The Global Pricing Study 2019 – MedTech, conducted by Simon Kulcher & Partners, a global pricing strategy consultancy, has found that 72% of med tech companies believe they are stuck in a price war of their own making – be it intentional or unintentional.
The number of companies in the med tech industry who believe they are in a price war is much higher than other industries when this figure is compared to the cross-industry average of 57%. This is likely due to the ongoing price pressure in the industry.
Half of med tech companies, when asked about the most important drivers of profitable growth, said higher sales figures. Interestingly though the study also reveals that selling online is not well established in the market. It was reported that 23% of companies don’t use digital sales platforms.
Dr. Marc Matar, partner in Simon-Kucher’s Global Life Sciences practice in London, added: “It is even more striking that only one in 10 companies have achieved significant numbers of sales through online channels.
“It should be clear to the rest of the industry that a purely conventional sales approach is no longer sufficient today. The many different customer segments can only be addressed effectively through holistic strategies involving different channels.”
Alternatively, 27% of businesses answered price increases as the most important profit driver. This is in contrast to the sector’s plans to raise prices as only 18% of companies plan to implement targeted price increases in the year ahead.
“In most cases, this low ambition amongst med techs to raise prices is because previous attempts weren’t particularly successful,” says Joerg Kruetten, senior partner and head of the Global Life Sciences practice at Simon-Kucher.
He goes on to say: “As ever, preparation is key: product value should be the central message whenever prices are increased. Price must always be aligned with corporate goals, and sales needs to be given a clear briefing to enable them to work efficiently.”
To combat this growing pressure, businesses are digitalising their products. 75% of med techs surveyed said they have invested in digitalisation initiatives over the last three years. Surprisingly, 44% of companies stated that their primary goal was cost reduction, not revenue or profit growth, despite the fact that digitalisation has improved revenue performance for 56% of med tech companies.