Pricing

Team Dosen Pemasaran Farmasi

Stages For Establishing Prices

Development of pricing objectives

Assessment of target market’s evaluation of price

Evaluation of competitors’ prices

Selection of a basis for pricing

Selection of a pricing strategy

1. Pricing Objectives And
Typical Actions To Achieve Them

Objective Possible Action

Adjust price levels so the firm can increase volume to match
Survival
organizational expenses

Profit Identify price and cost levels that allow the firm to maximize profit

Return on
Identify price levels that enable the firm to yield targeted ROI
investment
Adjust price levels so the firm can maintain or increase sales
Market share
relative to competitors’ sales

Cash flow Set price levels to encourage rapid sales

Status quo Identify price levels that help stabilize demand and sales

Product Set price to recover research and development expenditures and

quality establish a high-quality image
2. Assessment of the Target
Market’s Evaluation of Price

Price depends on:

Type of product
Type of target market
Purchase situation (e.g: price of
concessions at movies)
 3. Evaluation of Competitors’
Prices
Citifa Injection 500mg
Brand Company Presentation Price/box Price/pcs Index
Citifa Ikifa Farma 5 amp $24.00 $4.80 1.00
Competitor A A Farma 5 amp $25.00 $5.00 1.04
Competitor B 250mg B Farma 5 amp $8.50 $3.40 0.71
Competitor C 250mg C Farma 5 amp $8.25 $3.30 0.69

Citifa Injection 1000mg

Brand Company Presentation Price/box Price/pcs Index
Citifa Ikifa Farma 5 amp $28.00 $5.60 1.00
Competitor A A Farma 5 amp $42.50 $8.50 1.52
Competitor B B Farma 5 amp $21.00 $4.20 0.75
Competitor C C Farma 5 amp $20.00 $4.00 0.71
4. Selection of A Basis for
Pricing
 Cost
 Cost-based pricing – a dollar amount to the cost of the product
 Cost-plus pricing – adding a specified dollar amount to the seller’s
costs
 Markup – Adding to the cost of the product a predetermined
percentage of that cost

 Demand
 Customers pay a higher price when demand for the product is
strong and a lower price when demand is weak

 Competition
 Pricing influenced primarily by competitors’ prices
5. Selection of A Pricing
Strategy
Market
skimming
Contributio Value
n pricing pricing

Penetration
Loss leader
pricing
Pricing
Strategies

Cost-plus Psychologic
pricing al pricing

Predatory Competitor
pricing pricing
5.1 Market Skimming
Market
skimming
Contributio Value
n pricing pricing

Penetration
Loss leader
pricing
Pricing
Strategies

Cost-plus Psychologic
pricing al pricing

Predatory Competitor
pricing pricing
5.1 Market Skimming
 High price, Low volumes
 Skim the profit from the market
 Suitable for products that have short life cycles or which will
face competition at some point in the future (e.g. after a
patent runs out)
 Examples include: Playstation, jewellery, digital technology,
new DVDs, innovations and First to Market products etc.
5.2 Value Pricing
Market
skimming
Contributio Value
n pricing
pricing

Penetration
Loss leader
pricing
Pricing
Strategies

Cost-plus Psychologic
pricing al pricing

Predatory Competitor
pricing pricing
5.2 Value Pricing
 Price set in accordance with customer perceptions about the
value of the product/service
 Examples include status products/exclusive products /art
pieces
5.3 Loss Leader
Market
skimming
Contributio Value
n pricing pricing

Penetration Loss
pricing
Pricing leader
Strategies

Cost-plus Psychologic
pricing al pricing

Predatory Competitor
pricing pricing
5.3 Loss Leader
 Goods/services deliberately sold below cost to encourage
sales elsewhere
 Typical in supermarkets, e.g. at Ied Mubarok, selling Kong
Ghuan (biscuit) at Rp. 78.000,- in the hope that people will be
attracted to the store and buy other things (reg price Rp.
108.000)
 Purchases of other items more than covers ‘loss’ on item sold
 e.g. ‘Free’ mobile phone when taking on contract package
5.4 Psychological Pricing
Market
skimming
Contributio Value
n pricing pricing

Penetration
Loss leader
pricing
Pricing
Strategies

Cost-plus Psychological
pricing pricing

Predatory Competitor
pricing pricing
5.4 Psychological Pricing
 Used to play on consumer perceptions
 Classic example – Rp. 49.999,- instead of Rp 50.999,-!
 Links with value pricing – high value goods priced according to
what consumers THINK should be the price
5.5 Competitor Pricing (Going
Rate)
Market
skimming
Contributio Value
n pricing pricing

Penetration
Loss leader
pricing
Pricing
Strategies

Cost-plus Psychologic
pricing al pricing

Predatory Competitor
pricing
pricing
5.5 Competitor Pricing (Going
Rate)
 In case of a price leader, rivals have difficulty in competing on
price – too high and they lose market share, too low and the price
leader would match price and force smaller rival out of market
 In this strategy, we are compelled to follow pricing leads of rivals
especially where those rivals have a clear dominance of market
share
 Where competition is limited, ‘going rate’ pricing may be
applicable – banks, petrol, supermarkets, electrical goods – find
very similar prices in all outlets
5.6 Destroyer/Predatory
Pricing
Market
skimming
Contributio Value
n pricing pricing

Penetration
Loss leader
pricing
Pricing
Strategies

Cost-plus Psychologic
pricing al pricing

Predatory Competitor
pricing pricing
5.6 Destroyer/Predatory
Pricing
 Deliberate price cutting or offer of ‘free gifts/products’ to
force rivals (normally smaller and weaker) out of business or
prevent new entrants
 Flooding the market with cheap (often imported) goods
 Anti-competitive and illegal if it can be proved
5.7 Cost-Plus Pricing
Market
skimming
Contributio Value
n pricing pricing

Penetration
Loss leader
pricing
Pricing
Strategies

Cost-plus Psychologic
pricing al pricing

Predatory Competitor
pricing pricing
5.7 Cost-Plus Pricing
 The cost of the product + mark-up = selling price.
 You can do this by using a fixed percentage (150%, 200%) or a
fixed markup (Rp. 10.000, Rp. 50.000, Rp. 150.000)
 The advantage of this method is that you are able to calculate
your expected profit level very easily.
 The disadvantage is that it may be less, or more, than
customers are willing to pay and, most importantly, some
hidden costs may be forgotten and so the actual profit is less
than you think (or even a loss)
5.8 Penetration Pricing
Market
skimming
Contributio Value
n pricing pricing

Penetration Loss leader

pricing Pricing
Strategies

Cost-plus Psychologic
pricing al pricing

Predatory Competitor
pricing pricing
5.8 Penetration Pricing
Prices set to ‘penetrate the market’
‘Low’ price to secure high volumes
Typical in mass market products – chocolate bars, food
stuffs, household goods, etc.
Suitable for products with long anticipated life cycles
May be useful if launching into a new market
5.9 Contribution Pricing
Market
skimming
Contribution Value
pricing pricing

Penetration
Loss leader
pricing
Pricing
Strategies

Cost-plus Psychologic
pricing al pricing

Predatory Competitor
pricing pricing
5.9 Contribution Pricing
• Contribution = Selling Price – Variable (direct costs)
• Prices set to ensure coverage of variable costs and a
‘contribution’ to the fixed costs/overheads
• Similar in principle to cost-plus pricing
• Every product sold gives back a contribution towards covering
the running costs of the business
• Break-even analysis might be useful in such circumstances
Pricing
 COGs
 Cost of goods sale (inc. material, labor, electricity, etc.)

 Distribution cost
 Cost for distributing product

 Promotion cost
 Symposium, product presentation, advertisement, etc.

 Fixed cost (overheads)

 Salary, rents being paid per month (office rent, car rent, etc.)

 VAT
 Value added tax
HPP / COGM
• HPP (Harga pokok produksi) atau COGM (Cost of Goods
Manufacturing) adalah biaya yang terdiri dari Biaya bahan
baku (zat aktif dan tambahan), biaya tenaga kerja langsung,
biaya over head cost, telpon, bbm, listrik, spare part, training
dll)
• Untuk industry farmasi biaya bahan baku bisa mencapai 70-
80%, direct labour 5-10% dan overhead cost 15-20% dari HPP
• Khusus untuk obat-obat lisensi/paten dan obat paten masih
dibebani biaya lisensi serta kewajiban untuk membeli bahan
baku dari pemberi lisensi
COGS / HJP
• Cost of Goods Sales (COGS) adalah biaya HPP + biaya
marketing, biaya lain (general affair, termasuk komisi dan
bonus komisaris, biaya CSR dll) + bunga dan depresiasi + laba
operasional (profit) menjadi
HNA
• Harga Netto Apotek adalah HJP ditambah Distribution Fee
HJA
• Harga Jual Apotek adalah HNA + PPN dan Laba Apotek
• Harga ini harus lebih rendah dari HET harga eceran tertinggi
rata-rata 30% dari HNA + PPN
• Rata-rata Laba Apotek
• 20-30% untuk obat resep
• 10-20% untuk obat OTC
CASE
New Product of IKIFA Farma
IKIFA Farma plan to launch new product contain
Paracetamol 500 mg in effervescent form with lemon
flavor. The brand named Parafa.
The production cost is about 500 million rupiah and 450
million rupiah budgeted for promoting Parafa.
In other hand IKIFA Farma have to spent around 200
million rupiah as overheads cost.
IKIFA Farma appoint AMS as distributor and will cost 15%
of market price.
IKIFA Farma produce 25.000 boxes per batch.
List of Pricing details
• COGs: Rp. 500.000.000,-/batch
• Distribution cost: 15% of HNA
• Promotion cost: Rp. 450.000.000,-
• Fixed cost: Rp. 200.000.000,-
• VAT: 10% of HNA

• Note. 1 batch: 25.000 boxes of Parafa

Competitor List

Brand Company Presentation Price/box (Rp.) Price/day (Rp.)

Parafa IKIFA Farma Box, 30 Tabs ??? ???
Boska Dexa Medica Box, 30 Tabs 65.000 6.500
Biogesic Darya Varia Box, 10 Tabs 25.000 7.500
Panadol GSK Box, 30 Tabs 85.000 8.500
 Pricing Structure Formula:
(Market price x VAT)

Parafa (Box, 30 Tabs)

Details Cost
Market price 2,000,000,000
VAT 10% 200,000,000 Formula:
Distribution fee 15% 300,000,000 (Market price x distribution fee)
Price to Distributor 1,500,000,000
Promotion cost 450,000,000
Formula:
Fixed cost 200,000,000 (Market price – VAT – distribution fee)
COGs 500,000,000
Gross margin 350,000,000
% of gross margin 18% Formula:
(Price to distributor – promotion cost
– fixed cost – COGs)
Batch size : 25.000 boxes

Price per box Rp. 80,000

Formula:
(Gross margin/market price)*100%
Formula:
(Market price/batch size)
 Price Index

Price/box Price/day
Brand Company Presentation (Rp.) (Rp.) Index

Parafa IKIFA Farma Box, 30 Tabs 80.000 8.000 1

Boska Dexa Medica Box, 30 Tabs 65.000 6.500 0,81
Biogesic Darya Varia Box, 10 Tabs 25.000 7.500 0,94
Panadol GSK Box, 30 Tabs 85.000 8.500 1.06

Market leader

“Competitor Pricing” Strategy

Any question?
Thank you