When Should You Nickel-and-Dime Your Customers? Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Although standard economic theory (and common sense) dictates that customers should be just as willing to purchase carpeting priced at $500 plus delivery priced at $100 as they truly are to buy carpeting with free delivery priced at $600, recent research implies that cost partitioning, the way a total price is split into parts, influences customers' cost perceptions, their willingness to buy and even their likelihood of repurchasing from the same vendor. The challenge is determining when to combine extras into just one total cost and when to bill separately for extras.

When Should You Nickel-and-Dime Your Customers Case Study Solution

Whether "nickel and diming" your customers or "keeping things simple"is more effective for a special trade depends on many different variables, such as whether customers comparison shop, whether they are more sensitive to the prices of some parts (delivery) than to others (carpeting), whether the cost of one component is small or large relative to the others, whether the business controls the costs and quality of a special part, and which elements are most central to the customer's goals. The writers supply a choice framework to managers to determine when to separate what they bill into a number of parts, and when to roll everything into one cost.

PUBLICATION DATE: October 01, 2010 PRODUCT #: SMR365-HCB-ENG

This is just an excerpt. This case is about SALES & MARKETING