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Just Other Articles - How Price Gouging Can Hurt Your Business
"Price gouging" is an emotional, inflammatory term. Everyone is against it, but only buyers, angry over excessive profit-taking, proclaim it. As a seller, how can you reap the profit rewards you deserve without being accused of price gouging?
From a marketer’s perspective, attaching a price tag to a produc
From a marketer’s perspective, attaching a price tag to a produc
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
t or service is always an agonizing experience. What is the right price? This question is hotly debated in meeting rooms around the world every day. The search for the perfect price may be the Holy Grail of marketing.
Pricing is like sunblock. No matter how you decide to apply it, the question always ling
Pricing is like sunblock. No matter how you decide to apply it, the question always ling
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
rs; how much is enough? How can you avoid leaving money on the table without being burned by claims of price gouging?
While everyone certainly wants win-win relationships, the buyer and seller are adversaries where pricing is concerned. The seller wants to get the most money possible for their offering, be
While everyone certainly wants win-win relationships, the buyer and seller are adversaries where pricing is concerned. The seller wants to get the most money possible for their offering, be
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
ause each additional dollar gained is pure profit. From the buyer’s perspective, less is better and free is best.
The List Price Obstacle
Most claims of price gouging are based on comparisons of asking price to published list price. From the buyer's perspective, list price is the ceiling, the most they sh
The List Price Obstacle
Most claims of price gouging are based on comparisons of asking price to published list price. From the buyer's perspective, list price is the ceiling, the most they sh
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
uld have to pay for a seller's offering. More importantly, list price becomes the basis from which discounts are taken.
The idea of establishing a list price for a product is actually a fairly new invention. As recent as the middle Middle agesAges, prices were based on perceived ability to pay versus being
The idea of establishing a list price for a product is actually a fairly new invention. As recent as the middle Middle agesAges, prices were based on perceived ability to pay versus being
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
tied to some intrinsic worth of the product itself. For example, when a nobleman was purchasing a commodity such as food, they would routinely pay several multiples over what a peasant farmer would pay for the same product. Why? Because they could. The seller would have no trouble asking the nobleman for t
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
e higher price, and the nobleman would have no problem paying. In those days, gouging only referred to activities having to do with battles and body parts.
For most of us, we believe prices can only go down from list price. When buying a car, for example, nobody expects to pay "sticker". In fact, many car
For most of us, we believe prices can only go down from list price. When buying a car, for example, nobody expects to pay "sticker". In fact, many car
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
uyers believe that list price shouldn’t be the basis of pricing discussions at all. Instead, they focus on working from the dealer’s invoice price. How shocked these same buyers are when they’re asked to pay over sticker! This has happened when anticipation for a new model creates high demand though the pro
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
uct is in short supply. Examples include the original releases of the Mazda Miata, Dodge Viper, Nissan Xterra, the reintroduced Volkswagen Beetle, and the 2005 Mustang.
When sellers ask for more than list price, buyers deem it "unfair", “outrageous” and -- of course --price gouging. Now it's time to play t
When sellers ask for more than list price, buyers deem it "unfair", “outrageous” and -- of course --price gouging. Now it's time to play t
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
he blame game. We can blame manufacturing for not producing enough vehicles to meet demand. We can blame marketing for creating too much interest in a product they couldn't supply. We can blame the greedy capitalists who are exploiting the citizens. Nobody seems to think to blame the use of a list price.
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
ist prices are some of the best fiction ever written.
Should We Sell Over List?
Some routinely call the selling of a product at more than list price “gouging,” and consider it unethical and even immoral.
Buyers feel gouged when it appears that sellers are taking advantage of the buyer’s condition with a
Should We Sell Over List?
Some routinely call the selling of a product at more than list price “gouging,” and consider it unethical and even immoral.
Buyers feel gouged when it appears that sellers are taking advantage of the buyer’s condition with a
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
ommodity product. I’ll loosely define commodity as any product or service that has a fairly consistent price in most selling environments. When the buyer sees an inflated price for the commodity and has no other competitive alternatives due to the situation they're in, the buyer feels gouged.
For example,
For example,
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
would expect a hot dog and a Coke at most locations to be 4 or 5 US dollars. When I was watching the Atlanta Braves play baseball at Turner Field and got hungry, the hot dog and Coke I found cost closer to $10. To find any food that I considered reasonably priced, I would have to leave the stadium environm
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
ent. I felt gouged.
As a boater, I routinely pay 30-40% more at the dock for a gallon of gas than I would when I take my car to the pumps. Same gas, different environment. I feel gouged.
Price gouging occurs when no alternatives are available for purchase. In our free market society, that rarely happens.
As a boater, I routinely pay 30-40% more at the dock for a gallon of gas than I would when I take my car to the pumps. Same gas, different environment. I feel gouged.
Price gouging occurs when no alternatives are available for purchase. In our free market society, that rarely happens.
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
hen it does, we need to be especially careful. Where there is demand, there is usually -- but not always -- competition.
A Controversial Solution
An opportunistic sales force that I once worked with faced a pricing dilemma. Buyers in this industry routinely expected a 15-20% discount, making it nearly imp
A Controversial Solution
An opportunistic sales force that I once worked with faced a pricing dilemma. Buyers in this industry routinely expected a 15-20% discount, making it nearly imp
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
ssible to hold list price. The solution came to be known as “New York Pricing” -- invented by the New York district office -- which simply involved marking up list price by 15% before presenting it to the prospective buyer. After ardent negotiations, the buyer might receive their 15-20% discount, resulting
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
n a sale at or near list price for company. Because headquarters couldn’t come up with a better solution, “New York Pricing” was widely practiced by the sales team although not officially endorsed by management.
Gouging is in the Eye of the Beholder
While we might like the market to set the price, we can’
Gouging is in the Eye of the Beholder
While we might like the market to set the price, we can’
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
t all engage in an auction environment. At some point during a buyer-seller interaction, the seller is going to offer a price. This is perceived by the buyer as list price, and we expect to go down from there.
Price gouging is not about charging more than list price. It’s about the seller taking advantage
Price gouging is not about charging more than list price. It’s about the seller taking advantage
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
f the environment to require people to pay more than the offering is worth. Selling over list price is fine if the market is willing to bid up the price despite the presence of alternatives. That's what happens with hot new cars. If the buyer believes they are getting value well in excess of the list price,
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
both parties can feel good about the transaction.
© 2005 Paul Johnson. All rights reserved.
Note: This article is available for reprint at no charge. We only ask that you include our copyright notice in your reprint, along with the About the Author (byline) information we provide at the end of the article
© 2005 Paul Johnson. All rights reserved.
Note: This article is available for reprint at no charge. We only ask that you include our copyright notice in your reprint, along with the About the Author (byline) information we provide at the end of the article
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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