Pricing Strategy and Financial Sustainability
Have you ever seen items on a fast food menu priced at $1 or $2 each and wondered how the restaurant could possibly make any money by selling those products? In actuality, the profit margin for these items is generally slim, and sometimes restaurants even lose money on these dollar menu items. Why, then, might restaurants continue offering and even promoting their discounted menu items? What about other types of businesses that offer deep discounts on particular products or services and that face the same challenges? Is there a way to incorporate these low-cost offerings into a sustainable pricing strategy?
In this Discussion, you will examine why companies might use low-cost pricing strategies and the impact these strategies can have on the companies.
To prepare for this Discussion:
- Review this week’s Learning Resources on pricing.
- Review the Academic Writing Expectations for 2000/3000-Level Courses, provided in this week’s Learning Resources.
By Day 3
Post a 150- to 225-word (2- to 3-paragraph) explanation of the benefits and risks of low-cost product or service offerings for a business. In your explanation, address the following:
- Why would a company continue to offer these discounted items despite losing money on them?
- Is this pricing strategy financially sustainable for the businesses?
- Other than loss of profits, what are some other possible negative consequences of businesses offering discounted products or services?
- To support your response, be sure to reference at least one properly cited scholarly source.