This chapter discusses the pricing strategies and decisions made in the health care sector. It also evaluates various strategies used by health care providers, consumers, and companies when processing prices. These include determining the appropriate time when an organization should adjust its prices, how to handle price wars, and the influence of private and public payers when making decisions on pricing (Kotler, Shalowitz & Stevens, 2008).
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In terms of pricing decisions, this chapter explains that the price charged on products and services depends on the objectives of an organization. Several companies rely on price to establish their value and also position their brand or product in the market. A company that enjoys a well designed and marketed brand finds it easy to set a premium price that eventually leads to increased returns. However, it is important for organizations (especially those involved in health care provision) to put into consideration the current issues that are vital to members of the public.
Many people fail to understand why the price of different pills used to treat ailments would vary even in situations where the ailments are the same. Therefore, it is prudent for health care providers to explain the variation in price in order to help in instilling trust and confidence to members of the public (Kotler, Shalowitz & Stevens, 2008). Health care providers should also portray high levels of transparency when setting prices. One way of achieving the latter is by displaying the prices that consumers are required to pay before rendering services to them.
Despite the fact that consumers of health care services and products are assumed to be price takers, healthcare providers should be very careful when setting up prices for their products. This is because the current awareness in the health care plan has taught consumers the need to be responsible when paying for medical products and services. In order for health care providers to gain a good understanding of how they should price their products, they ought to consider quite a number of key features that relate to pricing. These include price-quality inferences, reference prices, and price cues (Kotler, Shalowitz & Stevens, 2008).
Organizations should make price adjustment plans only when they are introducing new products into the market or when an existing product is being introduced into a new geographical area or distribution channel.
There are approximately seven steps that an organization should follow when establishing a pricing policy. These steps include the selection of an appropriate pricing objective, demand determination, cost estimation, analysis of offers, costs, and prices set by competitors. While undertaking this process, an organization should also consider the stage of the product in the life cycle, the usefulness of the product in terms of a company’s performance, and the alternative opportunities available to the company (Kotler, Shalowitz & Stevens, 2008).
From this chapter, it can also be seen that the influence of government and private payers affects the manner in which decisions are made by organizations. Buyer power is likely to arise when government becomes part of the payer.
On the other hand, the involvement of private payers brings in complexities, especially when undertaking health care pricing. Companies can develop effective integrated marketing communication by introducing both offline and online marketing channels. Examples of offline marketing channels include traditional print (such as magazines and newspapers), industry relations, and mails. On the other hand, online marketing channels include micro-blogging, the internet, and search engine optimization.
Kotler, P., Shalowitz, J. & Stevens, R.J. (2008). Strategic Marketing For Health Care Organizations: Building A Customer-Driven Health System. New York: Jossey- Bass.