You operate a Caribbean destination resort. You currently offer plans for a cruise departing from the resort and plans for a casino stay. It is expected that in 2021 there will be some return to more normal travel. You will re-launch your advertising for 2021 announcing that customers will be able to do both for one price. Your marginal cost per customer across both tours is $4800. Customer Preferences Cruise Casino Customer 1 $7,000 $3,000 Customer 2 $2,000 $6,000 Given the preferences, would bundling improve profits over the high-price strategy? Support your conclusion by showing if (by how much) profits differ under each strategy, bundle v high price
You operate a Caribbean destination resort. You currently offer plans for a cruise departing from the resort and plans for a casino stay. It is expected that in 2021 there will be some return to more normal travel. You will re-launch your advertising for 2021 announcing that customers will be able to do both for one
Customer Preferences
|
|
Cruise |
Casino |
|
Customer 1 |
$7,000 |
$3,000 |
|
Customer 2 |
$2,000 |
$6,000 |
Given the preferences, would bundling improve profits over the high-price strategy? Support your conclusion by showing if (by how much) profits differ under each strategy, bundle v high price.
Bundling increases efficiencies as more goods are involved, thus reducing marketing and distribution costs. So, out of all the options, the best is bundling. The mixed bundling profit is equal to or better than that of pure bundling or pricing separately.
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