By- Archit Garg Geet Sawhney Mohit Sharma Siddharth Kumar

Case Brief:

Company Cost to mfg and Market New Bulldozer (a) =$30,000

Perceived worth of customers =$100,000

Therefore,(b)

Added value =a-b= $70,000.

Pricing options

This Added Value of $70,000 can be shared by the customer and Manufacturing one of the Three ways:

• They can share equally between the Caterpillar and the Buyers ($35,000 for both).

Then Price = $30000 + $ 35000 = $65,000.

• Manufacturer feels their hand in creating the value is more than Perceived Wealth. So they command a high share ($50,000 for Caterpillar & $20,000 for Buyers).

Then Price = $30000 + $50000 = $80,000.

• Caterpillar thinks Customers Contribution in perceived wealth creation is bigger. So pass the customers a major chunk and they take a smaller piece of the cake ($50,000 for Buyers & $20,000 for Caterpillar).

Then Price= $50,000.

CASE SITUATIONS

1) First Situation, When Technology is Low and Komatsu is expected to Copy the

Product within 1 Week after launch. And, Komatsu’s Cost to Make & Market is $20,000.

Minimum Selling Price that can be offered by Caterpillar = $30,000.

But within 1 week Komatsu will launch the product at $20,000. So, Caterpillar will suffer losses if product is launched.

Here, the Focus must be on following points:

Initially Concentrate on Market Penetration CDV should be very High.

In this case as soon as Komatsu launches the product the

market will go towards it and CATTERPILLAR will lose the market share.

The Strategies in this situation could be:1. It should promote its product based on the After Sales

Service and it should promote it as its USP.

OR

2. It should not launch the product.

In the Second Situation, When Technology is High

with enough Entry Barriers for Rivals and Komatsu will take minimum 2 years to copy the exact product. And here also, the cost to Make & Market the Bulldozer for Komatsu is $20,000.

No Competition exists as of Now Because it is a new Product being developed for the first time.

Here, The Strategy could be:

Follow Market Skimming To recover all Investments before Komatsu’s Bulldozer hits

the market. Make reasonable profit for the firm. To give High Delivered Value to the customers. Try to Capture majority of the market share.

So the Pricing Strategy could be as follows:

Perceived Worth = $100,000. Cost to Make & Market = $30,000. Added Value = $70,000.

Caterpillar can keep the Higher share for itself, and can give the buyers a Smaller share of the Added Value.

So, the Selling Price of 1 Bulldozer should be $80,000 till a few months prior to the launch of Komatsu’s Bulldozer. And, After launch by Komatsu, the Price should be brought down to $50,000.

And also it should come up with a new innovative product when Komatsu launches the same product.