CASE ANALYSIS REPORT

2. Which are the appropriate end customer segment(s) that Curled Metal should
target: (a) Pile Hammer Manufacturers, (b) Pile Hammer Renting Companies, (c)
Engineering/construction contractors or (d) Independent contractors? Why?

Going over the options given will help us evaluate which appropriate segment we want to
concentrate.

a) Pile Hammer Manufacturers:

While pile hammer manufacturers play a crucial role in designing and building the hammers
used in pile-driving projects, they typically do not directly select the specific cushion pads
utilized during these operations. Instead, the decision-making authority regarding cushion pads
often rests with the contractors overseeing the pile-driving activities. This limited direct user
influence suggests that while engaging with pile hammer manufacturers can be valuable for
endorsement and integration purposes, targeting contractors may yield more significant benefits
for Curled Metal in terms of sales volume and market reach.
b) Pile Hammer Renting Companies:

Renting companies, like manufacturers, typically prioritize providing hammers rather than
specifying the specific cushion pads used by renters. The ultimate decision regarding cushion
pad selection usually lies with contractors who rent the hammers. Therefore, while renting
companies play a significant role in supplying equipment, they have limited influence over the
choice of cushion pads. Moreover, renting companies lack direct control over how the cushion
pads are utilized or maintained by renters. This lack of control could potentially impact the
lifespan and effectiveness of the pads, highlighting the importance of targeting contractors
directly to ensure proper usage and maximize the benefits of Curled Metal's cushion pads in pile-
driving operations.

c) Engineering/construction contractors and d) Independent contractors:

Curled Metal's cushion pads are integral to the pile driving process, directly used by contractors,
both large engineering/construction firms and smaller independent contractors, who oversee
entire projects. These contractors wield decision-making power, determining the equipment and
materials utilized, including the selection of pile driving accessories like cushion pads.
Consequently, contractors directly experience the benefits of Curled Metal's pads, including
increased efficiency, reduced downtime, and potential cost savings due to longer pad life and
decreased labor expenses.

Engineering/construction contractors and independent contractors represent sizable market

segments compared to pile hammer manufacturers or renting companies. Targeting this broad
customer base offers Curled Metal the opportunity to tap into a larger market potential,
potentially resulting in higher sales volume and market penetration. While pile hammer
manufacturers and renting companies play indirect roles in the pile driving process, contractors
are the primary users and decision-makers, making them the most influential target audience for
Curled Metal's cushion pads.

Therefore, focusing on engineering/construction contractors and independent contractors as

the primary target audience allows Curled Metal to directly reach the decision-makers who
can benefit most from their product and contribute to a larger potential customer base.
3. Using an economic value analysis approach, estimate the end customer’s
maximum willingness to pay (or economic value) per pad for Curled Metal’s new
cushion pads. Perform this analysis using Kendrick Company’s trial data. Assume
that customers are aware of all advantages of the new cushion pad. Please do your
calculations for the 11.5-inch pad.
Positive Differentiation Value: Total distance driven: 300 piles * 50 feet = 15,000 feet

Uptime Saving:

Using Conventional Pads: 15,000 feet / 150 feet per hour = 100 hours

Using CMI Pads: 15,000 feet / 200 feet per hour = 75 hours

Net Time Savings = 100 hours - 75 hours = 25 hours = 25 * 60 minutes = 1,500 minutes

Downtime Time Saving due to changing Pads:

Conventional Pad: 20 sets * 20 minutes = 400 minutes

CMI Pads: 1 set * 4 minutes = 4 minutes

Net Time Save = 400 minutes - 4 minutes = 396 minutes

Total Saving = 1,500 minutes + 396 minutes = 1,896 minutes = 1,896 / 60 = 31.6 hours

Total Average Cost / Hour = $714 per hour

Positive Differentiation = $22,562.40.

Reference Value (Total cost of conventional pads needed to do the job):

Total Sets of Pads required for job = 20 sets

Cost per set of Pads = $150

Total Cost / conventional pad set = $150 * 20 = $3,000.

Total Economic Value for the Kendrick job using CMI pads:

Total Economic Value = Positive differentiation value + Reference value

Total Economic Value = $22,562.40 + $3,000 = $25,562.40.

Economic Value per Pad:

This is the total economic value of 1 set (6 pads) of CMI pads as Kendrick needs one set of CMI
pads for the job .

Economic Value per Pad = Total Economic Value / Number of Pads in a Set

Economic Value per Pad = $22,402.40 / 6 = $4260.40.

So, based on the adjusted calculations, the economic value per pad for Curled Metal's 11.5-inch
pad for the Kendrick job would be approximately $4260.40.
4. Calculate the end customer price per (11.5-inch) pad based on cost-based
pricing. To calculate the price per pad, use the Unit Cost data (assuming that the
$150K permanent tooling has been purchased) from Exhibit 6. Factor in the
distribution margin (35%, page 7) and the company margin (45%, page 8) to
calculate the end customer price.

Markup Price = Unit Cost * (1 + Markup Rate).

 Manufacturing Cost of 1 Pad = $207.54.

 Contribution Margin = 45% = $93.393.

 Average Selling Price = $207.54 + $93.393 = $300.933.

 Distribution Margin = 35% = $105.32655.

 Average Retail Price = $300.933 + $105.326 = $406.259.

As per Cost-based Pricing Estimate, the end customer price is $406.26.

5. How big is the potential market for the new CMI cushion-pad product
(calculate volume in number of pads)? [Use data in “The Market” section (page
5) to calculate market size].
First, we calculate the number of sets of pads needed annually for the entire market range:
For 290 million feet: Number of sets = 290 million feet / 10,000 feet per set
For 390 million feet: Number of sets = 390 million feet / 10,000 feet per set
Then, we calculate the total number of pads needed annually for each scenario:
For 290 million feet: Total number of pads = Number of sets * 6 pads per set
For 390 million feet: Total number of pads = Number of sets * 6 pads per set

For 290 million feet: Number of sets = 290,000,000 feet / 10,000 feet per set = 29,000 sets
Total number of pads = 29,000 sets * 6 pads per set = 174,000 pads
For 390 million feet: Number of sets = 390,000,000 feet / 10,000 feet per set = 39,000 sets
Total number of pads = 39,000 sets * 6 pads per set = 234,000 pads

So, considering the provided information, the potential market size for the new CMI cushion-pad
product ranges from approximately 174,000 pads to 234,000 pads annually, depending on the
driving distance of piles.
7. Arethere other factors that have implications for pricing of the new cushion
pad product? Think in terms of (a) company’s strategic objectives and (b)
competitive pricing/response

Factors influencing pricing for CMI's new cushion pad product:

1. Company's Strategic Objectives:

 Market penetration: This strategy involves setting a lower initial price to attract
customers and gain market share, potentially followed by price increases later. This might
be suitable if CMI wants to quickly establish brand awareness and gain a foothold in the
market.
 Profit maximization: Here, the price is based on cost-plus pricing, factoring in
production costs, desired profit margin, and overhead expenses. This ensures profitability
but might limit market penetration initially, especially if competitors offer lower prices.
 Skimming the market: This strategy involves setting a high initial price to capitalize
on early adopters and premium market segments. It can be effective if CMI's product
offers significant and unique value propositions that customers are willing to pay a
premium for.

2. Competitive Pricing/Response:
  Market competition: Analyzing existing competitors' pricing strategies for similar
products is crucial. Curled Metal could adopt a competitive pricing approach, setting
their price slightly higher or lower than competitors depending on perceived value and
differentiation. This ensures they remain competitive while capturing a fair share of the
market.
 Customer value perception: The price should reflect the perceived value CMI pads
deliver to customers. Extensive customer research can help understand how much
customers are willing to pay for the benefits offered (e.g., increased efficiency, reduced
downtime). Setting a price that aligns with the perceived value fosters customer
satisfaction and strengthens brand image.
 Cost structure: Analyzing internal cost structure, including production, distribution, and
marketing expenses, helps CMI determine the minimum viable price to cover costs and
maintain profitability. Setting a price below this point might jeopardize long-term
sustainability.

Pricing Strategies:

 Value-based pricing: This strategy focuses on the value proposition CMI pads offer to
customers. By understanding the benefits and quantifying their economic impact (as we
did in the economic value analysis), CMI can set a price that reflects the value delivered.
 Bundle pricing: This involves offering CMI pads with complementary products or
services (e.g., training, maintenance) as a bundled package at a discounted price. This can
incentivize customers to purchase the entire solution and potentially increase overall
revenue.
 Dynamic pricing: In a dynamic market, CMI might consider adjusting prices based on
factors like real-time demand, competitor pricing fluctuations, and customer segments.
However, this requires a robust data analysis and pricing optimization infrastructure.

Additional factors:

 Product life cycle stage: Pricing strategies might change as the product matures. As
competition increases, CMI might consider price adjustments to maintain market share.
 Legal and regulatory considerations: Some regions might have regulations governing
pricing practices and fair competition. CMI must ensure their pricing strategies comply
with all relevant regulations.
8. Basedon the analyses done so far, what is the final price band (or range) within
which Curled Metal should price the new cushion pads? Within this price band,
should they price the pads low or high? Either way (low versus. high price), justify,
why? What factor(s) should they consider while deciding to price low versus high?

 Cost-Based Pricing Estimate: The average retail price derived from the cost-based
pricing estimate is approximately $406.26 per pad. Additionally, the total economic value
(WTP) per pad is calculated to be $4260.40. These figures provide insights into the
potential price range for the product.
 Manufacturing Cost and Per-Pad Fixed Cost: With a total fixed cost of $225,000 for
manufacturing 500 pads per month, the per-pad fixed cost is $450. Adding this to the
cost-based pricing estimate results in an approximate price of $870 per pad.
 Market Penetration Pricing: Market penetration pricing suggests introducing the
product at a lower or moderate price point, such as $870, to attract buyers and gain a
significant market share initially. This strategy aims to stimulate demand and encourage
trial purchases by offering a competitive price compared to existing alternatives.
 Subsequent Adjustments: After the initial launch, adjustments in pricing can be made
based on market response, competitive dynamics, and customer feedback. If the $900
price point proves effective in attracting customers and generating sales volume, Curled
Metal can consider maintaining or adjusting the price accordingly. Conversely, if market
conditions or customer perceptions necessitate a change, the pricing strategy can be
adapted accordingly.
Curled Metal should strategically set a lower initial price within the $900 range for their
new cushion pads to:

1. Accelerate Market Entry and Penetration:

 A lower price point eases entry into a potentially competitive landscape dominated by
established alternatives. Customers are more likely to explore and adopt the new solution,
potentially switching from existing products.

2. Capture Early Market Share:

 Attracting a larger customer base at launch allows Curled Metal to capture a significant
market share quickly. This initial traction establishes brand recognition and fosters a
loyal customer base over time.

3. Stimulate Demand and Sales:

 A lower price point creates a perception of value for money, incentivizing customers to
purchase based on affordability and perceived benefits compared to existing options. This
strategy can lead to immediate sales volume growth and revenue generation.

4. Gain a Competitive Edge:

 Undercutting competitor pricing offers a compelling value proposition to customers,

potentially putting pressure on competitors to react. This can lead to competitive
advantages and favorable market positioning for Curled Metal.

5. Gather Valuable Market Feedback:

 An initial lower price allows Curled Metal to learn from early adopters through their
feedback and purchasing behavior. This valuable data informs future pricing strategies
and product improvements, enabling CMI to refine their offering and pricing approach
based on real-world market dynamics.

Price low versus high

1. Market Positioning:

 Low Price: Positions the product as a budget-friendly option, potentially attracting

cost-conscious customers.
 High Price: Positions the product as a premium offering, appealing to customers
seeking high-quality and potentially innovative solutions.

2. Competitive Landscape:
  Analyze competitor pricing and product positioning:
o Pricing too low compared to competitors might raise suspicion about quality or
devalue the offering.
o Pricing too high might struggle to compete unless the perceived value justifies the
premium price.

3. Cost Considerations:

 Low Price: Ensure sufficient profit margins remain after factoring in production costs,
overhead, and desired profit levels.
 High Price: Understand the cost structure and leverage the premium price to
potentially increase profitability while justifying it with perceived value.

4. Customer Value Proposition:

 Low Price: Might be appropriate if the product offers similar value or functionalities to
existing options at a lower cost.
 High Price: Must be justified by a clear value proposition, offering unique features,
benefits, or perceived quality that customers are willing to pay for.

5. Target Market:

 Understanding customer preferences and price sensitivity:

o Price-sensitive customers might be more receptive to lower prices.
o Customers seeking premium solutions might be less price-sensitive and
prioritize perceived value and quality.

6. Market Penetration Strategy:

 Low Price: Can be part of a rapid market entry strategy to gain market share quickly,
especially in competitive markets.
 High Price: Might be suitable for a niche market where customers are willing to pay a
premium for specialized solutions.

7. Brand Image:

 Low Price: Might negatively impact brand image if not carefully managed, potentially
leading to perceptions of lower quality.
 High Price: Can enhance brand image by reinforcing perceptions of premium quality
and exclusivity.

8. Long-Term Goals:

 Low Price: May lead to short-term gains in market share but might sacrifice
profitability in the long run if margins are too tight.
 High Price: May limit market reach initially but can maximize profitability over time
if the value proposition justifies the premium price.
By carefully considering these interconnected factors, Curled Metal can make an informed
pricing decision that aligns with their strategic objectives, market positioning, and target
audience, ultimately leading to a sustainable and successful product launch strategy.