PRICE MIX

Decisions and Strategies

Team DRUGLORDS
Cord Cruz, Karen Mae
Corilla, Zenith
Cristobal, Abigail
Dones, Michelle
What is Price?
- it is the amount of money
charged for a product or service.


Price is called by many name as
commonly used by various
practitioners in the pharmaceutical field
such as:

1. Bids or Quotations
2. Catalogue or List Price
3. Retail Price
4. Wholesale Price
5. Net Price
6. Billing Price
7. Rentals/ Allowance
Top Management decides for
the price of a drug product.

Examples:
1. Marketing Policy Board
2. Therapeutics Committee
3. Drugstore Owners
4. Hospital Chief Pharmacists
5. Supply/Purchasing Officers
Price Review Council
- monitors and regulates
pricing strategies implemented by
various divisions or sales
departments.

Others that influence on pricing:
1. Sales and Marketing Managers
2. Product Planners
3. Brand
4. Finance Specialists and
Accountants
President and Chief Executive
Officer
- who takes a personal hand in
pricing policy directed to competition
towards regaining market share and
leadership in the industry.
Marketing and Sales Managers
- they are most in contact with
the market and competition

Primary Responsibility:
1. Initiation of Price Changes
2. Price Determination
3. Formulation of Price Policies
4. Price Administration
Pricing is considered a game.
Companies are practically guessing
how the market will react to price
changes such as:

1. Possible shifting to substitutes or
shifting to competitors products
2. A price decrease may lead to
increase demand
3. End-users may eventually stop
buying imported drug products after
evaluation
Factors Influencing Price

A. The Market for the Product
1. Market Appeal
2. Market Characteristics
3. Elasticity of Market Demand
4. Expandability of Market
Demand
5. Pattern of Income Distribution
B. Costs of the Product
1. Lower Production Costs
2. Higher Selling Costs
3. Join Costs
When is Pricing a Problem to Drug
Companies?

1. When a company sets a price for the
first time
2. When inevitable circumstances lead to a
company to consider initiating a price change
3. When direct competitors initiate price
change
4. When a drug company produces several
drug products that have interrelated demands
and/or costs
Goals of Pricing

Overall objectives of pricing:
1. To maximize current profits.
2. To maintain or improve target share of
market.
3. To pre-empt or minimize entry of
competition in the specified market segment
4. To trigger increased customer traffic into a
retail store
5. To survive in business due to increased
overhead costs, excess capacity, stiff competition,
and changing consumer needs and wants.
6. To attain the highest quality product in the
market.
7. To help in the stabilization of price.
8. To keep the loyalty and support of
resellers or to avoid government intervention.
9. To help or argument the sales of other
drug products in the companys line.
10. To generate additional marketing effort.
11. To determine what product features
would be offered and what production costs could
be incurred with price.
12. To develop and implement a consistent
and effective marketing program.
Pricing Strategies commonly
Used in the Drug Industry

1. Selling Below Cost
2. Selling Below Competition
3. Competitive Selling
4. Pricing Above Competition
5. Stopping Entry of
Competition
6. Psychological Pricing
Strategy
7. Promotional Pricing Strategy
8. Geographical Pricing
Strategy
9. Freight Absorption Pricing
10. Market Skimming Pricing
Strategy
11. Market Penetration Pricing
Strategy
- drug companies set a low
price on their innovative drug product to
attract more buyers and gain a large
market share.
12. Product-Bundle Pricing
Strategy
- drug companies combine
several of their drug products and offer
the set at reduced price.

13. Discount Pricing and
Allowances Strategy
- reductions to the selling
price of goods/services.

13.1 Cash Discount
13.2 Quantity Discount
13.3 Trade Discount
13.4 Seasonal Discount
13.5 Promotional Allowances
14. Discriminatory Pricing
Strategy
- drug company sells a
product at 2 or more prices.

14.1 Customer-Segment Pricing
- where different customers pay
different prices for the same product.
14.2 Product-Form Pricing
- different versions of drug
product
which varies on brand name but same generic
names and are priced differently.

15. Full Cost Pricing Strategy
- a patronage mark-up
equal to the cost of operating the
store.

16. Sealed Bid Pricing Strategy
- setting a price lower than
that set by of the other drug firms.
17.Demand-Oriented Pricing
Strategy
- setting a price based on
customer perceptions and demand
intensity rather than on costs.

18. Perceived Value Pricing
Strategy
- pricing based on the
products perceived value
19. Going-Rate Pricing
- setting the price of products
largely by following competitors' prices.

20. Break-Even Pricing
Strategy
- also called target profit
pricing.

21. Cost-Plus Pricing Strategy
- a strategy that is used for
pricing goods and services.

22. Buyer-Oriented Pricing
Strategy
- analyzing consumer need
and price perceptions.

23. One Price Formula
Strategy
- can be applied to branded
drug products.

24. Price Bargaining Strategy
- a growing need for the
negotiated price and the demise of the
established price.
25. Current Revenue Pricing
Strategy
- setting the price to maximize
current sales revenue.

26. Target Profit Pricing
Strategy
27. Costs-Oriented Pricing
Strategy
- setting drug prices solely on
the basis of costs, such as mark-up
pricing and cost-plus pricing.

28. Market Share Pricing
Strategy
- setting a price that
maximizes its market share
penetration.
29. Mark-up Pricing Strategy
- by adding a fixed peso
amount to the total cost of the drug
product.
Principles in Building a Drug
Price Policy

1. Price must give enough profit to
the firm or drug outlet, which will keep
invested capital and employed labor.
2. Price should be such an amount
which will result in placing at a profit to
the firm by making the largest number
of units of production in use.
3. Price should attract new capital
to the industry under normal conditions.
4. Increasing volume should make
it possible for the drug manufacturers
either to increase the quality without
raising or reducing prices and without
reducing the quality.
5. Average net profit over a number
of years should form the basis for policy
validity instead of profit for a single year.
Definition of Terms

Allowance
- a definite sum of money given at
regular intervals.

Amenities
- additional benefits or free
services.
Buyer
- one who makes purchases for
drug products

Competition
- business rivalry between persons
or firms striving for the same market.

Cost
- the price paid for anything, such
as drug product.
Demand
- the desire to possess combined
with the ability to purchase the potential
amount of drug product that will be
purchased at a given time for a given
place.

Devaluation
- reduction of the value or worth of.
Discount
- to reduce the cost or value of the
product from the full amount that would
otherwise be charged or owed.

Geographical Pricing
- charging higher prices for faraway
customers to defray higher shipping,
freight, and handling costs.
Inflation
- an unstable rise in price level due
to an increase in currency and a
mounting demand for goods.

Inventories
- a list of drug products with the
description and quantity of each.

Loss Leader Pricing
- most popular brands, widely-
used, commonly-bought, or fast-selling
OTC drugs are priced lower than
competition.

Mark-up
- amount of price increase when
drug products are sold at retail or
wholesale prices.
Market Penetration Pricing
- setting a low price on new drug
products introduced to attract more
buyers and to gain a large market
share.

Market Skimming Pricing
- setting higher prices of new drug
products introduced to skim maximum
revenue
Perception
- any insight or knowledge arrived
at by perceiving what is in the minds of
customers.

Pin Money
- an allowance of money for minor
incidental expenses, or cash reward for
endorsing a drug product to clients.
Premium Price
- the price at which drug products
are valued in excess of their normal or
par value.

Pricing Strategy
- pricing plan or technique for
achieving some end relative to
competition.
Product Deal
- an arrangement or agreement, as
in the offer of a buy 10 plus 1 free, on
top of the regular discounts.

Profit
- any advantage or gain; the
surplus remaining after all the
necessary deductions, as for interest,
bad debts, etc.
Promotional Pricing
- temporary price roll back below list
price or even below cost to dramatically
increase sales during a given period.

Psychological Pricing
- use of even numbers like 8 which
is round and has a soothing effect
compared to angular numbers like 7
which has a jarring effect.
Rebates
- a deduction from a gross amount,
or money given as a reward for
patronizing a companys products.

Selling
- to transfer to another for money or
for some other considerations.
Subsidy
- any financial assistance afforded
by one individual to another.

Value
- desirability or worth of a thing.

Variable Cost
- not constant; having a tendency
to change.
THE END!
THANK YOU!