A classic analysis by Marn & Rosiello shows just how powerful the pricing lever can be: a 1% price improvement increased operating profit by 11.1% on average, assuming constant sales volume. By comparison, a 1% reduction in variable costs increased operating profit by 7.8%, while a 1% increase in volume resulted in a 3.3% improvement. In MedTech, much of this potential is left untapped because of cost-based thinking, fear of competitors, and a lack of language for value conversations.
Why MedTech companies systematically underprice: 5 causes
Cost-plus as the default
Manufacturing cost + margin = price. Logical, but blind. It ignores the value the product creates for the customer and what the customer is willing to pay for that value.
Fear of competitors without evidence
“The competitor is cheaper.” Often an assumption, rarely challenged enough. Simply trying to be cheaper doesn't protect you. It risks starting a race to the bottom.
Procurement as the only point of contact
If you only negotiate with procurement, the conversation quickly becomes all about price. If clinical users and decision-makers are also involved, you can discuss the actual value the product creates.
No quantified value
“Our device is better.” But by how much? How many minutes of OR time does it save? What costs could be avoided by reducing complications? If you don't quantify the value, it's difficult to use it in a pricing negotiation.
Fear of hearing no
Naming a higher price feels riskier than naming a lower one. But entering too low also creates a reference point for future price discussions.
The three pricing methods and what they achieve
Cost-plus pricing
Cost + margin. Simple and transparent, but it doesn't adequately account for customer value.
Competitive pricing
Pricing based on market prices. It provides an important reference point but creates the risk of underestimating your own differentiation and customer-specific value.
Value-based pricing
The price is based on the value created for the customer. This requires robust value quantification and a strong understanding of the product's clinical and economic impact.
Quantifying value: an example
→ at 500 procedures/year = 10 avoided complications
→ assumed average cost per complication: CHF 12,000
→ potential economic value: CHF 120,000/year
The key difference: the conversation is no longer only about the price of the device. It's about the economic value the product can create.
“If you can't justify your price, you'll always have to defend it. If you can quantify your value, you change the negotiation.”
What can help right away
- Build a value calculator: A simple model that shows the potential economic impact of the product for different customer types.
- Communicate reference costs: What does it cost if the problem persists? What does the cheaper alternative actually deliver?
- Introduce price segmentation: Not every customer needs the same configuration. Entry, standard, and premium offerings create different value and price points.
- Establish value before price: Price negotiations shouldn't begin before the clinical and economic value of the product is understood and communicated.
MedTech products that make patients safer, reduce the workload for clinicians, or make hospitals more efficient can create measurable economic value. That value should be a central starting point for pricing, not manufacturing cost alone.
Value-based pricing shifts the conversation from what a product costs to what it delivers economically.
Sources: Marn & Rosiello (1992), Managing Price, Gaining Profit, Harvard Business Review, 70(5) · Boston Consulting Group (2018), Next-Generation Pricing Is Transforming Medtech.
Published June 2026