The Launch of New Wireless Content Technology Harvard Case Solution & Analysis

Phase 1

Phase IT asks:

  • 1.      Based on the survey results, recommend a percentage mark-up for the subscription pricing. Please show your work.

On the basis of the random sampling in Exhibit 1, at the price of $400, 100 customers are willing to subscribe the product and at the price of $275, 150 customers are willing to subscribe the service, which indicates that the price elasticity of demand will show results of -1.6. Further, the organization can also adopt a practice to vary demand as there is a change in price and the organization shall choose the results at the point that provides optimal profits.

  • 2.      What concerns, if any, do you have with this survey and its ability to provide meaningful information for the pricing of the subscription plan? Explain.

Market survey provides useful information for setting price, which determines price that the customers are willing pay. Before conducting the survey, organizations need to determine the target market and it can be split into demographic and geographic parameters. The organization only targeted the shopping malls across the US but in order to obtain better results, the organization can also target specific locations in order to derive better results.

The sample size needs to be as large as possible          in order to increase accuracy of results and the sample should create sub samples in order to reduce the biasing of results. The market survey involves 1,000 subjects intercepted in shopping malls but the sample size needs to comprise of different gender orage so the organization can adopt appropriate marketing strategies to aim at the target market of customers, who are willing to pay increased price.

The organization also needs to set list of appropriate question and answers, which are expected to be asked from the surveyors. Further, it is also very important that the market research team has sufficient information about the product or service that they are offering to their potential customers because the customers can ask major questions from the team. Additionally, the research team must have sufficient knowledge about the future potential services, so as to influence customers for quoting higher price for additional services.

Phase II

  • 1.      Make a price recommendation based on these estimates. Please explain any concerns or caveats you might have with your recommendation.

“Own” price elasticity of demand is a measure of the change in quantity demanded as there is a change in price. The concept behind this approach is that the demanded quantity is significantly affected as there is a change in price.

Standard error is a measure of variation in a sample of data or when estimation has been made from specific data and when there is a variation in that data, which may disturb the final results.

Based on our analysis in Exhibit 2,the results of the contract with the third party to track subscription sales during the first few months shows price elasticity of demand of -0.75 with an standard error of 1.2, it indicates that a 13.3% change in price will lead to a change in demand by 10%; this is because the demand is inversely proportional to change in price but on the other hand there are standard variation of 1.2 in the results, which indicates that the results are not totally accurate and contains a margin of error.

PHASE-III:

Demand Analysis

  • 1.      (a) Consider the current subscription plan offered by the firm and assume it is the only service offered: basic service on the LG Device with content from NBC, CBS, and ESPN. Plot the EVC demand curve for this subscription plan. Be sure to label your graph clearly.

Economic value to customer (EVC) determines how a customer recognizes the worth of the product. In accordance with this view, the purpose is not to recover the cost but to perceive the value of product in the notice of buyer.

If the organization offers basic service on LG Device with content from NBC, CBS and ESPN then the EVC demand curve for subscription plan will be as follows. The EVC demand curve is plotted in Exhibit 5.

  • 1.      (b) Now suppose the firm also offers an alternative plan consisting of basic phone service on the LG device with content from NBC, CBS, ABC, ESPN and STARZ for $50 per month. Plot the new EVC demand curve for the plan offered in 1 (a).

If the organization offers basic service on LG Device with content from NBC, CBS, ABC, ESPN and STARZ then the EVC demand curve for subscription plan will be as follows. The EVC demand curve has been plotted in Exhibit 6.

Pricing Analysis:

  • 2.      Suppose the firm only offers the plan in 1(a). What is the revenue-maximizing, monopoly price of the subscription for a month of service?

Our analysis in Exhibit 3 shows that in order to maximize its revenue, the organization shall set a trade-off between margins and volume and the organization ...........................

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