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Adios Junk Mail Case Study Solution and Case Analysis
| Solution Id | Length | Case Author | Case Publisher |
|---|---|---|---|
| 2866 | 1388 Words (6 Pages) | Mark Parry | Darden School of Business : UVA-M-0553 |
A Word File
Bob McFadden founded Adios Junk Mail- AJM, along with Dan Collins, to help consumers get rid of unwanted direct marketing by paying $15 annually. The company offers a solution by asking consumers to register and providing AJM with their preferences, which are further passed on to the marketing professionals. The business model revolves around utilizing the Internet to keep the expenses to a minimum while being cost-effective. AJM recently thought of increasing the prices from $15 to $25-$30, considering the increasing expenses and market dynamics. However, setting the price was a critical factor for the company, considering the standard practices of the industry, competitors as well and consumer price consciousness. Gradually increasing the prices was a tactic AJM decided to opt for while having a close look at the consumer responses towards them. The case reflects light on their innovative model, pricing problems and the opportunity cost between client satisfaction and industry wisdom.
Following questions are answered in this case study solution:
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Use the data in the case to estimate the percentage of customers who will purchase the junk mail reduction service at various price points (e.g., from $5 up to $100).
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Based on your above analysis and any other relevant factors, recommend the price that Adios Junk Mail should charge.
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How else might Collins determine the price sensitivity of target customers?
Case Study Questions Answers
1. Use the data in the case to estimate the percentage of customers who will purchase the junk mail reduction service at various price points (e.g., from $5 up to $100).
The given case of AJM helps figure out the percentage of consumers who might be willing to pay at various price points. The case highlights how consumers are asked to pay $15 annually, and the management is willing to increase the charges to $30-$35. Additionally, a reference to industry norms is made, which indicates that $30 per year is a critical price point and that anything beyond that may call for extra marketing efforts. An assumption of demand elasticity based on these talks will be assumed.
In order to estimate the percentage of customers who will purchase the service at various price points, we will consider that the current price charged by AJM is $15. The suggested price increase is to touch $25-$30 after valuable insights from the employees and industry norms of keeping the prices under $30, as prices beyond this will come with the cost of extra marketing efforts and budgets. To understand the customer percentage at various price points, we will make a hypothetical demand curve. Let’s assume that at the current price of $15, a certain percentage of customers are down to pay this price point and purchase the service. However, at $30, AJM might see a decrease in its client base and its willingness to pay, considering the discussion with employees and industry wisdom. Going beyond $30 requires extra marketing efforts.
Based on the context given, we can deduce possible shifts in the percentage of consumers who purchase at different prices. For example, at the price of $15, let's assume that 60% of the consumers are willing to pay for the service, while at $30, AJM sales will decrease due to potential backlash from the customers; it might drop to just 40% customers willing to pay while at a price beyond $30, the demand will decrease further, dropping it to 25% or lower. The actual percentages could vary according to actual market dynamics, customer spending habits, and additional market research. These projections are based on assumptions and context from the case.
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