Optical Distortion

1325 WordsNov 6, 20066 Pages
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…show more content…
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**
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