Carmex Case Analysis Essay

1. Carmex, I believe uses all four pricing approaches with their products. They use mark-up pricing to set prices that would be different at pharmacies and grocery stores, then they would be at value locations like Walmart. They also use value pricing based off the bang you get for the benefits of the product. When Carmex was founded, it was all about value and Alfred Woelbing, who started the company, would leave a dozen jars of Carmex there for free if the pharmacy wasn’t exactly sure about the product. They use value pricing based off what the consumers perceive to be a good deal and would benefit more than what it would cost to buy the good. Carmex also use competition based pricing heavily when they were unveiling their moisture plus

Carmex always ends the product prices in 9 because when you take one penny off “the consumer responds to that price.” Alisa Allen in the case which is the Bolin director of marketing states that “There are magic price points for consumers”. With this technique, Carmex targets the perceived value that the consumer holds toward that product. They use the Odd-even pricing method to approach this. They manipulate the price to psychologically affect eh consumer by lowering the leading number which in this case is the dollar amount. This method then subconsciously interacts with the consumer which makes them view the product at a reduced price and then relate that price to the relative demand and their value

Cost should be one of Carmex’s top priorities to complete their business models. People buy Carmex for their odd-even pricing method and for their competitive low prices. One of any company’s prime objectives is to fully maximize profits while making sure that production costs are low enough to still make the cost affordable for the consumers. They create high quantity value pricing based off how many they distribute to stores. That is why at major discount retails such as Walmart or Aldi, the price would be around $0.99. When it comes to packaging, they are able to make more money on orders that are very large which would mainly go to those discount stores. Therefore, at pharmacies such as Wal-Greens and CVS the price would be up-charged to $1.79 because there is not bulk ordering. I think a reasonable markup for Carmex is a 3:1 ratio. Make the cost three times what the production of the unit is. If it costs 50 cents to make a tube of Carmex, then I believe it should be priced anywhere from $1.49 to $1.99 max. Then it is still competitive with brands and are still deals. 1/3 of the cost can go to production wages, and the other third and go to profits. With these profits, they can expand into new markets such as skin care or balm designs can be implemented for future improved