The purpose of this task is to develop an approach for Cumberland Metals (CMI) in setting the price for a new product, curled metal cushions, used in the pile-driving industry.
I will walk you through each step of assessing and establishing the price for the curled metal cushion pads. I will illustrate this by using the general pricing model from our textbook entitled, A Preface to Marketing Management, Chapter 11, pages 179-181, as my primary reference and guiding source.
Setting the price Objectives:
I recommend that CMI take a value-based price setting approach. This recommendation comes from my assessment of their goals of gaining and maintaining market share. The value-based approach will consider costs incurred by CMI to make …show more content…
When considering the product-price relationship, CMI's managers must understand and adhere to the internal financial policies of their company. In this case, CMI management has an expectation of a 40%-50% contribution margin, so we will honor that policy when setting the price for the product. (CITE ARTICLE HERE). However, the cost of manufacturing is just one aspect of this process. The manufacturer must also ask themselves can the customer-perceived value (ceiling) be delivered to justify the price? The marketers must take a step back and look at the situation from their customer's …show more content…
Also, CMI must be aware that the threat of new entrants is highly likely for this product and, in time, competition will arise. That said, CMI must be forward thinkers and work to enhance its production and maximizing its experience curve to reduce its production costs to an optimal level as it moves through the products life cycle. Using the estimated volume of 250 pads per month (CITE ARTICLE HERE), the product is considered to be inelastic as no substitutes are currently available. The elasticity of this product was determined by sampling the product's use with Colerick Foundation Company and Fazio Construction on one project each then assessing the test results. CMI has not yet polled these companies for their input on pricing the item. They decided to price the item internally using the available data, though limited at this
I will walk you through each step of assessing and establishing the price for the curled metal cushion pads. I will illustrate this by using the general pricing model from our textbook entitled, A Preface to Marketing Management, Chapter 11, pages 179-181, as my primary reference and guiding source.
Setting the price Objectives:
I recommend that CMI take a value-based price setting approach. This recommendation comes from my assessment of their goals of gaining and maintaining market share. The value-based approach will consider costs incurred by CMI to make …show more content…
When considering the product-price relationship, CMI's managers must understand and adhere to the internal financial policies of their company. In this case, CMI management has an expectation of a 40%-50% contribution margin, so we will honor that policy when setting the price for the product. (CITE ARTICLE HERE). However, the cost of manufacturing is just one aspect of this process. The manufacturer must also ask themselves can the customer-perceived value (ceiling) be delivered to justify the price? The marketers must take a step back and look at the situation from their customer's …show more content…
Also, CMI must be aware that the threat of new entrants is highly likely for this product and, in time, competition will arise. That said, CMI must be forward thinkers and work to enhance its production and maximizing its experience curve to reduce its production costs to an optimal level as it moves through the products life cycle. Using the estimated volume of 250 pads per month (CITE ARTICLE HERE), the product is considered to be inelastic as no substitutes are currently available. The elasticity of this product was determined by sampling the product's use with Colerick Foundation Company and Fazio Construction on one project each then assessing the test results. CMI has not yet polled these companies for their input on pricing the item. They decided to price the item internally using the available data, though limited at this