In-class Assignment 4

Chapter 10

Financial Planning and Wealth Management

Section 6113-5

Sailesh Kattel

C0908423
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Sailesh Kattel
C0908423

Read the following scenarios and decide which pricing strategies would be most beneficial.
Answer the given questions / follow the instructions.

1. A videographer specializing in weddings currently charges $2,000 to shoot a wedding. She

has been shooting weddings for over twenty years and has now booked some well-known
clientele. Which two pricing strategies would be most strategic for this videographer and
why? What other pricing recommendations would you make to this videographer?

The videographer has been engaged in the shooting field for more than twenty years and is
well-known for working for celebrity-status clients. The nature of wedding photography is
also cyclic in nature. Thus, following two pricing strategy will be best for the videographer.

Premium Pricing:
Since, the videographer is a very experience person and has worked with well-known
clients, videographer has good status in the market. So, it would be beneficial to adopt a
premium strategy. This strategy involves setting a high price in the market and will attract
the client with sound economic background and well-known social status. The customer will
be willing to pay premium price to get the best wedding photography. Since, every customer
wants their wedding photography to be best, they are willing to pay extra price for the
service.

Tiered Pricing:
Tiered Pricing means offering different products and services in different price bracket.
Wedding photography come with various services like whole wedding photography and
videography including “Mehendi”, “Haldi”, “Wedding”, “Reception”, “Post Wedding Shoot”
etc. The price range can differ according the type of service provide. The wedding shoot
may or may not include shooting with the help of drone as per the price bracket. So,
providing tiered pricing will give an option to customer to select the best service as per their
needs.

Other Pricing Recommendations:

Value Added Services

Bundle Pricing
Regular Review Pricing

2. Recommend and prepare a pricing strategy for a videographer that aligns with her pricing
objectives (assume/suggest these objectives) and considers relevant costs, demand, and
revenues.

Objectives: Assuming objectives of a videographer is to maximize the profit and maintain a

competitive edge.

Strategy: Dynamic Pricing – Adjust the price according to various factors like wedding
date, wedding location, demand of photographer etc. For instance, in peak wedding season
where there is too many wedding and demand of photographer is high, charge high price
and in the season where demand of photographer is low, provide relevant discount.
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Consider Relevant Costs: In peak seasons, consider the price in order to obtain maximum
profit but in off-season, give relevant discount and try to build the brand by attracting as
much customer as possible.

3. Discuss the value of break-even analysis and conduct break-even calculations for the
videographer wedding shot.

Break-even point is the level of sales where total revenue equals to total cost. At break-even
point, company neither incurs profit nor incur losses. It is very much important for a business
to analyse its break event point so that they can analyze how much sales they need to make
in order to cover its fix cost.

Break Even point = Total Fixed Cost/Contribution per unit*

Contribution per unit = Selling Price per wedding – Variable cost per wedding

Identification of fixed cost

The fixed cost of wedding includes following cost:
Insurance costs
Administrative costs
Equipment Costs
Software Costs etc.

Let’s say $40,000 a year

Identification of Variable Cost per Wedding

Variable cost of wedding includes following cost:
Labor cost (Cost required for photographer for photoshoot)
Travelling expenses per photo shoot
Photo Album Cost/ Pen drive cost etc
Let’s say $1,000 per wedding.

Selling Price per Wedding

Selling price per wedding. Let’s say $2,000 per wedding.

Break Even Point

Break Even Point = [$40,000/($2,000 - $1,000)
i.e 40 weddings.
Hence, a photographer should shoot at least 40 weddings per year to break even.

4. Sam has created a clothing line that sells at a local boutique. Short-sleeved shirts are $40,
sweaters are $60, hats are $20, and accessories such as socks are $15. Give Sam two
psychological strategies to use to improve his pricing and hopefully increase product sales.
Explain your answer.
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Bundle pricing can be one pricing strategy that can be used by Sam in order to sell the
product. Bundling the winter cloths like sweater, hats, socks, gloves etc. with appropriate
price could draw few customers and hopefully increase product sales.

Next pricing strategy that could be used and catch consumer’s attraction could be odd-even
pricing. Odd even pricing is a common pricing strategy that involves setting price that end
with an odd or even number. By pricing an a short-sleeved shirt at $39.9 or $39.5 could
attract many customer and can hopefully increase product sales.

5. Now assume that Sam’s shirts sell for $400, his sweaters for $600, his socks for $150, and
his hats for $200. Would your pricing strategy recommendations change any? Why or why
not?

Since Sam is selling the product at higher prices than in the previous case, it seems Sam
has already narrowed his target market. Looking at the selling price of the product,
customers with better financial health are the customers of Sam. So, prestige pricing could
be a better option at current point. His current customers can afford extra prices for quality
products so placing his product as a premium product with prestige pricing could be good
option to boost his sales and earn good profit.

6. Define price elasticity of demand for Sam’s store for two scenarios above. How it affect
Sam’s pricing strategy?

In first scenario (lower prices), the price elasticity of demand could be relatively elastic. At
lower selling prices, customer are more sensitive to price changes, so offering few discounts
could be best option at this scenario.
In the second scenario (higher prices), the price elasticity of demand is likely inelastic.
Customers are less sensitive to price changes, and premium pricing could be an option for
Sam to maximize sales.