Standard Machines Pricing Essay Example

in a conversation with Joanne Baker about the benefits of Standard’s equipment and figured out a way to avoid a process where accounting folks would focus on cost instead of value. II. What recommendations do you have for Standard Machines Corp’s management on how they should address the problem?Although we do not believe that it is wise for Standard Machine Corp to lower their prices, essentially commoditizing their products, it is important for them to manage their customer relationships on an individual basis.

By this we mean that Standard should find ways to justify their price premium. This may be done by offering packages uniquely customized to retain their long-term clients. Specifically, for long-term customers like Occidental, Standard must justify their $22,000 premium over their competitors within the market.One way to address this issue would be through rebates. Standard could offer customized rebate packages to its premium customers, like Occidental.

Although they are, in effect, lowering their prices for Occidental, they are not sending a negative signal to the market. An outright price decrease could create a price war, where their competitors continue to drive down their own prices, further commoditizing Standard’s line of products. A rebate would offer an incentive for Occidental to purchase, because the company knows that they will be rewarded on the back end.Another way for Standard to remedy this pricing situation is to offer additional services along with its milling machine in order to further differentiate themselves from their competitors. Standard’s package could include an unlimited warrantee for a specified amount of time greater than that of its competitor, and an increase in on site service time. These sorts of

service upgrades add value to the product, and perhaps Scott can equip Joanne with an overall better deal to sell the product to the purchasing department at Occidental.

If Standard could package additional, less costly, products along with milling machine, Occidental may have greater incentive to pay a premium. Perhaps the Standard could bundle additional parts for the machine at a discount. The total cost, although slightly higher than the price of the milling machine alone, might be more attractive to companies like Occidental since they might feel as though they are receiving more for the money that they are spending.