Tien LeTien LeDasul LimDasul Lim

Wai Man LeungWai Man LeungSusan DepazSusan Depaz

Thang NguyenThang NguyenGeorge Mason UniversitySpring 2012SOM 498

Declining sale New product

Potential to double our company revenue Formulate a strategy for new product

Double our revenue

CMI CUSHION PAD

Background

External threats

Threat Level of Risk Solution

Entry High PatentExpertise

Competitors Low Product differentiation High quality Hazardous free Custom Size

Substitutes Low

Supplier Low •Bid by price•Contact agreement

Buyer Low •Product differentiation

Risk Analysis

Marketing Strategy

For successful market of the CMI cushion pad

Seminar Manufactures’ Representative Word of Mouth Advertisement

Marketing Strategy

Seminar: introduce cushion pad for the 1st time Potential buyers:

• Independent Pile driving contractors “frontline buying influence”

• Pile hammer distributing/renting companiesGive free first set of pads

Manufacturer’s Representative: Focus training on: cost saving benefit of the

pads• Potential danger of the asbestos

Creating brand name • Important in promoting the diffusion of the

product in marketplace

Marketing Strategy

Word of mouth Pile hammer manufacturers

• To influence recommendations Professor Stephen McCormack

• Department to study pile driving and was a respected authority

Advertisement [Magazine/Newspaper/TV ads] Publish our test results in magazine & Newspaper Engineering channel on TV

Distribution

Two warehouses in each region in the country

In the beginning stages Take advantage of the existing distribution networks:

Equipment Supply Houses

Hammer Distribution Rental Companies

Distribution

After the market develops

Create our own distribution network. 

Reach architectural and consulting engineers.

Distribution

Price objectives: maximize quantity and

profit margin. Price methods: cost-plus pricing – set the

price at the production cost plus a certain profit margin.

Pricing Strategy

A report by Construction Engineering magazine

Pricing Calculating Potential Demand for CMI

Potential demand for pads monthly 17,063

Estimated percent Demand of Market 20%

Potential demand for CMI pads monthly 3,413

Calculating CMI Price

Test 1 Test 2

Conventional Pads

CMI Pads

Conventional Pads

CMI Pads

Number of pads per set

24 6 12 5

Number of set required

20 1 50 1

Cost per set 150 500 120 1200

Total 3,000 3,000 6000 6000

Calculating CMI CostWithout new equipment

Price per 11 1/2 inches pad

$444

Average Potential demand for CMI pads monthly

3,413

Total cost monthly

$1,516,720

Selling Price Low-end price High-end price

$500 $1,200

Net sale $1,706,250 $4,095,000

Gross profit $189,530 $2,578,280

Contribution Margin

11% 63%

With equipment cost $750000

Price per 11 1/2 inches pad

$208

Depreciation $5

Cost per pad $213

Average Potential demand for CMI pads monthly

3,413

Total cost monthly

$725,293

Selling price Low-end price High-end price $500 $1,200

Net sale $1,706,250 $4,095,000

Gross profit $980,957 $3,369,707

ContributionMargin

57% 82%

Corporate management expected a contribution

margin after all manufacturing costs of

40% to 50% of selling price.

Corporate management expected a contribution

margin after all manufacturing costs of

40% to 50% of selling price.

Price list

Size (inches) 11 ½ 14 17 ½ 19 ¾ 23 30

Total manufacturing cost

$207.54 $272.16 $396.96 $493.08 $581.34 $1,061.10

Change is Cost 31% 46% 24% 18% 83%

Price (according to change in cost)

850 1115 1626 2019 2381 4346

With the new CMI pads: 20% of market demandGenerate additional $34,812,600 for the net sale

Conclusion

Thank You for Your Attention