Visit Us on the Web: http://www.themarketechgroup.com/?utm_source=SlideShare&utm_medium=Social+Media&utm_campaign=Optimizing+Pricing+Strategy+for+a+Product+Portfolio About Us: With offices in North America and Europe, The MarkeTech Group provides a unique combination of extensive marketing research methodology expertise, deep medical technology domain knowledge and value-added strategic marketing consulting to medical technology companies who seek high quality marketing research studies and professional marketing strategy consulting. The MarkeTech Group's team of marketing research and strategy experts take pride in integrating their leading voice of customer (VOC) research expertise and strategic consulting into their clients' marketing and R&D departments to help successfully launch and maintain profitable products in healthcare. The MarkeTech Group, LLC 502 Mace Blvd, Suite 15 Davis, CA 95618 Tele: (+1) 530-792-8400 Fax: (+1) 530-792-8447 The MarkeTech Group, SARL 3, Rue Emile Péhant 44 000 Nantes Tele: +33 (0)2 72 01 00 80 Fax: +33 (0)2 40 48 29 40 Contact Us: http://www.themarketechgroup.com/index.php?page=Contact_TMTG&utm_source=SlideShare&utm_medium=Social+Media&utm_campaign=Optimizing+Pricing+Strategy+for+a+Product+Portfolio

1. CASE STUDY
OPTIMIZING PRICING STRATEGY
for a PRODUCT PORTFOLIO
METHODOLOGIES USED:
1. Qualitative Interviews
2. Adaptive Conjoint Analysis (ACBC)
o simPRO™ Preference
Simulator
o Reactor™ Market Modeling
& Forecasting

2. The following case study and data is from an
actual CLIENT project, however the data has
been de-identified to avoid sharing any sensitive
client or confidential information and is intended
for general information only.

3. First….let’s meet the CLIENT

4. LOOKING TO LAUNCH A NEW PRODUCT TO
REPLACE AN EXISTING PRODUCT
Dominant market leader in…..
1
2 LOOKING TO MAXIMIZE PROFITS FOR ITS
PRODUCT PORTFOLIO
3 SEEKING TO AVOID CANNIBALIZING EXISTING
PRODUCT SALES
NETWORKED HOSPITAL EQUIPMENT

5. The CLIENT wanted to know…..

6. Research Objectives
CENTRAL RESEARCH QUESTION:
What impact will different pricing models and timing of our product launch
have on our revenues and profits?

7. Research Objectives
CENTRAL RESEARCH QUESTION:
What impact will different pricing models and timing of our product launch
have on our revenues and profits?
1.What is the purchasing process and who are the key
decision makers and influencers?

8. Research Objectives
CENTRAL RESEARCH QUESTION:
What impact will different pricing models and timing of our product launch
have on our revenues and profits?
2.
1.What is the purchasing process and who are the key
decision makers and influencers?
What is the preference for different product and
non-product features and pricing models?

9. Research Objectives
CENTRAL RESEARCH QUESTION:
What impact will different pricing models and timing of our product launch
have on our revenues and profits?
2.
1.What is the purchasing process and who are the key
decision makers and influencers?
3.How do we maximize our 5 year profits?
What is the preference for different product and
non-product features and pricing models?

11. Phases

12. 23 IN-DEPTH INTERVIEWS
Hospital C-Level Executives
Hospital Managers and Directors
GOALS
Identify key
decision makers
Understand the
decision-making
process
PHASE Qualitative Analysis
1
2

13. We IDENTIFIED DOPs and CFOs as the DECISION MAKERS
that should be the key TARGETS for sales and marketing.
In-Depth Interviews Key Findings 1
Identify key decision makers
GOALS
1
 Risk Managers are not the decision makers
 CNOs and CIOs are potential influencers

14. In-Depth Interviews Key Findings 2
Understand the decision-
making process
GOALS
2
Incremental changes or expansions to these
networked hospital equipment typically fall
under the operational & financial authority of
DOPs…

15. In-Depth Interviews Key Findings 2
Understand the decision-
making process
GOALS
2
…while larger additions or entire system
upgrades require C-level approval.
Incremental changes or expansions to these
networked hospital equipment typically fall
under the operational & financial authority of
DOPs…

16. In-Depth Interviews Key Findings 2
Understand the decision-
making process
GOALS
2
Decision-making is based on:
…while larger additions or entire system
upgrades require C-level approval.
Incremental changes or expansions to these
networked hospital equipment typically fall
under the operational & financial authority of
DOPs…
→ Overall Cost of Ownership
→ Brand
→ System IT Architecture
→ Product Usability Features
→ Time to Market

17. 442 WEB-BASED SURVEYS
DOP, CFO, CEO, CIO, COO, CNO,
IT Director, VP Nursing
Determine intention of
upgrading or replacing
existing product
Statistically validate
preference for different
pricing models
1
2
GOALS
PHASE Quantitative Analysis

18. Key Findings 1
Half of customers plan to
upgrade within 2 years...
PLAN TO
UPGRADE/REPLACE
WITHIN 2 YEARS
53% PLAN A REPLACEMENT
28%
Surveys
Determine intention of
upgrading or replacing
existing product
GOALS
1

19. Key Findings 1Surveys
…because of the following 5 reasons:
Product Lease Expires60%...
Significant New Product Benefits Offered61%...
Current Products No Longer Supported46%...
Equipment No Longer Functions Properly &
Too Costly To Maintain
46%...
The Price Declines16%...

20. To DETERMINE the most important PURCHASING DRIVERS, respondents were
asked to select their most preferred product configuration in a conjoint exercise.
Key Findings 2Conjoint Analysis
Statistically validate
preference for different
pricing models
GOALS
2
Brand Brand A Brand B Brand C
Upgrade Guarantee Plan S/W only Not Included S/W & H/W
Time to Commercial Availability 6 months 6 months Available Now
Service Levels Service Only Service with Parts None
Product Feature #1 Fast Slow Fastest
Product Feature #2 High Low Low
IT Architecture Hardware Hardware Web-based
Payment Model Purchase Lease Lease
Total Networked Equipment Price $160K for all units
($40K per unit)
$2.3K per month
($30K per unit purchase price
equivalent for 5 years of
operation at 6% discount rate)
$3.9K per month
($50K per unit purchase
price equivalent for 5 years
of operation at 6% discount
rate)
Total Price of Service Plan $6K for all units
($1K per unit)
$4K per month
($900 per unit)
$5K per month
($1.2K per unit)
⃝ ⃝ ⃝
Please select the product that you most prefer. Assume everything about the 3 products is identical
EXCEPT for those differences presented in each scenario.
Choose the product you most prefer by clicking on of the buttons below.
By forcing respondents to make
various trade-offs between
features and price, it becomes
possible to measure which
product features are more likely
to drive product selection.

21. Key Findings 2
0%
5%
10%
15%
20%
25%
30%
Total
Monthly Service Plan Price
Brand
Service Levels
Upgrade Guarantee
Payment Plans
Price per Unit
IT Architecture
Product Feature #1
Time to Market
Product Feature #2
Importance
27%
MONTHLY SERVICE PLAN PRICE is
validated to be the MOST IMPORTANT
purchase decision driver.12% 13% 13% 12%
9%
6%
5% 4%
3%
Conjoint Analysis

22. Next, we used our proprietary market
forecasting simulator, ™, to
assess how the Client could maximize profits
based on the survey and market data.
Revenue
Market Share
Profitability
Conjoint Analysis
Historical Market Data
INPUT FORECAST FOR:

23. Combine survey findings with
historical market data to model
various strategic options
Determine impact of
product and non-product
features on:
 Revenue
 Market Share
 Profitability
Assess likelihood of
adoption of the new
product
1
GOAL
PHASE Market Forecasting
2

24. Using Reactor™ Market Model, we TESTED
alternative business decisions…
Market Model
Scenario Modeling
CLIENT PROJECT
System
Price
Monthly
Lease*
Service
Price
Months to
Launch
Unit cost
System
Unit Cost
Service
Long-Run
Annual
Units
Long-Run
Unit Share
Long-Run
Brand Unit
Sales
Long-Run Brand
Unit Share Year 1 Revenue** Year 2 Revenue** Year 3 Revenue** Year 1 Profit** Year 2 Profit** Year 3 Profit**
Discounted
3-Year Profit
Discounted
5-Year Profit
New Red Lease $55,000 $700 $300 0 $12,000 $50 1,914 10.46%
New Blue Purchase $55,000 $300 0 $12,000 $50 302 1.65%
New Red Purchase $55,000 $300 0 $12,000 $50 344 1.88%
New White Purchase $55,000 $300 0 $12,000 $50 158 0.86% 2,718 14.85% $116,240,492 $185,984,786 $185,984,786 $92,196,643 $147,514,629 $147,514,629 $348,420,503 $579,322,702
Legacy Red Lease $45,000 $677 $275 $10,400 $50 6,809 37.20%
Legacy Blue Purchase $45,000 $275 $10,400 $50 886 4.84%
Legacy Red Purchase $45,000 $275 $10,400 $250 1,161 6.34%
Legacy White Purchase $45,000 $275 $10,400 $250 585 3.20% 9,440 51.58% $530,815,537 $530,815,537 $530,815,537 $382,195,592 $382,195,592 $382,195,592 $1,042,200,103 $1,640,444,516
Client Total 12,158 66.43% $647,056,029 $716,800,324 $716,800,324 $474,392,235 $529,710,221 $529,710,221 $1,390,620,605 $2,219,767,218
Comp#1 Legacy Lease $35,000 $677 $200 1,332 7.27%
Comp#1 Legacy Purchase $35,000 $200 1,515 8.28% 2,847 15.55%
Comp#1 New Lease $40,000 $773 $200 0 444 2.43%
Comp#1 New Purchase $40,000 $200 0 569 3.11% 1,013 5.53%
Comp#1 Total 3,859 21.08%
Comp#2 Legacy Lease $55,000 $850 $250 354 1.94%
Comp#2 Legacy Purchase $55,000 $250 1,258 6.87% 1,612 8.81%
Comp#2 New Lease $55,000 $850 $250 0 183 1.00%
Comp#2 New Purchase $55,000 $250 0 491 2.68% 674 3.68%
*Assumes 5 Year lease with a 6% annual discount rate compounded monthly Comp#2 Total 18,304 2,286 12.49%
**Undiscounted
14.9%
51.6%
15.6%
5.5%
8.8%
3.7%
Long Run Unit Share
New
Legacy
Comp#1 Legacy
Comp#1 New
Comp#2 Legacy
Comp#2 New

25. Market Model
Scenario Modeling
CLIENT PROJECT
…an iterative process…

26. … to QUANTIFY the SALES effects of
alternative business decisions:
Market Model
Key Findings:
Sales Team Guidance
 A moderate software upgrade plan
with specific features & limited
hardware upgrade guarantees is most
highly valued option… and leads to
increased share, revenue, and profits
 The different needs of buying &
leasing customers was identified…
o …and those leasers that are
potential brand switchers can
be captured (or retained) with
a specific combination of
service and pricing plans
 Switching costs are worth a 5% price
premium for an incumbent product

27. Market Model
Key Findings:
Product Portfolio Opportunity
If the existing product is taken off the market the
new product can achieve
68.0%
14.4%
5.6%
9.6%
2.5%
Long Run Unit Share – NEW PRODUCT ONLY
New Client Product
Competitor #1 Legacy Product
Competitor #1 New Product
Competitor #2 Legacy Product
Competitor #2 New Product
68% market share.

28. Market Model
Because many customers preferred the
legacy product, and really wanted an
improved service plan, rather than an
improved product…
However, we IDENTIFIED that the Client’s
upgraded PRODUCT plan was NOT the
OPTIMAL product strategy.
Key Findings:
Product Portfolio Opportunity

29. …by leaving its existing product on the market the Client
can achieve
32.8%
41.1%
10.4%
4.0%
9.3%
2.4%
Long Run Unit Share - OPTIMIZED PRODUCT PORTFOLIO
Client New Product
Client Legacy Product
Competitor #1 Legacy Product
Competitor #1 New Product
Competitor #2 Legacy Product
Competitor #2 New Product
Market Model
Key Findings:
Product Portfolio Opportunity
Therefore we RECOMMENDED
the Client introduce the new
product at a premium price and
retain the existing product as a
value product.
(instead of 68%) market share...
…and an overall increase in profitability
74%
74%

30. $-
$100
$200
$300
$400
$500
$600
$700
Y1 Profit Y2 Profit Y3 Profit
Scheduled Launch
12-mo Pre-Announce
Market Model
Long-Run
Brand Unit
Sales
Long-Run Brand
Unit Share
Year 1
Revenue** Year 2 Revenue**
Year 3
Revenue**
Year 1
Profit**
Year 2
Profit**
Year 3
Profit**
Discounted
3-Year Profit
Discounted
5-Year Profit
6K 33% $228M $364M $364M $174M $278M $278M $658M $1.1B
7.5K 41% $394M $394M $394M $275M $275M $275M $750M $1.2B
13.5K 74% $623M $758M $758M $449M $553M $553M $1.4B $2.3B
We DISCOVERED that the Client could see a 36% drop in PROFIT
because of delayed purchases if a new product is pre-announced.
Key Findings:
Pre-Announcement
64%
SAMPLE OUTPUT
Without the pre-announcement, customers will continue
to purchase the current product, especially if they can also
purchase a S/W upgrade plan.

31. FINDINGS and RECOMMENDATIONS

32. We provided guidance on product roll-out
management, pricing strategies, product line
management, including:
FINAL RECOMMENDATIONS
1
2
3
Schedule new product announcements very
close to actual launch dates
Minimizes short-term revenue reductions and optimizes
financial returns.
Target DOPs and CFOs
DOPs and CFOs are the primary decision-makers and should
be the primary target for sales and marketing strategy.
Create a two-tiered product portfolio by
keeping existing (legacy) product
Profits are maximized when both the legacy and new
products are available on the market.
Price the new product at a premium
Customers who value the new product’s features
are willing to pay a higher price.
Price-sensitive customers will have a satisfactory value-
priced alternative in the client’s portfolio.
4

33. USA
502 Mace Blvd, Suite 15
Davis, CA 95618
PH: + 1 530-792-8400
FX: + 1 530-792-8447
http://www.themarketechgroup.com/
Europe / France
3 rue Emile Péhant
44000 Nantes
PH: +33 (0)2 72 01 00 80
FX: +33 (0)2 40 48 29 40