This question has been answered
Question

Consider the Cost

"We have to lower our price or we'll just get killed," said Hoyt Jones, director of operations for the seven‐unit Binky's Sub shops. Binky's was known for its modestly priced, but very high‐quality, sandwiches and soups. Business and profits were good, but now Hoyt and Rachel, who served as Binky's director of marketing, were discussing the new $6.99 "Foot Long Deal" sandwich promotion that had just been rolled out by their major competitor, an extremely large chain of sub shops that operated over 5,000 units nationally and internationally.


"They just decided to lower their prices to appeal to value‐conscious customers," said Hoyt.


"But how can they do that and still make money?" asked Rachel.


"There's always a less expensive variety of ham and cheese on the market," replied Hoyt. "They use lower‐quality ingredients than we do. We charge $8.99 for our foot‐long sub. That wasn't bad when they sold theirs at $7.99. Our customers know we are worth the extra dollar. Now that they are at $6.99 ... I don't know, but I think this is really going to hurt us in the market. We need to do something—fast."


Question


   How large a role do you believe "cost" likely played into the decision of this competitor to reduce its sandwich prices? Explain your answer.

   Do you think the typical foodservice customer will consistently pay a higher price for better‐quality food and beverage products? Give a specific example to support your answer.

   Assume that you were the president of Binky's Subs. What steps would you instruct Hoyt and Rachel to take to address this specific pricing/cost challenge?

Answered by Expert Tutors
The student who asked this found it Helpful
Overall rating 100%
Subject: Business, Management
Consider the Cost 'We have to lower our price or we'll just get killed,' said Hoyt Jones, director of operations for the sevenunit Binky's Sub shops....
Get unstuck

359,109 students got unstuck by Course
Hero in the last week

step by step solutions

Our Expert Tutors provide step by step solutions to help you excel in your courses