Smart Pricing: the key lever for the success of a new business model in Pharma

Thursday May 20, 2021

98.6 per cent of managers aspire to a data-based culture in their organizations, but only 32.4 per cent indicate that they are successful in this regard. In this age of digital disruption, new opportunities are opened that allow us to anticipate business challenges and create a competitive advantage. The key is to make data-based decisions, our intuition can be right sometimes, but the data is never wrong.

Who doesn’t need to understand what is happening in their business, why is it happening and what are the best decisions they can make to improve their current situation? Nowadays, the best way for pharmaceutical companies to understand latent information in their data and improve their future strategies is to build a Business Insights strategy.

It is important to discover the meaning and added value of data in our companies to turn it into relevant information. And that’s that what’s measured and analyzed, it’s improved. Let’s go a little further and explain some of the most innovative practices in the pharmaceutical sector.

The optimal discount for our products

Are we giving the necessary discount? What would be the optimal percentage? Can we reduce the discount without decreasing the units sold? These are the main questions that our customers are asking.

The answer is simple: with a strategy of Business Insights we can define the most efficient discounts and with a higher acquisition of sale as well as obtain insights about them according to the profile of pharmacy, product or channel of sale.

The key points are:

Key #1 – Segment pharmacies as appropriate according to their sensitivity to discount, identifying those whose purchase volume is directly linked to the discount applied to them. This allows us to perform focused actions.

Key #2 – Calculate the elasticity of product discounts according to various axes, such as the sales channel, geographical region or pharmacy profile, thus obtaining the most incremental sale combinations per discount point.

Key #3 – Detection of “hook” products (those that boost purchasing) by the pharmacy. Other products in the portfolio are identified that allow the generation of cross-discounts that increase the total volume of orders.

Key #4 – Analyze the average shopping basket, in order to detect specific purchasing patterns of a specific area or pharmacy profile, allowing to better adapt volume discounts and gain effectiveness.

With this methodology, you can define a campaign with specific discounts for each pharmacy and product, knowing how to apply them in the most efficient way and identifying the cases that we know will bring us a certain level of incremental sales.

The result of applying a discount campaign based on the data analysis is:

  • Significant reduction of costs associated with the application of discounts and increase of gross margin.
  • Increase in sales volume due to the effect of rebate takeover

Looking to a new discount business model

By adopting a Business Insights strategy, we can learn the knowledge that we use to support the generation of a new business discount plan. We do this by segmenting those pharmacies that have similar behavior against discount and analyzing the elasticity of each segment so that we can define which ones will be most efficient for each product.

From our experience in the industry, it is common to get on with such initiatives, increased sales by 1.5% to 4% and reductions in the costs associated with discounts by more than 5%.

As you’ve seen, a Business Insights practice allows you to answer key business questions and extract valuable knowledge from the pharmaceutical sector. Incorporating them into the strategic plan’s definition ends up translating into a significant economic benefit, as well as an increase in agility in tactical decision-making. The insights act as a compass that guide managers to make the best decisions, to successfully manage the company and increase results, based on information and forecasts from the data.

 

By Carlos Campos
Partner, SDG Group
SDG Group is a global data and analytics consultancy.

We help companies to create data-strategies & roadmaps,
design and implement cloud data & analytics architectures
and incorporate data governance solutions. 

 

 

 

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