Cost-Volume-Profit Analysis: Special Pricing and Determination of Customer Profitability

Cost Volume Profit Analysis
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Cost Volume Profit Analysis
Special Pricing
Special pricing is a strategy to attract customers to buy our new product. Oppo Company came up with an approach to introduce special prices to help in gaining market share. Smartphones in selected outlets will have reduced prices, attracting customers to try the products. The price of the newly selected smartphones will be 200 dollars, different from 205 dollars, which is the regular pricing (Discount Pricing Strategy: Pros and Cons of Discounts, n.d.). The strategy is set to entice customers to get used to the new price, especially when the product is new. The company targets high demand for smartphones due to the special pricing. When the market expands, then the price will slowly increase (Fuchs, 2021). The main aim of the low-pricing strategy is to introduce a new product in the market. When the customers have tried the products and are sure of the product, the price can be increased.
Determination of Customer Profitability
Customer profitability will be calculated depending on the revenue that will be generated. Customers who buy smartphones at a regular price are likely to generate more income for the company. In most cases, valuable customers need preferential treatment whereby they can be given gifts when they purchase a specific product. However, preferential treatment should not be used to alienate other customers from the shops because they also add value to the company. Determination of Customer profitability is vital because, as a company, you can analyze the specific prospects that need to be improved on to improve customer service (Niraj et al, 2001). Additionally, it helps minimize costs because the company can focus on ways to retain profitable customers who add value. The company can identify the loopholes and hence develop strategies to fix them taking customers into account.
Effect of R...