Question

Marketing Strategy

Price Response

In NewShoes you will make marketing decisions for each region in which you are selling your shoes. When setting price, you need to consider both the unit cost of your product and expectations of consumers in the market. You can use break-even analysis to project how many units you need to sell at a given price to cover costs. Knowing how consumers respond to price will require doing some market research. A good place to start is to get an overall understanding of your market. You will find brief descriptions of the Home, Domestic, and Foreign markets in the case. While this does not tell us the exact price consumers expect to pay, there do appear to be some differences worth noting. You will explore these differences in questions 1, 2, and 3.

Understanding general tendencies is helpful, but you need to get a clearer picture of each market’s response to price. One way to do that is to try out different prices in test markets to establish the relationship between price and demand for our product. If that is not an option, you may be able to use historical data to predict what demand will be at a particular price. For questions 4 and 5, you will use the following sample data, which shows 5 periods of prices and unit sales.

Period

1

2

3

4

5

Price

$90.00

$110.00

$70.00

$80.00

$80.00

Units Sold

100,000

70,000

110,000

120,000

130,000

1. Regarding the price of athletic shoes, how would you describe consumers in the Home market?

2. In the Domestic market, what is probably the best price for buyers?

3. What is the attitude of customers in the Foreign market toward price?

Continued on next page...

Student or Team Name:

4. Plot the data from the table on the graph below, and draw a curve that estimates the consumer response to price. How many units would you expect to sell if you set the price at $85?

5. What factors besides price might account for the differences in sales for each period?

Answer 1

Hi friend,

Please refer to the solution below.