Like living things, products and services can be thought of as having a life-cycle. When pricing vision correction, you may want to consider product life cycle management – a number of strategies used as a product goes through its natural lifecycle. Knowing where your product or service is in its lifecycle will help you understand your market and will give you a possible picture of what the future brings. Importantly, it may give you a signal to price your product in a position that “goes with the current” as opposed to “going against the grain”.
Case: Laser eye surgery and the product life cycle
As an example to help understand product life cycles and pricing decisions, what follows is an analysis of where laser eye surgery is in its lifecycle.
The position that laser eye surgery sits in its product life cycle suggests that average prices could be higher than they are now.
Nearly 60 percent of all people in the UK need corrective lenses, 30 percent have myopia. Whilst glasses and contact lenses are in the Maturity stage of their product lifecycle, laser eye surgery, like many elective surgery procedures, remains in the Introductory stage. There are nearly 36 million people in the UK who could benefit from laser eye surgery surgery, but only about 100,000 actually choose this as their option to correct their vision every year. There is evidence to suggest that these patients will be amongst the ones that pay the most for their laser eye surgery, and would probably pay more than they do now.
Market characteristics at the introductory stage of the product lifecycle include:
- Costs are high – so profits are modest, in spite of relatively high prices
- Slow sales volumes at the start
- Little or no competition
- Demand has to be created
- Patients have to be prompted to try the product
- The financial benefits are relatively small and underproductive at this stage
While useful, there is no predictive value in the life cycle concept. In other words; there is no evidence to suggest that laser eye surgery will follow the same lifecycle of contact lenses, or eyeglasses. In fact, the worldwide market for contact lenses continues to grow, and the market for eyeglasses continues to grow in the long term as a result of macro-economic trends (the ageing population and improving economic conditions globally).
Laser eye surgery patients are all, by definition “innovators” and “early adopters” (the 15% of patients that are first to try any newly introduced product). There is a vastly larger pool of potential patients in the “early majority” who will make the next wave of patients (34%) in the “growth” stage of laser eye surgery.
The rewards associated with the opportunity to serve innovators will not knock forever and the door is closing day by day.