Liza Davis & The Bargain Hunting Customer Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Problem Statement

The main problem of the company is how to curtail the extra cost of discount and on that basis how it can overcome it to achieve the desired profit. Moreover, the organization wants to adopt the bargain hunter strategy in this economic crisis. This is challenging for the company to maintain the profitability level while giving incentives to the customers. The organization is rooted on providing customers’ value and it does not focus on profits. The company has to analyze its benefits and costs with respect to the external environmental factors which affect the enterprise value. Bargain Hunter gives the incentive plan to the customers which involve the discount percentage, incentives, coupons, and rewards. The marketing people believe that the consumer behavior has changed because of the recession and customers are now becoming more price-sensitive. The problem now is that the merchandise head is not supporting this decision because of the profitability of the organization. By providing the discount to the customers they need to bear heavy cost which will affect their profit.

Furthermore, the company has faced the problems regarding management appraisal because it lacks the criteria of performance evaluation. The company has to perform remarkably well in order to survive the recession. The company is cornered regarding both internal and external issues. The competitors are providing lower prices as compared to the company’s; hence are impacting over the company’s image and credibility. .

The solutions for the problems depend upon the internal and external strengths & weaknesses of the company. Moreover, management has to utilize the resources for gaining such extra benefits to the current and future objectives of the enterprise. It has to analyze the customers’ information and customer profitability for upgrading the values of the company with respect to the financial as well as non-financial factors which are very important for the company.

Analysis factors

The analysis factors for the company are to build the cost and benefit features to solve the problems by giving the suitable answers for it. In the current system, the company is already having operating losses. The magnitude of these losses is increasing because of recession. The steps to overcome these losses are to reduce the irrelevant costs of the project. This is one of the factors of the analysis, but in this company the analyzed discount rates may change with respect to certain assumptions. These assumptions are basic assumptions which relate to the management accountancy and performance management. Although the emphasis of the factors relates to the financial side, but they also allow the help of the non-financial factors which is important for the analysis of the management operations.

The non-financial factors are based on the qualitative factors which most probably are brand values of the enterprise, their value proposition with respect to the customers and customer relationship with the business. Furthermore, the factors are given below with respect to the current features of the company:

Gathering the requirements of existing and future legislation
Comparing the competitors standards with good reputations
Ensuring the morale of the sales teams
Maintaining the position with customer with respect to their needs and wants

These are some non-financial factors which affect the profitability of the company as well as dealing with the external environment of the organization. The financial factors relates to the cost and benefit analysis which are as follows:

Decide whether the discounts to the customers is feasible or not
Discounts are appropriate for the company’s finances
Chances of the success with respect to the discount values of customers
The resource may be utilized proper with numerical presentations

These are the factors upon which the company has to analyze the possibility to increase the retail store revenues after incorporating all the above criteria.

Question 1

What is the value of the discount customer?

Answer 1

Value of the Discount Customer

The value of the discount customers will vary depending upon the discount rate, which will be offered to the customers. The excel sheet shows the calculation performed on the basis of different discount rates. In the analysis, the discount rates have been taken from 20% to 60% on the basis of certain assumptions and criteria to evaluate the best potential discount policy for the company. At sixty percent criteria the discount values give a loss instead of operating margin. If the analysis moves to 50% discount then it appears to yield profits for the business. The cost of the discounted customer will be $568,925 loss at sixty percent, compared to its full price. This shows that the company has a low level of potentiality and this will result in an advantage for the competitors..........................

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