A New Product Pricing Model Using Intracorporate Market Perceptions to Extract the Value of Additional Information
Robert S. Woodward
Mark A. Schnitzler
Daniel C. Brennan
Objective: This model introduces a unique and inexpensive technique to estimate profit increases that might be expected from: (i) an additional clinical trial to establish a drug's second clinical indication; and (ii) a survey of market demand. Design: Microsoft Excel_ spreadsheets are used to solicit selected expert opinions about the new product's annual market share under scenarios reflecting different pricing points, promotional expenditures and clinical advantage. Main Outcome Measures and Results: The preprogrammed model returns profit-maximising price, promotional expenditure and market differentiation for each expert and the group as a whole. The extent of disagreement among the experts is used to estimate the additional profits which might be expected from a clinical trial and a market survey. Results from an illustrative application indicated greater incremental profits could be expected from the survey of market demand. The clinical trial generated smaller expected incremental profits because several experts felt that the trial's potential results would not affect the drug's profit-maximising price. Conclusions: With a 1-day meeting between 6 experts, the model provided a recommendation about the new product's profit-maximising market price and promotional expenditure. Furthermore, it estimated profit increases that might be expected from additional clinical trials and a survey of market demand.
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