Retrieved video from https://www.youtube.com/watch?v=cn82ij7evFg This video expl

Question

Retrieved video from https://www.youtube.com/watch?v=cn82ij7evFg

This video explains the pricing method used by Root Candles to price the product it manufactures—candles sold under the family brand name of “Root Candles.” A number of pricing concepts are explained in the video: markup pricing, variable and fixed costs, price sensitivity, and price reductions. The influence of competition on pricing, in particular foreign competition, is addressed. The U.S. candle industry has been successful in getting antidumping duties assessed on petroleum wax candles from China, in 1985 and again in 2004. Bob Krulik, Vice President and General Manager, also talks about the impact of a material cost increase on profits when price cannot be increased.

After watching the video case, please answer the following questions:

1. Using the factors identified by marketing researchers that influence price sensitivity, explain why U.S. consumers are not overly price sensitive when it comes to buying candles.

2. What other pricing methods could Root Candles realistically use to price its candles?

3. How might Root escape the price-cost pressures it is experiencing with votives?

Explanation / Answer

1. U.S. consumers are not overly price sensitive because of following reasons:

i) Priority for costumer is scent and color than price. Consumers want the candle to be warm and inviting, match with the décor of the house. Those consumers who buys candle for gift purpose focus on its design and packaging as outer aesthetic is more important for them.

ii) Competition in candles market is high meaning by prices for all candles are almost same because of low barrier for entry and exit in the market.

2. Other pricing method is pricing on the basis of customer perception of the product/brand. The company should focus on offering best quality of wax and long –lasting wick so that they are able to justify high price with good quality.

3. It can escape the price-cost pressure by finding a substitute for the paraffin wax. The increase in the cost of production results in decrease in marginal revenue. Thus any alternative and cheaper source of wax can lower the cost of production thus Root can use beeswax for preparing candles. It can reduce the size of candle at lower price but higher profit margin.

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