Pricing Policies

The pricing policies of Zappos.com can be determined from the data provided in the case and by making certain assumptions, we would be able toevaluate sales revenues generated with respect to the customers in their segments.Moreover, pricing for each item with respect to the segments isillustrated below.

Premium Customers

The premium customers segments developed by the management of the company comprise of those customers in the market, who are loyal and recurring and account towards providing the most profit to the online store.  The pricing policy is represented in the exhibit below.

Premium Customers
Avg. Income  $          200,000 Favorite brands
Ages 45-55 Patagonia
Average household                            4 Beeville
Average order value  $                   181 Marc Jacobs
Average order size                            3 Stuart Weitzman
Sale revenue of items orders No. of people Theory
                                                                 452,500                 10,000 Dansko
Assumption Mephisto
Household available                   2,500 Salvatore Ferragamo
Average Selling price of items ordered                   60.33  
 each house hold would order at 1 order  
In peak season, household would order 2 orders No of items ordered
In low season, household would order 0.5 orders                                 7,500
Sale revenue of items orders in Peak               905,000                              15,000
Sale revenue of items orders in Low               226,250                                 3,750

 

In order to calculate the selling price of each item ordered, the total premium household available to the online store was assumed at 2,500 and the average number of people in the household was 4 people. Furthermore, it can be determinedthat the average value of the order amounts to $181 and the average items order in each order amounts to 3 item. Therefore, the average selling price of each order can be determined amounting at $60.33., whichwould enable us to evaluate the total revenues generated by order, amounting at $452,500 based on the assumption that each householdwould order at least one orderunder normal seasonal condition. Moreover, the total revenues generated under peak seasons amount to $905,000, where it was assumed that each household would order at least two order, whereas, the revenues generated under off-seasonsamounted to $226,250.

Young Professional Customers

The young professional customers segment developed by the management of the company comprised of those customers in the market, who were difficult to maintain loyal , and such customers had a tough time balancing work/life. Additionally, these customers were least likelyvisitsite, whereas the cost associated towards their acquisition was minimal. The pricing policy is represented in the exhibit below.

Young Professional Customers
Avg. Income  $55-$75 Favorite brands
Ages 26-34 Calvin Klein
Average household 2 AK Anne Klein
Average order value $                     74 Levi’s
Average order size 1 Cole Haan
Sale revenue of items orders No. of people Rockport
                                                                 88,800 2,400 Samsonite
Assumption Nike
Household available 1,200 Dooney and Bourke
Average Selling price of item ordered 74.00  
It was assumed each house hold would order  
In peak season, household would order 2 orders No of items ordered
In low season, household would order 0.5 orders 1,200
Sale revenue of items orders in Peak 177,600 2,400
Sale revenue of items orders in Low 44,400 600

 

In order to calculate the selling price of each item ordered, the total young professional households available to the online store were assumed at 1,200 and the average people in the household were around 2 people…………….

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