If you owned an ice cream shop at a resort and additional ice cream shops were opening in your area , how would you introduce substitute products to compete more effectively ?how could you apply the concept of price elasticity of demand when deciding whether to raise prices for your specialty items, such as shakes ,sundaes ,and banana splits.
2007-03-18 02:56:59 · 3 answers · asked by henry f 2 in Social Science ➔ Economics
I think the ice cream shop has two different strategies to thinkg about.
First, as you suggest, the shop could try to offer substitute products to keep the business profitable. An ice cream store, however, doesn't strike me as a good business for this type of strategy. I wouldn't want to stop at the ice cream store to buy cigarettes or bread!
But, I think a more profitable strategy would be to try and make the shop seem unique. Branding is a good way to hold on to market share. Advertising is necessary, but the right ad would help the shop hold onto its customers.
2007-03-18 03:04:09 · answer #1 · answered by Allan 6 · 0⤊ 0⤋
Yes, I would introduce coffee's (flavored, espresso, etc.) Make your place a more social gathering site, etc. Be careful about raising the price of your ice cream treats, now that you have competition the consumer has more choices (more elastic demand resulting here). If your price goes up, quantity demanded for your product can go down significantly as the consumer switches to the other guy. Better to compete with non price props, style, special events, etc.
2007-03-18 11:47:29 · answer #2 · answered by econgal 5 · 0⤊ 0⤋
the Q is can you stay in business? Are you willing to loose more money? What is your ROI?
2007-03-18 14:11:20 · answer #3 · answered by RayM 4 · 0⤊ 0⤋