Reference no: EM132288085

Part One: Overview: This case study addresses the relationship between an operator’s costs, prices that are charged and the resulting customer perceptions of value for money spent. Secondarily, the case notes the importance of assessing customer needs and wants prior to establishing product and service pricing. Revenue Management at Work - Chapter One. “According to my calculations, it’s about $2.55 per delivery,” said Connie. “That’s includes everything?” asked Chad. “Labor costs, vehicle, . . . packaging?” “Everything” replied Connie. They were discussing the additional costs associated with starting their new on-campus pizza delivery service. Connie and Chad were partners in one of the country’s largest franchised pizza chains. Business was good, their product tasted great and because their store was adjacent to the campus, the University supplied a large, hungry and built-in market. It was service to that market Connie and Chad wanted to expand by offering their new “To Your Dorm Room” delivery program. “Well, I guess that means we need to charge at least $2.55 more per pizza,” said Chad. “Not necessarily” said Connie. “One dorm room might order two or more pizzas. Maybe we should charge a flat $2.55 delivery fee instead? “Connie, maybe it should be $3.00 per delivery,” said Chad. “We need to make a profit on this service or we shouldn’t offer it. Right?” Revenue Management Considerations and Answer: Q: Assume Connie discovered a mathematical error in her calculations that, when corrected, increased the estimated cost of the pizza delivery program from $2.55 to $3.55 per delivery. Would such a discovery also immediately increase by $1.00 the value to students of the pizza delivery program? Explain your answer. A: Q: Do you think that the value students would associate with the “To Your Dorm Room” delivery service is directly related to the costs incurred by Connie and Chad? In what way(s)? A: Q: What factors do you think would most affect student perceptions of the value provided by the “To Your Dorm Room” delivery service? What steps would you advise Connie and Chad to take if they wished to learn more about the importance of those factors?