17 Pricing Objectives and Policies

Chapter 17: Pricing Objectives and Policies

Method Products Case Study

  • Founding Story:

    • Adam Lowry (chemistry, sustainability) and Eric Ryan (marketing, design) founded Method in 2000.

    • Identified an opportunity in the 17 billion household cleaning product market due to lack of differentiation.

    • Aimed to create stylish, sustainable products with safe ingredients that were effective and appealing.

  • Early Days:

    • Mixed cleaning products in their bathtub and stored them in beer pitchers.

    • Personally pitched products to independent grocery store managers.

    • First customer: Mollie Stone’s Market.

  • Differentiation Strategies:

    • Design: Hired Karim Rashid to "reinvent soap" with unique packaging.

    • Green Promise: "People Against Dirty" campaign highlighted the toxic chemical residues left by most cleaners and their environmental impact.

    • Charged a premium price, about 20 percent higher than leading brands.

  • Retail Success and Challenges:

    • First big sale was to Target due to Method's stylish packaging aligning with Target's market.

    • Walmart dropped Method due to its higher prices not aligning with Walmart's customer base.

    • Struggled with profitability due to higher production and operating costs compared to giants like Procter & Gamble.

    • Suppliers didn’t offer the same quantity discounts, and Method lacked manufacturing economies of scale.

    • Retailers and wholesalers expected up-front cash payments or free product cases, adding to costs.

  • Financial Backing and Mission:

    • Financial backers initially prioritized market share and sales volume over profitability.

    • As a registered B Corporation, Method prioritized its environmental mission as much as its profits.

  • Laundry Category Innovation:

    • Introduced a laundry soap three times as concentrated as Tide but faced the challenge of educating customers about proper dosing.

    • Later launched Method Pump with “smartclean technology,” eight times the concentration of regular detergent.

  • Sustainability Initiatives:

    • Partnered with the Fifty-Nine Parks Print series to raise money for the National Park Service.

    • Offered limited-edition hand soaps with national park images and scents.

  • Pricing and Value:

    • Method laundry detergent was priced similarly to Tide and slightly higher than Target’s Everspring brand.

    • Bargain shoppers could opt for cheaper store brands.

    • Sales continued to grow due to Method's superior value proposition: stylish packaging, green roots, effective cleaning, and environmental protection.

Price and Value

  • Price as a Marketing Variable: Price is a key decision variable that affects sales and earnings. It’s what customers give up to obtain the benefits of a product.

  • Pricing Objectives: Marketing managers set specific pricing objectives aligned with company goals.

Dimensions of Price

  • Definition: Price is the amount of money charged for something of value.l

  • Variations: Can be called tuition, rent, room rate, subscriptions, dues, interest, fares, fees, wages depending on the context.

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