Pricing Strategies and Marketing Channels

Introduction

Pricing Strategies and Marketing Channels are essential to the success of the health care system today. The role of pricing is to give the product or service its image. A health care facility that has quality products and services has to make sure that they also have a good pricing mix to attract new customers and to appeal to its customers loyalty. In today's society, customers are beginning to be sensitive to pricing of products and services because of the economic change. With the rise in prices, loss of employment and the health insurances issues on the minds of citizens in the United States, many are now searching for the best service or product that they can obtain for less. This paper will display the importance of pricing strategies and the use of intermediaries in the health care system. It. will explore the concepts of pricing strategies and marketing channels and their relevance to the health care system.

Explain at least four of the seven steps for setting an initial price for a product or service,

In the past, many physicians, customers and health care professionals thought it to be unethical and unprofessional to market the sales of health care products and services (Kreidler, 2008). The following will addresses how the health care facility can be successful in marketing its products and services. :These next four steps will show the importance of price setting.

Selecting the Pricing Objective is when the health care facility positions its market offering. To obtain this, the facility must pursue five major objectives: survival, maximum current profit, maximum market share, maximum market skimming or product-quality leadership. Survival is a short term objective for the organization to stay in business. Maximum current profit is an estimate of the demand and costs that are associated with alternative prices. Maximum market share consists of when an organization believe that if they charge higher prices it will lead to lower cost in the long run. Market skimming is when an organization tries to gain as much revenue as they can in a short time and then there is product quality leadership which encompasses the gold-standard of pricing and allows the organization to charge a premium price for its products and services (Kotler, Shalowitz & Stevens, 2008) .

Determining Demand- health care facilities must be careful in determining the prices for their products and services. According to the text, the higher the price, the lower the demand and vice-versa (Kotler, Shalowitz & Stevens, 2008). Because there are so many other health care facilities with the same services and products, it is important for each organization to find the proper price mix for its products and services. The organization must decide their target group and the demand for what it has to offer. In today's market, consumers are seeking the best prices for quality products and services. If a health care facility is offering quality services at a high price, this could cause some consumers to look to other organizations based on price.

Estimating Costs- consists of the organization determining the cost of its products and services by looking at the cost of production, distribution and selling the product (Kotler, Shalowitz & Stevens, 2008). The cost of products and services that the health care industry has to offer depends totally on the demand of what the consumer wants or needs.

Analyzing Competitors' costs, prices and offers-an organization must look at the competitor's prices and possible pricing reactions to help with pricing its own product or service (Kotler, Shalowitz & Stevens, 2008). Since there are so many health care facilities offering the same type products and services, it is important for the organization to know how and what their competition is offering the consumer. By knowing the competitor's prices, helps the organization to make a decision on how it will market its products and services as well as how to price them.

Explain at least four ways an organization can respond to a competitor's price change.

Health care organizations have quite a lot of competition, therefore it is important to know how to promote its products and services beyond what its competition has to offer. Health Care organizations can improve their overall institutional performance by implementing the following steps:

Delayed Quotation Pricing- this is the final price when the product is finished or delivered (Kotler, Shalowitz & Stevens, 2008).This is a good tool to use with inflating prices of health care products and services in today's times. By setting the price of the product or service when it is finished or delivered helps the organization give the consumer the best product for the best price possible.

Escalator Clauses-this is a clause that requires that the customer pay today's price and all or part of any inflation increase that take place prior to delivery (Kotler, Shalowitz & Stevens, 2008).

Unbundling- this is where the organization maintains its price but removes or prices separately one or more components that were part of a former offer such as free delivery or installation (Kotler, Shalowitz & Stevens, 2008).

Reduction of Discounts- this is when the organization instructs its sales force not to offer its normal cash and quantity discounts (Kotler, Shalowitz & Stevens, 2008).

It is not only important for an organization to have the proper pricing mix, but also to execute the use of channels in the delivery of products and services. Channels are used in an organization to set the paths and relationships needed to reach consumers. The following will discuss the effectiveness of channels and how to manage them.

Describe how effective health care delivery channels can be designed.

The design of effective health care delivery channels include the following:

Analyzing Customer Needs- consists of lot size, waiting and delivery time, spatial convenience, product variety and service backup (Kotler, Shalowitz & Stevens, 2008).

Establishing Channel Objectives- channel objectives are measured by the targeted services output level for the lowest cost. For this to be effective, the planning requires determining which market segments to serve, what level of service they expect and the best channels for each. (Kotler, Shalowitz & Stevens).

Identifying Major Channel Alternatives- to identify major channels there are three elements, the types of intermediaries, the number of intermediaries needed and the terms and responsibilities of each member. The types of intermediaries consists of having the correct person for the job that needs to be done such as a wholesaler or retailer can buy products on behalf of the organization; they can take the title and stand as the representation of the agency and they can resell the merchandise whenever needed (Kotler, Shalowitz & Stevens, 2008).

Evaluating Major Channel Alternatives. After the organization has chosen its major channel alternatives, it must evaluate each choice against appropriate economic, control and adaptive criteria (Kotler, Shalowitz & Stevens, 2008). It is an important element of the health care system to choose its intermediaries very carefully. Intermediaries can perform such positions as merchants who buy, take the title to and can resell the merchandise and then you have agents who search for customers and negotiate on the producer of the products behalf. Both of these intermediaries are important because they are seen as the go between for health care facilities and they help to keep the cost down for the end user.

Describe the four main decisions that companies face in managing their channels.

In managing the channels, the health care facility should use the following criteria:

Selecting Channel Members:- this should be done carefully because the channels represent the company to customers, (Kotler, Shalowitz & Stevens, 2008).A channel member should be evaluated by the number of years they have been in business, their growth since being in business and the reputation they have portrayed in business, these are important in selecting the proper channel members for the organization's purposes.

Training Channel Members-the intermediaries must be carefully trained and the organization must plan and implement the best training for their intermediaries (Kotler, Shalowitz & Stevens, 2008).The proper training of channel members can help to promote the product and services that the health care organization wants to present to the end user. A well trained intermediary can lead the organization into a successful journey in business.

Motivating Channel Members -organizations must identify the needs and tailoring their channel positioning to provide them with superior value. A channel should know that they are valued and needed (Kotler, Shalowitz & Stevens, 2008). Establishing a long-term partnerships with channel members gives the organization another excellent way to promote the organizations products and services. When a member feels needed by the organization, this causes the member to want to give the best service possible and to get the best results that they can obtain for the business.

Evaluating Channel Members-it is important to evaluate intermediaries' performance by checking such items as sales quota, average inventory levels, customer delivery time, treatment of damaged and lost goods and cooperation in promotional and training programs (Kotler, Shalowitz & Stevens, 2008). By checking the sales quota of an intermediary will give the organization an idea of the abilities to sell, negotiate and resell the products and services that the business has to offer the consumer.

In conclusion, marketing and pricing strategies in today's health care system is becoming a trend because the consumer's demand has changed because of more and more competition in the health care industry. By advertising and pricing the products and services of the health care facility to meet the target groups demand, can produce loyal customers and reach new consumers. The old system of health care just reaching those in the community is long gone since there is more competition for patients, therefore this has caused marketing and pricing in the health care system to increase in its sophistication (Kreidler, 2008).

References

Griffin, J. R. & White, K.R. (2007) The well-managed healthcare organization. (6th. Ed). Chicago: Health Administration Press.

Kreidler, M. L. (2008). Health Care Strategy. Health Care Strategy -- Research Starters Business, 1-10. Retrieved May 23, 2011, from EBSCOhost.