If you’re a marketing manager of life science products, smart pricing can make you a hero. Here are a few things you need to know about your pricing superpower!
COGS is for Design, Not Pricing
COGS is a design factor, not a pricing factor. Of course your products must deliver deliver acceptable PGMs (product gross margins), but setting price by solving the gross margin equation for “P” is a big waste of your power. There are much better ways to determine the best price for your product, even if it’s one that defines an entirely new market category.
Specialize
If you have a choice, take on more products in the price range of the one(s) you’re already managing. If you’re managing a $128,000 instrument, take on another instrument in the same range. If you’re managing a $199 consumable, build your fiefdom out of similarly priced consumables and reagents. Do not be tempted into managing “whole solutions” composed of products at diverse price points. Here’s why: The high-dollar instrument will be sold through your direct sales force. Let me tell you, those people can take up a big chunk of your time every day. And you have to help them. Help them, help you. Which means you’ll get dinged for doing a lousy job on the packaging, promotion, and e-commerce set-up for your consumable product. And vice-versa: If you’re neck-deep in the click and conversion analysis you need to do to become a high-dollar mountaintop e-commerce guru, your ascent will be ruined by “negative feedback” on your performance from the sales force. Stick with similarly priced products.
Be a Shrink
Pricing and psychology go hand in hand. So try a little price therapy. Here’s an example: Say you’re starting to extend your product line downward by introducing a de-featured, lower-cost product below your top-of-the-line market disruptor. Price the follow-on product within view of your top-of-the-line product, and you’ll encourage buyers to scrounge up more money so they can buy the “big one.”
What kinds of feelings does that stir up for you?
Do Not Take Their Word For It
Don’t ask a scientist what he or she would pay for a certain feature set. The academic mindset is pervasive in our industry, and the academic mind is on a part-time holy mission against American Business. You’ll get a ridiculously low, useless number.
Keep Your Enemies Close
Yes, you need to make friends with your company’s sales manager, who probably thinks it’s perfectly OK to “throw in” a few extra products to help bring a sale into the current month. You need to stop that. Why? Because your accounting department might just add the price of those “freebies” to the cost of sales for the product that was sold! Depending on your company’s accounting method, that could mean lower PGMs for your product. So every “freebie” the sales manager “throws in” makes your performance look “worse” on your “review.” Don’t let the sales manager steal your superpower!
For help pricing life science laboratory products, call (408) 905-7630, or send e-mail to matthew@wygant.net.
