CASEAPPLICATION 2 4 9
4.Whatconditionsarenecessaryif a "pricingabovethecompetition"strategyistobesuccessful?
- Discussthealternativestrategiesthatcanbeadoptedinnewproductpricing.Underwhatcon-
ditionsshouldeachbeused?
- Listsomeadvantagesofp:;ychologicalpricing.Whataresomeoftherisks?
7.Whataresomeofthemorecommontypesofdiscountsandallowancesandthepurposeofeach?
- Whatispricelining?Whatbenefitsdoes priceliningholdforcustomers?
- Whatadvantagemighta uniformdeliveredpricehaveforaseller?
Project
Interviewa marketingpersonresponsibleforpricingintheirorganization.
Assess thetypeofpricingstrategytheyus e andwhy.Writea three-tofive-pagereport.
CASEAPPLICATION
UNITEDTECI:ITRONICS
UnitedTechtronicsfaceda major pricingdecisionwith respecttoitsnewvideoscreentelevision.
"We'rereallyexcitedhereatUnitedTechtronics,"exclaimedRoyCowing,founderandpresidentof
UnitedTechtronics."We'vemadea mostsignificanttechnologicalbreakthroughinlargescreen, video
televisionsystems."He wentontoexplainthatthemarketingplanforthisproductwasnowhismajor
areaofconcernandthatwhatpricetochargewasthemarketingquestionthatwasgivinghimthe
mostdifficulty.
CowingfoundedUnitedTechtronics(UT) inBostonin1959.PriortoL!}attime, Cowinghad
beenanassociateprofessorofelectricalengineeringatM.LT.CowingfoundedUTtomanufacUlre
andmarketproductsmakinguseofsomeoftheelectronicinventionshehaddevelopedwhileat M.I.T.
Salesweremademostlytothespaceprogramandthemilitary.
Fora numberofyears, Cowinghadbeentryingtoreducethecompany'sdependencyon gov-
ernmentsales.Oneofthediversificationprojectsthathehadcommittedresearchanddevelopment
moniesto was theso-calledvideoscreenproject.Theobjective ofthisprojectwastodevelopa sys-
temwherebya televisionpicturecouldbedi splayedona screenas bigaseighttotenfeetdiagonally.
OneofUT's engineersmadethenecessarybreakthroughanddevelopedworkingprototypes.Upto
thatpoint,UThadinvested$600,000intheproject.
Extra-largetelevisionsystemswerenotnew.Therewerea numberofcompanieswhosoldsuch
systemsbothtotheconsumerandcommercial(tavern~,restaurants,andsoon)markets.Mostcur-
rentsystems madeuseofa specialmagnifyingscreen.Theresultofthisprocessisthatthefinalpic-
turelackedmuchofthebrightnessoftheoriginalsmallscreen.Asa result, thepicturehadto beviewed
ina darkenedroom.Thereweresomeothervideosystemsthatdidnotusethemagnifyingprocess.
Thesesystemsusedspecialtubes,buttheyalsosufferedfroma lackofbrightnes:;.
UThaddevelopeda systemthat wasbrightenoughto beviewedin regulardaylightona screen
uptotenfeetdiagonally.Cowingwasunwillingtodiscuss howthis wasaccomplished.Hewould
onlysaythata patentprotectedtheprocessandthathethoughtit wouldtakeatleasttwotothree
yearsforanycompetitortoduplicatetheresultsofthesystem.
Anumberoflargeandsmallcompanies wereactiveinthis area.Admiral,GeneralElectric,
RCA,Zenith,andSonywereallthoughttobeworkingondevelopinglarge-screensystemsdirected
attheconsumermarket.Sonywasrumoredtobereadytointroducea 6O-inchdiagonalscreen3YS-
ternthatwouldretailforabout$2,500.Anumberofsmallcompanieswerealreadyproducingsys-
tems.AdventCorporation,a smallNewEnglandcompany,claimedtohavesold4,00084-inchdiagonal
