The Art of Customer Segmentation in Value Based Pricing for Premium MedTech: Lessons from Luxury Brands

In today’s competitive MedTech landscape, mastering customer segmentation is essential to unlocking the full potential of value‑based pricing. Over the past decade—and especially during the last five years—the MedTech industry has evolved from a cost‑plus pricing model to a sophisticated, data‑driven, value‑based approach. This transformation wasn’t just about changing numbers; it was about rethinking how we segment, target, and position our products. Drawing on Marta Dapena Baron’s Big Picture Marketing Framework, we now know that understanding our customers in granular detail is the cornerstone of sustainable success. In many ways, the approach mirrors the strategy used by premium car brands like Rolls Royce, which focus on impeccable engineering, quality, and sometimes even esteem.

In this post, I’ll dive deep into customer segmentation and its critical role in value‑based pricing—especially segmentation by willingness or ability to pay—and show why, as a premium MedTech provider, sometimes the right decision is to say, “This product is not for you.”

1. The Power of Customer Segmentation in MedTech

Customer segmentation divides the broad market into smaller groups of consumers who share similar characteristics, needs, or behaviors. In MedTech, typical segments include:

• Institution Type: Academic hospitals, large integrated delivery systems, community hospitals, and outpatient centers. For instance, a 2022 industry survey found that nearly 65% of academic hospitals are willing to invest in premium technology if it improves patient outcomes (source: L.E.K. Consulting, 2022).

• Clinical Specialties: Segments based on therapeutic areas (e.g., cardiology, orthopedics, radiology) where each specialty values distinct clinical outcomes.

• Geographical Regions: Differences in reimbursement systems, regulatory environments, and purchasing power across regions.

• Willingness or Ability to Pay: Perhaps the most critical segmentation for premium products, distinguishing high‑value customers (often with larger budgets or better reimbursement structures) from those who cannot absorb higher price points.

By clearly identifying these segments, companies can tailor their marketing, sales, and pricing strategies to meet each group’s specific needs.

2. Linking Segmentation to Value‑Based Pricing

Value‑based pricing is about setting prices according to the perceived value and outcomes delivered to the customer rather than simply covering production costs. This approach relies on a deep understanding of each segment’s willingness to pay.

Measurable Outcomes

A recent study by IQVIA (2023) demonstrated that MedTech products that can reduce hospital stays by 20% or lower readmission rates by 15% are viewed significantly more favorably—often commanding premium prices up to 25% higher than cost‑plus estimates. Each segment may value these outcomes differently, thereby informing the optimal price point.

Willingness/Ability to Pay

Segmentation by willingness to pay allows companies to:

• Identify High‑Value Segments: Typically, large academic hospitals or well-funded private institutions are ready to invest in solutions that offer substantial clinical and operational benefits.

• Tailor Communication: For high‑value segments, the focus is on the long‑term ROI and superior outcomes. For those with less purchasing power, scaled‑down or alternative offerings might be more suitable.

• Make Strategic Exclusions: In the premium space, it is sometimes necessary to reject customers who cannot meet our price point. This isn’t about exclusion for its own sake—it’s about preserving the product’s value proposition. As one report by Revenue Management Labs (2024) noted, maintaining premium pricing credibility often requires a “this product is not for you” stance to avoid diluting brand equity.

Drawing on Marta Dapena Baron’s framework, segmentation forms the foundation for precise targeting and effective positioning, ensuring that every customer group is addressed in a way that reinforces the product’s superior value.

3. Lessons from Luxury: The Rolls Royce Analogy

Just as Rolls Royce sets a baseline price that reflects its legendary craftsmanship and technological prowess, premium MedTech companies must establish a premium baseline price based on measurable benefits—improved clinical outcomes, enhanced operational efficiencies, and proven cost savings.

• A Premium Baseline: Rolls Royce vehicles can easily exceed $400,000, with that figure justified by unparalleled quality and exclusivity. Similarly, MedTech’s premium pricing is set by quantifiable improvements (for example, reducing hospital stays by 20% or cutting operational costs by 15%), ensuring that the high price is backed by real value.

• Targeted Discounts Without Dilution: Luxury brands rarely discount their products, as doing so can erode their premium image. In MedTech, we use targeted, data‑driven discounts only for specific, well‑defined segments—such as high‑volume purchasers or long‑term strategic partners. This ensures flexibility in addressing diverse customer needs without compromising our premium positioning.

• Selective Customer Segmentation: Just as Rolls Royce isn’t for the mass market, MedTech premium solutions are designed for customers who truly value and can afford them. We rigorously segment our market by willingness and ability to pay and, when necessary, we clearly communicate that our product is not for those who cannot invest in its full value, and offer alternatives with fewer features.

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4. Implementing Segmentation in Practice

Step 1: Data Collection and Analysis

Gather both quantitative and qualitative data on patient outcomes, operational efficiencies, and customer preferences. Advanced analytics can reveal how different segments respond to various value drivers. For example, a 2023 survey by Deloitte found that over 70% of premium MedTech buyers are willing to pay 20% more if a product consistently delivers superior outcomes.

Step 2: Define Segments Clearly

Identify segments not just by demographics, but by key financial metrics (budget size, reimbursement models, historical purchasing behavior) and customer feedback. Surveys and interviews can help gauge willingness to pay.

Step 3: Develop Tailored Value Propositions

For high‑value segments, emphasize the tangible benefits—like a 20% reduction in hospital stay—that justify a premium price. For lower‑value segments, consider alternative offerings that meet their needs without compromising your brand.

Step 4: Make Tough Decisions

Maintaining premium pricing sometimes means rejecting customers who can’t afford the product. This strategic decision protects brand integrity and focuses resources on customers who derive the full benefit from the innovation. Clear messaging—“This product is not for you”—is sometimes essential to preserving premium positioning.

5. Conclusion

Customer segmentation is not just an academic exercise; it’s a strategic imperative that underpins value‑based pricing in premium MedTech. By understanding and targeting segments based on willingness or ability to pay—and by drawing inspiration from luxury brands like Rolls Royce—MedTech companies can set premium prices justified by measurable outcomes and deliver tailored value propositions.

Embracing a holistic approach that integrates segmentation, targeting, and positioning (as outlined in Marta Dapena Baron’s Big Picture Marketing Framework) enables you to optimize revenue, maintain brand integrity, and build lasting relationships with customers who recognize and are willing to invest in superior outcomes.

References

• L.E.K. Consulting, Pricing Best Practices for the MedTech Industry, 2022. Link

• IQVIA, MedTech Value and Pricing Survey, 2023.

• Revenue Management Labs, 2024 Executive Pricing Survey Report, 2024.

• Deloitte, MedTech Buyer Insights Report, 2023.

• Baron, Marta Dapena. Big Picture Marketing Framework, 2020.