The Bair Hugger system, which consist of a heater/blower unit and a separate inflatable plastic/paper blanket, is an air-circulation product and provides hypothermia patients surface warming. Although using the skimming pricing strategy has greater return in the short run, the danger is the company can not have a greater market share as well as a long run profit. Also, this market is price-sensitive to alternative methods. On the other hand, since the demand is known, the estimate of the total potential market for this system is about 2737 units, and 1000 units of blankets for each blower unit per year, and there are many substit

The central issue at this time was the determination of the list price to hospitals for the heater/blower unit and the plastic blanket. The price set for the Bair Hugger Patient Warming System would influence the rate at which prospective buyers would purchase the system since the market was price-sensitive to alternative methods. Also, price and volume together would influence the cash flow position of the company. Before the company prices this system, several considerations are required in terms of organizational objectives, demand for the product, customer value perception and buyer price sensitivity, the price of competitive offering, and direct variable costs.

A penetration strategy is one in which the seller charges a relatively low price on a new product. Generally, this policy is appropriate for the Bair Hugger Patient Warming System because of the following conditions.

Alternative B: Penetration pricing strategy.

1. Demand for the product is price elastic. The more substitutes a product has, the greater its price elasticity. Obviously, it is valid in this market because there is a variety of competitive products existing. Also, through an interview with physicians and nurses, respondents felt that the product was price-sensitive. Moreover, in the hospital, expenditures for equipment over $1500 were typically subject to a formal review and decision process.

Alternative A: Skimming pricing strategy.

4. After the company dominates the market, it is possible to increase the blanket's price for only $.50 or $1 per unit that will increase lots of profits.

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Approximate Word count = 2481
Approximate Pages = 10 (250 words per page double spaced)