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You are the new marketing manager of a jewelry cleaning product specially formulated for cleaning precious stones, jewelry, and watches. The product is sold through two large department store chains, which receive a 50% retailer margin. The product’s retail price is $20, although at times it is discounted to $12. The product is primarily promoted through point of purchase displays and salesperson recommendations. In your new marketing role, you are leading a strategic repositioning of the product, including a redesign of its packaging, logo, and brand identity. You have paid $5,000 to a consultant for a new upgraded, modern design. You have manufactured and inventoried a production of 20,000 units with the new branding. The estimated cost of the content and packaging is $5.00 per unit. Three main competitors currently exist in the market. These competitor products are priced between $14 and $17 at retailers. The competition promotes both through various retailers and online websites. You now have to decide the pricing strategy for the newly repositioned jewelry cleaner. In looking at a recent market study, it seems that few consumers are willing to pay more than $20 for the product. You also have to decide how to market the product. You could distribute the product through costume jewelry retailers, or additional department stores. The margin for these retailers ranges from 30% for costume jewelry retailers to 50% for department stores. You have to decide whether to carry out additional promotional activities; however, a budget of $1–2 million to produce advertising messages and to pay for media fees will be required for such promotion. 1. What factors influence the pricing decisions for your product? Comment on how each of these factors may impact the price that can be set. 2. What pricing strategy would you propose for the product? Explain your reasoning. What, if any, discounting strategy would you recommend? 3. What price would you set for the product? What costs and expenses would be involved? Given your recommended price, what would be the break-even point? (Note: refer to the financial powerpoints on BE from earlier in the semester if needed.)
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