So, it's been a little while since I last wrote (I blame lapse on Twitter, but that's a different post for an upcoming day). And while this is supposed to be a marketing blog, I wanted to get some general thoughts out about healthcare reform.
Overall, I think that anything that leads to more Americans being insured is a great thing for all of us. Right now 20% of all emergency room admittees are uninsured. But, the hospital has to treat them anyway. Additionally the number of people on Medicare and Medicaid is increasing, and we know that the government doesn't pay the same as the private payors. So, where do hospitals make up the difference? And what does this do to your standard of care? Think about it. The less money hospitals are reimbursed, the less they have to invest in necessary technology and improvements, to pay nurses and physicians, and even in some cases to continue operating.
I think most people are in agreement there. The issue tends to arise when we look at where the money is going to come from to pay for all of this. One of the areas that is quickly pointed to is medical imaging. Granted, the amount spent on medical imaging is rising every year. However, it is important to look at how imaging, when used properly (more on this in a minute) can actually save money in the long term. For example, let's assume that it costs $1,000 to do a Coronary CTA exam of a patient that presents with some basic risk factors. From there, the physician can assess any treatments that might be needed. Let's say these cost $5,000. Sounds pricey, right? Consider the alternative. The patient never gets scanned. Two weeks later he suffers a massive heart attack. He is then rushed to the hospital and has to undergo surgery. He is then in the hospital for a week to recover. I'd venture to guess that this proposition is not only less appealing to the gentleman that suffers the heart attack, but also that it is going to cost much more than the imaging and prescribed treatments.
That's the one aspect that seems to get missed the most. Medical Imaging, when used in the proper instances (those developed by physicians as generally accepted standards of care), is a very effective screening and prevention tool. If we look at costs in medicine, the majority are on the treatment side. Any time a disease or condition is caught in its early state, it costs much less to treat. If the focus is on prevention and screening, I would anticipate a long term savings in overall health care costs. Of course I'm not an economist, statisitican or anyone else that actually crunches the numbers, but...
(note: I'm not advocating the willy nilly use of imaging because there is always the real risks of overexposure. Thus the emphasis on proper usage).
Reform is definitely needed, and it's going to be expensive to do. I didn't really offer any solutions other than provide a focus on preventative care and screening, whatever that's worth. Just some thoughts as I'm trying to follow the process. I'm intersted to see where it will go, and ultimately how it will affect me both professionally and personally. It could generate a real marketing challenge, or it could generate a real marketing opportunity. At this point, it's hard to tell.
Thursday, July 23, 2009
Wednesday, July 1, 2009
Is penetration pricing a lost art?
Maybe this one is a little more of a personal gripe and it doesn't happen to everyone, but in my world, it's something that's bugging me, so I'm going to write about it.
Any marketing text will tell you that there are two primary strategies when introducing a new product, penetration pricing and prestige pricing. Each of these has its place. For prestige pricing, a company needs to have an established brand, a loyal fan base, and a true differentiator of a product. The best example of this is Apple with the iPhone. They launched the thing at $400-$500 a pop and were selling out of them left and right. They were the most expensive phone and people paid. Since then, the price has come down as the masses have joined the early adopters. This is classic prestige pricing.
On the flip side is penetration pricing. This tends to be used by companies that are introducing more of a "me-too" type product, or ones that don't have quite the established brand. It's designed to quickly take market share away and validate your product. The early purcahsers get a "deal" because they assume the risk of a new company or new product when the established players already have something. Then as they validate, the price creeps up as more customers are willing to give it a try (actually in today's markets this seems to be more that the new player sets the new price and others come down, but...). You tend to see this played out in the auto industry.
Now, my gripe. If you are introducing a me-too product, you better have one helluva brand reputation if you are going to use prestige pricing. And if you don't have that brand reputation, don't expect to get premium pricing! If there is a company that has 6,000 pieces of equipment installed, and you are trying to get your first, why would anyone pay more?
By demanding a higher price for a me-too product, validation is delayed, the competition has more time to build a story against you, and the sales team feels an incredible amount of pressure. It usually ends in deep discounting, one off price reductions, and totally erratic behavior (at least in my cases).
Overall, it seems that there are many more examples of prestige pricing than penetration pricing. Sometimes prestige works, sometimes it doesn't, but it seems to be the preferred method (of course I could be in a bubble that doesn't see pricing in the rest of the industries throughout the world).
I could go on and on about pricing and theory and execution, but if you are still reading this, I don't want to bore you any further. I'll wait for another post where I can look at pricing with regards to the technology adoption curve. Then there is the whole market pricing vs. "I just need to cover my costs, market be damned" pricing argument. Or the one-of-a-kind pricing phenomenon.
But in the end, just remember, have you earned the right to prestigously price your product, or would it be better to gain users quickly to help validate?
Any marketing text will tell you that there are two primary strategies when introducing a new product, penetration pricing and prestige pricing. Each of these has its place. For prestige pricing, a company needs to have an established brand, a loyal fan base, and a true differentiator of a product. The best example of this is Apple with the iPhone. They launched the thing at $400-$500 a pop and were selling out of them left and right. They were the most expensive phone and people paid. Since then, the price has come down as the masses have joined the early adopters. This is classic prestige pricing.
On the flip side is penetration pricing. This tends to be used by companies that are introducing more of a "me-too" type product, or ones that don't have quite the established brand. It's designed to quickly take market share away and validate your product. The early purcahsers get a "deal" because they assume the risk of a new company or new product when the established players already have something. Then as they validate, the price creeps up as more customers are willing to give it a try (actually in today's markets this seems to be more that the new player sets the new price and others come down, but...). You tend to see this played out in the auto industry.
Now, my gripe. If you are introducing a me-too product, you better have one helluva brand reputation if you are going to use prestige pricing. And if you don't have that brand reputation, don't expect to get premium pricing! If there is a company that has 6,000 pieces of equipment installed, and you are trying to get your first, why would anyone pay more?
By demanding a higher price for a me-too product, validation is delayed, the competition has more time to build a story against you, and the sales team feels an incredible amount of pressure. It usually ends in deep discounting, one off price reductions, and totally erratic behavior (at least in my cases).
Overall, it seems that there are many more examples of prestige pricing than penetration pricing. Sometimes prestige works, sometimes it doesn't, but it seems to be the preferred method (of course I could be in a bubble that doesn't see pricing in the rest of the industries throughout the world).
I could go on and on about pricing and theory and execution, but if you are still reading this, I don't want to bore you any further. I'll wait for another post where I can look at pricing with regards to the technology adoption curve. Then there is the whole market pricing vs. "I just need to cover my costs, market be damned" pricing argument. Or the one-of-a-kind pricing phenomenon.
But in the end, just remember, have you earned the right to prestigously price your product, or would it be better to gain users quickly to help validate?
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