Carmex lip balm products

Response to Question

Section 1

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1. Listed below are three different products in various stages of the product life cycle. What marketing strategies would you suggest to these companies?

1. Canon Digital Camera should increase its cost and product diversification. This will help it to capture more consumers based on their different products and cost efficiency for each consumer level.

2. Hewlett-Packard tablet computers should increase its advertisement to create product awareness. It can use platforms such as social media, print, and television marketing.

3. Handheld manual can openers should adopt low cost operations, rebrand the product or harvest the product and wait complete decline in sales. Rebranding is the best alternative as it introduces the product in an approach that new market entrants are taking.

2. What is the difference between a line extension and a brand extension?

Line extension refers to the increase in product diversification to reach various consumers while brand extension is the expansion of the market to reach a wider market but same consumers. Line extension seeks to attract more consumers by offering varieties of a brand.

3. Under what conditions would a camera manufacturer adopt a skimming price approach for a new product? A penetration approach?

The camera manufacturer should adopt a skimming approach when potential competitors are seeking to enter the market. This enables the company to recover its sunken costs in advance of competitors diluting the market prices. The manufacturer will use the penetration strategy if it is entering the market after others, thereby attracting consumers with lower prices.

4. Touché Toiletries has developed an addition to its Lizardman Cologne line tentatively branded Ode d’Toade Cologne. Unit variable costs are 45 cents for a three-ounce bottle, and heavy advertising expenditures in the first year would result in total fixed costs of $900,000. Ode d’Toade Cologne is priced at $7.50 for a three-ounce bottle. How many bottles of Ode d’Toade must be sold to break even?

Break-even occurs if Total Revenue (TR) equals Total Cost

TR= P*Q

TC= FC + (UVC*Q)

Hence, break-even occurs if FC+ (UVC*Q) = P*Q

$900,000 + ($0.45*Q) =$7.50*Q

$900,000= ($7.50 Q-$0.45 Q)

$900,000=$7.05 Q

Q=$900,000/$7.05

Q= 127659.57446808510638297872340426

Q=127660

Section 2: Carmex lip balm products

Questions

1. Which of the four approaches to setting a price does Carmex use for its products? Should one approach be used exclusively ?

Carmex uses all the four strategies to set prices. It uses taste and preferences to determine prices on the demand-oriented continuum. The cost of ingredients, staffing, manufacturing, and packaging influences its use of cost-oriented continuum. The premium products inform its use of a profit-oriented continuum. The competition with other brands in the market niche compels the company to consider price differentiation. Therefore, the four strategies are used based on the prevailing actors. The company should continue adopting the mixed approach as it enables it to compete.

2. Why do many Carmex product prices end in 9? What type of pricing is this called? What should happen to demand when this approach is used?

The company is employing the odd-even pricing strategy. The strategy influences consumer price perception so that they are led to thinking the product costs lower. For instance, consumers would purchase a product costing $4.99 and leave another costing $5.00 while the difference is only $0.01. The difference is negligible but matters to the consumers.