Question

1. Determine a price strategy indicating assumptions and reasoning.

Grandma recently gave you $1000 for successfully passing your marketing course in school. With this money, you decided to get into your lifelong ambition to set up your own nose piercing business. You ordered from “UP YOUR NOSE ACME” Inc. a shipment of 10K gold diamond stud nose rings. The shipment cost you $1000 including taxes and contains 100 rings. You got this great price on the rings since you bought them on a “final sale - no refund” agreement with ACME.

You want to sell as many rings as possible since the best you can do with unsold rings is to sell them as fish fly hooks for a $1 a piece. Your dad is angry with you since he said you could have invested the $1000 in his business. He would have guaranteed you a safe 20% return after one year. His tattoo business is really taking off.

Currently there are 2 other persons, in the neighborhood, selling nose rings. One sells only rings, at $29.95 each. The other person sells a combined ring and nose piercing service for $49.99. Both nose rings are very similar to the diamond studs that you received from ACME.

Mom provides her walk-in service for $25 per nose piercing job. This is the going rate in the trade. She, however, is willing to charge you only $10 per piercing if you sell the ring combined with (her) piercing service.

You have done some very hasty market research and come up some interesting conclusions regarding potential customer sales data. You expect that the demand for the nose rings is 75, 50, 25, and 5 if the prices are $25, $50, $75, and $100, respectively. You have also discovered that most potential customers recall the terrible incident that happened last year. A fly by night nose ring sales person sold some inexpensive rings in town. The rings, although they looked like gold, where made out of recycle copper. As soon as someone came down with a cold and runny nose, the rings quickly turned green. In one unfortunate case the nose ring wearer developed a bad reaction to the ring. The nose became so badly infected and gangrenous that the doctors had to cut if off from the person’s face.

Answer 1

Here are a few strategies you can choose from when determining your prices:

Price based on value. ...

Price based on perception. ...

Price with the trend. ...

Know how to raise or lower prices. ...

Use the high-low strategy to attract customers. ...

Price lower to dominate your market only if you have a long-term cost advantage.