Amenities Price Profit Margin Profit Cost Professional massage package $ 60.00 4
ID: 374201 • Letter: A
Question
Amenities
Price
Profit Margin
Profit
Cost
Professional massage package
$ 60.00
40%
$ 24.00
$ 36.00
Spa package
$ 95.00
30%
$ 28.50
$ 66.50
Aerobics classes
$ 35.00
40%
$ 14.00
$ 21.00
Formula Used:
PM=Profit/Retail price
Under bundle pricing system, companies offer a package of goods/services for a lower price than taking all those services would charge individually. This strategy allows the company to increase their profits (due to utilization of all the services offered) and the customer gets a discount. Hence, it is a win-win strategy for both.
Bundling Amenities
Cost
$ 123.50
(36+66.50+21.00)
Required PM
25%
PM=(price-cost)/price
Solving for price, p:
0.25=(p-123.50)/p
0.25p=p-123.50
0.75p=123.50
p=164.67
Hence, the final price offered will be $16.67 for the bundled pricing program for the given 3 amenities.
Amenities
Price
Profit Margin
Profit
Cost
Professional massage package
$ 60.00
40%
$ 24.00
$ 36.00
Spa package
$ 95.00
30%
$ 28.50
$ 66.50
Aerobics classes
$ 35.00
40%
$ 14.00
$ 21.00
Formula Used:
PM=Profit/Retail price
Under bundle pricing system, companies offer a package of goods/services for a lower price than taking all those services would charge individually. This strategy allows the company to increase their profits (due to utilization of all the services offered) and the customer gets a discount. Hence, it is a win-win strategy for both.
Bundling Amenities
Cost
$ 123.50
(36+66.50+21.00)
Required PM
25%
PM=(price-cost)/price
Solving for price, p:
0.25=(p-123.50)/p
0.25p=p-123.50
0.75p=123.50
p=164.67
Hence, the final price offered will be $16.67 for the bundled pricing program for the given 3 amenities.
Explanation / Answer
You are to assemble a bundled pricing program for the amenities of the hotel. The goal is to combine any three of the amenities that you feel would be the best combination. Your desire is to establish a pricing mechanism for the bundle that would allow you to maintain a 25% profit margin for the hotel. Explain your pricing system, your final price you would offer, and how you determined that price.
The three amenities are:
Professional massage package – price: $60 for a 30 minute massage (40% PM)
Spa package – price: $95 for a 30 minute sauna followed by a facial treatment and then heated rock therapy (30% PM)
Aerobics classes – price: $35 for a 30 minute session (40% PM)
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