1. What’s your price for the curled metal pads? Why? (3)
2. How attractive an opportunity is this for CMI? (7)
3. How are you going to market these pads? Describe your marketing plan. (8)
4. What are you going to say to the Colerick Foundation?Exhibit 1:
CMI was one of the largest manufacturers of curled metal products in US with an 80% market share. CMI’s sales were dipping and management was not optimistic of maintaining the current market share in the long run. Cumberland had a history of using curled metal technology to develop innovative metal products like slip-seal to meet the demanding specifications. Existing cushion pads in the market seem to be meeting the need adequately and hence no specific attention was being paid to develop new and high performing products. The results of tests of the use of new metal pad had been excellent, exhibiting nearly 33% gain in efficiency and 20 times more life as compared to asbestos pads. Because of the lack of an existing market and sales and distribution channels, company faced a herculean task of convincing the channels that there indeed was a market for the new pad. Existing pads in the market came in standard diameters but CMI’s manufacturing process provided the flexibility to develop pads in any diameter using the same band of curled metal. Because of the lack of statistics on cushion pad usage, CMI did not have a clear idea of the sales mix of the various product sizes.
Contractors and Subject matter Experts(Prof. R. Stephan McCormack of Pennsylvania A&M university ) had expressed great enthusiasm about the new pad. At this stage of prior to product launch and manufacturing, CMI seem to be struggling to find a responsible contractor to use the product and monitor its performance | Opportunities| Threats|No direct competition for Cumberland existed because of the lack of interest of… foot driven. This alternative is in line with the price of current used pads in the test scenario, hence competitive. The advantage of this method is it fulfills the company objective of 50% markup, is easy to calculate, and competes well with other pads. Furthermore, proceeding years will realize a greater than 50% margin since the $150,000 equipment investment will be eliminated. This approach would work best for a strategy of extensive market penetration. Since the price of the pads are the same current used, CMI needs only to convince consumers of the efficiency and safety advantages to convert them to the new pads. However, this pricing method does not consider the possibility of premium pricing due to efficiency cost savings or value added to the customer by using the CMI pads.
Case PresentationCurled Metal Inc. (CMI) faced a pricing and channel marketing decision for metal pile cushions utilized during pile driving. CMI’s approach to metal pads has significant efficiency advantages over currently used pads available in the market. However, CMI has to take into account several barriers to entry into this market. The primary barrier is that most companies viewed role of pads as a necessary accessory or tangent item instead of viewing them as a potentially value adding or cost reducing part of pile driving. In order to penetrate the market, CMI has to alter the point of view of pile driving pads for the opinion leaders, engineering firms, and contractors involved in the decision process. There is several stakeholders to consider, first CMI that need a new successful product to the continued success of the company. The decisions regarding pile cushions could greatly increase the company’s revenues and profits. There are also several secondary stakeholders in the pile driving industry. Secondary stakeholders include pile hammer manufacturers, architectural consulting engineers, soil consultants, pile hammer distributing/renting companies,…Promotion strategyPatent?
Curled Metal’s strategic and marketing objectivesThere is a need to increase the industry’s awareness for the new pad and to recognize it as a “necessity” for projects.This can be achieved by soliciting different influencing parties. Different parties have established ties with their targeted clients. The parties can easily influence clients.Pile hammer manufacturers, architectural/ Consulting engineers play a role in influencing decisions of contractors by providing recommendations. Curled Metal should maintain a good relationship with these parties and carry out firm visits to introduce the product to them.For independent pile-driving contractors, professional staff from Curled Metal can be assigned to these contractors to help with management at the initial period.Less resource should be allocated on pile hammer distributing and sophisticated engineering/ construction contractors as it may be difficult to change their mindsets.This can also be achieved through promotion.
Curled metal can continue to make use of the influence of respected Professor Stephen McCormack of Pennsylvania A&M University. Since sophisticated firms of the industry are familiar with his research, Curl Metal should value Professor McCormack’s influence. Curl Metal should publish the test results of the new pads to the industry when it is finalized.Curled Metal can make use of existing publication on pile-driving jobs, such as Oklahoma Contractor. Curled Metal can have its advertisement featured on the publication to introduce the advantages of the new pads.Curled Metal can also sponsor professional-level seminars and conference for contractors, designers and equipment developers to exchange ideas. Curl Metal can make us of the chance where different parties gather together and promote the new pads to them. Professors can be invited to hold talks and explain how the new pads can help save resources and time. Answered questions:
What should a customer be willing to pay for one of Curled Metal Incorporated’s new cushion pads? What factors are relevant in calculating willingness to pay in this situation? Prepare a specific monetary estimate of customer value in this situation. What price should Curled Metal Inc. set for one of its new cushion pads? Why? Please focus on an 11.5-inch cushion pad. On page 1 of the case, Curled Metal Inc.’s vice president Joseph Fernandez says, “The way we price this could have a significant impact on everything else we do.” An integrated strategic option specifies the basic type of advantage a company will pursue (e.g., differentiation? low cost? other?), relevant decisions about customer and product scope, and key choices throughout the company’s value chain. Please prepare an integrated strategic option for CMI – an option that specifies your price but also specifies the many other choices facing CMI in formulating a strategy for its new cushion pads (e.g., in marketing, sales, distribution, production, finance, and other functions).
Case analysis for Curled Metal Inc.1. What should a customer be willing to pay for one of Curled Metal Incorporated’s new cushion pads? What factors are relevant in calculating willingness to pay in this situation? Please prepare a specific monetary estimate of customer value in this situation. When calculating the value of CMI’s curled metal pads to the customers one has to take a variety of factors into account. These are the total costs per hour of pile driving, the saved costs for driving as well as the savings in changing time. By calculating the total amount of money saved when applying the new pads, one can calculate the “real value” of the product. One „real hour’s“ worth of pile driving is calculated as follows:
One real hour has a total cost of $714. We will use this number for further calculations. Below I have calculated the total costs for driving time, replacing pads for both the Kendrick Foundation Company and Corey construction… Cumberland Metals: Case Study Analysis. 1/9Cumberland Metals faced a both a pricing and channel marketing decision for metal pile cushions utilized during pile driving. Cumberland’s approach to pile cushions had significant efficiency advantages over other asbestos methods that were currently available in the 1979 market. However, Cumberland faced several barriers to entry into the pile cushion market. The primary barrier was that most companies viewed role of cushions as a necessary accessory or tangent item instead of viewing cushions as a potentially value adding or cost reducing part of pile driving. In order to penetrate the market, Cumberland would have to alter the lackadaisical view of pile driving cushion pads for the opinion leaders, engineering firms, and contractors involved in the decision process.Key IssuesCumberland needs to consider several marketing decisions.
First, they must determine a method for pricing and ultimately a price for the new metal pads. Second, Cumberla nd must decide which channels to market the pads based on the selected pricing strategy. Third, Cumberland must determine how much to invest in manufacturing equipment by estimating market penetration and considering the costs and benefits of investing in pad producing equipment.AnalysisCumberland’s new metal pile driving pads provided several benefits over the current asbestos cushions. Several Pad features and pricing decisions will be discussed and analyzed in this section. First, the safety and heat properties of the cushions will be analyzed and compared to current asbestos pads. Second, efficiency characteristics will be analyzed and compared with current asbestos pads. Third, several methods of calculating the best price in order to match the price to the value added for the customer will be discussed. Finally, an analysis of the different marketing channels and marketing strategy will be presented. Safety Presentation MarketingCumberland Metal Industries ( CMI cushion pads)
The Problem Definition: For Cumberland Metal Industries the curled metal cushion pads represent a great breakthrough. These pads offer the company the opportunity to diversify, and double their sales, given a proper market introduction. Cumberland Industries faces the challenge to Place in the market (promote/advertise) and price their latest innovation, the curled metal cushion pads in a way that it reveals the great advantages that the product provides.In order to do that, the company needs to pay attention to certain factors that can influence the success of the product on the market. These factors are: promotion and advertising, and the pricing of the metal pads on the market.Marketing Strategy: A sensible thing for the company to do is to use the niche strategy in order to place the product on the market. A Niche strategy will focus on a specific area of a service or a product. The advantage of using niche strategy is that it can focus on a specific niche that provides either a large volume of business or small volume with lucrative profit margins.
The whole idea behind the niche strategy is that it targets those people who are interested in the type of product offered. In our case, by placing the CMI metal cushion pads as a niche, Cumberland Metal Industries has the potential of becoming a dominant player on the market.The next step is promoting and advertising the product as such (niche/innovative etc.). What Cumberland Industries should do, is create a brand. They have a truly innovative product that has the potential of becoming a huge success. Before the CMI metal pads, the only pads available were the asbestos pads. Those, however, could be found at diverse retailers, and were not properly marketed. Moreover, it is well known, and proven that the asbestos pads are a hazard to health and also there are some government regulations that prohibit the use of asbestos.
Cumberland Metal Industries – Pricing Strategy
Executive SummaryCumberland 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 successCMI 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.