Abstract:
'Price' is the compensation given by customers in return for the 'value' received by them when purchasing a product or service, and is one of the most important factors influencing company profitability. Currently it is a challenging task for companies, especially those in the life science sector, to implement an appropriate pricing strategy that captures the value created from their products. Foremost, often it may be difficult for companies to quantify the value delivered by a product and/or service. This research involved assessing case examples of various products in the life science and information technology sector, in order to evaluate an appropriate pricing strategy for life science products. It further involved developing a four-stage method to identify the factors motivating customers' purchase decisions, to quantify the value delivered by a product from the customer's point of view, and ultimately, to develop a price strategy. The research findings showed that strategic pricing would be advantageous for pricing products in the life science sector, as opposed to cost-based pricing, as strategic pricing enables firms to capture the value created by their products. The developed four-stage method enables firms to quantify the value delivered by a product from a customer's point of view, and ultimately to develop a pricing strategy for a product based upon its value and by taking the competitive landscape into account. It enables firms to differentiate their product from competing products, which will ultimately decrease the customer's substitutability.