The year is 1979, Cumberland Metal Industries(CMI), one of the largest manufacturers of curled metal products in the country has developed a new product. As compared to the hardwood blocks or abestos pads, the new metal cushions developed at CMI had successfully tested for longer durability and passed health safety regulations. CMI realized the potential of the product and the opportunity of becoming industry leaders with this newly developed product of theirs, hence wished to introduce to the product to the market immediately.
Though, since the products success relied heavily on its marketing mix and especially the pricing strategy, CMI faces a challenge. The following ...view middle of the document...
Competitive products and channels of distribution?
No manufacturers dominates the business. Most pads came unbranded, having been cut by small, anonymous job shops. C.M.I. should focus on the manufacturers' representatives that sell directly to the supply houses and distributors as the primary distribution channel.
How to market these pads? What should be CMI’s marketing strategy and marketing mix?
High/low expenditures/support? High/low price?
While pricing the product too low would prevent CMI from capitalizing on its new innovation in an increasingly difficult market, pricing it too high could also prevent CMI from quickly grabbing market share in this new product category. Obtaining a large market share right away in a new product category has several long term advantages.
I. Recommendations based on numeric data calculations
Two sets of test data confirm that CMI pads provide two main advantages over conventional pads. This section will use the test results obtained by Colerick Foundation company and Fazio Construction’s when comparing the use conventional pads against CMI pads on-site.
The numerical results show that CMI pads offer two main advantages, productivity and time-efficiency.
In terms of productivity, CMI pads output of feet of piles driven per hour is 25% and 20% more than conventional pads, respectively for Tests A and B
Driving 20-25% more feet per hour, means less time is required to complete the project which increases time-efficiency.
Time-efficiency is achieved in many other ways as well. Conventional pads accounted for 6.65 hours and 16.67 hours for changing time in the tests, whilst CMI pads took a total changing time of only 0.02 hours in each of the both tests.
This data showed that whilst the changing time appeared volatile and unpredictable in conventional pads, it was constant in both tests for CMI pads at an extremely efficient 0.02 hours each test. It would appear therefore that CMI pads would achieve this same outstanding efficiency in future tests as well.
How much time is saved?
Total time saved in using CMI pads over conventional pads was 31.65 hours in each test.
As each hour is assumed to be worth $238, the corresponding dollar savings due to time saved was $7532 for each test.
As only 6 CMI pads were used to achieve the test result for test A, this would equate to corresponding dollar savings or customer value generated of $1255.45 per pad. For test B it is US$ 1506.54 per pad as only 5 pads were used to achieve the same result.
By comparison tests A and B utilized 20 and 50 sets of conventional pads respectively. The costs of these pads totaled $1,000 (test A) and $2000 (test B).
Six CMI pads used for the same job $1,000 job gives a value of $167 per pad for Test A.
Five CMI pads used for a $2,000 job gives a value of $400 per pad for Test B.
To find the total economic value for the customer (EVC), we add the savings...