BUSINESS to BUSINESS MARKETING

CASE SUBMISSION - 9
Cumberland Metal Industries: Engineered Products
Division

Cumberland Metal Industries

Submitted to: Prof. Sanket Vatavwala

SUBMITTED BY: Group 5 (Section: B)

Mohammad Tariq Anwar Ansari MBA07031 Kartik
Mangwani MBA07139

Amar Khattri MBA07124

Komal Goyal MBA07208

Siddhant Mohapatra MBA0722

Case Overview

A new solution from Cumberland Metal Industries (CMI) aims to help contractors handle heaps
more quickly. Curled metal cushion cushions were a new product they were thinking of
introducing. Cumberland had great success producing products made of coiled metal. The
curled metal product was regarded to have more incredible promise than the company's other
items and, as a result, was predicted to treble revenues. The Colerick Foundation Company put
this novel product to the test and was so pleased with the outcomes that they were ready to
purchase curled metal pads from CMI.
The business, however, encountered difficulty in making this choice. It was challenging to
decide on and streamline market tactics because there weren't many new instances and there
wasn't as much data available.
Therefore, Cumberland Metal Industries' first priority was to set a fair price for the recently
produced product.

5C’s Analysis

Company

• With sales of $18.5 million in 1979, Cumberland Metal Industries is one of the biggest
curled metal businesses in the US. When exhaust gas recirculation valves were first
used in US cars, the company focused on producing parts for chemical filtration.
• They created a product, marketed it under the trade name Slip-Seal, and amassed an
industry market share of 80%. However, when this new use of coiled metal technology
was brought to their notice, they were eager to investigate it since management wanted
to diversify away from their dependence on this business in the long run.

Customer

• Initial tests with consumers (Colerick) revealed that consumers are eager for CMI’s
product. The asbestos cushion pads currently used were seen as just a necessity of the
job and not a branded product providing benefits to the consumer. Also, the consumer
is becoming increasingly wary of the detrimental health effects of asbestos, so
employees were pleased to hear about a new asbestos-free product.

Competition

• Anvil Products Inc., Fabricated Metals Corporation, and Wireworks Corporation were
Cumberland's three primary rivals. None of them, however, was in a position to challenge
Cumberland in the slip-seal market effectively. Anvil Products, Inc. had little interest in the
automotive sector, and Wireworks likewise abandoned the proposition and any further
communication. In addition, the third direct opponent, FMC, could not win this bid since
Cumberland's management rejected the agreement's terms.
Collaborators
Pads were available via hammer sales and rental businesses, heavy construction supply shops stocked
them, pile producers occasionally offered them, and a 580-104 They were periodically provided as a
service by various other channels, according to Cumberland Metal Industries: Engineered Products
Division, 1980 8.
1. Pile hammer manufacturers:
Several manufacturers sold hammers in the United States, although many were imported from
Western Europe and Japan. The leading domestic producer in 1979 was Vulcan Iron Works of New
Orleans.
2. Architectural/Consulting engineers.
Identifying the requirements of a construction project requires excellent knowledge in pile driving.
It was necessary to perform extensive stress analyses and other mathematical analyses.
Architectural/consulting engineers were regarded as the supreme authority on all facets of the sector
because of the hazards involved in constructing the pricey projects, typically supported by piles.
3. Soil consultants.
Similar to architectural/consulting engineers, these experts were only engaged in extreme
circumstances.
4. Pile hammer distributing/renting companies.
In addition to hiring people to drive piles, businesses like Conmaco and Raymond International also
designed jobs, selected materials, and even produced their own machinery. Simpson understood
that if he successfully got CMI pads used on larger, more complicated construction projects, CMI
would need to actively and expertly solicit this group. Independent pile-driving contractors.
5. Independent pile-driving contractors
In terms of "frontline buying influence," these contractors were represented. Making money was
their primary goal. They were not highly intellectual, but they were very informed about pile
driving's practical applications.

Context
• The majority of the industry had switched to stacks of alternate layers of 1/2-inch-thick
aluminum plate and 1-inch-thick micarta slabs, which were employed most frequently and
appeared to operate correctly.
• Both pads were available in a range of standard sizes, with 11 1/2 inches being the most popular.
The size of the helmet, which changed depending on the size of the pile, defined the diameter.
• According to industry sources, up to 75% of pile-driving contractors were self-employed, and
the majority also owned at least one crane and a set of leads.
• CMI examined the costs of small contractors who rented equipment for pile-driving activities
to ascertain the contractors' cost of doing business.
• These figures were simple to get and solved the issue of tying the price of a crane or hammer
to a specific job.
Problem Statement

Cumberland needs to weigh its marketing options. They must first decide on a pricing plan and
a cost for the new metal pads. Second, Cumberland must decide the channels to employ to
advertise the pads based on the price plan selected. Before selecting how much to spend on
manufacturing equipment, Cumberland must determine the market penetration and assess the
pros and disadvantages of investing in equipment that produces pads.
Evaluation of Alternatives

There are several ways to figure out how much something costs:
Cost-based
Value-based
Equal competition
Pricing based on costs:
Estimates for each pad Existing
Supposedly, if you buy $50,000 worth of permanent tooling
Value-based pricing: The goal is to set a price between what the customer thinks the product
is worth and what it costs CMI to make the money. Average Value to Customers = $834.24,
while SP = $500 and Manufacturing Costs (with purchase) = $69.18.

Using cost-based pricing, here's how to figure out the profit for Scenario 1:
Profit = (Revenue/year - Cost/year) = (296.24 * 250 * 12) - (148.12 * 250 * 12) = $444,360.
For Scenario 2, it's: Profit = (Revenue per year - Cost per year) = (138.86)(250*12) -
(69.18)(250*12) = $159040. This means that Scenario 1 is better than Scenario 2 in the end.
Using value-based pricing, the profit for Scenario 1 is $105,564, and the profit for Scenario 2
is $124,246. So, Scenario 2 beats Scenario 1.
So, the organization should buy the equipment with a value-based pricing approach in mind.

Recommendation:
• Cumberland Metal Industries must employ the cost-oriented pricing approach. Bill
$138.36 after spending additional money on the permanent tooling. The firm will
ultimately repay its $50,000 investment by purchasing the tooling, which has cheaper
production costs. It is impossible to launch new products at high costs in a sector when
there is no demand for them. This is because no one will want to try out the product
since they are worried it won't work. The product can only be marketed to a certain
degree, even with the two tests and the segmentation-related impacts. Value-based
pricing will generate significantly more revenue, but as the product is still in its early
stages, customers are unclear about how much they will need it. As demand grows, the
cost of these cushion pads should climb gradually over time. Demand growth reveals
how soon companies learn how superior Cumberland pads are. They can raise their
pricing when consumers start to value it more. Although there is a lot of advertising
and a strong word-of-mouth industry, these pads do not yet have any value until people
use them. Since new products need much advertising to become successful, this price
will help defray the expenses of manufacture and promotion. In conclusion,
 Cumberland Metal Industries will profit from this new development and foster the
company's continuous growth.
• For cost-based pricing to be effective, a company must be able to sell its goods in large
quantities to raise profit margins. Still, because of CMI's cushion pad's exceptional
efficiency, businesses like Fazio and Colerick utilize less of it. As a result, the business
could not sell in large quantities since few businesses would purchase the inferior
performance pads.
• Value-based pricing is ordinarily the best choice when the product in issue is of high
quality and in great demand. This is because the consumer's inflated opinion of the
product will increase their likelihood of purchasing it. Cost-based pricing would not
fully exploit the market's potential; value-based pricing does. The corporation should
also investigate other potential competitors, such as independent pile drivers, pile
hammer manufacturers, architectural engineers, soil experts, rental companies, and
construction firms. These influencers may increase consumer awareness and,
subsequently, sales, which will undoubtedly have a long-term impact on price.