The price
of value
FORTUNE 500 CORPORATION | MEDICAL PRODUCTS | UNITED STATES
When customers value different features, what’s an optimal
price? Using ZS’s approach, a medical device firm found out
BUSINESS ISSUE
Determining if the price is right
It’s a problem for any company in every industry. You have a
new great product, an existing base of potential customers and
a compelling value proposition. But what will people pay for
your product—and will it be enough to generate profits?
For B2B companies, the complexity of purchasing decisions and
proliferation of information online makes pricing tricky at best;
in medical devices, the complexity of health-care delivery makes
the pricing issue just as difficult.
This creates a web of purchasing decisions that can include
health-care executives, corporate managers, doctors, payers,
patients and a host of other decision makers, each with an
individual definition of value.
So launching a medical product that has a B2B customer base
has pricing issues as complicated as any: What’s the true value
of its features? What will different customers pay for any given
feature? And how will the answers to these questions affect our
customer segmentation and marketing approach?
Case Study
PRICING AND SEGMENTATION
THE PROBLEM
What’s the value?
A leading medical devices manufacturer had a new product that
is sold to pharmaceutical companies. The company was facing a
dilemma like many of its competitors—it would be difficult to
determine what customers truly valued, and so finding an
appropriate pricing structure would be a complicated, possibly
problematic, exercise.
“We had used a cost-plus method of pricing,” says a senior
manager with the company. “In terms of selecting features, we
might speak to a few rather than a whole array of customers, and
not understand what individual features drove price.”
If the company priced “correctly,” it could immediately get a
strong, profitable market share, given the differentiated nature of
its new product; if it chose the “wrong” price, it could seriously
hamper product performance and profitability.
THE SOLUTION
A unique methodology
Working with ZS, the company conducted extensive research
that answered essential questions regarding its product’s price
sensitivity, buyers’ role in the purchasing processes and what
would truly succeed as a value proposition.
Qual-joint modeling involved conducting interviews with 40
stakeholders, including the following:
•Conjoint exercises in which respondents provided qualitative
feedback in real-time on the “whys” behind their choices
•Computing the relative values of product features and
validating them in research with respondents, again in real time
•Monetizing the validated relative values of product features
THE RESULTS
The ability to segment and price
The company could start to find the right pricing for its product,
but the end results were ultimately of a much greater value:
•The company could employ an initial pricing strategy and had
estimates of customer willingness to pay for features.
•Because it knew customers’ willingness to pay, the company
could develop a high-level customer segmentation and
appropriate targeting and messaging plans.
•With pricing and segmentation data, the company kicked off
an initiative to tailor pricing for specific customers.
“ZS shared our passion for this project,” the senior manager
says. “It didn’t feel as if they were going through the motions. ZS
was truly interested, and quickly picked up what we wanted.
That’s something you don’t always see.”
“ZS’s people shared our
passion for this project—
it didn’t feel as if they
were going through
the motions…that’s
something you don’t
always see.”
ZS Associates is a global leader in sales and marketing consulting, outsourcing, technology and software. For almost 30 years, ZS has
helped companies across a range of industries get the most out of their sales and marketing organizations. From 20 offices around the
world, ZS experts use analytics and deep expertise to help companies make smart decisions quickly and cost effectively. ZS comprises
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