Introduction Optical Distortion Inc. is a small new company with a patent for an innovative new product which is a contact lens designed to impair the eyesight of chickens. The analysis in this paper provides recommendations for ODI on their marketing and pricing strategy to launch this new product.
Market Segmentation There is substantial evidence in the case to suggest that ODI should segment the market based on flock size of the farms and focus their marketing and sales strategy towards farms with more than 10,000 birds. As illustrated in Exhibit 4 of the case study, number of chicken farms with flock size less than 10,000 has vastly shrunk between 1964 and 1969. This trend has continued and it is estimated that between 1975 and
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Some of the advantages of an initial high pricing strategy are: 1) the high initial price does not attract competitors from the market 2) it communicates the image of a quality product 3) can extract the maximum revenues from the market while facing no competition from other vendors, 4) leaves room for initial promotions or bulk discounts. By 1979 ODI would have already gained enough market-share to effectively use economies of scale to bring down their average costs allowing them to further lower their prices. A lower price will discourage firms from entering the market as potential competition. There are some clear challenges facing ODI in terms of implementing the above strategy. Higher initial prices would require ODI to hire some best-in-class sales people who can justify the price to farmers by convincing them with the value-analysis of the product and also meet the aggressive penetration rate targets. This might push the cost of the product (pricing floor) further up eating into their operating margins. ODI should continue investing in research to meet their goal of a multi-product and multi-market company in the long run.
Appendix A ODI 's value to chicken farmers
Number of Birds 20,000 50,000 75,000 100,000
Savings from reduced cannibalization* 2160.00 5400.00 8100.00 10800.00
Trauma savings**
In addition to ODI’s patent, ODI had signed a contract with New World that it couldn’t offer the polymer, the main material for the contact lens, for other firms who also intended to enter the market, and prevent others from using the updated products. Although this patent-protect agreement made sure that competitors in the same field had no access to duplicate the contact lens, the companies who offer the debeaking service are rivals to ODI. Farmers are so familiar with debeaking process, so they are more likely to choose this way other than lens. In conclusion, the requirement of the contact lens will be so sensitive to the price.
which would not be adequate for producers under competition. For example, the flock size of
This occurs when a business charges the highest price for a product during the introduction stage of its lifecycle. This is typically used when introducing a new, unchallenged product into the market, ensuring high profits before the product has competition. For example, Apple set its price for its iPhone 6 plus exceptionally high due to its advanced features and lack of competitors. This ensured that Apple received high-profit levels before the iPhone 6 plus was challenged by other products. Additionally, this has seen Apple have a high product position and helped cement its brand image, as these higher prices are typically associated with a higher quality product. This has subsequently improved market share and profits.
Thirdly, option is to strategically adjust the prices of their products because consumers are often very price sensitive. By doing so the company can either create more value that defines the quality and quantity of the product.
In order to acquire the market share in any segment, the company uses penetration pricing strategy aimed at increasing the number of consumers in an area. Apart from increasing the sales of the company, this strategy helps in increasing demand for the produce hence a positive result in productivity. In addition, the company uses promotional pricing strategy aimed at increasing the market share at the expense of the competitors (Ferrell & Hartline, 2011).
Not only the reduction of the cannibalization, the lens also has the less trauma issue which improves chicken productivity, greater feeding efficiency, and better labor efficiency. Therefore, the expected value of the lenses to farmers should come from the diminution of costs which
Companies can choose many ways to set prices, skimming price strategy where a company sets a higher price than normal and a penetrating price where low initial price is set. “Pricing
FFA and 4-H are non-profit organizations that allow young children to learn the fundamentals to agriculture as well as the values of responsibility and work ethics. Some of the livestock feeds that Coryell Feed and Supply provides such as Purina and Economy. “The prices for Purina we can not adjust much, due to the company Purina has set minimums that are their purchase prices. However, the Economy brand we are able to be more flexible with for they do not have a set sells minimum” stated Mr. Bay. A bag of Purina oats will normally cost around thirteen dollars while a bag of Economy feed can be under ten dollars a bag depending on the livestock it is intended for”(Mr. Bay). Coryell Feed and supply distribution is to the local area, however, they do not make deliveries customers must come pick up their feed and supplies themselves. “If a customer calls and states that they wish to purchase a certain amount of a product we will have it counted and set aside for them, and once they arrive it is our pleasure to load it for them” said Mr. Bay. Their target market is the niche of the agricultural industry with farmers and ranchers and the hunting community. The market segmentation that is being used for Coryell Feed and Supply is farmers, ranchers and lawn and
Optical Distortion Inc. is a small new company, not yet in business, with a cash asset of $200,000 and a patent for an innovative new product (the only one) which is a contact lens designed to impair the eyesight of chickens. . These lenses are used instead of debeaking. Lensed chickens are more likely to survive. They also eat more efficiently than debeaked chickens. The key issue facing ODI is "How to market these lenses?". The analysis in this paper provides recommendations for ODI on their marketing and pricing strategy to launch this new product.
The second pricing strategy is the penetration pricing where the product enters newly into the market. To gain some consumer base from the competitors, the seller initially charges a lower price than the competitors. For example the ticket prices initially charged for IPL, Indian Premier League, matches were lower than the ticket price of the competition ICL matches. On the contrary, price skimming strategy is to grab the financially top class of the market and to do this, the seller charges high prices. The effectiveness of this strategy is based upon
Optical Distortion Inc. is a small new company, not yet in business, with a cash asset of $200,000 and a patent for an innovative new product (the only one) which is a contact lens designed to impair the eyesight of chickens. . These lenses are used instead of debeaking. Lensed chickens are more likely to survive. They also eat more efficiently than debeaked chickens. The key issue facing ODI is "How to market these lenses?". The analysis in this paper provides recommendations for ODI on their marketing and pricing strategy to launch this new product.
Once the consumers like the product and realizes it is good quality, then they accept the product and the low pricing help the product create some buzz in the market and have some good techniques.
In pricing strategy, Miele sets high price as a symbol of high quality product and differentiation
Price, which is one of the most important elements of the marketing mix, can be difficult to get right. Pricing too high, or low, can negatively impact on customer satisfaction and revenue. Adopting a pricing strategy is necessary to achieve desired sales objectives (Chan & Wong 2005).
It’s only the effectively managed, high performing and better performance farms in the current society have been accorded their status.