October 21, 2013
CA by Yiwen Zhang
Cumberland Metal Industries (CMI) is one of the largest metal manufacturers in the world. The company evolved from selling metal as a finished product to one that used it as a raw material, increasing sales from $250,000 in 1963 to over $18,500,000 in 1979. Currently, CMI relies heavily on SlipSeal, which is used as a high-temperature sealant in automobiles. Although CMI dominates the market for this product, corporate sales figures decreased over the last year. As a result, the management at CMI realized the importance of diversifying its product-line so that the company does not rely as heavily on SlipSeal or the automobile industry.
In choosing the curled metal pads price, CMI should take advantage of the performance and operational benefits that its product offers. The pads are more efficient and last longer, they are easier to handle, reaching temperature that are almost three times less then those of asbestos. There was significant savings gained by using CMI pads in both tests, ranging from 29 to 35%. Customers should be willing to pay for these benefits, especially when presented to them in terms of their economic value. Therefore, CMI should price the product as close as possible to the economic value for the customer.
Current profit maximization
Market share leadership
Product quality leadership
In pricing the pads, CMI should follow a differential pricing strategy with an effort to maximize the amount of consumer benefit captured with the price. The differential pricing strategy would also allow CMI to reward early purchasers and help them create relationships. It would also help CMI negotiate distribution deals. For example, CMI could quote to the Colerick Foundation a relatively low price of $800 per pad as a first time customer purchasing directly from CMI. Colerick will be happy to pay this price because