John Deere Case

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To: Deere & Company Senior Management Team From: Robert Gerstenberger Date: November 15, 2010 Subject: Deere & Company Pricing Strategy for Launch of JD 750 This memo recommends a pricing strategy of pure parity for the launch of the JD 750 Bulldozer, one of Deere & Company’s most audacious ventures yet. Because this product launch addresses a market space in which Deere is not a dominant player, this strategy aims to provide incentives to industrial customers and existing Deere dealers to embrace a new technology. By launching this pricing scheme through an aggressive $300k promotional campaign, Deere & Company may expect to earn line profits of $45M, and establish itself as a major player in a new lucrative market segment. Background Deere has an established reputation for quality in the small crawler tractor market segment, and has built considerable brand loyalty among this purchasing group, along with more than 50% market share. Deere has not, however, enjoyed this significant level of share in the heavy construction industry and has never offered a product as large as the new JD 750. Over the past 10 years, we have invested nearly $70M in development and production for this innovative new line, and are ready to begin promoting the JD 750. We have received a promotional budget of $300k, and must decide on the price to communicate to our dealers. Recommendations I recommend that Deere & Company price the JD 750 at the same market price as the Cat D5 product. By pricing at parity and focusing our advertising on the superior performance and standard higher quality feature set of our JD 750 in comparison to the Cat D5, we can capture market share and bring in an estimated $45M in line profits. Basis for Recommendations Financial analysis of projected revenues and market shares from the three pricing options shown in

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