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    How Much Good Smell

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    Ashutosh Sharma
    Courtney's gift store has sold a popular scented potpourri for the past few Christmases. Last year, the store sold 600 units at $9.95 each after raising the price from $9.50 the previous year. This year, the wholesale cost has risen to $5.50 per bag. The store owner wants to keep the retail price at $9.95, believing the $10 price point attracts customers, but the buyer argues they should raise the price to $12.50 to improve margins. The owner is concerned higher pricing could reduce the product's draw for customers.

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    How Much Good Smell

    Uploaded by

    Ashutosh Sharma
    126 views1 page
    Courtney's gift store has sold a popular scented potpourri for the past few Christmases. Last year, the store sold 600 units at $9.95 each after raising the price from $9.50 the previous year. This year, the wholesale cost has risen to $5.50 per bag. The store owner wants to keep the retail price at $9.95, believing the $10 price point attracts customers, but the buyer argues they should raise the price to $12.50 to improve margins. The owner is concerned higher pricing could reduce the product's draw for customers.

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    How much good smell

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    Courtney's gift store has sold a popular scented potpourri for the past few Christmases. Last year, the store sold 600 units at $9.95 each after raising the price from $9.50 the previous year. This year, the wholesale cost has risen to $5.50 per bag. The store owner wants to keep the retail price at $9.95, believing the $10 price point attracts customers, but the buyer argues they should raise the price to $12.50 to improve margins. The owner is concerned higher pricing could reduce the product's draw for customers.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    126 views1 page

    How Much Good Smell

    Uploaded by

    Ashutosh Sharma
    Courtney's gift store has sold a popular scented potpourri for the past few Christmases. Last year, the store sold 600 units at $9.95 each after raising the price from $9.50 the previous year. This year, the wholesale cost has risen to $5.50 per bag. The store owner wants to keep the retail price at $9.95, believing the $10 price point attracts customers, but the buyer argues they should raise the price to $12.50 to improve margins. The owner is concerned higher pricing could reduce the product's draw for customers.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 1

    m:

    For the past o Christmas seasons, Courtney's


    it) sold 300 pieces for $9.50. Courtney's supp~' .
    an upscale
    . gift store
    . , has
    . earned . aa Sweet-' ran out 10 days before Christmas, and it was
    smellmg . potpourri
    . in a plastic'
    . bag .WIt
    . h an
    too late to get any more.
    attrac~Ive nbbon. Heavily scented with cloves
    the mixture gives a pleasant holiday aroma t~ Last year, the manufacturer raised the price ;,'~
    any room, including the store. to $5.00, so Courtney's raised its retail price~p ",,,,~
    Two y~ars ago, the mixture cost $4.50 a bag. $9.9~. Even though the markup was lower tliap'l;~~
    Courtney s (the only store in town that carried that m the previous year, the store owner f~trf~~~
    there was "magic" in the $10 ($9.95) price.":' ,.11,'f:~

    Cases 717

    .~&efore,the store had a complete sellout, this keeps them in a free-spending state of mind. I
    ,'~mefive days before Christmas. Sales last year think we should keep the price at $9.95, despite
    . ere 600 units. '. the poorer markup. And if we can sell many
    This year, the wholesale price has gone more at this price, we'll realize the-same dollar
    to $5.50, and store personnel are trying to gross margin as last year. I think we should buy
    .termine the correct· retail price. The owner 1,000. Furthermore, if people see us raising a
    ..nee again wants to hold the price at $1 ° familiar item's price 25 percent, they might
    wonder whether our other prices are fair."
    -J~9.95), but the buyer disagrees: "It's my job to
    .",ush for the highest possible markup wherever
    :'1 can. This item is a sure seller, as we're still
    :rtheonly store around with it, and we had some DISCUSSION QUESTIONS
    ';'unsatisfied demand last year. I think we should 1. What prices caused Courtney's new
    ~~ark it $12.50, which will improve the markup charges?
    ':to 56 percent. Staying at $10 will penalize 2,~ich price WP\1ldresult in the highest
    '.us unnecessarily, especially considering the
    profit?
    f markup would be even lower' than last year.
    3. What other factors should Courtney's
    ,. Even if we run into price resistance, we'll only
    consider?
    .. have to sell 480 to maintain the same dollar
    , volume." 4. Whatprice would you charge, and how
    many Units would you order?
    The owner demurs" saying, "This scent is • ••••. to. ~: ~ •.

    ipart of our store's ambience. It acts as a draw to This case was written by Professor David Ehrlich, Mary-
    7'~etpeople into the store, and its pleasant smell mount University.

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