In the summer of 2022, joy4Home Brands was preparing for the launch of its first household products. One line, Kitchenjoy, comprised of cookware items, such as pots and pans, that were lightweight, nonstick (and hence required less oil), and easy to clean. A second line, Spacejoy, comprised of storage containers that were sleek, highly functional, made of recycled materials, and remarkably durable. The products in each line were curated to meet the needs of young professionals, especially those living in small apartments in major urban cities. As part of the go-to-market plan, management decided to initially use a direct-to-consumer (DTC) approach by selling from the company's own e-commerce website. Customer acquisition would be achieved through various digital platforms such as Facebook, Instagram and Google Search Ads. Yet one aspect of the go-to-market plan - pricing had remained elusive. Every executive at the edgling company had a view on what price to charge for a product in each of the two lines, with some suggesting to use costs (to make and ship items) as a logical starting point. In particular, a typical Kitchenloy product would entail a $16 cost and a typical Spacejoy product a $12 cost. A gross margin of 25% was oated as reasonable. Given that the brand was new, the company expected prospective customers to buy at most one product from each line. Furthermore, to simplify the consumer buying experience, all products within a line would be priced the same. However, CMO Molly Hines was not satisfied with basing pricing on costs alone. She was keen on understanding demand before finalizing prices and decided to conduct some online market research to get a sense of what the market might bear.1 With the data just in, Hines called a meeting of her marketing team to make recommendations. As she prepared for the meeting, Hines observed that at a general level the findings from the research were straightforward. It appeared that there were four main segments, of roughly equal size, which differed in terms of how much they were willing to pay for a product in each of the lines. Hines summarized the information in a table [see Table 1) that she planned to present at the meeting. Table 1 Market Research Results on Willingness to Pay for a Product in Each Line by Segment Segment Kitchenon SpaceJoy 1 $5 $25 2 $22 $25 3 $24 $23 4 $24 $12 Source: Case-writers. Flaming for the Future KitcheHIUy Directfor Small Businesses Although all the executives at ontlHome agreed that the best way to establish the two sub-brands and generate early sales would be to launch via a DTC approach, the company had showcased Kitchenloy prototypes at a major trade show for small businesses. The experience was encouraging, as there seemed to be keen interest among independent foodservice providers, many of whom would consider buying more than one item. Yet management also learned that most potential buyers did not value the lightweight property of Kitchenjoy products, and were willing to forgo it if this translated to a lower purchase price. Consequently, on4l-1ome had begun working on a cheaper version of the line that met the needs of these business customers. The R&D team indicated that, given the difference in materials and production process, the cost of the modified Kitchenjoy line would be about half that of the original line. With product development now nearly complete, Hines followed up with the contacts established at the trade show, asking them to complete a short survey to gauge demand. She was able to summarize the responses in a table (see Table 2]. Table 2 Potential Demand from Poodservice Customers for the Modified Kitchenjoy Line Price Quantity Demanded 1 2 3 4 5 $15 155 205 265 220 73 $18 185 22? 257 195 63 $17 173 241 235 180 48 $18 183 221 217 155 15 Source: Casewriters. Note: Each cell represents the number of customers who would purchase a given quantity [column label) at the corresponding price point (row label). Hines believed that the sample she had polled was representative of the broader market. She planned to share the results at the meeting as well, and have her team devise a pricing approach for these 828 customers that would maximize profitability. Channel Expansion for Spacejoy As she prepared her slide deck for the meeting, Hines could not ignore yet another, longer-term, opportunity that had recently emerged. A major brick-and-mortar retail chain of home goods had learned about the upcoming launch plans of the Spacejoy line through a recent article featuring an interview with Joy4l-lome's CEO. The chain's procurement manager, Todd Jefferson, who was always on the lookout for exciting new products, believed that the Spacejoy line would sell well at the chain's stores - especially if Joy4Home were willing to produce larger containers that were more suitable for suburban homeowners the primary patrons of the retail chain. To explore this possibility, Jefferson contacted Hines and provided her a sense for what sales could look like at various price points, given his experience and taking into account the advantages of the Spacejoy line (see Table 3). Hines subsequently received an estimate from ]oy4Home's R&D team that the larger storage containers would be slightly more expensive to make. However, because products would be delivered in bulk to the retailer's distribution warehouse, the overall cost per unit would drop to about $10. Table 3 Estimate of Retail Sales at the Brick-and-Mortar Retailer for a Larger Spacejoy Line Retail Price Sales (Units) per Year $15 50,000 $20 38,000 $25 27,500 $30 21 ,000 $35 15000 $40 11,000 $45 5,750 Source: Casewriters. If there was time at the upcoming meeting, Hines thought she might present this retail opportunity for Spacejoy and solicit reactions. In this case, she would be looking for a recommended wholesale price to charge. Heading to the Meeting As Hines walked into the conference room, she was pleased to see all members of her team assembled with their laptops open - ready to run analyses. She commenced the meeting by saying, "The pricing recommendations we will arrive at today matter a great deal for our company' s future - in the short, medium and long term. We need to get this right!"