Question

A manufacturer of surgical gloves traditionally made gloves in one color: white. The company received a...

A manufacturer of surgical gloves traditionally made gloves in one color: white. The company received a request from one of its customers to make each size glove a different color. The customer wanted small gloves to be purple, medium to be yellow, and large to be green. Assuming that the cost of the dyes needed to color the gloves is negligible, should the colored gloves be priced any differently than the white gloves?

Homework Answers

Answer #1
Pricing of gloves should differently would depend upon the following factors :
1.No. Of units demanded by customer :
Assuming the customer has demanded a considerable amount of product which would not have been ordered in case dying option was not available , in such a scenario not increasing the price can be considered considering additional revenue which would not have been earned in case of white gloves.
2.Demand for white Gloves in the Market :
In case there is surplus demand for white gloves in the market and even if dying request for the customer is rejected and the order is cancelled manufacturer can earn through supplying whites gloves to other customers in such a scenario manufacturer is in a bargaining position and should charge extra .
3.Pricing Strategy of Competitors : Price charged by competitors should also be considered . Even in case the cost of dying is negligible if competitors are charging extra for coloured gloves and manufacturer gives it a same price then there is a opportunity loss for the manufacturer .
4.Market Position : It is very important to understand the current status of manufacture in the market in case the manufacture does not have enough sales he can give coloured gloves for same prices in order to gain entry in a particular market . But if manufacture is in a comfortable market position and has enough sales there might not be a need to bear extra cost for dyes.
5.Price Trend for Dyes :Once the manufacturer does not charge for the dyes it might be difficult to charge in future . In a scenario where future price of yes increases significantly and forms a significant part of cost manufacture might incur huge loss .Hence it is very important to gain knowledge of price trend .
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