Croft Industries produces asphalt shingles for the construction industry. The market for asphalt shingles has slowed in recent years due to depressed new home construction and uncertainty in the economy. Croft faces competition from large producers like GAF Corporation and Georgia-Pacific Corporation. The primary problem is determining the optimal price per square for Croft's asphalt shingles. Historical pricing data shows the impact of price changes on Croft's market share. The recommended action is to use a competition-based pricing strategy and set the price at $18 per square, which analysis shows could lead to a 10% gain in market share. Croft should also increase marketing/advertising and consider differentiating its product

1. I.
Croft Industries
Summary of Facts
A. Market – Asphalt shingles/construction industry
1. Users of their products
a. Homeowners
b. Roofing contractors/applicators
c. Shingle manufactures
2. Shingles market
a. Depressed conditions in new home construction
b. Plateaued in recent years
c. Lower incidence of reroofing owing to uncertain economic issues
3. Economic market
a. Monopolistic Competition
b. Pricing within a relevant range
B. Product
1. Asphalt shingles
2. Benefits
a. Provide protection to a foundation
b. Illustrate style and home decor
3. PLC
a. Maturity stage
b. Slowed growth in sales with intensified competition
C. Price
1. Company sales were $10 million in 1990
2. Price per square raised from $18 to $20 in 1989
3. Prices have been $17, $15, $18, and $20 from 1982-1990
4. Elasticity
a. Elastic -Manufactures are sensitive to price
b. Inelastic- Homeowners will buy no matter the price for protection
D. Promotion
1. Word-of-Mouth
2. Personal selling
3. Roofing material
4. Expansibility
a. Relatively nonexpandible
b. Consumers will always need shingles
E. Place
1. Region area
2. Channel: Channel: Croft - distributors - contractors/applicators consumers/users
3. Channel: Croft - distributors - shingle manufacturer - consumers/users
F. Other
1. Competition with large producers
a. Do not have manufacturing facilities
b. Costs of freight due to weight poised shipping problems
c. Examples: GAF Corporation and Georgia-Pacific Corporation

2. 2
2. Future market share
a. Price at $20, an additional loss of 10% point in market
b. Price at $18, lead to a gain of 10% in market
c. Price at $18 and competitors lower, then a loss of 15% points in market
3. Installed price parity problem
a. Applicators are making money off competitors pricing
b. No cost advantage at point-of-sale for new construction
c. No cost advantage in the bidding process for new construction
4. Problems facing direct competitors
a. Higher direct labor costs
b. Higher material costs
c. Lower contribution margins
II. Problem/Opportunity
A. Primary – Determining the price per square for the asphalt shingles
B. Secondary
1. Competition pricing
2. Marketing and advertising
3. Market share
4. Product differentiation
III. Recommended Action
A. Primary – Use the competition-based pricing strategy to determine a price
B. Secondary
1. Must be aligned in pricing with competitors
2. Allocate budget for additional marketing and advertising efforts
3. Buy out or merge with a current competitor to increase market share
4. Offer a different quality, service, or promotion from competitors