The medtech industry is facing less price pressure and developed a better understanding of pricing as growth leverage. But digitalization remains a key issue to ensure sustainable profits.
July 1, 2021 – The Global Pricing Study 2021 – Special Focus: MedTech* conducted by the global strategy and marketing consultancy Simon-Kucher & Partners indicates: more than 60 percent of medtech companies globally improved their profit margins in 2020. However, with half of these improvements attributed to COVID-19 impacts, 64 percent of companies predict these are only short-term spikes.
Asked for their biggest driver for future profit growth, the majority of surveyed companies stated sales volumes (45 percent). But the medtech industry also seems to be aware of the tremendous leverage effect of pricing in relation to growth: With 36 percent price even increased its relevance as the most important profit driver compared to the Global Pricing Study results of 2019 (27 percent). 74 percent of companies are planning to implement price increases in 2021, one third even above inflation. Omar Ahmad, partner and head of the global HealthTech cluster at Simon-Kucher, comments: “A promising sign for the medtech business – In other industries we can observe that a lack of pricing ambitions presents a clear risk for companies of losing ground versus their 2020 position by failing to factor in predicted inflationary increases.”
Covid-19 was also able to undermine sales volume for the majority of companies who experienced no margin improvement and thereby diluted companies’ profit margins in 2020. Of the companies with lower profit margins, 67 per cent said it was because of dropped sales volume.
Less price pressure leading to fewer price wars]
The study also reveals a decreasing price pressure in the medtech sector, only half of companies have been exposed to it in the last two years. A descending trend compared to 2019 with almost 70 percent. “It’s interesting to see, that this reduced price pressure apparently also leads to fewer price wars: Less than half of medtech companies are currently caught up in a price war, down from 72 percent in 2019. The decreasing price pressure will enable companies to be more bold when challenging the status quo and exploring new business models in light of COVID-19”, adds Omar Ahmad.
Innovations and digitalization as growth drivers
Key priorities to maximize revenue growth for the healthtech industry are launching new products and increasing the agility of price/revenue models. But the study also suggests that digitalization is still on the rise: Digitalizing their sales processes and improving the digital customer journey are at the top of companies’ to-do lists. Jan Bordon, partner and digital health expert at Simon-Kucher: “Although the industry has weathered the uncertain pandemic year relatively well, it is obvious that we need more sustainable growth strategies. Innovation, digitalization and modernizing business models are the key priorities for medtech companies this year and have to be part of those strategies.”
*About the Global Pricing Study 2021: The Global Pricing Study evaluates the pricing and growth strategies of companies across all industries worldwide. The unique study is the largest of its kind and each edition reveals valuable insights on hot pricing topics and trends, the competitive environment, and profit outlooks. This 7th edition included approximately 2,200 respondents covering over 27 countries and 36 industries took part in an online survey in March 2021. The sample includes respondents across top and middle management positions in a range of B2B and B2C companies, with 42 participants from the medtech industry.