The medical industry, like any industry today, is only as successful as how much business it brings in. That’s why a hospital pricing strategy is necessary for today’s competitive marketplace. Deciding how to price your products and services requires more planning than simply calculating your costs and placing a mark-up on them.
How much a customer actually wants to pay for any product and how much they value it are two different concepts, and figuring out the balance between the two is essential. This is what value-pricing entails. If you’re wondering how to price your services, read on.
Common Pricing Strategies
Hospital pricing strategies do not vary much from other industries and are one of the most important aspects of the marketing strategy. The most common strategies include:
- Cost-plus pricing: This includes a simple calculation of total costs and adding a profitable mark-up to your services.
- Competitive pricing: This plan includes setting prices based on your competitor’s behavior.
- Value-based pricing: This plan entails pricing your products in accordance with how much the customer values them.
- Market Skimming: Here, you set a higher price at the beginning of the product/ service launch and increase it as the market evolves.
- Penetration pricing: With this plan, a low price is set to penetrate the market, which is gradually increased.
Is Value-Based Pricing the Best for Differentiated Businesses?
Healthcare services often shy away from value-based pricing because it requires more marketing effort and experience. However, cost-based or competitive pricing is not ideal for long-term planning.
Using value-based pricing can ensure that your organization makes profits while ensuring that your consumers are happy with your services and costs. For facilities offering products or services that stand out in the market, or are certifiable of higher quality, value-based pricing can help improve profits and the reputation of the business.
In this model of pricing, the perceived value to the patients is based on whether your services are suited to the needs of the patients/ clients. When a pricing strategy doesn’t work, the ideal option might seem to simply higher or lower it, but it’s not the best idea. Determining how to make the price match the customer’s value can prove most effective. Read more about Hip Dip Surgery: Procedure, cost, and side effects
How to Arrive at Value-Based Pricing?
If you’re considering value-based pricing for your products, it may seem daunting in the beginning. Here’s how you can arrive at value-based pricing:
- Pick products that can be compared to your own and find out how much customers are willing to pay for them.
- Find unique points about your product that sets it apart.
- Place a value on the differences while adding value to your product’s positives and subtracting value from the negatives to round off to a potential price.
- Make sure that your costs are slightly lower than what the customer values them at.
- Demonstrate your product to customers while explaining its value.
- Study the market if your product/service has an established price range.
All hospital pricing strategies are double-edged swords, which may or may not work. However, understanding the target audience, competition, and customer’s perspective can help you come up with the best plan for your business.