CUMBERLAND

Group 3
 PRICE RANGE FOR PADS
 Economic value for the tests involving 11 ½" pads ranged from
$1400 to $1900
 Not enough data to adequately determine whether the true value for
an 11 ½" pad is $1400 or $1900
 Select the lower of the two as the maximum price
 Upper price limit for CMI's curled metal pad is $1400.
 Product price based only on material costs of the existing product,
the price would be closer to $167 (6 CMI pads used, $1000 worth of
asbestos pads).
 Pricing range of $167 to $1400, with the lower price recovering
fixed costs and a small profit
Q-1:WHAT’S YOUR PRICE FOR THE
CURLED METAL PADS? WHY?
 Excel showing Calculation of Manufacturing Cost

 Excel showing Calculation of Economic Value to the

customers
 OPTIMAL PRICE FOR CURLED PADS
 Follow a differential pricing strategy.
 Maximize the amount of consumer benefit captured with the price.
 Reward early purchasers and help them create relationships.
 Help CMI negotiate distribution deals.
 For example, CMI could quote to the Colerick Foundation a relatively low price
of $800 per pad as a first time customer purchasing directly from CMI.
 Colerick will be happy to pay this price because they are familiar with the
benefits and the EVC, reducing costs by $600 per pad.
 Over time, as the market was established, distributors would be handled
differently.
 Allowing for the traditional 30% margin that a distributor would carry, CMI
should sell to them for a price of $900 or more.
 With the mark-up, the customer would pay $1,170 per 11 ½" pad.
 The distributor would make $270 per pad, while the customer would realize a
benefit of $230 per pad. Both of these profits are reasonable portions of the total
EVC.
HOW MUCH DO YOU THINK ONE OF THESE PADS IS
WORTH TO A CUSTOMER? DO THE TEST DATA TELL
YOU ANYTHING ABOUT THAT

 Excel showing Calculation of Economic Value to the

customers
HOW BIG IS THIS MARKET? WHAT KIND OF AN
OPPORTUNITY IS THIS FOR US, ANYWAY?
 Based on industry sources and a 1977 Construction Engineering magazine
report, he estimated that approximately 13,000 pile hammers were owned
by companies directly involved with pile driving, with another 6,500 to13,
000 leased.
No of No of No of Hours/Per pile Ft/yr No of Total
Hammers Hours per weeks per hammer driving Pads per Demand of
week year per year per hour 10000 ft Pads
( Ft)

19500 30 25 750 20 290,000,00 6 174,000

0

26000 30 25 750 20 390,000,00 6 234000

0
Name of Amount Paid No of Asbestos Price Per Pad
Company Pads
Colerick 1000 480 166.67

Fazio 2000 600 400

Price Per Pad No.of Pad Sales (Low End) Sales (High End)

$29,000,580 $39,000,780
166.67 174000

$69,600,000 $93,600,000
400 234000
DOES YOUR PRICE AFFECT THE KIND
OF MARKET YOU GET
 Potential revenue, based on pricing the curled metal pads equivalent
to asbestos pads, is very encouraging when comparing the figures in
Table 1 to those of the company in 1979, a year that CMI had net
sales of $18,524,428
 Assuming a price of $166.67 per pad, low-end potential sales of
$29,000,580 would represent almost 1.6 times CMI's total net sales.
 This underscores the projections made by Robert Manicucci at a
meeting discussing the pads, where he stated that company sales
could be doubled by metal pad sales.
Q-8WHAT ARE YOU GOING TO SAY TO
THE COLERICK FOUNDATION?
 Quote a lower price because of making them first time
customers
 Explaining them in detail the benefits of EVC to make
them buy in bulk
 Tell them about the intent to maintain a long term
relationship
 Make them aware of the performance and operational
benefits of the product w.r.t asbestos
 More efficient and long lasting
 Ease of handling
 High temperature resistant
 Savings gained from tests ranging from 29% to 35%
Q-5IS IT MORE IMPORTANT TO MAKE
HIGH PROFITS OR TO BUILD MARKET
SHARE?
 High Profits vs Market share strategy
Parameter High Profit Market share

Price $1400 $200

Market Size 243000 243000

Market capture 25% 100%

Total Sales 85,050,000 48,600,000

Variable Costs $70 $70

Margin 31,590,000 80,797,500

The high profit margin strategy needs to obtain just 10% of the market to break
even with 100% market share strategy
Q6. WHO HAS TO SAY “YES” BEFORE YOU
SELL A CMI PAD? WOULD ANY OF THESE
PARTIES LIKE TO SEE CURLED METAL
PADS FAIL? WHY?
 Purchasers Influencers
Independent pile-driving contractors (Cost Architectural/consulting engineers
saving)
Engineering/construction contractors (Large Pile hammer Manufacturers
construction projects)
Pile hammer distributing/renting companies
Louisiana Contractor Magazine
"Piletalk“ seminars
Professor R. Stephen McCormack
 The architectural/consulting engineer is probably the most vital because of the
expertise. Generally considered “the ultimate authority”.
 Convince them by expounding pad’s superior capabilities

 CMI may find it a challenge to convince the rental companies because the overall

rental time would be reduced thus reducing their operating profits.

 Rental agency could actually take advantage of the faster turnaround, allowing them
to supply the same number of contractors with fewer pile drivers
 Another group that may wish CMI to fail is Organized labour. CMI pads reduce the
time necessary for pile driving. The main savings are in labour costs. May result in
less frequent work for the construction labour or more layoffs.
 CMI should contact labour leaders and push the health benefits of their pads over

asbestos.
Q7. HOW ARE YOU GOING TO MARKET
THESE PADS? DESCRIBE IN DETAIL THE
CHANNEL MEMBERS, INFLUENCERS, AND
OTHERS, AND GIVE US YOUR PLAN.
 Very few existing market channels for CMI to advertise or
develop consumer awareness apart from the purchasers and
influencers
 No national industry associations or publications that
influence the pile driving business.
 Unsure how effective word-of-mouth communication would
be
 Construction-oriented magazines such as Louisiana
Contractor, "Piletalk" seminars and Professor R. Stephen
McCormack are other channels they can pursue
 The distribution structure for cushion pads has not been well
established either with no current market leader
Heavy Construction Engineers, Magazines, "Piletalk", Professor R.
●

Supply Houses Stephen McCormack

Hammer Sales and

Rental Shops
●
Pile Manufacturers
 CMI should take advantage of the existing networks to
distribute their pads rather than start from scratch with their
own direct distribution
 The manufacturers' representatives should be trained by a
small CMI sales team on how to market the cushion pads
 cost savings benefit of the curled metal pads
 the potential dangers of the asbestos pads
 the CMI brand and product name

 CMI should also present on the cost savings experienced by

the two experiments with Colerick and Fazio to all potential
customers
 CMI should provide a sample set of pads to the largest pile
driving contractors along with a promotional package
explaining the benefits of the pads
Q9. IF THE RISKS IN A MARKETING PLAN
CAN BE DESCRIBED BY TECHNOLOGICAL
UNCERTAINTY AND MARKET
UNCERTAINTY, OR KNOWING WHETHER
YOUR PRODUCT WORKS AND KNOWING
WHAT THE CUSTOMER NEEDS, HOW
DOES THE CMI PAD STACK UP ON THESE
DIMENSIONS?
 The market for curled metal pads is not market driven but rather
technology driven. Currently, the needs of the customer are met with
the asbestos pads
 Product is technically sound, as was proven by the initial two tests
and also the enthusiasm shown by Prof Stephen
 There is a risk that the industry will not try the CMI pads due to the
lack of clear distribution channels and existing attitudes towards
pads.
 CMI must also overcome the initial shock that customers will
experience when seeing a tenfold increase in price over asbestos
pads.
 The cost saving message of the CMI pads must penetrate the market
in order for the pad to be successful.
 Another concern and potential risk for CMI is competition. In the
short run, patent protection will be effective in preventing second
movers from capitalizing on the promotion and research conducted
by CMI.