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Case Analysis on Markups, Markdowns and Channel Decisions Swim Master "it was just like solving a problem in one of those math puzzle books," Jenny Hsu was telling her friends after work. Jenny works for the Swim Master Division of the Nottingham Corporation. Her division manufactures swimming pool supplies and equipment "We are going to introduce a new pool vacuum attachment that we think should retail for $79.95 at the pool supply stores. These stores expect at least a 45% markup based on the store's retail selling price and buy from wholesalers who expect at least a 32% markup based on the price at which they sell to the retailers. The attachment costs us $21.26 to make. Now, what suggested prices do we set at each level in the channel?" Jenny asked her befuddled friends. Guidelines for channel markup decisions: Formula: Markup on Price = (Price Cost Price 100% Markup on Cost = (Price-Cost/Cost 100% Manufacturer Price Cost (1 + Markup on Cost) Retail Price = Cost/(1- Markup % on Price) Cost Retail Price (1 - Markup on Price) 1. Complete the following table using the data in the case (Scenario 1). Channel Level Cost Price Margin Markup Markup on Cost (%) on Price (%) Manufacturer Wholesaler Retailer 2. Assume that SwimMaster expects a 136% markup on manufacturing cost to cover overhead and profit. Also assume that the wholesaler's 20% markup is based on its costs rather than its selling prices (Scenario 2). Channel Level Cost Price Margin Markup Markup on Cost (%) on Price%) Manufacturer Wholesaler Retaller 3. In terms of cost, which scenario is better for: a. Manufacturer - b. Wholesaler - c. Retailer- 4. In terms of price, which scenario is better for: a. Manufacturer - b. Wholesaler - c. Retailer- 5. In terms of markup, which scenario is better for: a. Manufacturer - b. Wholesaler - c. Retailer - 6. Which distribution/promotion (push or pull) strategy are the two scenarios using: a. Scenario 1 - b. Scenario 2 - 7. Which of the two scenarios is better for the consumer? a. Scenario 1 b. Scenario 2 Case Analysis on Markups, Markdowns and Channel Decisions Swim Master "it was just like solving a problem in one of those math puzzle books," Jenny Hsu was telling her friends after work. Jenny works for the Swim Master Division of the Nottingham Corporation. Her division manufactures swimming pool supplies and equipment "We are going to introduce a new pool vacuum attachment that we think should retail for $79.95 at the pool supply stores. These stores expect at least a 45% markup based on the store's retail selling price and buy from wholesalers who expect at least a 32% markup based on the price at which they sell to the retailers. The attachment costs us $21.26 to make. Now, what suggested prices do we set at each level in the channel?" Jenny asked her befuddled friends. Guidelines for channel markup decisions: Formula: Markup on Price = (Price Cost Price 100% Markup on Cost = (Price-Cost/Cost 100% Manufacturer Price Cost (1 + Markup on Cost) Retail Price = Cost/(1- Markup % on Price) Cost Retail Price (1 - Markup on Price) 1. Complete the following table using the data in the case (Scenario 1). Channel Level Cost Price Margin Markup Markup on Cost (%) on Price (%) Manufacturer Wholesaler Retailer 2. Assume that SwimMaster expects a 136% markup on manufacturing cost to cover overhead and profit. Also assume that the wholesaler's 20% markup is based on its costs rather than its selling prices (Scenario 2). Channel Level Cost Price Margin Markup Markup on Cost (%) on Price%) Manufacturer Wholesaler Retaller 3. In terms of cost, which scenario is better for: a. Manufacturer - b. Wholesaler - c. Retailer- 4. In terms of price, which scenario is better for: a. Manufacturer - b. Wholesaler - c. Retailer- 5. In terms of markup, which scenario is better for: a. Manufacturer - b. Wholesaler - c. Retailer - 6. Which distribution/promotion (push or pull) strategy are the two scenarios using: a. Scenario 1 - b. Scenario 2 - 7. Which of the two scenarios is better for the consumer? a. Scenario 1 b. Scenario 2