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Chapter 9 – Competition heats up but your new strategy seems to working in week 7
Last week we discussed details of the sixth week. Your competition had dropped the price from $1 per cup to $0.75 per cup and it affected your sales in week 6. So let us discuss what did you do in week 7?
PRICE Analysis – As predicted, you had to decide on a price for week 7. Your competition, “Jack & Jill Lemonade”, had dropped its price from $1.00 per cup to $0.75 per cup which affected you sales to go down from 80 cups in week 5 to 45 cups in week 6.To address the drop in sales you researched and evaluated the following three options – 
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Drop the price lower than the competition to $0.50 per cup.You decided against it because your product and services are far better than the competition. You have an advantage over your competition such as organic lemons, taste, and customer service. In addition, you have a very good cost advantage from the local organic farmer of a 33% cost discount only available to you so far.
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Match the competition price of $0.75 per cup. Based on your analysis and review of the three options, you decide to drop the price. You advertise and meet the competition price of $0.75 per cup. SALES – By dropping the price from $1.00 per cup to $0.75 per cup you were able to increase your sales from 45 during week 6 to 70 during week 7. Your advertising about the price drop helped to bring back customers who were sensitive to paying $1.00 per cup when they could buy $0.75 per cup from the “Jack & Jill Lemonade”. CUSTOMERS – You regained most of the lost customers. It is a success! COST Advantage – You have created a competitive cost advantage over your competition. During week 6 you had smartly cut the cost from $0.33 per cup to $0.24 per cup, a 27% cost reduction. Your smart cost reduction strategy allowed you to drop the price by 25% and still keep a healthy 51% profit margin for week 7. Not bad! Keep up the good work! This is how your week-7 numbers look –
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