Terracog's Market

Autor: mk70296 • October 15, 2012 • Case Study • 1,321 Words (6 Pages) • 1,441 Views

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Problem Statement

TerraCog’s market share is declining and profitability of the company is at stake.

Argument

The management believes that it is TerraCog’s skill of converting customer feedback into high quality and exceptionally designed products that helped TerraCog grow in its GPS business. A competitor’s GPS product with satellite imagery has visually appealed to customers. TerraCog’s delay in responding to the market trend has already caused TerraCog to lose market share.

TerraCog has decided to respond to the customer demands with Aerial. It was agreed that in order to keep Aerial’s price point only $50 above the price of their top-of-the-line GPS and to speed up its launch, this new satellite imagery enabled GPS would be designed within the existing GPS framework and the same high end-functionality and value-added features would be retained. However, a trade-off in speed would be required in order to keep costs low.

The TerraCog team has reached a deadlock on pricing Aerial. After much deliberation and cost optimization, the production team has priced Aerial at $475. The Sales team maintains that it cannot sell Aerial above $425 as the competitor products are priced at $400 and $395. If the margins are reduced to make the price point competitive, there would be a question on profitability.

Aerial is slow and production cannot cut costs any further without taking a hit on TerraCog’s reputation of superior quality. Hence, it is imperative for Aerial to satisfy customer expectations to maintain its advantage.

Therefore, the decision on Aerial’s pricing and launch time is critical to the company.

Recommendation

It is recommended that to recover its market share and maintain profitability, TerraCog should defer the launching of Aerial by 6 months and market it at $475. The additional 6 months would help TerraCog redesign Aerial’s entire platform to make it a superior product than the competing products.

Evaluation of Options

The criteria for evaluating the various options are as below:

Impact on Customer Relations

Positive customer experience with TerraCog’s products is critical to the company. TerraCog has been known for its quality products. Any option must be evaluated against impact on TerraCog’s image and hence customer relations.