The Vblock drug not only decreases recovery time and requires less administration work, but also has no restrictions with being used alongside other drugs. Because Vblock and Nobarf are virtually identical when it comes to reducing nausea, the economic value of Vblock comes from the increase in time efficiency. Despite that, I would not charge a price equivalent to the economic value (to patients) because 1. it does not effectively capture the psychological values of the new drug (for instance, the price of the recovery room at $150 does not account for the psychological value of not having to stay in the hospital for another hour, from the patient’s perspective and 2. if the patient is uninformed of all the differential values and psychological
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Gillette aims to fill in the gap between its “higher end” razors and “lower end” razors by dropping prices on a few of its “higher end” razors, to up to 20%. The problem with this strategy is that a double digit price drop might undermine the perceived value of the razors. It could create an idea that a “high end” razor is nothing but “middle range” razor with a significant mark up, and that consumers were paying a higher price than the real value. This could create a feeling of distrust and unfairness towards the “higher price” razors that did not get a cut in price and the brand itself. Furthermore, based on the Monroe Model, a decrease in price could also lead consumers to assume that the quality on those “high end” razors also decreased, because of the relationship between price and quality. An alternative to the lowering price strategy could be removing some of the “higher end” razors and replacing them with “middle range” razors. This way, there would be no price decrease to affect consumer’s perception of fairness and quality. This strategy, however, requires products to be removed from the product line and time for designing the new products, which can be expensive and time consuming. Because of this, the alternative solution is only recommended in case Gillette is willing to wait to regain market share and increase
Gillette aims to fill in the gap between its “higher end” razors and “lower end” razors by dropping prices on a few of its “higher end” razors, to up to 20%. The problem with this strategy is that a double digit price drop might undermine the perceived value of the razors. It could create an idea that a “high end” razor is nothing but “middle range” razor with a significant mark up, and that consumers were paying a higher price than the real value. This could create a feeling of distrust and unfairness towards the “higher price” razors that did not get a cut in price and the brand itself. Furthermore, based on the Monroe Model, a decrease in price could also lead consumers to assume that the quality on those “high end” razors also decreased, because of the relationship between price and quality. An alternative to the lowering price strategy could be removing some of the “higher end” razors and replacing them with “middle range” razors. This way, there would be no price decrease to affect consumer’s perception of fairness and quality. This strategy, however, requires products to be removed from the product line and time for designing the new products, which can be expensive and time consuming. Because of this, the alternative solution is only recommended in case Gillette is willing to wait to regain market share and increase