The healthcare industry is becoming increasingly customer-centric. With rising consumerism, the need for transparency, high-deductible health coverage, and transition towards value-based services, it comes as no surprise that healthcare providers need to develop a good hospital pricing strategy that improves their position in the market.
Effective Pricing Strategies to Use in the Healthcare Industry
Coming up with an efficient hospital pricing strategy is a long-term, tactical process that requires consideration of numerous factors. Any successful business needs a pricing strategy, which also comes with experience and understanding of the marketplace.
Here are some of the most effective pricing strategies used in healthcare:
Price skimming targets high-income patients and customers who can be categorized as trendsetters or influencers. This type of plan is used when launching a new service or to gain a competitive advantage. Here, you put your price at a point and then gradually lower the price over time. When providing unique and high-quality services, you can price them at a higher cost to achieve the highest profit for your business. Some of the advantages of this strategy are that you receive higher ROI’s, help segment the market, enable early adopters to test and review new products, and so on. Pride skimming also helps companies break even faster.
This strategy entails a massive volume pricing plan, which is the opposite of price skimming. Instead of starting with higher prices, companies start with the minimum price possible and gradually raise them as service volume goes up. There is, however, some risk of making zero profits in the beginning, but it is a freeway for you to get more customers to test your services and determine the quality for themselves. It also improves customer loyalty, especially if you’re in an area filled with competition. With this plan, instead of targeting short-term profits, you attract new market shares.
Penetration pricing is meant to help shed the spotlight on your brand, therefore, you always price lower than what your competitors are charging at the start. Once you’ve successfully penetrated the market and built a client base, you can begin to make profits.
The market, in today’s environment, is always filled with competition. Companies are always surrounded by competitors, and to be successful, it is essential to keep an eye on what the competition is up to. Competitive pricing is similar to penetration pricing, but here you don’t target the market. Instead, you try to keep the competition away from your customers, so your price is at a competitive level and moves around your prices based on their reactions and activity. This way, you’ll manage to keep price-sensitive clients loyal to your company while helping them stay within budget and make profits. This is a tricky long-term strategy, however, as you cannot constantly control internal and external conditions. It does, however, enable you to build a client base who can see the service of your services, before adopting a different strategy.
Coming up with hospital pricing strategies is always a complex process and can be quite unstable. This is why, having an experienced professional manage your needs, understand the market and observe the competition, can help your healthcare organization save time and make profits with a narrower room for error.