The healthcare industry is facing a multitude of challenges when it comes to pricing its products and services. Rising costs, market instability, and constantly changing consumer behaviour are just a few factors that make decision-making increasingly difficult, and the lack of transparency in pricing also creates a negative impact on the overall patient experience. According to a recent survey by AKASA, 64% of respondents have never researched pricing for healthcare services, and 58% would research their options and shop for the best price if pricing information was disclosed in advance of healthcare procedures and services.
However, addressing these challenges is not a simple task. One solution could be the implementation of better pricing strategies that benefit both businesses and consumers. Utilising advanced analytics applications such as Van Westendorp and Gabor-Granger methods can provide robust and reliable data for pricing healthcare products and services.
Van Westendorp / Price Sensitivity Analysis (PSA)
The Van Westendorp method provides businesses with a range of acceptable prices based on respondents’ ratings. In a typical survey, respondents are asked four questions to identify a price scale from “too expensive” to “too cheap”. The questions are as follows:
- Too expensive: At what price would you consider X to be so expensive that you would not consider buying it?
- Too cheap: At what price would you consider X to be priced so low that you would feel the quality couldn’t be very good?
- Expensive: At what price would you consider X starting to get expensive, so that it is not out of the question, but you would have to give some thought to buying it?
- Cheap: At what price would you consider the X to be a bargain—a great buy for the money?
Results are displayed as a graph, where each line represents a range on the scale. The intersection of these lines provides several outputs, including the optimal price – the price point where businesses will typically have the highest possible profit.
The Gabor-Granger tool provides a price elasticity analysis, showing the respondents’ willingness to pay for a product or service in response to a change in its price. Price range and intervals are predefined, and respondents are exposed to them one at a time, either sequentially or randomly. For instance, the respondents can be asked questions such as:
- Would you buy X for £150? Yes or no.
- Would you buy X for £1,500? Yes or no.
- Would you buy X for £3,100? Yes or no.
The typical output is a price sensitivity graph showing both the percentage of respondents willing to pay at a given price and the impact on profit when prices increase.
Overall, the healthcare industry faces challenges in pricing its products and services. Utilising advanced analytics applications such as Van Westendorp and Gabor-Granger can provide robust and reliable data for pricing healthcare products and services. By using these two methods, healthcare businesses can determine an evidence-based optimal price point for their products or services, resulting in a win-win situation for both businesses and consumers.
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