Curled Metal - Case Study
Pricing Policies
Case Study: Curled Metal Inc.
Executive Summary
Situation analysis: CMI is looking to diversify its portfolio. It wants to introduce a new high performing cushion pad into the pile-driving market. CMI will initially target small engineering/construction and independent pile-driving contractors. CMI will have the first-to-market advantage, as there are currently no direct competitors for metal pads. In terms of channels, CMI would distribute its pads through manufacturing representative.
Main problem: CMI’s primary issue is figuring how price of their new product.
Alternative solutions: We studied four different alternatives: cost +, EVC, price differentiation and contingency pricing.
Chosen solution: Following a comparison between all alternatives we concluded that EVC was the best pricing method. This method takes into account the real value to the customer according to which CMI should price each pad at $2,150.
Implementation plan: CMI will focus on 11 1/2” pads and initially target independent construction companies and independent pile-driving contractors. These are most price sensitive and accessible. This move will provide CMI time to learn the market and perfect its production line in preparation for supplying larger project developers in the future. CMI will position its pads as a new industry standard while stressing their cost-efficiency and superior performance. It will also advertise in magazines and collaborate with professionals and academics to conduct further testing and publish results.
Contingencies: plans regarding potential economic distress, product defects, unfavorable market reception, and alternative distribution channels will be discussed.
I. Situation Analysis
Company: CMI specialized in metal equipment production and experienced a decrease in net sales between 2006 and 2007. The company dominated the exhaust seal market (in auto industry) with its Slip-Seal product capturing 80% market share. Due to shrinking sales
Case Study: Curled Metal Inc.
Executive Summary
Situation analysis: CMI is looking to diversify its portfolio. It wants to introduce a new high performing cushion pad into the pile-driving market. CMI will initially target small engineering/construction and independent pile-driving contractors. CMI will have the first-to-market advantage, as there are currently no direct competitors for metal pads. In terms of channels, CMI would distribute its pads through manufacturing representative.
Main problem: CMI’s primary issue is figuring how price of their new product.
Alternative solutions: We studied four different alternatives: cost +, EVC, price differentiation and contingency pricing.
Chosen solution: Following a comparison between all alternatives we concluded that EVC was the best pricing method. This method takes into account the real value to the customer according to which CMI should price each pad at $2,150.
Implementation plan: CMI will focus on 11 1/2” pads and initially target independent construction companies and independent pile-driving contractors. These are most price sensitive and accessible. This move will provide CMI time to learn the market and perfect its production line in preparation for supplying larger project developers in the future. CMI will position its pads as a new industry standard while stressing their cost-efficiency and superior performance. It will also advertise in magazines and collaborate with professionals and academics to conduct further testing and publish results.
Contingencies: plans regarding potential economic distress, product defects, unfavorable market reception, and alternative distribution channels will be discussed.
I. Situation Analysis
Company: CMI specialized in metal equipment production and experienced a decrease in net sales between 2006 and 2007. The company dominated the exhaust seal market (in auto industry) with its Slip-Seal product capturing 80% market share. Due to shrinking sales