Based on the case titled: Aras Design and Multimedia Centre (ADMC): its pricing strategy for video internet market training.

1.Determine the basic training unit contribution margin and the break-even point (number of participants) in the current year.

2. Assuming that the training fee remain constant at RM30 per participant, compare ADMCs operating income (per training session) if the sales of DVDs are incorporated with the training in the current year and 2013 (anticipate with new costs).

3. Do you suggest that Diyana increase the fee? If so, what would be the new fee? Explain

4. Do you think the promotional strategy taken by Diyana was effective? Please justify your answer.

Pricing strategy - the way to attract customers At the time, ADMC charged each participant RM30 for basic training classes. Diyana set a policy to offer a free place to any participant that brought a friend along to the course, with the proviso that the second participant would not be provided with any supplemental training materials. Diyana thought this might help get a higher response from clients. Typically, the company managed to enroll approximately 100 participants to register for each training program and the cost of space rental for training venue and equipment amounted to about RM1,500 per training session. ADMC had to hire a part-time master of ceremony (MC) for RM220 and eight crews at RM200 each in every training session. The printing and stationery costs were estimated at RM10 per participant. The company planned to revise the registration fees, as the space rental and equipment costs was raised approximately 20 per cent by the vendors. The MC cost increased to RM250 and wages for the crew increased to RM230 per person. The printing and stationery costs increased by 10 per cent. Moreover, Diyana provided lunch in training sessions that cost RM11 per participant. In addition to meeting the rising costs, Diyana believed that the willingness to pay higher fees might demonstrate higher commitment from the participants. She also had a view that the new fees could also attract specific target participants who would particularly value the knowledge they had from the training. Thus, Diyana expected more participants in advanced classes. A similar deal was offered where each participant who registered for the basic class was allowed to bring along another friend to join for free. Based on their experiences, 20 per cent of the registered participants would use the free seat, and on average, this would result in an increase of additional 5 per cent of the total fixed costs. By June 2013, Diyana had estimated that the number of participants enrolled in the basic class would be around 80 in each training session. In addition to training classes, ADMC sold several ranges of video and audio design templates DVDs to the participants and sold an average 40 DVDs in each training session. The selling price of the DVD was RM50, and the cost was RM3 per DVD (approximately). As most of the costs associated to the training had increased, Diyana believed this might have a significant effect on the economic performance of ADMC, especially their profit; therefore, she wanted to revise the registration fees so that profits would be secured with the minimum number of participants. The innovative pricing strategies might help to attract a higher number of participants from different backgrounds to join their training. Diyana also considered whether the price remained the same, regardless of whether the break-even point was achievable. She knew that break-even pricing is the practice of setting a price point at which her business could earn zero profits on the sales. This was due to the reason that she intended to use low price strategy as a tool to gain market share and to drive competitors from the marketplace. By doing so, ADMC might be able to increase its production volumes to such an extent that it could reduce costs and then earn a profit at what had previously been the break-even price. She felt that, once it would drive out competitors, the company could raise its price sufficiently to earn a moderate profit. ADMC's customers came from varieties of background. Most could be classified into four different groups. The first group of customers was college and university students. They frequently enrolled in the basic class but seldom registered in the advanced classes. The second group of customers was corporate personalities (local and international) who requested in-house trainings. To provide training for this group, ADMC customized the training contents based on participants' needs and requirements. The third group was entrepreneurs, owners of micro, small and medium enterprises. Customers from micro and small enterprises always opted for basic training class, and only few of them enrolled for advance classes. On the other hand, customers from medium enterprises preferred to enroll in both basic and advanced classes. The last group of customers was general customers from widely different backgrounds and from a range of different income statuses. Figure 3 Funneling strategy Aras Design \& Multimedia Centre's promotional strategy Diyana used both online and offline mediums to promote her business. In regard to online promotional activities, she used social networking sites (SNS) such as Facebook, her website, blog and a mini-site. While using the Facebook platform, she used free marketing strategies as well as paid advertisements. After promoting the training using online platforms, she conducted training series, and from that point, she instituted more expensive training (specific skills training in video editing and how to market business using video marketing). Figure 3 depicts how she funneled down the target group to draw in more clients, either for video training and/or for video production. She named this approach "Funneling Strategy". There were usually roughly between 150 and 200 participants for the free training module, and the original cost for this module was a minimum of RM30. From that number, 30 per cent of the participants went on to enroll for normal price training. Then from those, 20 per cent would register for advanced level. Next, following on from advance training, 10 per cent of these participants would sign up to be in the apprentice class so that Diyana got most of her participants from a series of earlier advanced classes. A further extension from that, for those who preferred that ADMC prepared a video for them or for their business/organization/company, they would then appoint ADMC for their video production services. Toward the second quarter of 2013 Although ADMC's training fee was minimal, Diyana realized that the rate of participation of the clients was not meeting her expectations. She attended marketing workshops to better understand the strategic points of view required to attract more customers. She believed that charging nominal fees might create a lower level of commitment from her clients, and, because of this, she wanted to set the training fees at a certain level, which would allow her to attract more participants. Diyana believed that the revised fees could attract the right participants to attend the basic classes, which in turn would encourage more participants to register in the advanced level training programs offered by ADMC. Diyana was not sure how much she could charge for the basic training course. She knew that the basic course was not aimed at profit margins but rather to be used as a promotional