Baby Needs a New Crib An on-line retailer that sells home and children’s items,
ID: 366149 • Letter: B
Question
Baby Needs a New Crib
An on-line retailer that sells home and children’s items, such as children’s furniture, clothing, and toys, was seeking a way to reach a new audience and stop the declining sales and revenue trends it was suffering. A market research firm hired by the retailer identified a new but potentially risky market: lower-income single parents. The new market seemed attractive because of the large number of single parents, but most of these households were severely constrained in terms of their monetary resources.
The research firm proposed that the retailer offer a generous credit policy that would allow consumers to purchase up to $500 worth of merchandise on credit without a credit check, provided they signed up for direct payment of their credit account from a checking account. Because these were high-risk consumers, the credit accounts would carry extremely high interest rates. The research firm believed that even with losses, enough accounts would be paid off to make the venture extremely profitable for the on-line retailer.
Should the retailer pursue this new marketing strategy? Why or why not?
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Explanation / Answer
Sometimes in business to grab the customers and to get a maximum number of customers it is required to do a loss in the business. Actually, it is not a loss because it is the initiation step of earning maximum profit. The company strategies of helping customers are sometimes different and it varies from one to another. So here for the new baby cribs, it is somehow not possible to afford for a single parent but the retailer planning is something different. The consumers are getting an excellent opportunity to buy the items for babies as the retailer is offering to purchase up to $500 price without any credit check. They are just signing up for the payment from their credit account to the checking account. The retailer knows that in this process the interest’s rates will be higher but they may able to get many paid off to make the process profitable. As because due to this offer many consumers will come to do these online retailing activities to get benefits and they can also buy cribs more and more for their babies. In this way maximum transaction will be held in the session, the initiation of the process will be at a loss but gradually when every consumer will aware and do take this facility automatically the profit rates will be much higher than the normal process of retailing.
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