Case Analysis CumberlandAbout Cumberland Metal Industries (CMI) is one of the largest manufacturers of curled metal products in the country. CMI typically sells products which are used as raw materials in other products. The company has also been recognized in developing and manufacturing sophisticated products in highly technical applications, traditionally in the automotive sector. One of CMIs products known as Slip Seal, has been carrying the company for many years as the market leader. CMI, however, decided to diversify their product line. In 1980, Robert Minicucci, Vice President of the Engineered Products Division of CMI and Thomas Simpson, Group Manager of the Mechanical Products Group were reviewing a new product, CMI cushion pad, the company was planning to introduce. Problem Definition Cumberland is faced with a few issues which they need to make a decision about. The company needs to consider several marketing decisions starting with price. They must determine a method for pricing and ultimately a price for the new metal pads. Secondly, Cumberland must decide which market they should target based on the pricing strategy they will follow and how will they reach the various purchase influences. Situation Analysis SWOT Cumberland has many strengths, one being that is a very successful and well known manufacturer. The reason why the company has a competitive advantage over its competitors is because the product is exceptionally better than the conventional cushion pads. The product is more efficient than its competitor Asbestos. CMIs cushion pads lasted the entire job which eliminated the downtime required for changeover. In addition, with Asbestos pads, workers often had to handle superheated pads; the average temperature for the pads was between 600-700 degrees Fahrenheit. This was a safety hazard for the workers. CMIs pads, on the other hand, never exceeded 250 degrees Fahrenheit and could be handled almost immediately with protective gloves. Furthermore, CMI pads accounted for a 33% faster driving time, which translated into significant cost savings. Following the strengths are the weaknesses of CMI. Cumberland was uncertain about the consistency in the performances of its curled metal pads in different sizes other than that of 11 inches. Also, CMI lacked sufficient information and knowledge of the size of the potential market for curled metal pads in different sizes. As a result, CMI had issues in developing effective pricing and marketing/promotional strategies for its new products. By not having a strong pricing and marketing strategy, CMI was unable to effectively design the sales mix for various sizes of its curled metal pads for maximizing future profits and market share. One of the opportunities associated with CMI introducing a new product is the health scares. There are health dangers with the asbestos cushion pads which influenced people to find pads that dont contain asbestos in it. Thats where CMI has developed a competitive advantage. One of the threats for CMI was that the barriers to entry into the pile cushion market were high. The primary barrier was that were consumers viewed the cushion pads as a necessary accessory or a tangent item rather than a potentially value added or cost reducing part of pile driving. In order to penetrate the market, CMI must change the perception of opinion leaders, contractors, and engineering firms who are involved in the decision making process. Another threat is that although there are no competitors right now, new entrants can easily replicate CMIs products with a better value proposition therefore, CMI must be careful of future competitors. AlternativesThere are several pricing options which CMI can follow. 1) Cost Oriented Price: General MarkupThe first alternative involves selecting a general markup price where a specific margin is reached. Since the corporation required a margin of 45% and the breakeven production over one year is $565.08 an appropriate selling price would be 1.45*$565.08= $819.366. Assuming that the retailers and distributers want a 30% margin, the retail price would be 1,065.18 or 6.46 cents per pile foot driven. This is an expensive alternative; however, the advantage is that it fulfills the companys requirement of a 45% margin, easy to calculate and it still competes well with asbestos pads. This pricing method also does not consider the value added benefits or efficient cost savings therefore, the company cant charge a premium price.

2) Compete with Asbestos CMI has the option to compete directly with Asbestos on a price per foot basis. In this case, a single set of CMI pads is the equivalent to the retail price-per-foot as Asbestos pads. Thus, assuming a 30% markup, the pads will wholesale for $769.23. Even though is this alternative is $50 less than the 45% markup for Cumberland, the company can compete on price-per-foot basis. This approach would be best suited if the company wants to follow an extensive market penetration strategy. Since the price of the pads are the same as Asbestos, Cumberland just needs to convince consumers of the value added benefits of their product such as cost effectiveness and safety advantages. 3) Value Oriented Pricing The third alternative is to use Value Oriented Pricing. Its important to look at the Colerick and Fazio tests.

Its important to find the time efficiency and the total time saved. The value added price would be $1270. RecommendationThe value-based pricing is best alternative because it looks at the demand. Channel/Distribution Cumberland should market the CMI pads through a push strategy. Also they should focus on the educating their consumers about their product benefits. Therefore, they should market directly to contractors and engineering firms by educating them on the safety and efficiency benefits. CMI should use price penetration to build their market share.