Pencil Manufacturing and Marketing

Pencil Manufacturing and Marketing

Pencil: From the manufacturer to the consumer

In the case of an ordinary pencil, every aspect of the production and marketing process is designed to maximize profits and to minimize costs.

Most pencils are relatively low-cost, low-investment items -- a consumer does not give much thought to a pencil, other than functionality and price. "These days, typical yellow writing pencils and children's coloring pencils are generally considered to be a commodity. That is, one product from one producer is more or less considered by the customer to be as good as another, just like corn from one farm is more or less the same as corn from another farm" (Economics of pencil-making, 2012, Studio 602).

Most consumers do not have a 'favorite' brand of pencil.

Profitability

A. Economies of scale: For a pencil, the profit occurs through manufacturing at an economy of scale, rather than making a larger profit off of each pencil. Ultimately, the manufacturer must consider how "the quantity of product to produce drives the level of investment required in the factory and inventories as well as can effect [sic] the cost per unit produced due to economies of scale" (Economics of pencil-making, 2012, Studio 602).

B. Reducing input costs

1. Outsourcing

2. Moving the location of production to reduce "transportation costs for incoming materials as well as to the customer" (Economics of pencil-making, 2012, Studio 602).

3. Finding ways to reduce "regulatory and energy cost as well as duties and taxes" (Economics of pencil-making, 2012, Studio 602).

III. Marketing

A. Quality-based: Some level of quality is required for the pencil to be functional. If a particular brand of pencil is completely substandard, consumers will not purchase it next time.

B. Retailer promotions: The manufacturer must also reach out to retailers to ensure that the pencil is attractively displayed in stores and promoted to likely consumers.

1. During 'back to school' sales, some retailers may offer discounts on specific brands of pencils. The manufacturer can benefit from having the right retailer promote and position the product in stores and both benefit from this arrangement. The retailer benefits from higher sales figures of the popular office staple, while the manufacturer benefits from higher sales figures.

C. Niche marketing: Although pencils are low-cost items, for companies which market 'special' pencils, spanning everything from pretty pencils in bright colors for schoolchildren to drafting pencils, some additional marketing may be necessary beyond that of low pricing or discounts via retailers, since such specialty items are usually not sold on a cost basis alone. The attractive 'eye candy' appeal is required to make the product particularly desirable and to add to the 'nag factor' which will make children beg their parents to buy the product; or, the product must be of higher quality to make it desirable for professionals who use it for a functional purpose.