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Highlights

    Enhance your problem-solving skills with this medium-level practice case. This sample will familiarize you with question types and boost your readiness, preparing you for the interview process.

    Understanding the client’s goal

    Your client is the CEO of an Indian startup that has developed a new digital therapy product for autistic children. The product replicates in-person therapy sessions through interactive videos, audiobooks, and games. They have come to Oliver Wyman to help price the product before its launch.

    Description of the case situation

    Your client’s product reduces the need for in-person therapy, allowing children to use it at home and expanding access for those who currently cannot access traditional therapy. Doctors can also use the product to expand their reach through this digital solution. You can assume that the product can reduce the need for in-person therapy by one-third. The product is available in English throughout India and is designed for use on tablets. There are two to three similar products in the market, offered by competing firms.

    What strategies would you use when pricing the product?

    Helpful hints:

    • Identify the main objective
    • Write down key facts and important information that may be used now or later in the case
    • Feel free to ask the interviewer for an explanation over anything that is not clear to you
    • Ask for a few minutes to gather your thoughts and write down a framework for addressing the main case question/objective

    Evaluation criteria:

    • Ability to identify the key question and pertinent information
    • Ability to structure a problem in a clear and effective manner
    • Ability to verbally communicate problem structure in a succinct format

    Question 1: Cost-based and value-based pricing

    Based on the above framework, what would be the optimal price for the product?

    Helpful hints:

    • Take time to organize your thoughts
    • Develop and communicate your overall approach
    • Ask the interviewer for information or data points you need to effectively answer the question

    Evaluation criteria:

    • Ability to develop and verbally communicate a thought-out approach
    • Ability to identify and ask for key information needed, for example the size of the addressable market
    • Ability to perform calculations and quantitative analysis
    • Ability to synthesize information into a meaningful insight and drive the case forward

    • Autism therapy doctors are scarce and costly, typically charging around INR 300,000 per year
    • A few competitors exist in the market; further details will be provided later
    • Assume that variable costs are minimal compared to fixed costs
    • The annual fixed costs for delivering the product are approximately INR 10 billion
    • Assume there are 10 million autistic children in India
    • The income distribution in India is as follows: 50% of the population is low-income, 40% is middle-income, and 10% is high-income
    • Assume the product is not covered by public health insurance

    The interviewee must first understand more about the product (for instance consumption mode, usage frequency, duration, and production costs), the objective of the pricing, and the core competency of the client.

     

    Framework for pricing calculations:

     

    There are three broad ways of pricing the product: value-based, competitor-based, and cost-based. You must first break up pricing strategies into these three categories before moving on with calculations.

     

    1. Value-based pricing: The product reduces the need for doctor therapy by one-third, which suggests a potential price of INR 100,000 per year. However, this should be seen as the upper limit, as a higher price would make the product less affordable and less competitive in comparison with other digital therapy solutions.

     

    2. Competitor-based pricing: More details will be provided in the next question.

     

    3. Cost-based pricing: This involves breaking down costs into fixed and variable components. Fixed costs, such as the annual INR 10 billion delivery cost, would be amortized over several years and divided by the number of users to calculate the fixed cost per user per year. Next, variable costs would be added, along with a desired profit markup, to determine the final price. The fixed cost per user per year is calculated by dividing the total fixed costs by the number of users or the addressable market size.

     

    Addressable market: The addressable market can be calculated by applying filters such as income levels, internet/tablet penetration, and English-speaking population to the total market size. 

    It is also important to consider the presence of competitors and the potential reactions from doctors. Since the product directly competes with in-person therapy, some negative publicity from doctors can be expected. Additionally, with the market being shared among two to three competitors and doctors, a realistic goal is to capture 25% of the calculated user base (25% of 4.2 million, which is roughly 1million).

     

    Using the cost-based approach and assuming a 50% markup, the product can be priced at INR 15,000 (INR 10,000 * 1.5). On the other hand, the value-based approach considers that autism therapy doctors are scarce and expensive, typically charging around INR 300,000 per year. Given that the product reduces the need for in-person therapy by one-third, this suggests a potential price of INR 100,000 per year. Thus, the upper pricing bound for the product is INR 100,000.

     

    In conclusion, the product can be priced within a range of INR 15,000 to INR 100,000.

    • Autism therapy doctors are scarce and costly, typically charging around INR 300,000 per year
    • A few competitors exist in the market; further details will be provided later
    • Assume that variable costs are minimal compared to fixed costs
    • The annual fixed costs for delivering the product are approximately INR 10 billion
    • Assume there are 10 million autistic children in India
    • The income distribution in India is as follows: 50% of the population is low-income, 40% is middle-income, and 10% is high-income
    • Assume the product is not covered by public health insurance

    The interviewee must first understand more about the product (for instance consumption mode, usage frequency, duration, and production costs), the objective of the pricing, and the core competency of the client.

     

    Framework for pricing calculations:

     

    There are three broad ways of pricing the product: value-based, competitor-based, and cost-based. You must first break up pricing strategies into these three categories before moving on with calculations.

     

    1. Value-based pricing: The product reduces the need for doctor therapy by one-third, which suggests a potential price of INR 100,000 per year. However, this should be seen as the upper limit, as a higher price would make the product less affordable and less competitive in comparison with other digital therapy solutions.

     

    2. Competitor-based pricing: More details will be provided in the next question.

     

    3. Cost-based pricing: This involves breaking down costs into fixed and variable components. Fixed costs, such as the annual INR 10 billion delivery cost, would be amortized over several years and divided by the number of users to calculate the fixed cost per user per year. Next, variable costs would be added, along with a desired profit markup, to determine the final price. The fixed cost per user per year is calculated by dividing the total fixed costs by the number of users or the addressable market size.

     

    Addressable market: The addressable market can be calculated by applying filters such as income levels, internet/tablet penetration, and English-speaking population to the total market size. 

    It is also important to consider the presence of competitors and the potential reactions from doctors. Since the product directly competes with in-person therapy, some negative publicity from doctors can be expected. Additionally, with the market being shared among two to three competitors and doctors, a realistic goal is to capture 25% of the calculated user base (25% of 4.2 million, which is roughly 1million).

     

    Using the cost-based approach and assuming a 50% markup, the product can be priced at INR 15,000 (INR 10,000 * 1.5). On the other hand, the value-based approach considers that autism therapy doctors are scarce and expensive, typically charging around INR 300,000 per year. Given that the product reduces the need for in-person therapy by one-third, this suggests a potential price of INR 100,000 per year. Thus, the upper pricing bound for the product is INR 100,000.

     

    In conclusion, the product can be priced within a range of INR 15,000 to INR 100,000.

    Question 2: Competitor-based pricing analysis

    Competitors in the market are priced between INR 50,000 and INR 75,000.

    Competitor product differentiation:

    • Product A: Priced at INR 50,000, it includes basic therapy modules with limited gamification and no remote therapy support.
    • Product B: Priced at INR 60,000, it offers more comprehensive content, including gamification, but lacks progress tracking features.
    • Product C: Priced at INR 75,000, it includes bundled services such as digital modules, some in-person consultations, and a specialized device.

     

    Our product differentiation:

    • Our product offers a digital-only solution that includes interactive content, gamification, and progress tracking, without requiring a specialized device or in-person consultations. This makes it a more affordable, flexible, and accessible alternative.

    Based on this information, which competitor’s product most closely matches our product? What would be an appropriate price point and model for our product?

    The client should adopt a subscription-based pricing model, priced between INR 15,000 and INR 50,000 annually. For better market penetration, particularly among lower-income families, the client could consider pricing between INR 15,000 and INR 30,000, positioning the product below Product A.

     

    Rationale:

    • Cost advantage: Lower production costs allow for competitive pricing, making the product more attractive to price-sensitive middle-income families.
    • Affordability and accessibility: A subscription model reduces the initial financial burden, supporting the client’s goal of making the product affordable.
    • Market differentiation: This pricing approach positions the product as an accessible solution, filling a gap in the market for families who cannot afford higher-priced alternatives.
    • Sustainable revenue: A subscription model provides consistent, recurring revenue, helping to cover fixed costs over time and ensuring financial stability.

    The client should adopt a subscription-based pricing model, priced between INR 15,000 and INR 50,000 annually. For better market penetration, particularly among lower-income families, the client could consider pricing between INR 15,000 and INR 30,000, positioning the product below Product A.

     

    Rationale:

    • Cost advantage: Lower production costs allow for competitive pricing, making the product more attractive to price-sensitive middle-income families.
    • Affordability and accessibility: A subscription model reduces the initial financial burden, supporting the client’s goal of making the product affordable.
    • Market differentiation: This pricing approach positions the product as an accessible solution, filling a gap in the market for families who cannot afford higher-priced alternatives.
    • Sustainable revenue: A subscription model provides consistent, recurring revenue, helping to cover fixed costs over time and ensuring financial stability.

    Question 3: Provide a recommendation

    What is your final recommendation to the client? How should they price their product and what are the next steps?

    Helpful hints:

    • Take a moment to gather your thoughts and review your findings from each part of the case
    • Start with a clear answer and then follow with supporting details
    • Keep it concise (30-60 seconds)

    Evaluation criteria:

    • Ability to synthesize information from the entire case and highlight the most critical components
    • Ability to verbally communicate a concise recommendation in an effective, confident, and persuasive manner 

    Based on the analysis of cost structure, competitor landscape, and the value proposition, the optimal pricing strategy for the client’s digital therapy product is a subscription-based model priced between INR 15,000 and INR 30,000 annually. This refined pricing strategy leverages the client’s cost advantage, aligns with their affordability goals, and differentiates the product from competitors, ensuring broader market reach and sustained growth.

     

    Next steps:

    • Pilot testing: Launch a pilot program with the proposed subscription pricing to gauge customer response and adjust as needed.
    • Monitor competitor activity: Track competitor pricing strategies and market changes to maintain a competitive edge.
    • Customer feedback and market research: Conduct further research to fine-tune the pricing strategy based on customer preferences, perceived value, and price sensitivity.

    Based on the analysis of cost structure, competitor landscape, and the value proposition, the optimal pricing strategy for the client’s digital therapy product is a subscription-based model priced between INR 15,000 and INR 30,000 annually. This refined pricing strategy leverages the client’s cost advantage, aligns with their affordability goals, and differentiates the product from competitors, ensuring broader market reach and sustained growth.

     

    Next steps:

    • Pilot testing: Launch a pilot program with the proposed subscription pricing to gauge customer response and adjust as needed.
    • Monitor competitor activity: Track competitor pricing strategies and market changes to maintain a competitive edge.
    • Customer feedback and market research: Conduct further research to fine-tune the pricing strategy based on customer preferences, perceived value, and price sensitivity.