OEM_Team1_Paulson - Paulson Precision Parts OEM 2009 MAR...

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Paulson Precision Parts OEM 2009 MAR 5805 Team 1 Rusty McLaughlin Larry Miller Corrie Musgrave Luke Setzer MAR 5805 OEM Team 1 page 1 of 9
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Introduction and General Considerations This case presents a number of interesting challenges such as price determination, avoidance of sticker shock, education of the customer, and so forth. All of them hinge on the proper selection of a price metric. Selecting the right price metric will accomplish the goal of educating the customer on the actual value of the product, avoiding sticker shock and providing an objective reference from which to select the optimum price. For instance, the problem of sticker shock amounts to a problem of informing the customer. To price this product at $1777 for a set of six pads while explaining none of the product benefits would result in a dismal failure in sales and a loss for all concerned. To price these new pads correctly, i.e. so they sell at the desired volume, requires presenting the whole picture to the consumer. As an illustration, in the first trial run with these pads, the contractor could have saved a total of $6,742 or 26% of his total costs on this job. Of course, not all jobs have the same size, so the client will not see the same savings percentage on every job. This fact suggests the need to present the information in a way that everyone using the product can understand. For example, we could present the savings in terms of dollars saved per thousand feet of pile driven. Alternatively, we could represent it in a chart that shows different numbers of feet driven and the savings expected for each. Figure 1 illustrates this metric graphically. Metrics Marketing strategies can appeal to many different metrics to sell these pads. Some examples of possible metrics include: 1. Time saved on jobs (200 ft/hr compared to 150 ft/hr) 2. Time saved in change outs (4 min vs. 20 min) 3. Fewer pad set changes (15000 ft vs. 750 ft) 4. Safer work environment (600-700 deg F vs. no more than 250 deg F) 5. Total savings not including injuries ($6,742 on one trial run) 6. Number of pads per set (6 vs. 24) 7. Cost per foot driven ($1.31 vs. $1.76) To narrow the field and determine the right metrics to use, the metrics need to comply with a few simple guidelines as shown below and in Figure 2: 1. Track how the customers realize value. 2. Delineate between customer segments that receive different levels of value. 3. Be both measurable and enforceable. 4. Support customer buying habits. 5. Leverage channel dynamics. 6. Manage the competitive environment. MAR 5805 OEM Team 1 page 2 of 9
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With respect to pile driving, then, the relevant metrics boil down to a final list focused on reducing costs or increasing profits: 1. Feet driven per hour 2. Time spent on pad set changes 3. Down time for accidents and injuries 4. Cost of consumables Values of our metrics come from our customers.
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OEM_Team1_Paulson - Paulson Precision Parts OEM 2009 MAR...

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