Slide21_2010Fall_MGMT324

# Offering both l h versioning rule of thumb sell l to

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Offering both L & H (Versioning) Rule of thumb: Sell L to low-valuation segment (B) and sell H to high-valuation segment (A) Set P L = \$40 to sell L to B and then think about P H Can we set P H as high as \$100? No! Then A would buy L because CS L =\$10 & CS H =\$0 Thereby P H =\$90 so that CS H =\$10. Profit=40×100+90×100=13,000

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Versioning: How to Price Discriminate Case 3 Perceived Benefit (\$) Version 50 40 60 L H Segment A Segment B 80 Offering L only P L =40 Sell L to both A and B Profit=40×(100+100)=8,000 Offering H only P H =60 Sell H to both A and B Profit=60×(100+100)=12,000 Offering both L & H (Versioning) Rule of thumb: Sell L to low-valuation segment (B) and sell H to high-valuation segment (A) Set P L = \$40 to sell L to B and then think about P H Can we set P H as high as \$80? No! Then A would buy L because CS L =\$10 & CS H =\$0 Thereby P H =\$70 so that CS H =\$10. Profit=40×100+70×100=11,000
3 rd Individual Assignment: Versioning Test Problem Given the following information, does ACME maximize its profit by offering just a slow speed carrot peeler, just a high speed, or both? ACME has a monopoly in the carrot peeler industry. What price(s) would be charged? What profit would be made? Segment Number of consumers Benefit derived from Product Slow speed High Speed A 30 \$70 \$80 B 10 \$50 \$90 Marginal costs of production are zero for both the high and slow speed carrot peeler. Consumers in each segment all behave exactly same. They purchase the high speed peeler, the slow speed peeler or neither. Answer the above questions once more in the situation where marginal cost is still zero for the slow speed carrot peeler but \$30 for the high speed carrot peeler. [Note Profit = (Price – Marginal cost) × Number of units sold ]

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3 rd Individual Assignment: Submission Guideline By uploading a file through the “Homework” tab on the Katalyst Attachment format: 1) One-page Word/PDF file, 2) Your section # and name must be contained in the file name (for example, HW3_S5_SangwooShin.doc) Due: By Next Tuesday 11:59PM, Nov 23 Grading policy Based on 1) Whether to submit on time and 2) Whether to follow the guidelines However, correct answers pay off by two-point bonus in “In-class Participation and Others” account Submission guideline
Promotion (or Communication) Mix Advertising Elements Any paid form of nonpersonal presentation and promotion of ideas, goods, services by an identified sponsor Public Relations Nonpersonal indirectly paid presentation of a product, service or business unit Personal Selling (Salesforce) Oral presentation in a conversation with one or more prospective purchasers for the purpose of making a sale

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