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Lipman Bottle Company

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Price is an element of the marketing mix that can produce revenue for an organization. Price communicates to the market the value positioning of an organization's product. A product that is well-designed and marketed as a premium product can bring in increased revenue for an organization. Pricing is more than a number on a tag and has many components. Pricing decisions, strategies are complex and involve the decision makers to consider many elements such as the company’s positioning, the company’s brand, the customers, the competition and the marketing environment (Kotler & Keller, 2012). Companies use many methods to determine the prices for products that will generate better revenue. The owner or boss of a small business will often be the ones that determine the pricing strategy but in a big corporation, the pricing strategy will be established by the top management. The divisional, product and line managers of the big corporation use the pricing strategy policies and objectives approved by the top-management team (Kotler & Keller, 2012).
Lipman Bottle Company is a bottle distributing company that offers bottle label printing solutions to their customers. Lipman Bottle Company launched its operation in 1909 and had become the leading bottle distribution company in Albany (Anthony, Hawkins, & Merchant, 2011). Over the past two the use of plastic has increased because of its use in manufacturing bottle caps, lids, spray pumps and also because distributors had the technology that allowed them to print directly labels onto bottles, making it convenient and more cost effective for users to purchase both solutions from one vendor. In November 1982, Robert Lipman the vice president of Lipman Bottle Company wanted to develop a pricing strategy that could be recommended to his father that will help the company generate 30 percent profit margin and allow expanding their

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...Summary: Lipman Bottle Company is a bottle distributor located in Albany, New York. The firm is operating in variable sizes of bottles and printing, but their profit is entirely from printing. The vice president, Robert Lipman, has a goal to make 30 percent margin and expand their business in New York-New Jersey area. Hence, he asked us to review their product line and costing information then give suggestions to increase profit and make a price list for the Albany area. Analysis: We completed the calculations finding variable costs per thousand bottles for a number of combinations. Table #1 summarizes the variable costs for the Albany area, which includes scrap. Table #2 summarizes the variable costs for the New York – New Jersey area, which includes shipping but not freight costs. We analyzed the data for bottle sizes 0-1 oz. and 17-32 oz., as well as order quantity ranges of 5,000-9,999 and 100,000-249,999. Full calculations and details can be found in Exhibits 1-8. Mr. Lipman’s goal is to get 30% margin of the revenue. Exhibit 9 shows the break even, which means no gain or loss, the profit margin of 30%, and then the price calculated to achieve the margin of revenue Mr. Lipman wanted. We subtract the 30% of revenue; the break even should be the rest of 70% of revenue. So we use: Variable cost + Fixed cost/Total machine-hours ($106,944/16,000hrs) = Break even Total price (revenue) * (1-30%) = Break even Thus, the suggested prices are shown in Exhibit...

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