Question

Mark's pricing strategy assumes immediately increasing the resort's prices will generate the revenue needed to improve its products and services. Do you believe such an assumption is reasonable? Explain your answer using the buyer's view of value formula.

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Answer #1

I do not believ that the assumption is reasonable, this is because as per the buyer's view of value formula when the cost price of the product or services decreases then the value increase. If the prize is increased suddenly then the company will able to deliver less value to the customers. Although because of the increased price the revenue will be better than the earlier if the sales volume remains the same. The company will have more money to invest in improving the quality of the product and services but yet the value will be lower than the earlier.

Due to the sudden increase in the price there is probability that the customer will not sue the services because of the higher price. And if competition is there then there is less probability that the sell will be increased.

So the volume will be decreased resulting the overall revenue may also decrease.

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