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Discussion Set

1. You are serving as the chair for your community’s annual wellness campaign.  A key event is the annual Walk 3k, Run 10k, Ride 20k event.  The event is staged entirely by volunteers and the goal is to attract community-wide awareness of getting active as a key step to wellness.  In other words, the goal is not to raise money, but to prompt awareness.  As the chair, you set a financial goal to break even on the one and only cost of the event, a fitness bag with the community seal and the event motto, “I AM ON THE RIGHT TRACK!”

The cost of the bags, which must be ordered in batches of 100, are: (complete marginal cost, below).

Select any or all viable approaches below:

2. Your marketing department just undertook a major advertising campaign promoting the quality of your Best Brand Bike Shorts—BBB Shorts. They have provided you with an estimate of the success of the campaign stating: “the price elasticity of demand has decreased from -5.76 to -3.76.”

Before the campaign, your price was $240 per pair of BBB Shorts.  What should the new price be? (Show how you obtained answer).

3. You help couples book their perfect honeymoon.  You currently offer plans for a cruise and for a casino stay.

Your sales manager is getting her MBA and has suggested you might consider bundling as a way to boost profits.

The table below shows the customer preferences.  Your costs are $100 for the first booking and $50 for each additional booking.

“We Book Your Honeymoon Tour”

Given the preferences, would bundling improve profits over the high-cost strategy?  Support conclusion by showing if (by how) profits differ under each strategy.

4. Follow up (note that the dollar amounts have not changed from the previous scenario.)

You help couples book their perfect honeymoon.  You currently offer plans for a cruise and for a casino stay.

Your sales manager is getting her MBA and has suggested you might consider bundling as a way to boost profits.

The table below shows the customer preferences.  Your costs are $100 for the first booking and $50 for each additional booking.

“We Book Your Honeymoon Tour”

You know that about 21% of your customers decline cruises because of seasickness.  At least 12% decline the casino trip saying they do not believe in gambling.  As a rough approximation, you estimate that approximately 33% of your customers will never bundle.  Given the preferences distribution, will mixed bundling increase profits?  Show the calculations that support your conclusion.