Product pricing component analysis

Product Pricing Component

The organization

Boiron Group, a French company, provides products for health maintenance through, mainly, health and natural foods stores. The products they produce and market are homeopathic medicines. These medicines are the result of work by a German physician, Samuel Hahnemann, in the 1800s. He was disgusted with the barbaric state of medicine, which still included bloodlettings at the time, and decided to look for a gentler way to heal people of disease. He began taking doses of various plant and mineral substances to determine the effect on the body. Today, the medical establishment regards homeopathy as a 'quack' form of medicine, as do most Americans. Interestingly enough, however, the British Royal Family uses homeopathic physicians, and no one can accuse them of shortening their lives. "Queen Mary and King George VI were firm followers of homeopathy, the King even calling one of his horses Hypericum which won the 1000 Guineas race [in 1946]." (Hypericum is the name of a popular remedy.) (Homeopathy Home Web site)

The utility of the product

The products are relatively inexpensive, and the interesting and wonderful, aspect of homeopathy is that self-prescribing is perfectly safe. One of the basic ideas of homeopathy, in which incredibly dilute solutions of the curative substance are responsible for kicking the body's immune system into a cure, is that if it is not the right remedy for the illness in question, it will simply have no effect. In homeopathy, that is part of what is known as the "law of similars." Obviously, to a population burdened not only be astronomical health-care costs, when the allopathic medicines needed to cure a strep throat can cost $90 or more (Zithromax, for example), paying about $6 or $7 for a tube of remedy would be a great advantage to the consumer. In fact, even if the consumer chose the wrong remedy the first time -- or the first three times -- they would still have saved enormously over the cost for an allopathic medicine.

Substitute products

There are a number of other homeopathic medicine manufacturers competing with Boiron, and producing virtually identical products, including:

Arrowroot Standard Direct, a subsidiary of Standard Homeopathic Company; this is a leading mail order distributor for health care professionals ad consumers in the U.S.

Boericke & Tafel, manufacturers of homeopathic remedies.

Dolisos recently merged with Boiron, but it supplied homeopathic medicines for the consumer market.

Hahnemann Laboratories, manufacturers of remedies.

Heel and BHI, American distributors of combination homeopathic remedies developed by Dr. Hans-Heinrich Reckeweg.

Homeopathy Overnight delivers homeopathic remedies from Boericke & Tafel, Standard, and Dolisos to consumers overnight.

Homeopathy Works is the retailer for Washington Homeopathic Products.

Luyties Pharmacal delivers homeopathic products to homes, as it has been doing since 1853.

National Homeopathic Products is the distributor for Boericke & Tafel.

Natural Health Supply produces hand-succussed (mixed and shaken, to the layman) potent homeopathic remedies.

Hyland's Homeopathic is a mainly Canadian company but distributes in the U.S. (Whole Health Now Web site)

Inelastic pricing

Considering the 'boutique' quality of the market -- health-conscious consumers who prefer a natural approach and have taken time to study homeopathy -- there are a number of competitors offering virtually identical products. Each homeopathic product does conform to the homeopathic pharmacopoeia. Because there is virtually none of the original substance left in the remedy, with the 'active ingredient's function assumed to be passed to the inert carrier material (often milk sugar or alcohol), these are not regulated in the U.S. Or in other nations where they are popular. The fact that these remedies are easily and cheaply manufactured and require no 'gatekeeper,' such as a medical doctor, to obtain, the price remains low.

Issues affecting consumer demand and price

The demand, while high among the small number of adherents to the system, is still insufficient to start anything like a price war. In fact, the price is relatively inelastic because the consumer will simply go to a health food store where a competitor's precisely similar product is sold for less, or will even order online, especially with overnight service available.

The marketing issues surrounding homeopathic remedies are not so much intrinsic to that industry itself as to the medical establishment's impact on any non-AMA methods of health maintenance in the U.S. A Web site called Quackwatch carries an article by Stephen Barrett, M.D., in which he takes issue with Hahnemann's original concept, writing: "Hahnemann declared that diseases represent a disturbance in the body's ability to heal itself and that only a small stimulus is needed to begin the healing process." Barrett continues to deride the remedies because they are not loaded with vicious chemical molecules as are allopathic medications, and, in fact, often display none of the original substance.

Barrett is not alone in his attacks on homeopathic medicines, of course, but his virulent posture is typical of the sort of AMA pressure that puts downward price pressures on homeopathic drugs because the potential market is being pressured to avoid them.

One of Barrett's main objections is that there is no original substance left in many of the remedies. He says that it is then impossible for them to effect a cure, even if they could otherwise.

The best strategy to counteract this negative pressure lies in the scientific community itself. Education, expensive as it is, seems to be the best way to begin to enhance revenues. In short, because of the downward price pressures noted above, the only way to increase profits is to expand the market. One of the only ways to expand the market is to counteract the claims of the AMA-backed medical community. Jean-Marie Pelt, Distinguished Professor of plant biology and pharmacognosy at the University of Metz, writes: