Macky
Pricing of Cellular phone services
Aircall is a company located in the USA providing cellular phone services for the last ten years. In addition to the basic mobile-phone service provided at a fixed monthly fee, the company offered a number of value-added services including voice mail and a hot line for customer support. The company early last year, worked up a pricing strategy for this value added services. While the fixed cost of providing each of the two services was substantial, variable cost per customer was low and was set to zero for pricing purposes, i.e., sales revenue for the two services was to be maximized.
A market study revealed that a large number of customers valued the two services together at less than $5 per month. These customers were considered not worth pursing and were excluded from further analyses. The remaining four customer groups differed in relative valuations of the two services. The maximum prices for voice mail and hot line that these four groups are willing to pay are given in Table 1. Customer group 1 was attracted to voice mail but valued the hot line little, whereas for group 4 it was just the other way around. Groups 2 and 3 were intermediate cases. The four groups were of about equal size. The willingness to pay for both services was calculated by summing up the two maximum prices.
TABLE 1
Maximum Prices for Voice Mail and Hot Line Services
CUSTOMER
GROUP
MAXIMUM PRICES ($ PER MONTH)
Voice Mail
Hot Line
Voice Mail + Hot Line
1
9.0
1.5
10.5
2
8.0
5.0
13.0
3
4.5
8.5
13.0
4
2.5
9.0
11.5
What do you think is the bundled price that was charged? At what price were the two services available separately?
Aircall is a company located in the USA providing cellular phone services for the last ten years. In addition to the basic mobile-phone service provided at a fixed monthly fee, the company offered a number of value-added services including voice mail and a hot line for customer support. The company early last year, worked up a pricing strategy for this value added services. While the fixed cost of providing each of the two services was substantial, variable cost per customer was low and was set to zero for pricing purposes, i.e., sales revenue for the two services was to be maximized.
A market study revealed that a large number of customers valued the two services together at less than $5 per month. These customers were considered not worth pursing and were excluded from further analyses. The remaining four customer groups differed in relative valuations of the two services. The maximum prices for voice mail and hot line that these four groups are willing to pay are given in Table 1. Customer group 1 was attracted to voice mail but valued the hot line little, whereas for group 4 it was just the other way around. Groups 2 and 3 were intermediate cases. The four groups were of about equal size. The willingness to pay for both services was calculated by summing up the two maximum prices.
TABLE 1
Maximum Prices for Voice Mail and Hot Line Services
CUSTOMER
GROUP
MAXIMUM PRICES ($ PER MONTH)
Voice Mail
Hot Line
Voice Mail + Hot Line
1
9.0
1.5
10.5
2
8.0
5.0
13.0
3
4.5
8.5
13.0
4
2.5
9.0
11.5
What do you think is the bundled price that was charged? At what price were the two services available separately?