Pricing Strategy Harvard Case Solution & Analysis

Phase III

Demand Analysis:

Since, there is no data regarding the variation is price and demand under the phase-III the demand curve is made using the Willingness of Pay synthesis provided in the table. The above graph shows a plot of total willingness to pay in each segment regarding the particular standard package LG phone and three channels NBC, CBS and ESPN.

Similarly this demand curve is also a fair representation of The Willingness to pay, combined with the original standard package of willingness to pay there are additional two channels the ABC and the STARZ, the above graph is a combined willingness of pay for the LG phone along with NBC, CBS, ABC, ESPN and STARZ.

In Phase- III there is not any data that can be used to calculate the best possible price for the subscription package, but an understanding can be developed using the total willingness to pay of each segment what range of price should be charged for the revenue maximization. Since, segment 1 has a total willingness to pay of 14.01; hence, this shows a very small part of the segment will actually be willing to buy this product so the price to be set should be with low margins so the people would actually be drawn towards the product.

Similarly, segment 2 has a total willingness of to pay of 41.43 which represents a greater portion of the segment will be willing to buy this product, which will indicate the company can charge moderate margins on its price.

Segment 3 has a total willingness to pay of 71.7 which comprises a greater part of the segment, which indicates the company can charge substantially high margins to this segment setting a higher price.

If the company is using the basic package with additional channels so it will be a more worthwhile approach for the company and a more satisfying measure for the customer. As the customer will be paying for the channels, hence, he desires to watch meaning he is not bound to the basic package, a greater desirability for a particular channel will have a greater willingness to pay for that particular channel meaning the company will be able to charge a greater price against it, the more popular the channel the more costly it will be.

Under segment 1, with the revised package the WTP has become 30.65 with the increase in WTP the company can now charge marginal profits using higher margins.

Segment 2, the revised WTP is 52 which means greater than half of the segments want to buy this package meaning substantially high margins can be charged.

Segment 3, having a WTP 90 the company could almost charge anything at this point and the market will still absorb it.

Question 2: Childcare Services Pricing in a Ski Resort

The cost given of food & material, baby sitter and average rental the total cost stands at $57 if a 60% gross margin can be set at the price of $143.

There is additional demand in the winter season due to which extra space is to be rented to meet the demand as a result of which additional cost is incurred. The data for additional demand is not provided; the cost of extra rental per child is calculated on the original average children per day that is $25. The price to be quoted with 60% profit margin is $114.

The charge of 60% profit margin will help the Childcare service to achieve profit maximization target. They have set for only concern with this strategy is that by charging such a high price may push the customer away, this will be evaluated by evaluating the market in which the Childcare department is operating. Since, there is very low probability for the fact that a visitor of the ski ranch will drop their child at some other day care center and there is very low chance for that there will be more than one child care service center at the ski ranch meaning Childcare service can charge a high margin with the consideration should also be taken the cost should not be too elevated, which will lead the customer not to visit the ski ranch anymore........................................

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