Carmex is dedicated to providing consumers with superior lip balm formulas—that heal, sooth and protect—while ensuring lips remain healthy and hydrated,” exclaims Paul Woelbing, president of Carma Laboratories, Inc.

It’s an ambitious mission, but the company has been extraordinarily successful with its 75-year-old product.

Woelbing and his management team at Carma Laboratories can attribute their success to a strong brand, a loyal customer base, a growing product line, financial strength, and an exceptional talent for setting prices that achieve company objectives and still provide value to customers. Even during the recession and periods of slow growth the company has been successful. “In a rough economy, shopping habits change,”

Woelbing says. “People buy smaller quantities more frequently, but they still need personal care products.”

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 an 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 their prices?