Fertilizer Innovation
Practice this intermediate pricing case interview question in the Manufacturing sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of CasesCoach's 835+ consulting case library.
This case tests the candidate's ability to calculate customer willingness-to-pay through economic value analysis and apply segmentation strategy to maximize profit. The solution requires identifying that while large farms alone generate $7M profit, segmenting to include medium farms at a lower price point achieves higher total profit ($8.8M), demonstrating the power of pricing optimization beyond simple cost-plus approaches.
Your client is an agricultural products manufacturer. They invented a product called “Green Nutrient”. This product will help farmers by allowing a variable fertilizer rate which measures the specific amount of fertilizer required for a plot of land, reducing the chance of using too little or too much fertilizer.
The company is interested in a pricing strategy.
Clarifying Information
- “Green Nutrient” measures the amount of fertilizer required, allowing for a “variable fertilizer rate”
- Two main benefits: Avoids over-use (reduce costs) & under-use (increase yield)
- Benefit #1: 20% reduction in fertilizer cost per bag @ 1 bag / acre @ $15 / bag
- Benefit #2: Improve yield 2% [Current average yield: 100 bundles / acre @ $2.5 / bundle]
- No competition
- Farms are about 400 acres on average
- 1,000 Large farms: 1,000 acres each
- 3,000 Medium farms: 400 acres each
- 6,000 Small farms: 200 acres each
- Product lasts 10 years after initial use.
- Product production cost: $1K per unit
- Unit works the same regardless of farm size
- Discount rate: 0%
- Assume no other costs (ex. cust. acq costs)
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