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Jd 750 Case Study

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Jd 750 Case Study
10/25/2010
TO: Robert Gerstenberger
RE: Pricing JD-750
Our Company is now entering the heavy industrial market with the new construction tractor JD-750 a heavy bulldozer with 110 horse power and a fully automatic dual-path hydrostatic drive. These features are truly unique for our company since it is significantly larger than our previous product line. JD-750 should be priced right at Caterpillars D-5 and not higher based on the unique features of our product and I recommend pricing JD-750 at $64082.00 (Table A). The price suggested will meet our objective of maximizing profits in the first few years of the launch before our competitors enter the market. JD-750 is a niche product with technological innovation and will attract heavy construction …show more content…
Moreover there is a market of 5500 units per year in which we can tap in to and with the current price recommendation it can profit us about 8% more than recommendation that has been made.
Our company has the largest market share in the light crawler tractors, and our market share mostly came from domestic market. Our distribution channel is also second only to Caterpillar who dominates the market for heavy equipments in construction industry and will be our biggest competitor in this market. Our light crawlers, JD350 and JD450, were very successful products. Introducing JD-750 will help our company gain market share in farming contractors that have started using these product lines for non agricultural area. Since our customer already know us and our successful reputation as reliable, innovative and engineering excellence, we can leverage our reputation and engineering work, …show more content…
Total | $64,020 | $61,110 | | | | | | | | | | | | | Cost Price Ratio and Profit Margin JD-750 | My Suggestion | Case Suggestion | | | | | | | | List Price | $64,020 | 59785 | | | Discount volume discount (20%+4.5%) | $15,684.9 | 14647 | | | Net Price | $48,335.10 | 45138 | | | | | | | | Cost | $36,110.00 | $36,110.00 | | | Net Profit | 33.85% | 25.00% | | | Cost/Price Ratio | 74.71% | 80.00% | | | | | | | | Dealer discount 20% and volume discount 4.5% | | | | Net Price is list price minus 24.5% dealer discount | | | | Costs are factory standard costs | | | | | Cost/price ration is cost divided by net price | | | | Net profit is net price minus cost divided by cost | | | | | | | | |

Table B (Three C's Model of Pricing JD-750 | | | HIGH Price | 110% at current Caterpillar D-5 | | No Possible Demand at this price | $67,228.70 | | | | | Ceiling Price | 100% at current Caterpillar D-5 | Competitors price of substitutes | Customers assessment of unique product | $64,020.00 | Orienting Point | | | | Floor Price | 90% at current Caterpillar D-5 | | Low price no possible profit at this price | $55,005.30 |
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