Should cost be a factor in carmex prices

1. Which of the four approaches to setting a price does Carmex use for its products? Should one approach be used exclusively?

2. Why do many Carmex product prices end in 9? What type of pricing is this called? What should happen to demand when this approach is used?

3. Should cost be a factor in Carmex’s prices? What do you think is a reasonable markup for Carmex and for its retailers?

4. What is the difference between and EDLP retailer and a High-Low retailer? Why does Carmex charge them different prices?

5. Conduct an online search of lip balm products and compare the price of a Carmex product with three similar products from competitors. How do you think the competitors are setting prices?

This case describes the interesting history of Alfred Woelbing, who created the first Carmex product in his kitchen in 1937. The case also explains how Alfred’s son, Don, helped add new products and expand the business, and that Alfred’s grandsons, Paul and Eric Woelbing, are responsible for running Carma Laboratories, Inc. today. The primary focus of the case is to describe how prices are set for Carmex lip balm products.

The case provides students with an opportunity to see how each of the four approaches to pricing—demand-oriented, cost-oriented, profit-oriented, and competition-oriented—can influence the price of a consumer product. In addition, students learn about several types of retailers, the introduction of a new product, and the use of several forms of promotion. The experts in the video, Kirk Hodgdon and Alisa Allen from Bolin Marketing, represent a growing trend for agencies—personnel who offer marketing expertise in addition to the traditional advertising and media expertise.

One way to begin the discussion of pricing is to ask students to describe a recent purchase. They might mention a meal in a restaurant, clothing, a book, or a ticket to a movie. Ask them what the price was, and then ask them to explain how they think the price was determined. Follow that discussion by asking:

1. How many of you have purchased a lip balm (e.g. Carmex, Blistex, ChapStick, etc.)?

2. What was the reason for your purchase (e.g. dry lips, chapped lips, cold sores, etc.)?

3. What was the price and how do you think it was determined?

These questions then lead to the questions posed in the case.