Curled Metal Inc.

Case Study
Question 1

WHAT SHOULD A CUSTOMER BE WILLING TO PAY

FOR ONE OF CURLED METAL INCORPORATED’S

(CMI) NEW CUSHION PADS? WHAT FACTORS ARE

RELEVANT IN CALCULATING WILLINGNESS TO PAY

IN THIS SITUATION?
 Factors to be considered
• Average Cost per hour Saving for Equipment , labor and overhead
1

• Downtime : If we also factor in the amount of time it takes to change asbestos sets, it contributes
2 significantly to overall cost ( can be considered)

• Higher Efficiency of CMI product

3 • Longer lifetime of CMI over conventional

• How will it help CMI gain a dominant footing in the market by adding value to its product
4 portfolio

• Is the model sustainable?

5
Question 2

WHAT PRICE SHOULD CMI SET FOR ONE OF ITS NEW CUSHION

PADS? WHY?
 Cost of Single
Manufacture costs vary from $444 to $1920 for the
conventional pad=
larger sizes, thus price needs to be balanced
$6 - $9
accordingly

Pad type No. of Changes Time reqd

X time per
changes
Conventional 20 X 20 mins 400 mins
CMI 1 X 4 mins 4 mins

Pad type Total Feet / Feet Total time

driven per hour
Conventional 15000 /150 100 hours
CMI 15000/200 75 hours
Total value of savings = $5400

Value based Price = $5400

If the reports from Professor McCormack proved the same

assumptions in savings of time, then it would be easy for the
company to prove “value” to the customer.

CMI can charge ~$3000-$4000 per pad if it wants to start

skimming the market and reduce price later on

CMI can charge ~$1000 if it wishes to achieve a high market

share overnight
Market Based Price = $10
Company could price the 11.5 inch
pad at a higher price and gain
profits which could be
compensated for the larger
products where production costs
are higher
Question 3

HOW BIG IS THE POTENTIAL

MARKET FOR THIS PRODUCT,
AND WHAT SHOULD BE CMI’S
STRATEGIC AND MARKETING
OBJECTIVES IN INTRODUCING
THIS PRODUCT?
Market Potential
 Total requirement = 290 – 390 million feet of
piles to be driven
 One set of curled metal pads – 10,000 feet
 (One set of curled metal pads = 4 initially
installed, plus two added)
 Market requirement = 29,000 – 39,000 sets of
curled metal pads
◦ i.e. 174,000 – 234,000 curled metal pads
 Market value = $121.8m – $163.8m (@$700 per pad)
Strategic and Marketing objectives
Strategic Objectives
• Price the product right to achieve high profit margins while establishing a dominant
market share in the market
• Distribution, production and capital investment strategy
• Advertising, promotion and positioning of the product with respect to the existing
cushion pads available in the market
• Protect IPR for this pad by filing patents if possible

Marketing Objectives
• To convince the important influencers to endorse CMI cushion pads
• Architectural/ consulting engineers and soil consultants have a key influence in the
buying decision (expert power)
• Engineering/ construction contractors (large value contracts)
• Independent pile-driving contractors (large volumes)
• Promote in industry magazines like Oklahoma Contractor and try and get a feature
in the same
• Get Professor Stephen McCormack of Pennsylvania A&M University to officially
endorse the product
 Question 4.

4. ON PAGE 1 OF THE CASE, CMI VICE PRESIDENT JOSEPH FERNANDEZ SAYS, “THE WAY WE PRICE THIS

COULD HAVE A SIGNIFICANT IMPACT ON EVERYTHING ELSE WE DO.” AN INTEGRATED STRATEGIC OPTION

SPECIFIES THE BASIC TYPE OF ADVANTAGE A COMPANY WILL PURSUE (E.G., DIFFERENTIATION? LOW

COST? OTHER?), RELEVANT DECISIONS ABOUT CUSTOMER AND PRODUCT SCOPE, AND KEY CHOICES

THROUGHOUT THE COMPANY’S VALUE CHAIN. DEVELOP AN INTEGRATED STRATEGIC OPTION FOR CMI—

AN OPTION THAT SPECIFIES YOUR PRICE BUT ALSO SPECIFIES THE MANY OTHER CHOICES FACING CMI IN

FORMULATING A STRATEGY FOR ITS NEW CUSHION PADS (E.G., IN MARKETING, SALES, DISTRIBUTION,

PRODUCTION, FINANCE, AND OTHER FUNCTIONS).

Launch of CMI Pads

Promotional
Strategy
Positioning
the Product
Setting Prices
for CMI Pads

Selecting a
pricing
strategy
Pricing Strategy
 Price objectives: maximize quantity and
profit margin.

 Price methods:
 Cost-plus pricing – set the price at the
production cost plus a certain profit
margin.
 Value Based Pricing
Demand Estimation
 Annual demand estimated = 290 to 390 m
feet
 Average no. of conventional pads required =
300m/ 28= 10.7m
 Average no. of CMI pads required= 290m/
1666 = 174000 ( lower limit)
 Average no. of CMI pads required= 390m/
1666 = 234000 ( upper limit)
 Annual capacity at 250/ month = 250 * 12 =
3000
Positioning
 Points of Difference
 Cost –overall cost is low.
 Efficient – more piles driven per set, energy used
efficiently
 Ease – easy to handle as temperature within 250 F
 Safe – no hazardous material
 Savings
 Point of Parity
Time Saving – Reduces time for changeover
 Distribution
Early Stage After the market develops

Take advantage of the existing •Create our own distribution

distribution networks: network.

 Equipment Supply •Reach architectural and consulting

Houses engineers.
 Hammer Distribution
Rental Companies

•Direct channels as:

•Contribute high quantity and demand (50% of estimated
market share)
•CMI has more control on education and monitoring

•Sell to hardware stores and wholesalers to cover small

contractors
 Marketing Strategy
◦ Promotion to educate customers and awareness about the
benefits

◦ Seminar: “Piletalks” to make people aware

 Potential buyers:
• Independent Pile driving contractors
• Pile hammer distributing/renting companies
Give free first set of pads

◦ Sales Representative:
 To educate customers about cost saving of CMI pads and potential
dangers of asbestos
 Creating brand name
• Important in promoting the diffusion of the product in
marketplace
 Marketing Strategy
 Word of mouth: Key influencers to endorse the product
 Pile hammer manufacturers
• To influence recommendations
 Professor Stephen McCormack would have a significant impact
• Department to study pile driving and was a respected
authority

 Advertisement [Magazine/Newspaper/TV ads]

 Effective advertisement in business magazines to target
undecided market
 Publish test results in magazine & Newspaper
THANK YOU