Pricing – Toyota Camry The Camry is Toyota’s most popular selling model internationally Toyota set the initial price for the 1998 model Camry at a lower than the 1997 model It marked the 2nd successive year that a “value pricing” was applied However, competition from other Pacific Rim firms with a lower cost base was becoming more intense Toyota’s Response: designers and operations engineers added product features to the Camry without adding to the cost of production The Impact: Toyota has cut $2.5 billion in costs by using fewer parts and stripping waste from production systems! The customers obtained additional product features without corresponding increases in prices Therefore, perceived customer value was enhanced, giving Toyota a competitive advantage! Pricing - Procter & Gamble’s Diapers Procter & Gamble’s two premium-priced diaper brands, Pampers and Luvs, were experienced sliding market share: from 50 % in 1988 to less than 42 % by 1993. The company repositioned Luvs as a quality brand at a competitive price, while keeping its flagship brand, Pampers, at its top-of-the-line position. While Luvs’ price was cut by 16 %, it continued to be about 15 % higher that the price of most store brands. However, Luvs also continued to have better quality and performance on attributes, such as absorbency. P&G’s value-based pricing strategy took into consideration not only competitors’ prices, but also intangibles and benefits consumers derived from the use of the product. P&G’ s new pricing strategy was introduced with a major advertising program emphasizing the superior value offered by Luvs. The Impact: The firm’s overall share of the disposable diaper market stabilized By 1999, the baby care, feminine care, and paper products business unit generated $12 billion in worldwide sales, 30 % pf the company’s total revenue!!! Pricing – Post Cereal In 1996, Post Cereal, a division of Philip Morris was losing ground to industry leaders Kellogg’s and General Mills. The company saw its market share drop from 16.8 % to 15.6 % in a year’s time. In addition, private label brands were sneaking up on the national brands. The store brands’ market share had grown from 3 % in 1987 to 10 % in 1996. The Breakfast cereal prices had increased by 90 % between 1983 and 1994, substantially more than other product categories! On April 15, 1996 Philip Morris announced price cuts of about 20 % on its Post and Nabisco ready-to-eat cereals. Its price reductions cut into Kellogg’s market share significantly. On June 10, Kellogg’s followed suit, announcing an average 19 % price cut on selected cereals. On June 20, General Mills initiated an 11 % price reduction on selected cereals. The Impact: The overall cereal market has shrunk to $7.2 billion in 1998 from $8.0 billion just four years ago! Kellogg’s market share has dropped to 32 % from 35 % in 1993, representing a decline of approximately $500 million in revenue! General Mills is similarly struggling – its flagship Wheaties lost 12 % of its market share in 1997, and the company has prices 17 % above the industry average! Private labels have now achieved an 18 % share of the market!
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