Cumberland Steel

d

Marketing Management Spring 2008

"Cumberland Metal Industries: Engineered Products Division, 1980"

Harvard Business School Case 580-104

Primary Problem

Cumberland Metal Industries (CMI), a company specialized in producing curled metal products, developed a new product in 1979 to help contractors drive piles faster and safer. Being the first to market with a superior product in a relatively new product category was a great opportunity for CMI's Engineered Products Division. How to properly harness the potential behind CMI's curled metal cushion pads ultimately came down to the pricing decision. At what pricing point would customers opt for higher-performing metal cushion pads versus the standard asbestos pads?

Peripheral Problems

* Large risks associated with a product that is new to us and new to market.

* No patent, leading to possible quick copy cat competition.

* Large risks associated with a product that is new to us and new to market.

* No patent, leading to possible quick copy cat competition.

* Some of our main customers already manufacture product for driving piles and could simply take over our pad market and cut us out.

* Hammer rental and distribution companies offer most obvious place to sell, but our product will cut into their rental revenues.

* Pricing - What they will cost us to make? What should we charge for them?

* Not knowing size of the market and in turn how many to start making and what sizes.

* How to promote and distribute our new pads?

* Trying to educate users that our pad is more efficient. You will use less pads, change them rarely and the cost savings on the job.

* Trying to get Manufacturers reps to give enough attention to our new pads to make them succeed.

* Some of our main customers already manufacture product for driving piles and could simply take over our pad market and cut us out.

* Hammer rental and distribution companies offer most obvious place to sell, but our product will cut into their rental revenues.

* Pricing - What they will cost us to make? What should we charge for them?

* Not knowing size of the market and in turn how many to start making and what sizes.

* How to promote and distribute our new pads?

* Trying to educate users that our pad is more efficient. You will use less pads, change them rarely and the cost savings on the job.

* Trying to get Manufacturers reps to give enough attention to our new pads to make them succeed.

Case Analysis

Prior to CMI's interest in producing cushion pads specifically made for pile drivers, this product niche was being filled with various surplus materials that were available. Some contractors were using wooden blocks, which needed to be frequently replaced and could sometimes ignite from pressure and friction. Other contractors relied on asbestos padding. Asbestos was hazardous primarily from its chemical composition and lacked adequate thermal resistance. CMI's curled metal cushion pads was a perfect solution for driving piles for a variety of reasons, but primarily because they lasted longer and had superior thermal resistance in comparison to the other substitutes.

To CMI's engineers and executives, curled metal cushion pads appear to be a great solution to a contractors' pile driving difficulties. The new product;

* Decreases down time

* Lasts longer than substitutes

* Is chemically sound

* Thermal-resistant

* Easy to replace

In two test projects, CMI's cushions were praised by contractors for their performance and many commented they were eager to buy the cushions. Major concerns for the product launch stem from an uncertainty on how the product should be distributed and how it should be priced.

With regard to price, pricing the product too high will inhibit CMI from rapidly gaining market share, while pricing it too low will forfeit profits at a time where CMI is struggling for growth. Because this is an entirely new product category, rapid acquisition of market share would catalyze the marketplace acceptance of the new pile driver pads.

The key decision makers in the purchasing schema for pile driver pads are pile hammer manufacturers, architectural and consulting engineers, soil consultants, pile hammer leasing companies, engineering and construction contractors, and pile driver contractors. Of these groups, this case study identified some groups as being more influential than others.

Concern arose when examining the case of pile hammer leasing companies that typically supply pads when they rent equipment. While this seems like one of the most profitable avenues to sell metal pads, it must be taken into consideration that these companies make more money the longer their equipment is being leased, so accessories that cut production time and increase efficiency on the job site add up to a loss for them. Until it can be determined how pile driver leasing companies will react to CMI's new high-performing product, the company would do best to steer away from marketing through them.

Two of the most appealing groups in the purchase decision for pile driver pads are pile hammer manufacturers and architectural and consulting engineers. The pile hammer manufacturers have tremendous leverage when it comes to specifying which pads best compliment their equipment. Better performing pads, like what CMI has to offer, contribute to better performance of the pile driving process. The positive performance could boost the hammer producer's brand image.

The architectural and consulting engineers are typically hired to advise builders on the most efficient tactics to ensure that the project is completed correctly and as smoothly as possible. Curled metal cushion pads have the potential to increase productivity