A manufacturer of a wearable fitness tracker has identified two groups of consumers for its product: occasional exercisers and competitive runners. Occasional exercisers, on average, have lower values for fitness trackers than competitive runners. Additionally, occasional exercisers attribute almost no extra value to a “friends” feature that lets you keep track of and compete with other users, while competitive runners, on average, value the friends feature. The manufacturer is considering introducing two different models. The manufacturer has determined that occasional exercisers value a fitness tracker without the friends feature at $70 and one with the friends feature at $80, while competitive runners value the two versions at $80 and $150. Suppose the manufacturer is considering three pricing strategies: 1. Market a single type of fitness tracker with the friends feature at $80 to both occasional exercisers and competitive runners. 2. Market a single type of fitness tracker with the friends feature at $150 to only competitive runners. 3. Market a fitness tracker without the friends feature to occasional exercisers for $70. In addition, market a fitness tracker with friends to competitive runners at $139. For simplicity, assume there is only one occasional exerciser and one competitive runner. Further assume that if the price of a fitness tracker is equal to an individual’s willingness to pay, the individual will purchase the fitness tracker. Use the following table to indicate the revenue from men, the revenue from women, and the total revenue from each strategy. Strategy Revenue from Occasional Exercisers Revenue from Competitive Runners Total Revenue from Strategy 1. Only fitness tracker with friends feature at $80 to both customers $ $ $ 2. Only fitness tracker with friends feature at $150 to runners. $ $ $ 3. Tracker without the friends feature to exercisers for $70, tracker with friends feature to runners for $139. $ $ $ Suppose the market for the fitness tracker is now made up entirely of competitive runners. For simplicity, assume the market is made up of two competitive runners. Under these conditions, pricing strategy (3,1,2) would maximize revenue for the manufacturer.
A manufacturer of a wearable fitness tracker has identified two groups of consumers for its product: occasional exercisers and competitive runners. Occasional exercisers, on average, have lower values for fitness trackers than competitive runners. Additionally, occasional exercisers attribute almost no extra value to a “friends” feature that lets you keep track of and compete with other users, while competitive runners, on average, value the friends feature. The manufacturer is considering introducing two different models. The manufacturer has determined that occasional exercisers value a fitness tracker without the friends feature at $70 and one with the friends feature at $80, while competitive runners value the two versions at $80 and $150.
Suppose the manufacturer is considering three pricing strategies:
1. Market a single type of fitness tracker with the friends feature at $80 to both occasional exercisers and competitive runners.
2. Market a single type of fitness tracker with the friends feature at $150 to only competitive runners.
3. Market a fitness tracker without the friends feature to occasional exercisers for $70.
In addition, market a fitness tracker with friends to competitive runners at $139.
For simplicity, assume there is only one occasional exerciser and one competitive runner. Further assume that if the price of a fitness tracker is equal to an individual’s willingness to pay, the individual will purchase the fitness tracker.
Use the following table to indicate the revenue from men, the revenue from women, and the total revenue from each strategy.
Strategy Revenue from Occasional Exercisers Revenue from Competitive Runners Total Revenue from Strategy 1. Only fitness tracker with friends feature at $80 to both customers $ $ $
2. Only fitness tracker with friends feature at $150 to runners. $ $ $
3. Tracker without the friends feature to exercisers for $70, tracker with friends feature to runners for $139. $ $ $
Suppose the market for the fitness tracker is now made up entirely of competitive runners. For simplicity, assume the market is made up of two competitive runners.
Under these conditions, pricing strategy (3,1,2) would maximize revenue for the manufacturer.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
