Strategic Pricing for IVM: A Customer-Focused Approach to Fertility

This case study examines Medi-Cult's In Vitro Maturation (IVM) as an alternative to In Vitro Fertilization (IVF), focusing on customer-oriented pricing strategies. It highlights the economic value created by IVM, emphasizing its lower cost, shorter cycle time, and increased patient comfort due to the absence of hormonal stimulation compared to IVF. The analysis considers factors influencing pricing decisions, including consumer willingness to pay, market volume, awareness, and the presence of substitutes. The study also explores pricing approaches such as markup pricing and perceived value pricing, considering the benefits of IVM over IVF, such as time savings and reduced discomfort. It concludes that IVM's perceived value and cost-benefit advantages make it a competitive option in the fertility treatment market. Desklib provides comprehensive study tools and solved assignments for students.

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Question 1
Economic value is created for the consumers when a particular product or service tends to
provide key desirable benefits that tend to be superior to the existing alternatives. The search
for sources of economic value for IVM needs to therefore focus on highlighting the
superiority of this service in comparison to IVF keeping in mind the desirable attributes of
such services (Mintzberg, Ahlstrand & Lampel, 2014).
A key aspect in relation to fertility treatment is the underlying cost to the customer. Over the
last two decades, IVF has been the only reliable method but this has all changed with the
introduction of IVM which offers the following sources of economic value.
 IVM is significantly cheaper in comparison to IVF as the cost of the former is about $
5000 in comparison to $ 9,000 for the latter.
 The time required for one cycle of IVM procedure is significantly lower in
comparison to the one cycle of IVF procedure owing to non-requirement of hormonal
simulation in the IVM technique.
 Also, IVM procedure is much more comfortable for the patients as the hormonal
treatments are absent. In case of IVF, these need to be performed and considered
highly unpleasant by the patient which limits the number of attempts.
Question 2
One of the key methods that need to be paid attention to determine if a given couple would
pay for IVM cycle would be the perceived value along with cost benefit analysis. The
customers would compares with IVM with the IVF to access the benefits of the former over
the latter. They would take note of the fact that the success rate in the two techniques is
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similar at 20% but IVM is relatively faster, cheaper and tends to be more comfortable for the
underlying patient owing to non-requirement of simulation through hormones. Further, it is
more likely that the end objective of having a baby would be met through IVM considering
that multiple cycles also are not an issue with the patients owing to procedural comfort.
Clearly, there are perceived benefits of IVM over IVF and these tend to come at a cost which
is about 45% lower than the IVF. Hence, it is highly likely that based on perceived value and
cost benefit analysis, IVM would have an edge.
Question 3
The following factors need to be considered while determining prices (Haberberg & Rieple,
2015).
 Amount of money that the consumers are willing to pay
 Amount of volume of IVM
 Amount of visibility, awareness and acceptability of IVM
 Pricing of substitutes
Further, the pricing of IVM would be driven by the following approaches (Damodaran,
2015).
1) Mark up approach – As per this approach, the firms tend to levy a definite mark up
percentage on the total cost. Let us assume that the mark up fixed by Medi-Cult is 50%.
Total cost for one cycle of IVM = $ 5,000
Hence, desirable pricing = 5000*1.5 = $ 7,500
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2) Perceived value approach – As per this approach, pricing is carried out by considering the
price of the alternatives available and the perceived value of the service over these. As
discussed IVM is superior to IVF owing to saving of time and less discomfort. Therefore,
price should be atleast equal to IVF. However, based on the perceived market size, lower
pricing can be fixed.
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References
Damodaran, A. (2015). Applied corporate finance: A user’s manual (3rd ed.), New York:
Wiley, John & Sons.
Haberberg, A. & Rieple, A . (2015), Strategic Management: Theory and Application (2nd
ed.), New York: Oxford University Press
Mintzberg, H., Ahlstrand, B. & Lampel, B.J.(2014), Strategy Safari: The Complete Guide
Through the Wilds of Strategic Management (4th ed.), New Jersey: Prentice Hall
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