Pricing a Combo Meal and Reasons for the Increase of Sales When Ads are Cut

Marketing Questions
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Marketing Questions
1. Decide the price for the combo meal based on the most acceptable price survey result as shown in Table 1 and defend
Pricing is an important determinant that decides which customers to attract and how many sales the organization will make. Based on the graph, the most acceptable price for the combo meal would be $7. Reason being, the frequency at which customers are willing to buy the product at approximately that price is much higher than at any other price. At approximately $7, the frequency is the highest at close to 7. It might be because similar meals are offered at a price that is close to or a bit higher than $7 but setting the price at that range would ensure more sales. However, the price will be dependent on other factors as well. If the money spent on making the meal would be higher than $7, then the price would need to be raised. Also, the price will be subject to change as market conditions change as well. Other restaurants might decide to decrease the price of their combo meal to attract more customers, which would force the price to drop as well. Moreover, setting the price at $7 will guarantee that the combo meal is not too cheap too expensive. Since customers tend to measure the quality of a product using its price, they may consider the meal to be of poor quality if the price is too low. Also, many customers might be discouraged to buy the meal if the price is too high.
2. Find a newspaper article which reports that a brand’s sales has increased when its advertising activity was cut (i.e., Ackoff and Emshoff’s (1962) V effect). Summarize what has happened and discuss the reasons of the increase in sales for decrease in ad activity as the article reports and/or you evaluate.
Tesla has managed to build its brand name with close to no advertising. The company has managed to reduce its advertising costs to zero over the past years while still managing to gain more popularity than its rivals. Tesla has managed to decrease its costs of marketing to zero by 2015, while companies such as General Motors spend close to $5 billion on marketing. Most surprisingly is the lack of advertising for their latest model the Tesla Model 3. Tesla’s brand has grown to be more valuable than the more established brands such as Land Rover and Porsche (Campbell, 2017). The company has managed to make more sales by word of mouth and media coverage, which has enabled them to reduce their investments in traditional advertising (Campbell, 2017). The reason for Tesla’s popularity is the experience that is associated with the brand. Tesla’s cars offer customers an experience that is does not fit any other brand. Moreover, customers believe that their Tesla’s cars make their lives better. Recently, the company received more than 115,000 pre-orders from customers for the Model 3 even before the company publicly revealed the car. Tesla is a perfect example of how a decrease or increase in advertising can have fewer effects on sales.
Based on the V-shaped adaptive model by Ackoff and Emshoff, There are positive effects of lowered advertising costs. The authors conducted an experiment which revealed that a 25 pe...