The online retail operation you recently opened is doing well but you are uncertain of your pricing strategy. Currently the typical customer purchases four items at an average price of $11.96 and for an average transaction size of $47.84. The cost of goods is 60 percent of sales, which yields a gross margin of 40 percent. You are considering lowering prices by 10 percent across the board so you can better compete with other music e-tailers. If you lower prices by 10 percent, you believe that the average number of items purchased per customer would rise by 25 percent.
Assuming your assumptions are correct, should you lower prices by 10 percent across the board? If not, do you have an alternative pricing strategy to propose?
Address the following in your paper:
Review the scenario and address each question while showing work for all mathematical problems.
Provide full analysis for all conclusions made.
For any assumptions made, be sure to reference the scenario when providing justification for responses.
The requirements below must be met for your paper to be accepted and graded:
Write between 750 – 1,250 words (approximately 3 – 5 pages) using Microsoft Word in APA style, see example below.
Use font size 12 and 1” margins.
Include cover page and reference page.
At least 80% of your paper must be original content/writing.
No more than 20% of your content/information may come from references.
Use at least three references from outside the course material, one reference must be from EBSCOhost. Text book, lectures, and other materials in the course may be used, but are not counted toward the three reference requirement.
Cite all reference material (data, dates, graphs, quotes, paraphrased words, values, etc.) in the paper and list on a reference page in APA style.
References must come from sources such as, scholarly journals found in EBSCOhost, CNN, online newspapers such as, The Wall Street Journal, government websites, etc. Sources such as, Wikis, Yahoo Answers, eHow, blogs, etc. are not acceptable for academic writing.