Product Pricing Decisions

A pharmaceutical firm that markets a number of branded drugs needed to decide its best pricing actions (size of price changes, frequency, etc.). The client’s objective was to positively impact the gross and net sales. Therefore, the assessment needed to also take into account possible price changes on the future demand of the product. A complicating factor was that the client had a number of conflicting data and information sources.

Together with the client, EpiX Analytics developed a stochastic pricing-analytics model. This model enabled the client to take into account the uncertainty in possible customer reactions to alternative pricing actions. In addition, the model captured all data sources and allowed the client to put different weights on the different sources of information.

The stochastic pricing-analytics model greatly helped the product management team in deciding about the most appropriate (optimal) future pricing actions, taking into account the uncertainty in customer reactions and considering a variety of data sources.

Note: The client has since used the same stochastic modeling approach for other important pricing decisions.

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