Curled Metal Inc. Case Analysis

Han Bao, Jianfeng Zang

MK 449 Business Marketing

Professor Riedout

Curled Metal Inc. Case Analysis

Introduction

Curled Metal Incorporation is facing a problem to price curled metal cushion pad, which is new to driving piles industry and has more potential than any other products in the company, because the way they price the new product will give a significant impact on company’s other performance. Since curled metal cushion pad is a breakthrough product in the market, we cannot set up the price based on conventional pads. In long term, in order to get more market share and profit, we believe that the customer value based is the best way for us to price the curled metal cushion pad.

Analysis

         By testing the new pads in Kendrick and Corey, there is no doubt that the curled metal cushion has the much higher value than those of existing conventional pads. First of all, the new product dramatically increase the productivity to the driven pile. Secondly, it reduces the large of change over time during working in terms of saving labor cost. These two reasons are the most important facts to set the price when we are presenting the value to the customers. Other features such as non-toxic materials can also help increase the product value but don’t have great impact on setting price as two reasons we talked above. Because 11.5-inches size is the most popular and the tested one, we will only set price to the 11.5-inches pad in our analysis. Also, we decide to use Kendrick’s test data as our base data because the Kendrick has the lower cost and higher productivity on every conventional pad. Moreover, according to Sanwal said, we assume each set of CMI pads can drive 10,000 feet.

               Although we can’t compare the price directly with other existing pads in the market, we can compare the effectiveness of two different pads by calculating the data in the case. First of all, Kendrick cost per set, which is 24 pad on each set, is $125 and it takes 20 set changes during the work. However, conventional pads only drove 300 piles using 106.7 hours total, According to the Table A, total average equipment and labor cost per hour is $714 and it costed Kendrick $7,910 in total. Compared to conventional pads, CMI pads drove piles 33% faster and lasted for the entire job without change any pads. During the work, six CMI pads drove 230 piles in 75 hours. Therefore, the value what CMI pads can delivery to customers is the equipment and labor cost saving during the work. Because of CMI’s higher productivity, customers can save 31.67 hours and save $22,610 in labor cost during the same job to Kendrick. Based on conventional pads, Kendrick’s willingness to pay every driven foot is $5.28. . So we conclude that on an assumption of 10,000 feet driven per CMI set, the customer's’ willingness to pay a pad is $2,176.