1. Business for Health Business Skills for Private Medical Practices
Module 21: Price Your Products and Services

2. Business Skills for Private Medical Practices
A Quick Start Welcome!
While you are waiting for the class to begin, please take the Pre-Test and make sure your name is on it before you hand it to the facilitator.
Thank you!.
Business Skills for Private Medical Practices

3. Agenda Welcome Pricing Goals Pricing Strategies Pricing Options
Break-Even Analysis
The Value of Price Adjustments
Summary and Evaluation
Close
Business Skills for Private Medical Practices

4. Business Skills for Private Medical Practices
Learning Objectives
During this session, you will:
discuss your current price-setting practices;
identify your pricing objectives;
explain different price-setting strategies;
list the number of different ways to price a product or service;
Business Skills for Private Medical Practices

5. Business Skills for Private Medical Practices
Learning Objectives
conduct a break-even analysis;
practice setting prices;
define key pricing terms;
analyze how varying prices can benefit a health practice;
discuss the next step; and
state your key take-away from this session.
Business Skills for Private Medical Practices

6. Business Skills for Private Medical Practices
Introduction
You will have 1 minute to introduce yourself: 1. Your name 2. Your position 3. Your business 4. How long you have been in business
Business Skills for Private Medical Practices

7. Business Skills for Private Medical Practices
Pricing Goals
Business Skills for Private Medical Practices

8. Your Current Pricing Practices
1. How do you decide how to price your products or services? 2. How do you determine if you are charging too much or too little? 3. Do you ever change your prices? If so, how often and why? 4. How well is your pricing strategy working for you?
Business Skills for Private Medical Practices

9. Your Pricing Objectives
Cover costs
Profit for business
Profit for you
Increase revenue
More market share
Serve community
Business survival
Provide for family
Business Skills for Private Medical Practices

10. Business Skills for Private Medical Practices
Pricing Strategies
Business Skills for Private Medical Practices

11. Price-Setting Strategies
Market or Competitive Pricing
Regulated Pricing
Cost-Plus Pricing
Discount and Promotional Pricing
Differentiated Pricing
Bundled Pricing
Volume Pricing
Business Skills for Private Medical Practices

12. Recognizing Pricing Strategies
Scenario 1: ?
Business Skills for Private Medical Practices

13. Recognizing Pricing Strategies
Scenario 1: Bundled Pricing
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14. Recognizing Pricing Strategies
Scenario 2: ?
Business Skills for Private Medical Practices

15. Recognizing Pricing Strategies
Scenario 2: Discount and Promotional Pricing
Business Skills for Private Medical Practices

16. Recognizing Pricing Strategies
Scenario 3: ?
Business Skills for Private Medical Practices

17. Recognizing Pricing Strategies
Scenario 3: Regulated Pricing
Business Skills for Private Medical Practices

18. Recognizing Pricing Strategies
Scenario 4: ?
Business Skills for Private Medical Practices

19. Recognizing Pricing Strategies
Scenario 4: Volume Pricing
Business Skills for Private Medical Practices

20. Recognizing Pricing Strategies
Scenario 5: ?
Business Skills for Private Medical Practices

21. Recognizing Pricing Strategies
Scenario 5: Market or Competitive Pricing
Business Skills for Private Medical Practices

22. Recognizing Pricing Strategies
Scenario 6: ?
Business Skills for Private Medical Practices

23. Recognizing Pricing Strategies
Scenario 6: Cost Plus Pricing
Business Skills for Private Medical Practices

24. Recognizing Pricing Strategies
Scenario 7: ?
Business Skills for Private Medical Practices

25. Recognizing Pricing Strategies
Scenario 7: Negotiated Pricing
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26. Recognizing Pricing Strategies
Scenario 8: ?
Business Skills for Private Medical Practices

27. Recognizing Pricing Strategies
Scenario 8: Differentiated Pricing
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28. Business Skills for Private Medical Practices
Pricing Options
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29. Innovative Pricing Options
This is a competitive brainstorming activity.
Select a product or a service.
List as many ways as possible to price it.
The group with the most innovative or greatest number of pricing options for each category will win a prize.
Business Skills for Private Medical Practices

30. Business Skills for Private Medical Practices
Break-Even Analysis
Business Skills for Private Medical Practices

31. Break-Even Analysis and Pricing
The purpose of break-even analysis is to determine the minimum number of sales that is required in order to avoid a loss at a designated sales price.
In order to calculate your sales price, you need to know your fixed and variable costs.
Business Skills for Private Medical Practices

32. Break-Even Analysis and Pricing Terms
Variable costs: costs that change in proportion to the volume of your practice.
Minimum affordable unit price: just covers your variable costs- only for a short period of time.
Business Skills for Private Medical Practices

33. Break-Even Analysis and Pricing Terms
Fixed costs: costs that are not dependent on the volume of goods or services sold by the practice.
Break-even price: in order to break-even, you need to cover all of your costs, both fixed and variable. You make a profit when your income exceeds your costs at a break-even point.
Business Skills for Private Medical Practices

34. Break-Even Analysis and Pricing Terms
Minimum profit per unit: What you want to make after fixed and variable costs are paid.
Unit price floor: the minimum price you will charge so that you can make that minimum profit. You set this price based on your profit goal ( 10%, 15% or higher).
Business Skills for Private Medical Practices

35. Break-Even Analysis and Pricing Terms
Additional unit profit: you get this if you are able to set a higher price.
Unit price ceiling: the highest price you can charge and still be competitive in your market.
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36. Business Skills for Private Medical Practices
Unit Price Ranges
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37. Business Skills for Private Medical Practices
Variable Cost
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38. Minimum Affordable Cost
Minimum Affordable Cost = Variable Cost
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39. Business Skills for Private Medical Practices
Fixed Cost
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40. Business Skills for Private Medical Practices
Break-Even Price
Break-Even Price = Variable + Fixed Costs
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41. Business Skills for Private Medical Practices
Minimum Profit
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42. Price Floor Price Floor = Fixed and Variable Cost + Profit
Business Skills for Private Medical Practices

43. Business Skills for Private Medical Practices
Additional Profit
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44. Business Skills for Private Medical Practices
Price Ceiling
Price Ceiling= Fixed and Variable Costs + Minimum Profit + Additional Profit
Business Skills for Private Medical Practices

45. Business Skills for Private Medical Practices
Unit Price Ranges
Business Skills for Private Medical Practices

46. Calculating Prices: Scenario 1
1. What is your minimal affordable price?
Business Skills for Private Medical Practices

47. Calculating Prices: Scenario 1
1. What is your minimal affordable price? 2 covers variable cost
Business Skills for Private Medical Practices

48. Calculating Prices: Scenario 1
2. What is your break-even price?
Business Skills for Private Medical Practices

49. Calculating Prices: Scenario 1
2. What is your break-even price? 3 = 1 (fixed cost) + 2 (variable cost)
Business Skills for Private Medical Practices

50. Calculating Prices: Scenario 1
3. What is your price floor?
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51. Calculating Prices: Scenario 1
3. What is your price floor? 4 = 3 (break-even price) + 1 (minimum profit)
Business Skills for Private Medical Practices

52. Calculating Prices: Scenario 1
4. When you sell at your typical sales price, how much profit do you make?
Business Skills for Private Medical Practices

53. Calculating Prices: Scenario 1
4. When you sell at your typical sales price, how much profit do you make? 2 = 5 (typical sales price) - 3 (break-even price)
Business Skills for Private Medical Practices

54. Calculating Prices: Scenario 1
5. If you decide to discount your product or service and charge only the minimal affordable price instead of your typical sales price, how much less profit will you make?
Business Skills for Private Medical Practices

55. Calculating Prices: Scenario 1
5. If you decide to discount your product or service and charge only the minimal affordable price instead of your typical sales price, how much less profit will you make? 3 = 5 (typical sales price) – 2 (minimal affordable price
Business Skills for Private Medical Practices

56. Calculating Prices: Scenario 1
6. If you decide to sell your product or service at the maximum price, how much profit will you make?
Business Skills for Private Medical Practices

57. Calculating Prices: Scenario 1
6. If you decide to sell your product or service at the maximum price, how much profit will you make? 4 = 7 (maximum price) – 3 (break-even price)
Business Skills for Private Medical Practices

58. Business Skills for Private Medical Practices
Scenario 1 Price Ranges
Business Skills for Private Medical Practices

59. Calculating Prices: Scenario 2
1. What is your minimal affordable price?
Business Skills for Private Medical Practices

60. Calculating Prices: Scenario 2
1. What is your minimal affordable price? 4 covers variable cost
Business Skills for Private Medical Practices

61. Calculating Prices: Scenario 2
2. What is your break-even price?
Business Skills for Private Medical Practices

62. Calculating Prices: Scenario 2
2. What is your break-even price? 6 = 2 (fixed cost) + 4 (variable cost)
Business Skills for Private Medical Practices

63. Calculating Prices: Scenario 2
3. What is your price floor?
Business Skills for Private Medical Practices

64. Calculating Prices: Scenario 2
3. What is your price floor? 8 = 6 (break-even price) + 2 (minimum profit)
Business Skills for Private Medical Practices

65. Calculating Prices: Scenario 2
4. When you sell at your typical sales price, how much profit do you make?
Business Skills for Private Medical Practices

66. Calculating Prices: Scenario 2
4. When you sell at your typical sales price, how much profit do you make? 4 = 10 (typical sales price) - 6 (break-even price)
Business Skills for Private Medical Practices

67. Calculating Prices: Scenario 2
5. If you decide to discount your product or service and charge only the minimal affordable price instead of your typical sales price, how much will less profit will you make?
Business Skills for Private Medical Practices

68. Calculating Prices: Scenario 2
5. If you decide to discount your product or service and charge only the minimal affordable price instead of your typical sales price, how much less profit will you make? 6 = 10 (typical sales price) – 4 (minimal affordable price
Business Skills for Private Medical Practices

69. Calculating Prices: Scenario 2
6. If you decide to sell your product or service at the maximum price, how much profit will you make?
Business Skills for Private Medical Practices

70. Calculating Prices: Scenario 2
6. If you decide to sell your product or service at the maximum price, how much profit will you make? 6 = 12(maximum price) – 6 (break-even price)
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71. Business Skills for Private Medical Practices
Scenario 2 Price Ranges
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72. Business Skills for Private Medical Practices
Question
How do you determine your break-even point if your practice offers many different products and/or services?
Business Skills for Private Medical Practices

73. The Value of Price Adjustments
Business Skills for Private Medical Practices

74. Important Definitions
Two key determinants of the market price are supply and demand.
Supply: The capacity to provide products or services for purchase.
Demand: A buyer’s desire, willingness and ability to pay a price for a specific quantity of a good or service.
Business Skills for Private Medical Practices

75. Important Definitions
Profitability: the ability to earn a profit because income will exceed expenditures.
Profit margin: the percentage of revenue that remains as profit after paying all expenses.
Business Skills for Private Medical Practices

76. Important Definitions Example
Supply
Demand
Profitability
Profit Margin
Business Skills for Private Medical Practices

77. Making Price Adjustments- An Example
Promotional Prices
How is the price change likely to affect:
Demand for products?
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78. Making Price Adjustments- An Example
Promotional Prices
How is the price change likely to affect:
Demand for products?
Increase demand
Business Skills for Private Medical Practices

79. Making Price Adjustments- An Example
Promotional Prices
How is the price change likely to affect:
Profitability of the pharmacy?
Business Skills for Private Medical Practices

80. Making Price Adjustments- An Example
Promotional Prices
How is the price change likely to affect:
Profitability of the pharmacy?
Profitability will go up, as long as the new prices don’t eliminate the margin.
The margin is the sales price minus the original purchase price.
Business Skills for Private Medical Practices

81. Making Price Adjustments
Price Bundling
How is the price change likely to affect:
Demand for services?
Business Skills for Private Medical Practices

82. Making Price Adjustments
Price Bundling
How is the price change likely to affect:
Demand for services?
Increase demand because if the women get diagnosed, they will need other services
Business Skills for Private Medical Practices

83. Making Price Adjustments
Price Bundling
How is the price change likely to affect:
Profitability of the health clinic?
Business Skills for Private Medical Practices

84. Making Price Adjustments
Price Bundling
How is the price change likely to affect:
Profitability of the health clinic?
Profitability will go up if the women have a need for additional services
Business Skills for Private Medical Practices

85. Making Price Adjustments
Pay What You Can
How is the price change likely to affect:
Demand for services?
Business Skills for Private Medical Practices

86. Making Price Adjustments
Pay What You Can
How is the price change likely to affect:
Demand for services?
Selectively increase demand for services and decrease customers who can’t pay
Business Skills for Private Medical Practices

87. Making Price Adjustments
Pay What You Can
How is the price change likely to affect:
Profitability of the health facility?
Business Skills for Private Medical Practices

88. Making Price Adjustments
Pay What You Can
How is the price change likely to affect:
Profitability of the health facility?
Profitability may go up a little, since they have to run the facility anyway- and now they’ll get some income where before they had none.
Business Skills for Private Medical Practices

89. Making Price Adjustments
Pay What You Can There might be a cross-subsidy, where richer customers pay a higher rate for the privilege of not having to be seen with poorer customers. More richer customers paying a higher rate will offset the lesser fee that the poorer customers pay.
Business Skills for Private Medical Practices

90. Making Price Adjustments
Pay What You Can However, the health facility needs to cover fixed costs. Hopefully, the poorer customers will pay enough to cover the fixed costs. If not, it can be considered a service to the community.
Business Skills for Private Medical Practices

91. Making Price Adjustments
Pay What You Can 3. How will you advise the community of this option without encouraging those who can pay the established rates to come for this special “pay –what- you- can?”
Business Skills for Private Medical Practices

92. Assessing Current and Potential Price Adjustments
Price Adjustment I’ve Tried
Why I Tried It
How Well It Worked
Business Skills for Private Medical Practices

93. Assessing Current and Potential Price Adjustments
Price Adjustment I Could Try
When
Desired Results
Business Skills for Private Medical Practices

94. Summary and Evaluation
Business Skills for Private Medical Practices

95. Business Skills for Private Medical Practices
Evaluation Sheet
Business Skills for Private Medical Practices

96. Business Skills for Private Medical Practices
The Next Step
Price your products and/or services:
Estimate your fixed and variable costs for the two products/services that contribute most to your total revenue.
Determine a fair profit margin.
Select a pricing strategy.
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97. Business Skills for Private Medical Practices
The Next Step
Set your prices for these two products or service.
Experiment using two different price adjustments.
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98. Business Skills for Private Medical Practices
The Next Step
Conduct a break-even analysis on these products/services that you might potentially discount- either to promote them or to attract new customers.
Business Skills for Private Medical Practices

99. Let’s See How Much You’ve Learned
Please take the Post-Test. We will compare it to your Pre-Test to see how much you’ve learned in this session. Thank you.
Business Skills for Private Medical Practices

100. Business Skills for Private Medical Practices
My Key Take-Away
Business Skills for Private Medical Practices