Carmex: Setting the Price of the Number One Lip Balm
Carmex Lip Balm was created in 1937 by Alfred Woelbing and his wife in his family kitchen in Wauwatosa, Wisconsin. Over the next 75 years, new products, flavors, and packaging options were added to the company’s product lines. With 10 percent of the lip balm market, this successful brand currently enjoys a loyal customer base, a growing product line, financial strength, and savvy pricing strategies. The management team at Carmex sets prices so that the company can achieve its objectives while continuing to provide value to its customers.
The fourth stage in the price setting process is selecting an approximate price level. In this stage, marketing managers must select a reasonable starting point for the price of the product. There are four common approaches to setting an approximate price level: demand-oriented, cost-oriented, profit-oriented, and competition-oriented. In practice, many of these approaches overlap and an experienced manager will consider several approaches when setting an approximate price level.
1. The company's new product Carmax Moisture Plus is actually entering a market that is in the mature stage of the life cycle. It has no patented technology, though its design and cosmetic like features give it some competitive advantages, they are limited. Since it was not first to the market it has no lead time and is rapidly seeking to gain economies of scale. Which of the pricing strategies should the company be using for this product.
a. non-price
b. competitive
c. skimming
2. Which of the following competitive value propositions is most appropriate for Carmax's Moisture Plus Product?
a. It should provide superior value in terms of lower price, and/or convenience, and accessibility.
b. It should provide superiour value by offering leading edge products and total commitment to TQM
c. it should provide superior value by precise segmentation, product tailoring to precise need, and most of all maximizing relationships
d. it should provide superior value by offering leading edge technology