Proc 5830 Price

In: Business and Management

Submitted By wmjohn
Words 305
Pages 2
Week 2- Case of the Pricing Predicament

Scott, the salesman for Standard Machine, has just received a call from Joann, the purchasing agent for Occidental Aerospace. Occidental has been one of Standard’s largest and most loyal accounts. Following Standard’s fixed price policy, Scott submitted his bid at list price, $429K. Now Joann has called to inform Scott that his bid was not good enough. She told him that one other competitor had bid “under $390K” and another “a little over $400K”. She tells Scott that to win this business; he needs to cut his price by an additional $22K. Although this bid is only for one piece of equipment, Joann reminds Scott that the company will be building two new plants over the next four years, representing “a lot of potential business.” Scott has gone to his boss Tony, the sales manager, to ask for an exception to the fixed price policy.
Why do you think Standard Machine is in this difficult situation with what was previously a loyal customer? What has changed? What would you do? _____________________________________________________________________
I think Standard Machine changed their pricing policy to maximize their profit, but neglected to conduct adequate research on the product demand to determine its current value and use a value-based product pricing strategy. It appears the demand curve has changed, but Standard current policy doesn’t allow for a change and the loyal customer is not willing to pay the higher price.
As sales manager, prior to approving an exception to the fixed price policy, I would consult with marketing and finance to review current data and determine a competitive price and resubmit the bid to Occidental for review and offer an apology. Lastly, I would visit with management to express concerns that the new fix price policy may affect the company profitability for future…...

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