To Ed Pryor- VP, Sales Harold Whistler- VP, Design & Development Tony Barren- Director, Production
Emma Richardson- Executive Vice President
Subject: Pricing strategy & viability of “Project Aerial”
Enclosed report deals with the launching price problem being faced by TerraCog for its forthcoming GPS product Aerial, different options that are available to the company, selection criteria for evaluation and proposed solution along with action plan and contingency plan.
There is significant disagreement over the proposed pricing of Aerial between the different departments.
Presently TerraCog has 3 options. It could offer the product at a price which is …show more content…
So the company’s sales team will have a difficult task to market it at a premium. Also, charging a premium for a product without any technical edge to its competitors might bring discontent to TerraCog's loyal customers.
C. Launch it according to schedule at $425.
The margin will be very tightly squeezed at this price and as a result, the profitability will come under serious. Company will be having serious problem especially if the input cost increases in future. CFO will never agree to this price.
2. Increase in Market Share
With such aggressive price TerraCog will be able to capitalize on the growing market for handheld GPS. Also this price is only $50 more than its present full featured GPS but built on satellite imagery. So there is chance that some of our customers might shift to the new product.
3. Performance of the device
This price being very low there is no scope for TerraCog to improve its features and speed which is a little low. Earlier TerraCog introduced products which was technically superior to its competitors & thus, has built a momentum in the market. With this product, the company runs the risk of losing that distinction.
Evaluation of all the options suggest that TerraCog should go after option (a) i.e. it should grant more time to develop a superior product and price it at a premium