Eastman Tritan Case

Executive Summary

Eastman developed a copolyester product, the Tritan, to market as a superior, longer lasting, and more durable alternative to polycarbonate within the plastics industry. The pricing for Eastman’s new copolyester product, the Tritan, should be calculated using a value based pricing model and adjusted for market conditions. Therefore, when I calculated an estimated economic customer value or price ceiling of $13.33 for the Tritan product, I decided to charge at a lower price point of $7.54/lb. This lower price is still substantially higher than the price charged for polycarbonate products, yet reduced in order to lower competition on price from competitors in the long run. Eastman will market the Tritan at a considerably lower price than its economic value to the customer, yet at a high enough price to make significant profit margin on the product.

Pricing Schemes

Eastman has to consider two types of pricing when bringing Tritan to market: cost-plus pricing and value-based pricing. Eastman can charge a price by taking the costs and adding a certain markup to the price. This guarantees a certain margin for the company’s bottom line. Eastman can also charge the amount consumers value and are willing to pay for their product using a value based pricing strategy.

Cost-Plus Pricing

The cost-plus price was determined by using a similar markup to the one Eastman used with its polycarbonate products. The polycarbonate products cost Eastman $0.75/lb to produce and they sold them for $1.75/lb. Therefore, the copolyester product was also marked up by a 133% at $1. It cost Eastman $1.50/lb to produce and therefore, the cost-plus pricing for the Tritan product is $3.50. I used the same markup percentage Eastman used on polycarbonate products, resulting in a $2 markup.

Cost-plus pricing is advantageous because Eastman can guarantee themselves a margin when they sell their product. It can price the Tritan based off its prior strategies used in the...