Question 3
When pricing for Lena, Maria Lopez has several elements she needs to consider such as the cost to produce the product, the amount of waste after packaging, the value to customers, and the competitor’s prices. After evaluating these elements, it would seem reasonable for Lopez to charge 38 dollars or perhaps even more for a hardwood powder-based coating. According to MarketingMO, one of the first steps in a pricing strategy is to match the price to the value proposition. In this case, Lena offers endless benefits to the consumer which other liquid-based coatings cannot compete with. For instance, the product is more durable, attractive, has higher quality, comes in clear or opaque, and contains very small amounts of volatile organic …show more content…
After looking at the data, Lena is priced fairly at 38 dollars. The table on page nine of the case indicates Lena has the highest contribution price per unit. This means Lena has the highest profitability per unit. Though Lena’s percent of contribution is not the highest, it does beat out water-based coating in overall profitability. Assuming, Lena was thoroughly communicated and promoted, Lena could provide the highest overall contribution. Currently, the solvent-based coating provides the largest contribution because it is the top-selling base coat–not because it yields a better contribution per unit. Moreover, given that Lena’s overspray can be re-used, it generates the least waste out of all base coatings, which in turn increases profitability. Lopez should not lower the price because the cost to produce Lena is $1.04 higher than for a water-based coating. One may ask, “if the product is only $1.04 more and it produces less waste, then why is Lena priced four dollars more?”. The answer is because Lena possesses superior customer value. Though the cost to produce a powder-based coating is not much greater than the other products available, it does provide many added
When pricing for Lena, Maria Lopez has several elements she needs to consider such as the cost to produce the product, the amount of waste after packaging, the value to customers, and the competitor’s prices. After evaluating these elements, it would seem reasonable for Lopez to charge 38 dollars or perhaps even more for a hardwood powder-based coating. According to MarketingMO, one of the first steps in a pricing strategy is to match the price to the value proposition. In this case, Lena offers endless benefits to the consumer which other liquid-based coatings cannot compete with. For instance, the product is more durable, attractive, has higher quality, comes in clear or opaque, and contains very small amounts of volatile organic …show more content…
After looking at the data, Lena is priced fairly at 38 dollars. The table on page nine of the case indicates Lena has the highest contribution price per unit. This means Lena has the highest profitability per unit. Though Lena’s percent of contribution is not the highest, it does beat out water-based coating in overall profitability. Assuming, Lena was thoroughly communicated and promoted, Lena could provide the highest overall contribution. Currently, the solvent-based coating provides the largest contribution because it is the top-selling base coat–not because it yields a better contribution per unit. Moreover, given that Lena’s overspray can be re-used, it generates the least waste out of all base coatings, which in turn increases profitability. Lopez should not lower the price because the cost to produce Lena is $1.04 higher than for a water-based coating. One may ask, “if the product is only $1.04 more and it produces less waste, then why is Lena priced four dollars more?”. The answer is because Lena possesses superior customer value. Though the cost to produce a powder-based coating is not much greater than the other products available, it does provide many added