cp marketing management - ii

8/2/2019 Cp Marketing Management - II

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SUBMITED BY

RAVI PATEL (B) (IB 1109249)

Prashant

Rashmi

Jyoti

Yash


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CATERPILLER CASE STUDY


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PRODUCT BULLDOZER

COST TO MAKE & MARKET = $30000

PERCEIVED VALUE IN 5 YR LIFE = $ 100000

ADDED VALUE = $70000

PRICE HASE TO BE FIXED IN SUCH A WAY THAT $ 70000 WILL BESHARED BETWEEN BOTH CP AND BUYER

BASIC INFORMATION


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(1) SHARED ADDED VALUE 50% - 50%

SO PRICE WILL BE $65K

CUSTOMER POINT OF VIEW = PERCEIVED VALUE SHARE IN ADDED

VALUE

=$100K $35k

= $65K

CATER PILLER POINT OF VIEW = COST + SHARE IN ADDED VALUE

=$30k + $35k

= $65

OPTIONS FOR PRICING


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(2) IF CP BELIEVES THEIR CONTRIBUTION IS HIGH AND TAKE $50000K AND GIVE $20000 TO BUYER

CUSTOMER POINT OF VIEW = PERCEIVED VALUE SHARE IN ADDEDVALUE

=$100K $ 20k

= $80K

CATER PILLER POINT OF VIEW = COST + SHARE IN ADDED VALUE

=$30k +$50K

= $80K


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(3) CATERPILLER FEELS THAT BUYR CONTRIBUTION IS HIGHER AND GIVE$5O TO BUYER AND TAKE $20K

CUSTOMER POINT OF VIEW = PERCEIVED VALUE SHARE IN ADDEDVALUE

=$100K $50k

= $50K

CATER PILLER POINT OF VIEW = COST + SHARE IN ADDED VALUE=$30k + $20k

= $50k


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As in alternative 1 marketing research indicateddifferential advantage is not high, and competitorkomastu can easily copy with same quality at $20000 costto make and market within one week.

In this case I would like to suggest Penetrationpricing Strategy

By using this strategy, we launch the product in low price.An example for this pricing strategy is explained below.

Price =$30k+$15k=$45,

and we can offer at different scheme like we can offer 5%cash discount or 1 year credit period or instalmentfacilities etc.., by this way we can attract consumer to buyour product.

PRICING STRATEGYALTERNATIVE 1


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And we reduce the profitability of market at initial stage socompetitor Komatsu will not be attracted towards market. Itprevents entry of competitor at initial stage. During 1 yearperiod I will try to build brand loyalty by different ways like Iwill provide After sales Services

-- high Quality Product

-- CRM etcAfter building Brand Awareness we can increase our price andwe can earn better profit.


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In this alternative we can also use

Captive Product Pricing

In this case we offer bulldozer at low price say at $ 33K

with service contract with customer. Suppose service costis $ 3k and we made contract with customer to provideservices after 6 month or year at $ 10k. Then we can alsoearn overall $3k + $7k = $10k profit per unit.


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As in alternative 2 marketing research indicated that innovation ofBulldozer is so high that competitor komastu will take long time tocopy about 3 years.

So in this case we have substantial Competitive advantage I wouldlike to use

Premium Pricing or Price Skimming Strategy and launch productat more than $80k and earn profit of $50k. ($80k-$30k). As the highprice and profit attract new competitor and chances of entry ofcompetitor I will decrease the price up to $70k , $60 in 2nd and 3rd yearrespectively. And after 3 year I will decrease price up to $ 40k. If wedecrease price directly from $80k to $ 40k in 4th year customer may feel

cheated.

And with huge profit we will able to launch new high technologicalproduct

Alternative - 2


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And with huge profit we will also able to launch new high

technical product.

In this case we can earn profit during 3 years as under

1000 units * $50k = $50,000,000

1000 units * $40k = $ 40,00,000

1000 units * $30k = $ 30,00.000

_____________$ 120,000,000


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Thank You

cp marketing management - ii

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