Burt’s Bees Case Study
Consumers look to price as an indication of quality and Burst’s Bees uses that to their advantage. While their products are well differentiated simply by the Ingredients list, Burst’s Bees marks up their products to create an even deeper sense of authenticity.
It wasn’t until the Colors calculations that they even advertised such differences: “… Colors immediately ran magazine ads comparing natural ingredients in Burst’s Bees to chemical ingredients found in other products”. Burst’s Bees had previously accomplished that differentiation on price alone.
Burst’s Bees ignores the competition’s pricing and charges 80% more than necessary, so clearly they have executed a value-based pricing strategy. Customer value-based pricing sets price by calculating the buyer’s perception of value instead of attempting to cover the costs of the company. Green shoppers expect to pay more for truly natural products and Burst’s Bees took that Into consideration before setting their marketing program. Originating In boutiques, they targeted a segment of the market that was accustomed to paying for quality and environmental responsibility. By reflecting the way the consumer perceives value, Burst’s Bees was able to establish a higher price bracket.
Product-mix pricing uses five strategies to maximize profits: product line pricing, optional pricing, captive product pricing, by-product pricing, and product bundle pricing. When Burst’s Bees first began, they clearly took advantage of the by- product pricing strategy of beekeeper Burt Shaving to obtain raw materials at low costs. They eventually set up an entire natural products line and ranged prices from $3 lip balm to $25 lotion, reflecting their product-line pricing strategy. Almost every cosmetics company recommends using the other products in Its line for “optimal results,” which can be described as captive product pricing, as well as advertising their products In “buy two, get one free” fashion.
I don’t think that they would have been successful as a natural-product marketer if they had adopted a low-price strategy. As stated in the case, price acts as both a quality indicator and an attention grabber, so the “willful overpricing” strategy of Burst’s Bees attracts consumers to the product. If the pricing was lower, then perhaps hey would have made a larger profit before the economic downturn, but afterward Burst’s Bees products would have fell victim to the “authenticity gap”. The dark green consumers who still buy natural products in tough economic times would overlook Burst’s Bees products and invest In a brand that they perceived as more authentic.
When Burst’s Bees was privately owned, people trusted the brand’s quality and believed in its all-natural ingredients. However, it has since been acquired by Colors, a conglomerate winos name Is synonymous Walt n Locale.
Nonusers saw tens as a big sell out” on the side of Burst’s Bees, and they no longer trusted the brand’s authenticity. Due to this shift in perception, I think that the pricing strategy is has become unsustainable. Now that the consumer has lost faith in Burst’s Bees, Colors may have to lower prices to attract buyers. Whereas this may have previously caused a decrease in consumer interest, the acquisition by Colors has changed the dynamic of authenticity. The dark green consumers have likely already written off the brand as unauthentic, so lowering the prices wouldn’t affect that market segment.