Implementing Value Based Pricing – It’s a Challenge!

Implementing Value Based Pricing – It’s a Challenge!:
from Axia Value Solutions by admin
Harry on tour! – Part 2
The 2^nd Annual Pricing & Profit Optimization Forum on Life Sciences hosted by the European Pricing Platform

The se7en R Framework

The last two conference sessions were delivered by Richard Coppoolse of EPP and our very own Harry Macdivitt. Harry examined the 7R’s VBP implementation framework (covered in Chapter 10 of our new book Value Based Pricing) with three or four real life medical devices examples.  The 7R’s framework simply reinforces the fact that the road to Value Based Pricing is a journey and needs to be planned and supported properly.  However, for any business that wants to capture some of the significant value it delivers to its customers, the journey is an important one.  Understanding value from a customer’s perspective is a critical starting point because it is only through this understanding that a real differentiation can be created and then subsequently communicated and priced.  These last two conference sessions were the only ones that really got into the issues of implementing prices effectively throughout the organization, although other speakers did touch on them briefly.
Discovery!
Perhaps the most startling discovery was that all of the companies in the room were using cost based or competition based pricing approaches. None was using VBP.  In pharma VBP has acquired something of a bad name because of how it has been handled by the UK government in particular.  We say “startling” because the products of these industries are so full of astonishing value.  In a survey conducted by DeLoittes during the conference about 40% of delegates said that sales were lost on price.  Taking these two factors together, there does seem to be a value communication and pricing challenge in lifesciences companies.
Capture your Value
This reinforces the plenary outcomes from Day 1.  Despite the enormous investments in product development, testing and compliance, most companies are still using cost based approaches for the most part.  These approaches completely fail to capture or communicate value.  This leaves companies struggling to compete on price in a heavily regulated, competitive industry – factors that cannot fail but to lead to premature commoditization.  And it leaves their sales teams with no weapons to defend against the pricing pressures they are subjected to. What a pity!
There is a solution……
But it doesn’t need to be that way – there are some things we can do.  Start today!

• Define your value properly.
• Place it at the centre of your value proposition, your collateral and your arguments.
• And finally capture, through Value Based Pricing, the economic rewards to which you are entitled.

It’s not an easy journey, but every journey has to start somewhere.  Check out the 7R’s framework and start your journey today.