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Part 1. Please review the case, “Cumberland Metal Industries”. This is not a pa
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Please review the case, “Cumberland Metal Industries”. This is not a particularly exciting case from the perspective of content — it involves a large piece of machinery that pounds steel beams into the ground. The case itself considers a cushioning pad (this is what goes between the hammer and the steel beam). The interesting thing here is that the cost to produce the pad is relatively low (under $100), but the value in terms of savings to the construction company is above $1,000. So what is the right answer? There is none. If you want to go with a higher price, greater marketing efforts will be needed though.
(a) Provide a quick calculation of the cost of production and value based on time savings from the numbers in the case (in other words, use the numbers found in the case to estimate the cost of producing the pads versus the pads’ value to the company)– do not spend more than 30 minutes on this and make whatever assumptions you have to make.
(b) If you want to charge more, what are the marketing activities that you will have to engage in to do so? Please provide examples and rationale.
(c) Would you go with a low, intermediate or high price strategy? Provide rationale.
(d) With respect to using the “high price” strategy, what elements related to price sensitivity (as mentioned in Doug Olsen’s video on Value Based Pricing) would be present?
(e) One possibility to keeping costs low would be to “farm out” sales to a wholesaler/distributor. Another possibility would be to keep the majority of this “in house” and use only Cumberland Metal Industries personnel. What would be the upsides and downsides to each of these options?
(f) Who are the people who could have an impact on the adoption of this product? Explain.
Consider two products/services, one of which you are very price sensitive to and the other that you are not very price sensitive to. Using material regarding price sensitivity from the course video, explain factors that underpin each of these beliefs. Please provide rationale.
Consider the SPIN selling method. Assuming you were selling a fire extinguisher to a small retail business, what are some questions you would ask. Please provide 3 questions for each of the S P I N components. Make any assumptions that you need to.
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