Problem 1. Read the following fictitious case and answer the questions that follow: Ten years ago, Judy Kaplan lost her marketing position due to a merger and was looking for a new job. As she discussed her search with Marty and Angela Curry, they realized she might be the perfect partner for their new business. For the last six years, the Currys have made and sold six different flavors of pickled garlic at local festivals. People who tried the product really seemed to like it. They had made the decision to go into the pickled garlic business full-time, but needed about $20,000 more to actually make the final move. Kaplan looked at their business plan and agreed to become a partner in the business. One of the first problems the partnership experienced was overpricing. Kaplan wanted to price the bottled garlic high enough so her money would earn the interest it would have received if she had left it in her investment account. The Currys wanted to set a low price so that they could acquire loyal customers. In its first year of operation, the company sold 8,000 cases of 24 bottles to retailers along the West Coast. Its fixed costs were $32,000 and its variable unit costs were $1.25 per bottle. They finally decided to sell individual bottles for $4.95 and a set of all six flavors packaged in a wooden box for $40. Half of the time, customers purchased the sets instead of the individual bottles.
- What type of pricing strategy were the Currys supporting? List three merits and three demerits of this strategy?
- According to the Currys, once a customer had used the pickled garlic in a salad or as a condiment on a sandwich, the person became addicted. They believed once they got a number of brand loyal customers, they could raise their prices without reducing their sales. Is the demand for their garlic elastic or inelastic? Give at least two reasons for your answer.
Problem 2. Read the following fictitious case and answer the questions that follow: Jenny Wood was already selling Jenny's Country Kitchen gourmet cocoa mixes at local fairs and craft shows when she came up with the idea for flavored creamers for coffee. She developed nine different flavors of creamers, including raspberry mocha and cherry vanilla. Response to the creamers was so good, Wood decided to rent a small manufacturing facility, hire employees, and an experienced manager. Her continued success brought her to the attention of some national retailers who were interested in carrying her product. National exposure on the QVC shopping channel gave the business a big boost in customer awareness.
A. Once Wood had a list of potential creamer flavors, she hired a food scientist to eliminate the flavors that would not mix well together, and those that were impractical because of logistical problems or high expense. Which stage of product development is Jenny Wood in now? Describe the 8 stages of new-product development with respect to Jenny Wood and her flavored cream with coffee. Write two paragraphs on what you imagine would she have done in these stages?
B. At this time, most adopters of Jenny's Country Kitchen flavored creamers fall into the category of early majority. Do you agree? Give suitable reasons.