Questions of pricing and pricing strategy are among the most difficult faced by health care marketers, even seasoned pros. There are two major reasons for this: First, so much is at stake where even a slight difference in cost per unit can significantly increase or decrease product sales and affect bottom-line revenues; second, there is so much inherent uncertainty in predicting the results of either a pricing change for existing products or pricing a new product entering a competitive arena.

The typical health care marketer is nevertheless unsure about the precise results of his pricing actions. The product in question may be currently in the process of licensing, and the company wants answers to the following questions:

In other words, the marketing professional needs to answer several questions pertaining to price elasticity.

Several approaches to resolving questions about price elasticity have been used. A new methodology has been developed which paints a more accurate picture of just how each product in the market under study affects the other products by its pricing strategy. For the last five years, Total Research Corp., a Princeton, N.J., full service marketing research and consulting firm, has been performing price elasticity studies using a technique currently being marketed as a proprietary package known as PEMS (Price Elasticity Measurement System). This technique uses experimental design theory to measure price elasticities.

In 1982, Total Research was asked to perform a study for an agricultural chemical manufacturer to determine the demand and pricing elasticity of a new herbicide. The manufacturer wanted to know what its share of the herbicide market would be if the new product cost farmers $15 an acre, $18 an acre, $30 an acre, and so on. At the same time, the manufacturer wanted information on the price elasticity of other products.

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