pricing maturity report_life sciences industry
DESCRIPTION
The vast majority of respondents believe that a pricing optimisation strategy is a must have business initiative in today's day and age and that this has to be supported by the appropriate big data analytics set up, though this appears to be a particular challenge for several firms.TRANSCRIPT
European Pricing Maturity2013Results and key findings - Life Sciences Industry
Page 2 of 4
Results and key findings - Life Sciences Industry
With its 12,4% of representation this is the third most represented industry in the survey, after Machinery Manufacturers and Automotive. It encompasses Medical Technology, Pharmaceutical and Biotechnology companies.
Approximately two-thirds of respondents for this sector have more than 3 years of experience in a pricing function, with about 20% of this group having more than 10 years of experience.
60% of respondents have pricing departments at a worldwide level that comprises more than 15 people.
The vast majority of respondents (93%) believe that a pricing optimisation strategy is a must have business initiative in today’s day and age and that this has to be supported by the appropriate big data analytics set up, though this appears to be a particular challenge for several firms.
Perceived pricing maturity 2,27 = LEVEL 2
Actual pricing maturity 2,10 = LEVEL 2
Ambition within 12 months3,23 = LEVEL 3
Life Sciences industry – observations
3rd most represented industry in this study
Figure 1: Distribution of respondents within the Life Sciences industry
Figure 2: Distribution of respondents within the Life Sciences industry
Source : EPP European Pricing Maturity Study – 2013
Source : EPP European Pricing Maturity Study – 2013
Perception Reality Ambition
Level 1: Price list maintenance
20% 40% 6,67%
Level 2: Transactional control
40% 53,33% 20%
Level 3: Full value capturing
33,33% 6,67% 66,67%
Level 4: Full profit optimisation
6,67% 0% 6,67%
perception reality ambition
20%
40%
Level 1:Price List Maintenance
You try to sell anything to anyone at all prices
40%
53%
20%
Level 2:Gain transactional control
and optimize
You sell the right products to the right cutomers at the
right prices
33%
7%
67%
Level 3:Full Value Capturing
You sell segmented solutions at value based
prices
7%0%
7%
Level 4:Profit Optimisation
You develop end-user solutions with different
revenue models
CHASM
7%
Page 3 of 4
Results and key findings - Life Sciences Industry
The sheer complexity of the environment in which Life Sciences firms operate leads us to expect a much higher pricing maturity than what was measured in the PMI survey of Q2 2013. On the right we take a closer look at where these companies believe that they need to improve.
Improve monitoring of effects of price promotions. Respondents indicate that urgent action is needed on capturing competitive intelligence from scattered sources, and to improve accuracy of cost information and availability of this info to pricing team.
Per product launch, price elasticity research by means of advanced tools (e.g. conjoint) needs to be performed. Important here to note that 73% of the respondents are from the MedTech sector and 13% from Biotech. For the pharma respondents, this type of research is already used much more extensively. For all Life Sciences respondents, more attention to price positioning is essential. More specifically: draw up price/value maps per segment, and align with market strategy. They also need to gain a clear understanding of value components per segment and use them for value pricing.
Convince management to invest in pricing research & pricing software to take full advantage of pricing intelligence gathered for effective operational and strategic initiatives.
Monitoring
Price policy & setting
Tools & Systems
Life Sciences industry – gap analysis
Source : EPP European Pricing Maturity Study – 2013
Source : EPP European Pricing Maturity Study – 2013
Reality Ambition
Price Strategy 2,30 3,43
Price Policy & Setting 2,00 3,27
Discounting strategy 1,93 3,13
Price Execution 1,93 3,16
Monitoring 1,67 3,03
System & Tools 2,07 3,30
Governance & Org. 2,40 3,35
Tendering 2,27 3,07
Figure 3: Gap analysis: Life Sciences industry
Figure 4: Distribution of maturity scores across components of the pricing framework
TenderingGovernance & Org.
System & ToolsMonitoring
Price ExecutionDiscount Strategy
Price Policy SettingPrice Strategy
Actual PMI score
0.00 1.00 2.00 3.00 4.00
Gap with Ambition
0.790.95
1.231.37
1.221.20
1.271.13
Page 4 of 4
Results and key findings - Life Sciences Industry
This sector, especially Pharmaceuticals, is quite well-known for its use of tendering in the sales process. 87% of respondents of this survey indicated that they use tendering. The aspects of the process on which they feel that most improvement is possible are:
The degree to which tender information is collected, compared, critically analysed and used in price setting for a tender.
Pay attention to the pricing strategy for tendering in general, and also look at a margin optimisation strategies per tender. More emphasise needed on margin targets and responsibility for reaching it before the tender is submitted. Margin targets need to take into account the life time value of the tender.
If you would like more information or to arrange an informal discussion on the issues raised in the EPP European Pricing Benchmark Study and how they affect your organisation, please contact:
Project Manager:Nicolene [email protected]
President & Founder of EPP:Pol [email protected]
Tender information
Pricing strategy
Life Sciences industry – Tendering