IDENTIFICATION OF THE PROBLEM

The curved metal cushion cushions were a significant development for Cumberland Metal
Industries. Given a good market launch, these pads would allow the firm the chance to diversify
and double its sales. The problem for Cumberland Industries was to position –
promote/advertise- and price their most recent invention, coiled metal cushion cushions, in a
way that communicates the many benefits the item offers.

ANALYSIS OF THE SITUATION AND THE PROBLEM

Cumberland Metal Industries has increased from $250,000 in sales to $ 18.5 million in less
than 20 years. It began as a business that sold advanced technological products as finished
goods; then, it changed to selling things that were utilized as raw materials for ongoing projects.
The company's major break was launching ERG valves in the US automotive sector.
Cumberland created their patented "Slip-Seal" to address the issues with ERG, and as a result,
they significantly increased their market share. Due to this, the business proliferated in the
middle of the 1970s. The advantages of the curled metal cushion pads were then assessed.
Cumberland Metal Industries initially aimed to handle new technology, but they still wished to
achieve that. Despite having 80% of the market for their products, Cumberland planned to
diversify due to their desire to be independent of industry and goods. Curled metal cushion
pads were a novel industrial application for Cumberland Metal Industries to consider. For a
successful run with the product, they must pay attention to several elements that might affect
the performance of the product on the market, such as marketing, advertising, and product
price. Given proper pricing and positioning on the market, Cumberland Industries can easily
demonstrate the advantages of these pads against Asbestos and so drive the latter out of
business.

POSSIBLE SOLUTIONS IDENTIFIED BY THE COMPANY

1. Cost Oriented Pricing: General Markup

This method of pricing would involve simply achieving a target margin as aimed by the
corporation, which is 45%. Adding this over the base cost of $565.08, we reach a price point
of $819.366. Assuming that retailers would want an additional 30% margin, the retail price
would be $1065.18. Though this form of pricing is able to reach the target margins of the
company successfully, it fails to charge a premium for the value-added benefits
2. Compete pricing with Asbestos

The second alternative is to match the price to the price per foot of Asbestos pads. This would
mean a wholesale price less expensive than the previous option. Even though margins are
smaller, this would ensure that we are able to throw off asbestos off-market and achieve
maximum market penetration absolutely. The value-added benefits of Metal over Asbestos are
clear, so the preference will definitely be for metal.

3. Value Based Pricing

The third alternative is to assess the monetary value of additional benefits and charge the
premium for it. These benefits include the health benefits for workers, efficiency, heat
resistance, longer service life, and other cost savings in terms of health liability claims.

RECOMMENDATION

The best option would be to go for value-added pricing because of the apparent market demand
for the product. The safety and efficiency benefits will take some educating to convey, but the
potential profits are also high. CMI should focus primarily on marketing to contractors and
engineering firms to ensure that the value proposition is communicated. Since this is a fresh
product with benefits that solve some significant problems in the industry (health hazards), it
makes sense to charge a premium, at least definitely on launch.