Cumberland Industries

What’s your price for the curled metal pads? Why? & How much do you think one of these pads is worth to a customer?

The MSRP for the curled metal pad will be established at $5000 for a set of 6 pads. Our analysis indicates that the average indifference price for a typical construction project is approximately $6000 (See Exhibit 1), which is also the perceived value to the customer. Other intangible components like safety will further increase the perceived value of the product by lowering insurance and workers compensation cost. At a price of $5000, the customer’s incentive to purchase is greater than $1000 and is therefore more attractive than asbestos pads. Considering the value and quality that the CMI pads provide to the consumers, they have a clear differential advantage, and with no competitors in the marketplace, setting a price of $5000 is a good start.

The price at which the product will be sold to the distribution channel will be set at $4500. Based on our analysis of the Colerick and the Fazio test, the price of $4500 will provide a 11% profit margin to the distributors. From a financial perspective, the CMI pads will provide the distributors with more absolute profit than the asbestos pads. Compared to $300 (30% of $1000 which is the pad cost for the Colerick test) of profit which the channels realize by selling the asbestos pads, CMI pads will provide them with a profit of $500 (which is more than 50%).

How are you going to market these pads? Describe your marketing plan.

As part of our marketing plan, pads will be manufactured in standard sizes of 11.5”, 14”, 17.5”, 19.75”, 23”, 30”. Custom sizes will be manufactured working with architectural engineers and contractors and will be shipped directly to the consumers.

Our analysis (See Exhibit 2) indicates that the lower bound of the current market size for pads is about 19,500 sets of pad per year for a total market size of approx. $100 million ($5000 per set). Cumberland will need...