Question

Illegal Price- Fixing or Just Good Customer Service?

You are the vice president for marketing at Explorer Technology (ET), a manufacturer of large 3D high-definition video screens. During a meeting with your staff, several pricing proposals are made with strong arguments to support each proposal.

a. ET should set a minimum price per set that the wholesalers can charge.

b. ET should set a maximum price per set that the wholesalers can charge.

c. The wholesalers can charge any price they want within a certain range; if they charge a higher price, they must give the customer a rebate coupon for the differential.

d. The wholesalers can charge any price they want, bit if they advertise a price that is less than ET's specified minimum advertised price, they are not entitled to receive the marketing funds that ET would otherwise provide.

After the meeting, you are considering the pros and cons of each plan so that you can make a recommendation to the president. Although each plan has different marketing advantages, your staff estimates that each will result in approximately the same level of sales. What other factors should you consider before making your recommendation? What are the legal pros and cons of each proposal? What else do you need to know before calculating the legal trade-offs among the proposals?

Answer 1

The other factors i, will consider before choosing were

• Competitor's price offered to pulic
• Fair market policies
• Cost cover with suitable profit margins

LEGAL PROS AND CONS

PROPOSAL 1

PROS- This proposal helps to recover cost and estimated profit as the minimum price will be set

CONS-Since, maximum price is not set so, it may affect our overall sale as wholesaler will charge higher prices from customers so, thta they can earn more profits.

PROPOSAL-2

PROS- If set the maximum price it will increase our overall sales as price is set according to the competitor's price and it will build company's reputation

CONS- Due to no minimum limit it leads to decrease in profit as wholesalers tries to sell more with lesser possible prices .

PROPOSAL-3

PROS- As certain range is set for the wholesalers so they can sell the product in that range only and if they sell at higher price they have to give rebate which will increase the sale and cusomer satisfaction also .

CONS - There must be something for lower units also if they sell less than the unit they will have to pay minimum amount to the company from their loss of profits .

PROPOSAL-4

PROS- Wholesaler's are free to set any price which wil increase the overall sales as they will get more willing to sell as there are no restrictions on setting amount . If they charge lower price it will not get overall market funds which will also beneficial for us.

CONS- As prices were charged by wholesaler only . So, the company will be not able to have any rights on the price set .

Things before calculating legal tradeoffs are:-

• Competitor's marketing strategies
• Wholesaler's needs
• Customer's needs and what they willing to pay for the said product
• Company's overall demand.