Brim-case study in marketing strategies
competitors will enter and market share leadership and prices will fall. Initially the pioneer is the sole supplier with 100% of the production capacity and sales. This was the case with Sanka in the decaffeinated segment from 1932 until the 1960’s when the competitive penetration stage began. Brim was introduced with the specific intent of holding off the competitors increasing interest in the decaffeinated market. Nestle introduced its brand of freeze-dried decaffeinated coffee at the same time as Brim was introduced. Taster’s Choice Decaffeinated was a major competitor and Proctor & Gambel’s High Point is already competing with Brim in select markets.
B.) Price
The Boston Consulting Group Model portfolio planning approach designated the Maxwell House Division a cash cow minus. What does it mean? It means Maxwell House should harvest. The objective of harvesting is to increase the SBU (Brim)’s short-term cash flow regardless of long-term effect. General Foods needs to cash in on Brim before it becomes a Dog. Some of the indicators of harvesting are as follows:
 Business is in a stable or declining market - The total US coffee market is at a 20 year low, and the decaffeinated market has stagnated for 3 years
 Business has small market share and building it would be too costly or it has a respectable share but defending it is not economically justified
 The business is losing money or produces only modest profits
 Sales decline would not be precipitous if support is reduced
 The firm has better use for freed funds
 The business is not a major component of the firm’s portfolio
 The business contributes little to other entities within the organization in terms of synergies, sale stability, and prestige
Harvest
One of the components of harvest is to reduce cost at a faster rate than any potential drop in sales, resulting in an increase in the company’s positive cash flow. Reducing costs include limiting investments in advertising, new plants and equipment, and R&D.
In addition to trimming product costs, Maxwell House can also consider changing Brim’s price. Questions that Maxwell House should ask include: would a price cut attract new users? If so, should the list price be lowered, or should prices be lowered through price specials, volume or early-purchase discounts, freight cost absorption, or easier terms? Or would it be better to raise the price to signal higher quality? Some of the objectives that Maxwell House might consider are as follows:
 Survival
 Profit Maximization
 Revenue Maximization
 Sales Growth Maximization – penetration pricing
 Market Skimming Maximization – inelastic demand situations
 Product-Quality Leadership – price/quality relationship
 Other Pricing Objectives – e.g., cost recovery, social pricing
Strategic Pricing Alternatives
After Maxwell House has decided on a pricing objective, it will then decide on whether to increase or reduce the price of Brim. The following lists the eight strategic alternatives:
STRATEGIC OPTIONS CONSEQUENCES
Maintain price and perceived quality Smaller market share
Lowered profitability
Raise price and perceived quality [next page]