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Pricing Strategy Marketing Case Study


The Challenge

The company did not have a strong understanding of new product pricing, and the drug would be the first indicated treatment for a rare condition. The pharma company had concerns it would not capture optimal revenue. It lacked a robust pricing strategy. Further complicating matters, drug payers had been exposed to very high launch prices but had mechanisms to limit prescribing. It also was not uncommon to face media backlash in the US market due to pricing.

Building a Solution that Fits

Pricing Solutions would need to conduct a full 3600 launch price evaluation of the major orphan product. That meant starting with a thorough research study. Multiple rounds of interviews would be essential:

  • First, internal interviews with senior managers from the pharmaceutical company’s Sales, Marketing and Commercial teams were scheduled
  • In-depth interviews were done with key payer groups from commercial, Medicare and Medicaid plans
  • A quantitative study with specialists was needed
  • Finally, in-depth interviews with key opinion leaders – those with extensive experience and knowledge of the rare disease – would be held

These gave Pricing Solutions an understanding of the importance of clinical and commercial factors in the payers’ decision-making process around coverage. The acceptability of different price points and price structures were tested in order to establish the key psychological thresholds. Insight from Specialists were captured from a larger sample to understand the prescribing price sensitivity on a practice level. This data was used to estimate expected volume usage levels, taking into account dosing, compliance and persistence. The research was able to confidently forecast prescribing of the drug, allowing for restrictions imposed by payers (see Chart A).

By testing a number of price points, it was possible to evaluate how physician prescribing and payer restrictions changed as price increased. This served as the basis for Pricing Solutions’ calculation of a price volume chart. (see Chart B).

The final step in Pricing Solutions’ 3600 assessment would combine the existing wisdom of the client’s project team and senior stakeholders with Pricing Solutions data analysis. Pricing Solutions met with the client to present and discuss strategic options. Pricing Solutions presented each in terms of revenue, risk volume, company reputation and logistics impact so the most comprehensive go-to-market strategy could be employed.

The Result?

The pharmaceutical company’s product team was now in a position to make strategic and tactical pricing decisions with confidence. Pricing Solutions prioritized six recommendations to implement during launch, and identified the price that returned optimal revenue in the current market (see Chart B). Today, the product has successfully launched under the prices recommended by Pricing Solutions.



What’s the Pricing Solutions Difference?

Pricing Solutions has in-depth knowledge of healthcare launch pricing in major global markets. Our experience across 700+ pricing research and modelling projects instills client confidence in our recommendations. We leverage our full healthcare expertise, and model of Pricing Research through the 5 Critical Stages of the Product Lifecycle, to deliver solutions for both established and alternative business models.

 

PART-1

Executive Summary

The Apple as a brand with its association like i-Tunes was launched internationally as a operating software for the entertainment and media. However, since Apple’s Attractive package and product offerings and value so far there i-Phone, i-Pad or even i-Mac goes is comparatively not attractive anymore because of its association with i-Tunes. Nevertheless, the pricing for a product like media and entertainment that too in the international market had a negative effect upon the brand image causing a tar to its future prospects.

Nevertheless, what perspectives would be used and conclusion of logical reasoning would need research and development. Hence the results about the perception about the effects of overt price has done to Apple in international context would be studied. The literature review would focus upon Brand and various associations of brands with pricing objectives is studied. The Questions pertinent to the study has been devised those would be directed to the i-tune users across the globe to have a primary data to know about their perspective. If required be for the subject’s study the Qualitative questions would be used. The second part would brief it in full.

Table of Contents

Introduction.

Rationale of the Study.

Apple and iTunes.

Brand Equity.

Value Proposition.

Product Differentiation.

Market Segmentation.

Low Cost Strategy Planning.

Value.

Discount Pricing.

Everyday low price.

Power of Pricing.

Conclusions.

References.

Introduction

The brand and its pricing strategies are directly linked with the way the consumer’s feel about the brand. Therefore the equity of a brand is dependent on the ways that the brand portraits itself in terms of pricing that in turn have a huge effect upon segmentation. Thus pricing is an important source of differentiation as the consumers relays the brands identity with the way the brands price for itself. The alignments would deal with the pricing tendencies for iTunes and the brand Apple itself. The brand associates with a segment when the price I displayed and when it comes to music, it’s free in the net age. However, the Apple’s policy of differentiation and its backlash on the equity itself would be critically analyzed and evaluated to have an informed conclusion.

 

Rationale of the Study

Brand equity is the value to the business, derived solely from the perception customers have about the company and the worth of your products and services. In this, pricing is a norm that generally focuses upon a multitude of subjects in the Brand mix like price, persona, and promotional ingredients. However, for Apple the feature of differentiation that too in an International was build upon i-Tunes for its futuristic business of mass-storage in entertainment. Therefore, if the policy had succeeded or had a negative effect upon the brand image is been researched. Therefore, the rationale is to study if brand and its pricing strategies do have any effect upon brand image and thus upon its Business equity, to study what was Apple’s plan and strategy for i-Tunes and to study the effects of the pricing upon Apple’s gross Brand equity

On the subject, the latest comes from Adam Sherwin in The Independent of UK on 14th of this November, 2014 News desk that they have calculated the decline in U2 profits being tarnished too. This was kind of mutual brand withdrawal for both the Bono’s U2 and Apple with the iPhone Six launch. Further, the news reports that U2 could only sell 6700 of its previous album in back catalogues, with this failure altogether. However, the Apple’s choice was to launch i-Tunes as a competent Apple sets like iPhone, iMac, iPad devices. However, the offer was to download songs instead of adding it. Nevertheless, iRadio was so big a price failure in terms of delivery along with tunes that the speculation is iPhone six launches may be the awaited disaster for Apple and the brand as a whole.

The days of media and entertainment has gone a bit widened in terms of storage and the buffering services like those of You-tube, or Socio. Therefore, nobody would be interested to invest 10 pounds of money whom they have never heard of. Nevertheless, the offerings were such that those were even given a discount pricing offer substitute to download 500 tunes but those available there are probably of not the taste for all, because music is diverse and taste differs and thus limited 500 may have features those are not liked by all. The view of consumers would be taken into consideration from different media sources as the online feedback processes may be biased due to international locations. Nevertheless, the idea of making i-tunes a product mandatory for such a big storage device was the basic problem. However, the effects of it on the brand and its sales have become the research issue and thereby the literature review as follows would identify and analyze how brand and the pricing are related and how do they have prices, what are the overture had it been to brand equity.

Apple and iTunes

Apple is a renowned brand from US based Computer manufacturer who are also famous their offerings in hardware supporting large memory in small space thus creating entertainment support and playing device and Operating software (OS). Innovations like i-Phone Technology making Apps a regular name to any techs today. Followed by these innovations the operating systems in these device however failed to generate any big success since its multi natural launch. But actually the strategy to make music payable or movies and books no funded like activity has become a regular activity. Form the consumer’s perspective for i-tunes subscriber in any Apple device has the inclination towards storing large amount of music in their device that has those multimedia offers like music playing, video outputs and also radio connectivity playing a range of US and Europe based radio channels (Sherwin, 2014).

However, for an International launch the device seemed not to have attracted any substantial market out of US, Canada, UK and France. The reasons are may be in the build and the Operating Software Concept itself. The compatibility with other OS is poor when it comes to Apple. Therefore the sinks between two Apple devices are having complained in loading and sinking music between 2 i-Tune devices. Nevertheless, the physical infrastructures of different nations that have limited connectivity for mobile devices other than Wi-Fi connectivity are feeling that the i-Radio add-ons in i-Tunes have no use. Again, when one can taste music for free, why a consumer would buy a new launch music video with a price was not understood by the global i-Tune subscriber. Even in US markets, iTunes took off with a boom but that was a phase when the product was tested. The market infrastructure and offerings are not compatible at all places in the international markets. In launch I-Tune, Apple sought the consumers to buy music and sync them in their devices. However, the buying affinity (In this Case Music) is low in international markets along with the devices inability to competently sync all multimedia items in one device due to different different platforms of media playing OS those don’t gets on with Apple. Again the I-Tunes cost is the major factor as the markets that the brand ventured is not keen to invest money upon a product like i-Tunes release before they have actually tasted the product. Nevertheless, the source of music is free and vast to choose from. Apple did not support the idea when at US market (Sanchez, 2014).

Brand Equity

The use of symbols, such as a name, logo, characters and slogans in promotional efforts, those helps build brand equity. Any pricing strategy also contributes to the perceptions customers have about the Brands offerings. Pricing is just as important to brand equity as other differentiators, because it is a source of meaning and identity. A solid pricing strategy can have a positive effect on brand equity, while a poor strategy can do the opposite. The various types of pricing strategies include premium pricing, discounted or competitive pricing, cost-based pricing, introductory or penetration pricing, everyday low pricing and bundle or bulk pricing. Finding the right pricing strategy is vitally important for the brand equity of a business. Nevertheless, the price is directly linked with product offerings, thus if a brand has less to offer the prices would be low as to keep the competitive edge, like most of the Retail brands and products pricing competition that we see for different grocery products (Cendrowski, 2012). Further, the more the price the more sensitive is a consumer about the offerings of the product.

 

The equity for a few also is somewhat price based at cases where the Brand offerings are supposed to be suggested by the price of it. One example is like Rolex Watches. Useable goods with value offerings but the pricing is set in a manner that creates its difference with others with the price differential that would suggest some goods of value like high grade steel, high valued Gold, platinum or Silver usage. Nevertheless, it also suggests the target audience along with Strategic marketing plans.

 

 

Value Proposition

The offerings in substance and benefits on the products use perceived by the consumer are the Value Proposition for the product (Muller, 2013). Value proposition is generally described as the mixture of benefits that a business offer through their product or service solution to targeted customers. However, from a customer point of view, the value equation is simpler. Customers compare the relationship between a product's price and the perception of worth they take from its use or the experience they get from it. A price that is too high negatively impacts the value proposition, while a price below what could get reduces the profit margins. However, Hulshof (2014) suggests that Value proposition is dependent upon the way the consumer has developed the pace and length of loyalty towards a brand, or whensoever’s choosing a brand.

Product Differentiation

The product mix is made out of components like product size, weight, offerings, price like factors. Differentiation means to develop and communicate something bigger, better or distinct about product offering. If the offerings are not presenting something distinct to the marketplace, then the business rely solely on arbitrary decision-making on the part of consumers. Developing a distinct and desired benefit mix and clearly telling market segments about it helps to drive customers to a business or products. Organic food makers or resellers pin their differentiation on the natural, healthy advantages their products provide and retailers may go for Price differentiation or Discounts and offers to let the consumers perceive that they are getting more for less.

Market Segmentation

Along with differentiation, the other key component of brand positioning is the target market to which business positions. Cendrowski (2012) argues that Business may offer an excellent, distinct benefit, but if it doesn’t present the same to the right market segment, it doesn’t really matter and the offerings may fail. For the Brands like Tesco it’s a larger Audience without much of Socio-Eco class segment than other Brands depending upon the product they sell. Again, location, age group of audience, income, taste, culture, belief like elements those comes as determinant in Market segmentation, when a brand chooses to offer and develop their class of audience. Offering the lowest price to a highly affluent market segment doesn't make much sense, for instance, because customers with money typically look for superior product benefits or excellent service. However, identifying customers based on shared demographic, geographic, and behavioral or lifestyle qualities are taken in promotion too as considerations. Thus focusing business efforts on them improves a business’s potential to have better position on brand equity to its similar in a market.

 

Low Cost Strategy Planning

The low cost strategic planning is the differentiation or strategic values. Ge (2010) suggests that pricing can be differential (Specialty and uniqueness) or strategic (as in Commodity pricing-especially in the retail Industry). However, the market place gets to choose in segment terms which are the business targets. Low the cost of profit the between due to bulk sales of retails can be true. Nevertheless, the strategies those it chooses to give are actually bulk and those kinds of profits are at times not made in price competitiveness-differentiation-creation wise. Therefore, goods or product with high use and those having lesser range of profit due to higher consumption like daily use Breakfast cereals or packed milk like items. The retailers use these products to be in the market for consumers to come in therefore the basic ingredients that attracts one to the market.

High End

The high end pricing are those pricing that is set to create differentiation between other pertinent product having same offerings. This differentiation strategy is generally segment oriented which have a sense of luxuries and added value offerings in the product. Products like Apple i-Phone, A Rolex watch or a car from Ferrari or similar is associated with a unique feature that those prices signify. (Villanueva, 2007) suggests the factor as perceived value is high; the satisfaction is the key, the association and personality signature like items are the high end products.

Value

Value is the element of added property advantage that a consumer feels. This is not a solid objective outcome but a perceived goodness or utility and advantages that keep a product ahead from its competitors. Villanueva (2007) suggests that the value associated with a brand is a very precious item of Brand as if the repute does the brand faces, the trust and faith upon the brand that consumers perceive, gets affected.

Brand Extension

A brand extension occurs when leverage brand equity to market a new business or product to a new customer market. A prominent company example was Gap launching GapKids. Leading toilet paper brand Charmin expanded its brand by offering a lower-end option, Charmin Basic, to price-conscious consumers. Brand extensions only work if you have strong brand equity, because you essentially rely on your proven reputation to attract new business.

Discount Pricing

Businesses usually adopt a strategy of differentiation or price leadership. Differentiation works for companies operating in luxury or niche markets, while price leadership works for discount stores (Shaffer, 2005). The effect of a discount or competition pricing strategy can create an image of second-rate products, which could have a negative effect on the brand’s equity. For example, Tesco would come up with Weekly offers to give added groceries on a certain amount of buy. That’s like what extra that a consumer feels that they gain in the process, in the regular buying habit with Tesco. This alienated some customers, but gained brand equity for the company in other target markets.

Everyday low price

This pricing strategy is the official positioning of most grocery store chains. Walmart successfully follows this strategy, which is imitated by stores in other countries. The chain’s approach of profitable and sustainable price differentiation has become a winning strategy and created significant brand equity, positioning the company as a low price, high value retailer. In addition, brands that successfully move into developing markets with a large number of less affluent customers, such as China and India, have their brand equity directly affected by the affordability of their products to the target market.

Power of Pricing

Pricing at both ends of the strategy spectrum can affect brand equity in different ways. For a low cost high use product of daily need like Salt or packed milk the pricing plays the key differentiator among the brands. However Kotler (2008) suggests Premium pricing is the principle of setting a high price point to reflect the product’s exclusivity and quality. Kittlaus and Clough (2009) argues that, with niche brands, such as sedan class Mercedes Benz or Rolex, the price is an aspect that the customers of the brand association enjoyments. It adds meaning and value to their purchase and sets the product apart from its competition. This makes the pricing strategy an important and integral aspect of the product’s brand equity. If the product doesn’t have any other strong differentiators, however, lower prices are likely to sell better than more expensive ones.

 

Research Questions

The research questions would try to answer the following:

Do the product like music, movies and books like products of social and moral value associate with pricing?

Did the Apple’s objective in pricing strategy have a direct impact upon its brand image?

How did international launch of i-Tunes impact the Brand image of Apple?

Nevertheless, the objectives would be building upon the rational of the subject that would be linked with the questions that the proposal suggests.

Conclusions

The assignment would build on effective study that had been done by primary research over the i-Tunes subscribers all across the globe in different cities among different age groups. However, the primary data gathered may be further studied for the Qualitative answers if they may require. Nevertheless, the online distribution and study conduction would be done for the assignment. The ways that the brand of Apple has been affected could be understood and the effect of price among the global population about a product like music and entertainment. Therefore the design would be to understand the brand association damage that Apple has faced and what all strategies proved failure in this process would be analyzed.

References

Books

Kittlaus, H. and Clough, P. (2009) Software product management and pricing. 2nd Ed, Berlin:

Springer

Kotler, P. (2008) Marketing Management, 4th Ed, New York: Free Press.

Shaffer, F. (2005) Costing out nursing, 3rd Ed, New York: National League for Nursing.

Villanueva, J. (2007) Customer Equity. 1St. Ed. Hanover: Now Publishers.

Cendrowski, H. (2012) Private equity. 2nd Ed, Hoboken, N.J.: Wiley

Journals

Ge, D. (2010) “Value pricing in presence of network effects” Journal Of Product & Brand

Management, 11(3), 174-185

Huang, T. (2011) “The Value of Clickstream Tracking: Advance Demand Information, Product

Personalization and Personalized Pricing” SSRN Journal, 23 (2), pp. 12-19

Hulshof, J. (2014) “Sustainable Health Care Systems: The Role of Therapeutic Value and Value

Based Pricing” Value In Health, 17(7), pp. 452- 454

Muller, J. (2013) “Value Based Pricing in the Context of Software Product Line Engineering”

SSRN Journal, 13(1), pp. 12-23

PART-2

Executive Summary

The Second part of the Assignment focus on the research methodology. The tools and techniques those would be used in conducting the research along with the research approached that would be guiding the entire process is discussed. The sample size along with population identification for the specific subject is been done. The various methods used in both Primary and Secondary data collection and analysis along with the various Qualitative and Quantitative research approaches are been evaluated.

The care towards the maintenance of ethics and their practices would be maintained in this project with sufficient details. Nevertheless, the answers and figures those come out of the evaluation and analysis would be further deduced to sync them with the research objectives that would give an answer to the hypothesis with which the research started. Thereby recommendations would be generated for the Apple brand that witch may help them is maintaining the brand image and value.

Table of Contents

Introduction. 4

Back Ground of the Study. 4

Research Methodology. 6

Data Analysis. 8

Ethics Validity and Reliability. 9

Conclusions. 10

References. 11

Introduction

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