Pricing

January 5, 2023 by George Benaroya 68 Comments

2. Customer Prioritization (BS)

Jenny, a student, runs a high-end shoe business on the side. High quality. One thousand dollars a pair. Her customers are wealthy New Yorkers.

Jenny typically sells 10 pairs per month. For Christmas, she has more pairs—50—but there are 100 clients at her apartment who want the shoes. Yes, she lives in a spacious one. She must decide whom to sell to.

The clients include:

48 new clients: This is her only chance to get their business.
48 long-time clients: They will be offended if they don’t get the shoes. One attends her niece’s soccer games, where she always sees Jenny.
2 understanding clients (1 new, 1 old): Both are kind and will be okay if they miss out.

Who should Jenny prioritize?

Do extensive research on how companies manage situations like this. Design a strategy that quantifies the value of saying “yes” to some and “no” to others.

January 4, 2023 by George Benaroya 104 Comments

3. Pricing

Your company asked executives like yourself to comment on whether to increase, decrease, or make no changes to pricing. Please share your comments below.

Background

Cost: a reduction in production capacity and foreign exchange has resulted in an overall cost increase of 30%.

Government regulations: a regulatory change has reduced how many consumers can buy the product at any given time by 50%.

Consumer demand: sales dropped last year. They have recovered some.

Profitability: the profitability of products varies from -20% (some products are sold at a loss) to +80%.

Please share your thoughts below on what to do about pricing.

See a short video about this session here:

January 2, 2023 by George Benaroya 150 Comments

4. Explaining Sales Growth

Imagine the CEO has asked each of you—company executives—to comment on Sales Growth for the next 3 years. Lay out a specific, credible way for your company to grow revenue over the next few years. Use hard data from your company’s latest annual report for your base year (previous year). No speculation. No invented numbers.

Walk through your logic:

How do you estimate total sales for the current year? If you have six months’ data, double it. If not, use the company’s average annual growth rate. Notice sales are falling? Adjust the growth rate down. Stay honest.
Identify 3 to 5 strategies—or pick one bold strategy, break it into key activities. For each, connect the dots between your activity and the revenue upside. If you don’t want to name the strategy at this point, refer to “Strategy 1” and say that the name remains confidential.
Make your estimates realistic. Sense-check them against the company’s typical growth. No wild promises—if you say revenue will double, explain why.
Don’t break growth out by year. Quantify the gain by strategy. For example, if you’re projecting growth from 2024 to 2028, show how each activity moves the total, starting with 2024 as your baseline.

Your comment must be sharp and clear. Mention the base year, the numbers, the revenue you expect, and the strategy behind it. Show you know how companies really grow—and how to make that growth real.

January 1, 2023 by George Benaroya 147 Comments

5. Marketing Payback

The executives of your company met. They are impressed for your sales growth plan (previous comment on the Blog or assignment). They want to know more about your marketing investment to realize that sales growth. If you are investing in a new product or service instead of marketing, they want to see that your cost assumptions are reasonable.

Explain how you calculated the marketing investment, what assumptions you used. Comment on how long the payback period will be.

Details to be included:

What is the business idea?
Revenue & Cost: estimate the cost to make, sales price, and revenue for 3 years
How are you going to sell it/launch it?
Why would consumers buy it?
Where are you going to sell it?
How will competitors react?
How much do you need to invest?
How successful was this or a similar product or service elsewhere (you must research globally for at least one example).

All commercial messges will be deleted and the companies black listed.

See a short video about what we learned in this session here:

February 25, 2022 by George Benaroya 12 Comments

Foreign exchange

Luis has three friends whose parents want to purchase a Rolex, which is unavailable in Mexico. Each Rolex costs $10,000 or MXP 180,000. The exchange rate is $1=MXP 18. The friends offer to pay him an additional $1,000 or MXP 18,000 for each watch he buys for them.

They give him the total amount in pesos, MXP 594,000, worth $33,000. Luis was going to exchange the Mexican pesos for dollars, but he forgot.

Luis routinely goes to visit his girlfriend Jenny in NYC. He goes to the Rolex store and takes a photo of the Rolex they want, to make sure he will get the correct one (photo below). While at the store. Jenny tries on a necklace. It looks great on her. Luis figures with the $3,000 profit he will make, he would buy Jenny a necklace.

Five weeks later, on his flight to NY, he reads in the newspaper that the Mexican Peso keeps depreciating. He panics. He gets off the plane and exchanges the money at Newark Airport. He gets $20,600. The teller confirms that on Valentine’s Day, February 14^th, the rate was 18. Today is April 4^th, 2020, and the rate is 26, plus a 10% fee.

What can Luis do? He just lost 58%. What can small businesses procuring goods from foreign countries in foreign currency do, if they have already collected payment in full? Please leave your comments below.

Note: one participant said that Luis should get Jenny the necklace, regardless.

Join the other discussions:

Why 79% of contractors don’t want to be full-time employees?

Would you offshore jobs?

Should we pay severance in the US?

Small businesses and inflation

Would you sell at a higher price in New York?

Increase prices 4% or fire one-half of the team?

February 13, 2022 by George Benaroya 10 Comments

2. Should Jenny accept credit cards?

Jenny, a student, runs a high-end shoe business on the side. High quality. One thousand dollars a pair. Cash only. Her customers are wealthy New Yorkers.

A friend in marketing tells her she’s making it harder than it needs to be. Nobody wants to be carrying that kind of cash. Take credit cards, she says. People will order more.

But her friend in finance disagrees. The moment she takes cards; there is a digital trace. Credit card fees, duties, sales tax, and income tax because there will be an electronic record of every transaction. Jenny doesn’t mind paying taxes; she’s concerned about the additional paperwork.

So—does she keep it cash, or start taking cards?

Please quantify the impact of: