Question
You were just hired by a struggling Country Club to help turn around the business and get the it back to profitability. The business has
You were just hired by a struggling Country Club to help turn around the business and get the it back to profitability. The business has been experiencing many months of losses which, according to the owners, is a probable consequence of an outdated membership pricing strategy. The owners asked you to look at the following economic data from a market research firm, which is split between three groups: Retired Community, Students from a local University, and Professionals. Relative Size Professionals 60% Retired 30% Students 10% Table 1: Demographics of potential customers Professionals Retired Students Racket Club 100 2Q 50 2Q 50 5Q Golf Course 200 4Q 250 3Q 100 4Q Pool 50 Q 150 2Q 50 2Q General Amenities 50 Q 100 Q 10 Q Table 2: Annual Inverse Demand Functions ($) 4 Professionals Retired Students Racket Club 100 4Q 50 4Q 50 10Q Golf Course 200 8Q 250 6Q 100 8Q Pool 50 2Q 150 4Q 50 4Q General Amenities 50 2Q 100 2Q 10 2Q Table 3: Marginal Revenue Functions ($) The corresponding Marginal Revenue curves are the following: Additionally, you determined that the costs for each of the categories above are split between the fixed costs of operating each part of the business and a Marginal Cost for servicing a customer as shown below: Marginal Cost ($) Racket Club 0 Golf Course 40 Pool 0 General Amenities 10 Table 4: Marginal Cost ($) After analyzing the data above and discussing the objectives with the firm owners, you learned that they would like for you to come up with a pricing strategy incorporating the following characteristics: Membership Plan (annual) Daily passes Weekend passes (3 days) Monthly passes (30 days) What is your recommended pricing strategy1 ? Explain carefully
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