Executive Summary
Cumberland Metal Industries (CMI), a company specialized in making of curled metal products, has develop a new product, metal cushion pad with health safety and long durability, to help contractors drive piles faster. Based on the successful tests, CMI now wants to launch this new product to the market. The main challenge CMI is facing is to price its new pads. Since the pad is totally new in the market, CMI should use perceived value pricing method and apply marketing mix programs comprised of advertising, education, and distribution channels to launch this product as well as develop it to get full market share in the future.
Perceived Value Pricing – strategy for future success
CMI should set the objective of this new business to be the monopoly and to maximize profits. However, the prerequisite for this objective is to get a patent to prevent this product from being copied and imitated. As long as CMI did not get patent for this product, CMI should not sell it as it would invite the entry of competitors because this cushion pad is not a high technology product and easy to be copied. Thus the following pricing strategy will be based on the scenario of getting patent protection.
To price the new product, CMI should apply perceived value pricing method to deliver its value to customers and CMI must make them perceive this value. CMI also needs to apply several marketing-mix programs such as advertising and roles of influencers to communicate and enhance perceived value in customers’ minds. The price calculation is as follow:
Normal a price of an 11 ½ inch asbestos pad is $3. A CMI’s pad lasts longer than asbestos pads 10 times (conservative estimate: p4). Thus speed and efficiency will be the top priority for marketing an ...