Pricing strategy: High end versus low end customers
Suppose a manager of a profitable department store you are confronted with a pricing problem. You have two types of customers: a high-end type that are willing to pay a price of $20 for a pair of Levis Jeans, and a low-end type customer that are willing to pay a price of $13 for the same pair of jeans. Your supplier provided you with the jeans at $10 each and your extra costs are calculated at $1 per jeans. Your survey of your customers for jeans tells you that 50% of your customers are of the high end type and 50% are of the low end type.
1. If you decided to price high, what would be your expected profits per unit?
2. If you decided to price low, what would be your expected profits per unit?
3. Suppose your store attracts 1000 customers for these jeans: will you price high or low? And why?
Solution Preview
1. If you decided to price high, what would be your expected profits per unit?
Total Revenue per unit = $20.00
Purchase cost=$10.00
Other cost = $1.00
Expected profits per unit =$9.00 per unit
2. If you decided to price low, what would be your expected profits per unit?
Total Revenue per unit ...
Solution Summary
This post illustrates how to take pricing decisions when dealing with two types of customers in the market.
... It is strategy that creates the disruptive impact. ... In low-end disruption, the disruptor is focused initially on ... to pay a little more higher price for higher...
... quality and a high price, ie Price and Quality ... The Promotional strategies applied by Mercedes-Benz are ... Mercedes Benz, Luxury “mass-to-class strategy and more ...
... The company applies this strategy since the demand ... be advisable to retain stable prices (Mohammed, 2011). ... Therefore the distribution strategies of these hotels ...
... so this pricing strategy alone wont cause an e-business to ... geographical region and other criteria, the price for DVDs ... who buys a lot of high end products might ...
... exclusively in consumer channels (product and marketing strategy). ... Because of their lower prices relative to the industrial ... and a product of high quality to ...
... A sound competitive strategy is to be competent in all ... than its higher end because of price and demand ... Just because less higher end items are sold does not mean ...
... the product-cost position. ... to forecast the trends so as to frame the future strategy. ... 2. Effective employee development strategies should be adopted to improve ...
... Differing strategies between product-oriented and market ... a wide range of retailers, ranked high to low... This solution discusses if pricing strategy should differ ...
... of the Nokia can be reduced by globalization strategies as. ... The company's strategy to combat this lacuna is that ... After one year, the prices of these models will ...
