Carmex Case Analysis Essay

1. Carmex, I believe uses all four pricing approaches with their products. They use mark-up pricing to set prices that would be different at pharmacies and grocery stores, then they

would be at value locations like Walmart. They also use value pricing based off the bang you get for the benefits of the product. When Carmex was founded, it was all about value and Alfred Woelbing, who started the company, would leave a dozen jars of Carmex there for free if the pharmacy wasn’t exactly sure about the product. They use value pricing based off what the consumers perceive to be a good deal and would benefit more than what it would cost to buy the good. Carmex also use competition based pricing heavily when they were unveiling their moisture plus

line. With that form of pricing they found an appropriate price point and marketed more toward women with the visual appeal of the product. They looked at competitors like Burt’s Bees and Blistex to accomplish the roll out of this product. I believe that if any of these pricing strategies were left out, they would be not setting themselves up for the future as beneficially as they are now. All of these strategies overlap and correlate with one another so they can accurately approach the market and what is used within it.

2.

Carmex always ends the product prices in 9 because when you take one penny off “the consumer responds to that price.” Alisa Allen in the case which is the Bolin director of marketing states that “There are magic price points for consumers”. With this technique, Carmex targets the perceived value that the consumer holds toward that product. They use the Odd-even pricing method to approach this. They manipulate the price to psychologically affect eh consumer by lowering the leading number which in this case is the dollar amount. This method then subconsciously interacts with the consumer which makes them view the product at a reduced price and then relate that price to the relative demand and their value

perception.

3.

Cost should be one of Carmex’s top priorities to complete their business models. People buy Carmex for their odd-even pricing method and for their competitive low prices. One of any company’s prime objectives is to fully maximize profits while making sure that production costs are low enough to still make the cost affordable for the consumers. They create high quantity value pricing based off how many they distribute to stores. That is why at major discount retails such as Walmart or Aldi, the price would be around $0.99. When it comes to packaging, they are able to make more money on orders that are very large which would mainly go to those discount stores. Therefore, at pharmacies such as Wal-Greens and CVS the price would be up-charged to $1.79 because there is not bulk ordering. I think a reasonable markup for Carmex is a 3:1 ratio. Make the cost three times what the production of the unit is. If it costs 50 cents to make a tube of Carmex, then I believe it should be priced anywhere from $1.49 to $1.99 max. Then it is still competitive with brands and are still deals. 1/3 of the cost can go to production wages, and the other third and go to profits. With these profits, they can expand into new markets such as skin care or balm designs can be implemented for future improved

sales.

4. An EDLP retailer sets the price in between normal retail prices and huge discounted prices to find a happy medium. They may not be the absolute lowest price but will always have consistently low prices with few promotional sales. High/Low pricing sometimes will have prices that are higher than competitors but will often have sales that will bring the price down lower. This method frequents advertising to promote sales to bring more people into the stores. It attracts people because of the stigma of a “Sale” that means lower prices and a better deal in the mind of the consumer. Carmex charges them different prices to maximize the sales at both retailers to satisfy the needs of a broader audience of consumers and increase total revenue. These are profit objectives that are set to be able to equal the pricing set by various retailers and their cyclical patterns.

5. Carmex- $0.99
Burt Bees- $2.97
Blistex- $0.99
Chapstick – $1.00

It seems that most companies have the same strategy as Carmex and charge a few cents below the dollar increase mark. The only other competitor of the 3 is Chapstick that charges the full $1.00 for their product. Burt’s Bees is much higher priced but they market that they use only the highest of quality/organic materials that is possible, which is the reason for the upcharge. Burt’s Bees I believe also charges more because of the brand name and how they have marketed the brand in the past as being the highest of quality. I noticed when the lip balm marketed phrases such as “Soothing and Moisturizing” or “Maximum Relief” the price goes up. So, the more basic the packaging the more it seems the price is lower.