Advi
Best Advi
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
e
Strive to increase your margins not reduce them.
Sell your products at market value. If everyone else is charging $20 plus or minus $1 then you should be charging the same.
Compete not on pr
Strive to increase your margins not reduce them.
Sell your products at market value. If everyone else is charging $20 plus or minus $1 then you should be charging the same.
Compete not on pr
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
ice but on service. Start a customer satisfaction program or prize draws--both can bring in more traffic and increase your sales without significantly increasing your costs.
Alex G Landels
Copyright 200
Alex G Landels
Copyright 200
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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