mkt301 sum08 mod 5 case assignment

8/6/2019 MKT301 Sum08 Mod 5 Case Assignment

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TUI UniversityStuart Schakett

MKT301: Summer 2008Module 5 Case Assignment

Instructor: Dr. Theresa PavoneDate: September 14, 2008

"Examine the factors which should have been taken into account by Kodak indeveloping its pricing strategy. In doing so consider whether the EVC pricing

method would have helped and analyze the customers' lifetime cost ofownership."


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Few companies were as firmly engrained into the American psyche than Kodak. Though

they had long surrendered the high-end camera market to Cannon, Nikon, Minolta and the like,

Kodak remained the dominant force in slide and print film. Nevertheless, the times had caught

up to the ubiquitous yellow box. Film was out; digital was in. To survive, Kodak had to adapt to

changing times. Rather than focusing on imaging, Kodak decided to focus printing. Not just an

advertising slogan, this corporate makeover was the ultimate Kodak Moment.

Launching and marketing a new product line, especially one designed to save the

company, is not just a matter of developing the item for consumer consumption. Product, place

and promotion each had, or will have, their turn in the spotlight. However, for now, pricing was

the focus of Kodaks lens.

Pricing Strategy

Whether art or science, pricing strategy is more than throwing something out there and

seeing what sticks. Instead, there are multiple factors that must be considered. Kodak had to

estimate the demand curve to assess the desire for the new products and to understand how

demand will fluctuate with variations in price. They needed to understand the environmental

factors, in particular the competitive environment and the opportunity to develop a competitive

advantage (NetMba, 2007).

Additional factors in developing a pricing strategy include developing a marketing

strategy. This should include the market analysis, segmentation, positioning and defining the

distribution channels, and promotional activities. Next to be considered would be to determine

the pricing objectives in regards to what the company deems to be appropriate profit goals.

Finally, the above information would be used to delineate pricing parameters (NetMba, 2007).


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Kodak assessed the market and decided on a strategy the polar opposite of what the

market was accustomed to seeing. They eschewed the traditional printer-pricing model where

the printer itself is sold at or near the breakeven point with the goal of reaping large profits from

the sale of ink cartridges. Instead, Kodak is reversing the trend by earning more profit from the

initial sale than through the sale of cartridges (Bulkeley, 2007).

Customer Value

By deciding on a pricing strategy that aims to drastically lower consumer post purchase

costs and deliver a lower lifetime cost of ownership, Kodak is developing a competitive

advantage over its competition (Ellis, 2007). They can obtain this advantage by supplying

superior Economic Value to the Customer (EVC). Kodak is betting that buyers will relate the

anticipated benefit of the lower cost of printing to the higher initial purchase price for their

printer and compare it to the total cost of ownership for a competitors printer (Homa, ND).

Cost of Ownership

To fully understand the economic value the consumer will receive from their purchase,

they must understand what the total cost of ownership will be. Here, Kodak clearly establishes

the advantage that is key to their success. Kodak reports that a standard print will cost 10 cents

to print (Bulkeley, 2007), while HP prints average 24 cents each (Staples.com). Using the

M.S.R.P.s shown on each companys website and a comparison of two similar models, the

Kodak 4530 and the HP C4480, the Kodak 4530 provides a much lower total cost of ownership.

The Kodak 4530 has a suggested retail price of $149.99. Printing 1000 photos at 10 cents per

photo would result in a printing cost of $100, for a cost of ownership of $249.99. The HP

C4480 has a suggested retail price of $99.99. Again, printing 1000 photos, this time at a cost of

24 cents each results in a printing cost of $240, for a total cost of ownership of $339.99. While


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the owner would pay a 50% premium for the purchase of the Kodak printer, the total cost of

ownership would provides a savings of 73%.

Conclusion

With sales of their traditional slide and print film resting in peace in the graveyard of

technology, Kodak needed to find a niche in order for the company to survive. If digital killed

their film business, the Kodak aimed to recover by tapping into the market for printing digital

photos. Rather than following the industry norm, Kodak made the printer and not the ink the

focus of their pricing strategy. By offering better results with a lower cost of ownership, Kodak

is striving to draw attention to their sustainable competitive advantage. Now the companys

future is based not on capturing images, but in sharing them.


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Works Cited

Bulkeley, W. (2007, February 6). Kodak's Strategy For First Printer -- Cheaper Cartridges. Wall

Street Journal (Eastern Edition), p. B.1. Retrieved September 10, 2008, from ABI/INFORM

Global database. (Document ID: 1211170961).

Ellis, B. (2007). Life Cycle Cost. Retrieved September 12, 2008 from http://jethroproject.com/Life%

20Cycle%20Cost1.pdf

Homa, K. (ND). Market Based Pricing. Georgetown University. Retrieved September 12, 2008

from http://faculty.msb.edu/homak/HomaHelpSite/WebHelp/Pricing_Market_Based.htm

NetMba. (2007). NetMba.com - Pricing Strategy. Retrieved September 12, 2008 from

http://www.netmba.com/marketing/pricing/

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