Re-Pricing OTC Medication After Release From Regulatory Restrictions
Case Study: Pharmaceuticals (Over-the-Counter Medication)
The regulatory requirement which capped the wholesale price that could be charged for this OTC oral medication was soon to expire. The pharmaceutical company wanted to plan how they could restructure their pricing to better reflect market demand.
In order to develop an optimal pricing strategy for this product, Pricing Solutions needed to understand consumers’ willingness-to-pay at different price points. They also needed to understand the role of distribution partners—both in setting the end-prices charged to consumers, and in influencing the purchase decision.
After completing a large-sample consumer survey, Pricing Solutions was able to recommend a revised pricing structure. Pricing Solutions also determined key segments most interested in this OTC oral medication. The mystery shopping interviews provided valuable insights into how pharmacist and doctors varied in their opinions about the value of this medication, and how this might nudge consumers for or against a purchase decision.
The challenge was to measure consumers’ willingness-to-pay at different price points; both for individuals and on behalf of their families. The study design also needed to consider the variation in prices charged via different distribution channels. The complete market research project had a strict one month timeline.
Below: A Selection of Canadian Pharmacies Included in the Project
Building a Solution that Fits
Pricing Solutions conducted 2 types of primary market research.
1. Mystery Shopper Interviews
Pricing Solutions conducted interviews at 22 retail pharmacies and 10 travel clinics in Vancouver, Toronto, Ottawa and Montreal. The interviews allowed the team to:
- Measure prices charged at various retail stores
- Understand attitudes towards this specific OTC medication
- Assess the level of recommendation for this medication based on its perceived value, including perceived length of effectiveness
2. Online Surveys
Pricing Solutions ran an online survey amongst roughly 800 target consumers across Canada. The survey:
- Used a monadic design with 6 different price points
- Employed MaxDiff for measuring value drivers with segmentation
- Employing CHAID to identify key predictors of interest in the OTC medication
Overall the primary market research provided deep customer insights that strengthened the pricing strategy implementation.
Above: Price Elasticity diagram for this OTC product. Six tested price points were condensed to four within this analysis
Above: Segments Identified as Likely to Purchase the OTC Medication
Pricing Solutions provided the client with a pricing recommendation for the OTC medication. In addition, the study demonstrated large differences in willingness-to-buy according to MaxDiff derived segments, and identified the groups most interested in buying this OTC medication. Pricing Solutions also provided clear recommendations about how to encourage doctors and pharmacists to support the purchase decision of consumers.
What’s the Pricing Solutions Difference?
For this project, Pricing Solutions was able to provide robust information and recommendations for a specific, time-sensitive decision. The robust information provided insights beyond the scope of the initial project with valuable implications for both the marketing and pricing departments.