Please see below two questions
You help couples book their perfect honeymoon. You currently offer plans for a cruise and for a casino stay.
Your sales manager is getting her MBA and has suggested you might consider bundling as a way to boost profits.
The table below shows the customer preferences. Your costs are $100 for the first booking and $50 for each additional booking.
“We Book Your Honeymoon Tour”
|
|
Cruise |
Casino |
|
Customer 1 |
$7,000 |
$3,000 |
|
Customer 2 |
$2,000 |
$6,000 |
Given the preferences, would bundling improve profits over the high-cost strategy? Support your conclusion by showing if (by how) profits differ under each strategy.
Follow up question (note that the dollar amounts have not changed from the previous scenario.)
You help couples book their perfect honeymoon. You currently offer plans for a cruise and for a casino stay.
Your sales manager is getting her MBA and has suggested you might consider bundling as a way to boost profits.
The table below shows the customer preferences. Your costs are $100 for the first booking and $50 for each additional booking.
“We Book Your Honeymoon Tour”
|
|
Cruise |
Casino |
|
Customer 1 |
$7,000 |
$3,000 |
|
Customer 2 |
$2,000 |
$6,000 |
You know that about 21% of your customers decline cruises because of seasickness. At least 12% decline the casino trip saying they don’t believe in gambling. As a rough approximation, you estimate that approximately 33% of your customers will never bundle. Given the preferences distribution, will mixed bundling increase profits? You must show the calculations that support your conclusion.
