Oct 09 2011
Lieber Case
"Skylight." Photograph. HowStuffWorks. First Last. HowStuffWorks Inc., Web. 20 Sep 2011..
When Lieber Light Division of Fraser Co, a company with a 70% monopoly in the Seattle skylight industry, was challenged with a new Canadian competitor (Vancouver Light) offering lowering prices – the company faced a diminishing customer base. To retain customers, Lieber could not reduce costs as this would devalue its strong brand; or, engage in a price war as it had higher variable costs. Therefore, Lieber’s best strategy was to maintain its price, but continue retaining customers by focusing on quality.
By focusing on branding and therefore perceptions of quality, Lieber will attract high-end customers who will be willing to pay the higher prices.
(Sourced from ExpoMediaGroup Staraya Krepost from the blog http://www.russiablog.org/2008/09/russian_cosmetics_market_overv.php)
Paul Mitchell Hair products faced similar problems, with high variable costs and increasing entrants in the hair industry, the company decided to focus on their brand and perceived quality. By only selling to professional salons, the company could demand higher prices which compensated for a highly – fragmented market. Even though Paul Mitchell’s pricing strategies marketed to less than 24.1 % of the industry (see chart above) the company still experienced higher revenues (with annual sales now approaching 900 million) 1 than many larger companies who cater to the entire market.
1 Uknown. “#65 John Paul DeJoria – The Forbes 400 Richest Americans 2009 – Forbes.com.” Information for the World’s Business Leaders – Forbes.com. Forbes.com, 30 Sept. 2009. Web. 08 Oct. 2011. <http://www.forbes.com/lists/2009/54/rich-list-09_John-Paul-DeJoria_PYLZ.html>.