Question

Recently, Bubblair, a diving-products company invented a new type of flipper. Flippers are used for swimming under water. The traditional kind resemble oversize webbed duck feet. The new flipper is split down the middle of the fin. It was inspired by a certain kind of fish that swims extremely fast. In tests, swimmers using the split-flipper could swim about 20 percent faster than swimmers wearing a traditional flipper. There are other benefits of using the split style besides swimming faster. It takes less effort to swim with it, so less oxygen is consumed while swimming. That means divers can stay underwater about 20 percent longer on a tank of oxygen. The cost of filling up a 90-minute tank of oxygen is $45.

The usual cost to the consumer of buying all the equipment needed to dive in moderately cold water is about $2000, including oxygen tanks, mask, flippers, oxygen regulator, and wet suit. Bubblair manufactures all of the equipment except the tanks. Their products are noted for being of very high quality, which is important to serious divers because of safety concerns. For example, their top-of-the-line traditional flipper is sold direct to consumers for the price of $60. The president of the company has come to you, the assistant manager, to set the price at which the new split-fin flipper will be sold. You know that because of a new manufacturing process, the cost of producing the new flipper is just $25 (the manufacturing cost of the $60 flipper is $35). You also know that Bubblair has a patent on the split design.

At what price do you sell the split-flipper direct to consumers? Be sure to explain why the price you recommended is better than other prices. Start your answer with the price. Should be around 200 words.

Answer 1

Bubblair, a diving-products company, is already known for their quality product offerings and has created a good brand image in the minds of consumers. The new product development of split flipper has very good and unique features which can decrease the overall requirement of oxygen by 20% and also the swimmer could swim faster by 20%. These benefits can definitely be incorporated into a good pricing strategy to earn maximum profit. As per my understanding, Price Skimming should be the best strategy in this case, i.e. offering the product at higher price till the time of monopoly and once the competitor enters the market with a similar product, then Bubblair can decrease the price and can look for some new differentiation. Thus, the sweet spot for the product in terms of pricing can be of the range $70-$80. The price is slightly higher despite being manufactured at lower cost than traditional flippers because the company should focus on recovering the investments made in the new product development of split flip and enjoy the first movers advantage.