Burt's Bees Case Study
Burt’s Bees
1. Consumers look to price as an indication of quality and Burt’s Bees uses that to their advantage (A17). While their products are well differentiated simply by the ingredients list, Burt’s Bees marks up their products to create an even deeper sense of authenticity. It wasn’t until the Clorox acquisition that they even advertised such differences: “...Clorox immediately ran magazine ads comparing natural ingredients in Burt’s Bees to chemical ingredients found in other products” (A17). Burt’s Bees had previously accomplished that differentiation on price alone.
2. Burt’s Bees ignores the competition’s pricing and charges 80% more than necessary, so clearly they have executed a value-based pricing strategy (A16). Customer value-based pricing sets price by calculating the buyer’s perception of value instead of attempting to cover the costs of the company (pg. 258). Green shoppers expect to pay more for truly natural products and Burt’s Bees took that into consideration before setting their marketing program. Originating in boutiques, they targeted a segment of the market that was accustomed to paying for quality and environmental responsibility. By reflecting the way the consumer perceives value, Burt’s Bees was able to establish a higher price bracket.
3. Product-mix pricing uses five strategies to maximize profits: product line pricing, optional pricing, captive product pricing, by-product pricing, and product bundle pricing (pg. 271). When Burt’s Bees first began, they clearly took advantage of the by-product pricing strategy of beekeeper Burt Shavitz to obtain raw materials at low costs. They eventually set up an entire natural products line and ranged prices from $3 lip balm to $25 lotion, reflecting their product-line pricing strategy. Almost every cosmetics company recommends using the other products in its line for “optimal results,” which can be described as captive product pricing, as well as advertising their products in “buy
1. Consumers look to price as an indication of quality and Burt’s Bees uses that to their advantage (A17). While their products are well differentiated simply by the ingredients list, Burt’s Bees marks up their products to create an even deeper sense of authenticity. It wasn’t until the Clorox acquisition that they even advertised such differences: “...Clorox immediately ran magazine ads comparing natural ingredients in Burt’s Bees to chemical ingredients found in other products” (A17). Burt’s Bees had previously accomplished that differentiation on price alone.
2. Burt’s Bees ignores the competition’s pricing and charges 80% more than necessary, so clearly they have executed a value-based pricing strategy (A16). Customer value-based pricing sets price by calculating the buyer’s perception of value instead of attempting to cover the costs of the company (pg. 258). Green shoppers expect to pay more for truly natural products and Burt’s Bees took that into consideration before setting their marketing program. Originating in boutiques, they targeted a segment of the market that was accustomed to paying for quality and environmental responsibility. By reflecting the way the consumer perceives value, Burt’s Bees was able to establish a higher price bracket.
3. Product-mix pricing uses five strategies to maximize profits: product line pricing, optional pricing, captive product pricing, by-product pricing, and product bundle pricing (pg. 271). When Burt’s Bees first began, they clearly took advantage of the by-product pricing strategy of beekeeper Burt Shavitz to obtain raw materials at low costs. They eventually set up an entire natural products line and ranged prices from $3 lip balm to $25 lotion, reflecting their product-line pricing strategy. Almost every cosmetics company recommends using the other products in its line for “optimal results,” which can be described as captive product pricing, as well as advertising their products in “buy