Question

1. The CEO of a large company selling seeds and garden supplies to consumers and businesses through catalogs and the Internet is unhappy with its overall profitability. He feels that part of the solution is to be more professional in price setting, and he asks the director of marketing to hire an experienced person for a new position of pricing manager. While interviewing one candidate, the marketing director explains that the company has been advised to listen more to customers and respond to their needs and asks the candidate how he would implement this advice in the area of pricing.

The candidate responds as follows:

“It’s great to listen to the customer when you are designing your product, but it’s just not practical in pricing. All the customers have to say is that they want lower prices. If you want me to increase profits, I can’t very well listen to that!”

a. What should the marketing director make of this response?

Answer 1

Response: Marketing Director will agree with the views and suggestions remarked by the customers in respect of Quality and Pricing of the product. Only Considering low pricing as per the demand of the customer is not feasible. Because, While Pricing Marketing director should not lower that much price which will not able to meet the breakeven point also. Is not good for the company. While charging excessive mark-up may also hit the market or shiftence of customer preferences.

Here while pricing the cost which are directly attributable to the product should be identified and indirect manufacturing cost should also be taken in to account. However sale and admin cost should be ignored.

In order to meet the above rule ABC costing can be best provided the company is manufacturing homogenous products, otherwise it is difficult to managed the utilisation of cost drivers as well as identification of cost driver itself.

Once Costing determines from the above process, evaluate the mark-up charged by the other rivalry in the market if any, if no competitor in the market currently, then better to charge minimum cost mark-up which will provide profit above its fixed cost coverage, This will helps to meet the customer needs and able to cover the cost of the company product also.

On getting reports over the Costing from the Production department, the deriving the markup policy of the Company and accordingly holds a meeting by dwelling over the various factors like customers demands, quality, and other preferences of capturing of markets all these factors are good enough to backed with the pricing of the product.

As the business is simple providing the seedings and garden supplies to the customers and corporate clients, here ABC principle can be followed with the no. of watering, no. of times the cutting, grafting, is required and other things, however they all depends upon the labour cost, hence ABC will make the situation more cumbersome, Here only direct cost and Labour cost will determine the pricing and Mark –up as per the corporate policy.

At the end it can concluded that changes cannot solely made on the basis of the customers comments however also look into the financial position and other requirements of the company cost incurred for launching such product into the market without compromising the quality of the product.

Answer 2

Can not be hired of business of his performance at all