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Learning Objectives
Explain why pricing is an important part of marketing pharmacy products and services. Discuss how pricing relates to other elements of the marketing mix. List and discuss the effects of consumerrelated factors, competition, pharmacy objectives, and costs on pricing decisions. Calculate the cost of providing a pharmacist service.
Components of price
Pricing
Focus on value what is product or service worth to consumer Value depends on
Consumer perceptions How well service is provided How convenient service is How well benefits are explained
Pricing
Consider value to consumer Set price to provide value Cost affects pricing primarily as it affects value Noncost factors equally important
Demand
Quantity that consumers will buy at a given price Different from need
Can be affected by marketing mix Is a function of price
Demand Curves
200 180 160 140 120 Price 100 80 60 40 20 0 0 10 20 30 40 Quantity 50 60 70 80
inelastic
elastic
Competition
Pharmacy Image
Price consistent with image
Consumers choose based on perceptions
Pharmacy Goals
Maximize long-run profit Increase sales or market share penetration pricing Increase sales of other products loss leader pricing Attract only customers willing to pay for better service price skimming Maintain status quo match competitors prices
Nonmonetary Costs
Time costs Search costs Psychic costs
Set Price
Volume 1,000 750 500 250 SC $25 $33 $49 $98 Avg. NI 1.80 2.40 3.60 7.20 PC 0 0 0 0 Price $26.80 $35.40 $52.60 105.20
Compare
Volume Assumed 1,000 750 500 250 Price Demand at that price $26.80 < 750 $35.40 500 $52.60 < 250 105.20 << 250
Re-evaluate
Problem: prices will not generate enough demand Solutions Cut costs Increase demand Do not offer service
Pricing Strategy
1. Consider competitors responses reevaluate as needed 2. Implement price 3. Monitor patient and competitor response re-evaluate as needed 4. Re-evaluate price periodically
Pricing Strategy
Set profit margins based on product demand Focuses on consumer perceptions
1. Market priced charge low margin - 10-25 Rxs / 30% volume 2. Staple charge avg. margin - 75 Rx products / 25% volume 3. Premium charge high margin - the rest of products
Pricing Strategy
Consistent with focus on ROA
ROA = NI/Sales x Sales/Assets NI/Sales measures profit per unit Sales/assets measures turnover or speed of sales So, you increase return by ?