Cumberland Metal Industries Essay

In its initial evaluation, the company believes that the new product, curled metal cushion pads, has a potential for increasing the company’s sales and profit and for diversifying the products it offers. Early demands for the product appear to be good, however an in-depth analysis of the marketing aspect is necessary before the company can introduce the product to the market. Situational Analysis Based on the two trials made, it is clear that the company is in possession of a product that is better than any of those currently available in the market. The question only is how much better this product is than the others already available. Based on the first trial performed, the product is 25% more efficient than its closest competitor in terms of feet of piles driven per hour. It also increases the efficiency of the operations by requiring less time for set changes of about 80%. Each set of the product also performs nineteen times better than said competitor. In the second trial, the product maintained its previous performance as far as feet driven per hour time for set changes is concerned. It surpassed its previous performance by performing forty-nine times better than its competitor. The efficiency and effectivity of the product translates to other forms of savings on the part of the user. First, the contractor or builder will decrease the cost of rental of the equipment used in the construction by at least 25%. If the workers’ compensation is computed based on the number of hours worked, the contractor or builder will incur savings amounting to 25% of the cost of labor. Aside from its efficiency the product can also decrease, on the part of the workers, the health risk usually associated with the use of asbestos and decrease employers’ expenses relating to workers’ health insurance in the long run. Actual figures of demand for the product are hard to calculate. Based on the assumptions made by Mr. Simpson that the construction industry will need to drive 290 million to 390 million feet of piles annually, the total demand for the product annually is around 174,000 (290,000,000/10,000 x 6) to 324,000 (390,000,000/10,000 x 6) pads annually. To penetrate the market, the company will need to convince the key players of the construction industry that it should use the product. The approval of the architecture/ consulting firms, engineering/construction contractors and independent contractors are a must since they are the ones that will actually use the products. Independent contractors could be targeted since they are more willing to try new products that can increase their profits. A positive review from this group can convince bigger firms to use the product. The approval of pile hammer manufacturers and pile hammer distributing/ renting companies will be good but not necessary. These two groups know that the use of the product will decrease their profits so they have motivation to not recommend the products to their customers. Pile hammer distributing/ renting companies can provide an efficient distribution channel and reduce the company’s distribution cost since the mechanism is already in place, but not having the approval of this group is not essential since other methods of distribution are available to the company. Once amount of demand for the product is large enough this group can later decide to offer the product to their customers. Recommendations Initially, the pricing used by the company should be based on the data provided by the first test since it is more conservative. It can gradually increase its prices if the performance of the second trial is confirmed by actual practice. Based on the first trial, the company should charge $167 per pad. This price is computed by multiplying the cost of each set with the number of sets required ($50 x 20 pads) and dividing the result with the no. f pads of curled metal cushion required (1000/6). By using this price, the consumer will incur the same amount of cost for cushion pads in a project whether it uses asbestos or the curled metal cushions; it is only the amount of cushion pads used that will vary. However, this price does not charge consumer for the additional benefits provided by the product, such as 25% decrease in the cost of renting equipment and wages of laborers. This will be the selling point of the product upon its introduction. It will be important for the company to concentrate on building the confidence of the key players of the industry, instead of maximizing the profits in the first few years of introducing the product. Marketing campaigns should be focused towards convincing the architecture/ consulting firms, engineering/construction contractors and independent contractors to use the products. It could try to market the products directly to these groups since renting companies may be hesitant to distribute products that will decrease the profits generated by the services they offered. Moreover, most contractors used their own pile hammers instead of renting, so distribution through these renting companies has limited reach. Independent contractors should be given particular attention, as far as efforts at direct selling is concerned, since these groups are more likely to try new methods that decreases their cost and increases their bottom line than the more established firms. When the reputation of the product is established, it can decide whether it will continue its direct approach or use the services of pile hammer distributing/ renting companies. For the reasons stated above, the demands of the Colerick Foundation Company should be accepted by the company since this would be the first of the company’s direct sales. In summary, I would like to recommend that the company sell its curled metal cushion pads for $167 each. The company should first focus in building the reputation of its product because of its innovative quality. One way of doing so is convincing the experts that it is better than anything else present in the market.