PRICING

EKOHEALTH
Submitted by:
Group 11
SECTION B

2019PGP402   Shweta Pal

2019PGP018   Abhishek Parasa

2019PGP155   Gundapuneni Ganesh Sai

2019PGP375   Seeyan P A

2019PGP523   Sarath Ram P

1) Does Ekohealth's business model result in a large consumer surplus?

Yes, the business model adopted by Ekohealth had huge consumer surplus i.e, consumers who
perceived higher benefits from services were being undercharged. This provided a scope to increase
the revenue by restructuring the existing price strategy; the current offering of membership at
INR1500 can be increased to capture the consumer surplus. The market survey conducted in
Mumbai and its surrounding territories showed that 50% of the respondents valued the membership
at INR1000 to 2000, and 17% were willing to pay more than INR2000. 

2) Determine the economic value delivered by Ekohealth services for its customers.

Traditionally, patients would have to pay not only for the drug and tests,  but also the referral and
marketing fees for the same would be passed onto them. The referral fees alone would contribute to
10-50% of the hospital invoice. About 50% of patients in India resort to loans to pay for their medical
expenses, thereby pushing 16% of them below the poverty line.

As far as insurances are considered, they did not cover more than 35% of expenses for the patients.
Thus India’s healthcare system not only charged patients more but also reduced the frequency of
hospital attendance as people did not go for routine health check ups fearing high prices.
In this scenario, Ekohealth provided economic value to both its B2B and B2C customer segments:
1. B2B segment: Ekohealth negotiated bulk deals with healthcare providers at discounted price
thus routing more customer traffic to the partner firms.
2. B2C segment: This included bulk purchases by corporates for their employees and the family
coverage scheme. The current annual subscription  model covered a family of 5 for INR
1500. The average annual savings per person with Ekohealth, as per Exhibit 4 is INR 5400 to
13,300 out of an average annual spend of INR 30,000, implying savings of 18 - 44.33% on an
average. Over the next 15 years Ekohealth plans to expand and save at least 20% of its
customers’ health expenses.

3) Will the existing price metric of Rs 1500 be ideal during Ekohealth's expansion strategy? Suggest
alternative metrics to increase profitability.

The current pricing metric results in the following cumulative monetary benefits to the customers,
which may be catering to different psychological benefits to them (one of the value drivers to
customers). Apparently, the entire value is not captured by the current pricing strategy, which is not
sustainable in expansion.

The price point perception is different in different cities according to exhibit 7. Thus, in the
mentioned cities, the customers can be charged a price equal to their perceived price (2500 in New
Delhi, 2000 in Ahmedabad and so on). Additionally, geofences may be introduced to prevent
customers from entering into other price levels. The fence here may be the validity of a card within
the city it was subscribed for.
 

4) Will adoption of price fences along with new price metrics help Ekohealth to effectively
implement its new pricing strategy? 

Ekohealth is looking to expand beyond the metropolitan and tier-ii cities; the adoption of new price
metrics along with price fences would help in segmenting the consumers and drive profitability to
the best extent possible. The existing price point was arrived with a pre-launch market survey done
around Mumbai and surrounding areas which may not be indicative of other parts of India.

As per exhibit 7, market research has shown that the price point preferences varied across cities
which is a favourable indicator of the new pricing strategy. The perceived benefits by the consumer
are more than the price charged by Ekohealth leading to consumer surplus. The consumer surplus
can be converted to margins by unbundling the subscription in terms of services, geography and
coverage and realising the profits on individual services which can be achieved through the new
price metrics.

Also, the growth in subscriptions along with decrease in variable costs over the years is indicative of
the credibility the brand has built among its customers and partners which was a concern during the
initial stages when mulling the premium strategy which no longer would be the case owing to the
developments.  Hence, the new price metrics and price fences would help in implementing the
pricing strategy effectively.