Retail pricing strategy

Pricing Strategy

Scenario

The online retail operation you recently opened is doing well but you are uncertain of your pricing strategy. Currently the typical customer purchases four items at an average price of $11.96 and for an average transaction size of $47.84. The cost of goods is 60 percent of sales, which yields a gross margin of 40 percent. You are considering lowering prices by 10 percent across the board so you can better compete with other music e-tailers.  If you lower prices by 10 percent, you believe that the average number of items purchased per customer would rise by 25 percent.

Assuming your assumptions are correct, should you lower prices by 10 percent across the board? If not, do you have an alternative pricing strategy to propose?

Address the following in your paper:

•Review the scenario and address each question while showing work for all mathematical problems.

•Provide full analysis for all conclusions made. 

•For any assumptions made, be sure to reference the scenario when providing justification for responses.

Include a title page and any references used.