Brim-case study in marketing strategies
Smaller market share
Maintained profitability
Maintain price and raise perceived quality Smaller market share
Short-term decline in profitability
Long-term increase in profitability
Cut price partly and raise perceived quality Maintained market share
Short-term decline in profitability
Long-term maintained profitability
Cut price fully and maintain perceived quality Maintained market share
Short-term decline in profitability
Cut price fully and reduce perceived quality Maintained market share
Maintained margin
Reduced long-term profitability
Maintain price and reduce perceived quality Smaller market share
Maintained margin
Reduced long-term profitability
Introduce an economy model Some cannibalization but higher total volume
Any price change can affect customers, competitors, distributors, and suppliers and may provoke government reaction as well. Customers’ often question the motivation behind price changes. A price cut can be interpreted in the following ways:
 The item is about to be replaced by a new model
 The item is faulty and is not selling well
 The item is in financial trouble and may not stay in business to supply future parts
 The price will be reduced even more; it pays to wait
 The quality has been reduced
A price increase, which would normally deter sales, may carry some positive meanings to customers: The item is “hot” and might be unobtainable unless it is bought soon, or the item represents an unusually good value.
Customers are more price-sensitive to expensive products and/or are products they buy frequently, while they hardly notice higher prices on low-cost items they buy infrequently. Coffee is generally a weekly purchase. In addition, some buyers are less concerned with the product’s price than they are with the total costs of obtaining, operating, and servicing the product over its lifetime. A seller can charge more than competitors and still get the business if the customer can be convinced that the product’s total lifetime costs are lower.
When contemplating a price change, Brim also has to worry about their competitors’ reactions as well as the customers’ reactions. Competitors are most likely to react where the number of firms in the industry is small, the product is homogeneous, and the buyers are highly informed. The decaffeinated coffee market is of such a nature. The challenge is to read the competitors’ mind by using inside and outside sources of information. Because there are several competitors such as P&G’s High Point and Nestle’s Tester’s Choice, Brim must estimate each of the competitor’s likely reaction.
C.) Brim-Advertising & Promotion
Promotion Objectives
Kotler’s three promotional objectives are to inform, persuade, or remind. Brim’s advertising shifted from informing (“The first strong coffee without caffeine”) to reminding (taste enjoyment). The message kept changing, from a rational appeal (caffeine concerns) to emotional appeal (husband reward), creating confusion for consumers. Further, Brim’s level of advertising spending shrunk during the 1970’s and during several periods was cut altogether, showing a lack of commitment from parent company Maxwell House. When a product is introduced, it should receive high levels of spending to develop brand loyalty. Brim [next page]