Half the Price Is Not Half the Problem
By Fiona van Iersel
Minerva Empowerment
Marketing Theory and Practice
1 October 2024

A dramatic discount can make a sales forecast look exciting. More customers, more activity, a fuller diary. The difficult question is what happens to the economics once the service has actually been delivered.

My first lesson from the Hoopes pricing case is to keep the units consistent. A patient, a treatment and an eye are not interchangeable measures. If revenue is expressed per patient, multiplying it by a change in the number of individual-eye procedures will distort the result.

The simple version is useful: if the average amount collected per patient is unchanged, a hypothetical 10% fall in patients means a 10% fall in collections. If the price is halved and the number of patients exactly doubles, revenue is unchanged before considering other effects. Neither assumption tells us what demand will actually do.

Costs then matter. Serving more people can add variable costs and put pressure on capacity, even if revenue has merely returned to where it started. A full diary and a profitable operation are different outcomes.

I would model several explicit scenarios rather than assume a discount automatically doubles demand. What contribution remains per patient? What capacity is available? What additional costs appear? What happens if volume rises less than expected?

There is also a positioning question. Could clearer differentiation, experience or trust protect value more effectively than entering a price contest? The answer needs evidence, but the calculation should not ignore the brand.

The point is to trace the proposed decision through price, volume, units and costs. Otherwise, an impressive-looking revenue story can conceal a much less attractive result.