Pricing the Monsoon Bundle at Aarohi Apparel
Aarohi Apparel sells rainwear through its own website and two marketplaces. Its best-selling item is a ₹1,200 rain jacket with a variable cost of ₹520. Last monsoon it sold 9,000 jackets and ran a bundle offer of jacket plus trousers (trousers price ₹800, variable cost ₹300) at ₹1,600, selling 2,400 bundles. This year the marketplace charges 18% commission on the bundle price, up from 12%, and demands a 10% discount during its monsoon sale week. Aarohi's fixed costs are ₹42 lakh a year. Website sales carry no commission but only 22% of customers buy there. Customer surveys show price sensitivity is high below ₹1,500 for the bundle and low above ₹1,800. Aarohi has 5,000 jackets and 3,000 trousers in stock and cannot reorder before the season ends.
1. Calculate the contribution per unit for the jacket sold alone, the bundle at ₹1,600 through the marketplace before and after the commission change, and assess whether the bundle is still worthwhile.
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Jacket alone: ₹1,200 − ₹520 = ₹680 contribution.
Bundle at ₹1,600, old commission 12%: commission ₹192; contribution = 1,600 − 192 − (520 + 300) = ₹588.
Bundle at ₹1,600, new commission 18%: commission ₹288; contribution = 1,600 − 288 − 820 = ₹492.
Bundle during the 10% sale discount: price ₹1,440; commission at 18% = ₹259.20; contribution = 1,440 − 259.20 − 820 = ₹360.80.
Assessment. The bundle's contribution per unit exceeds the jacket-alone figure only before the commission rise; at 18% it falls to ₹492, still above the jacket's ₹680? No - ₹492 is below ₹680, so per unit the bundle now earns less than a jacket sold alone. However, the bundle moves a trouser unit that otherwise may not sell, and total contribution matters. Selling a jacket alone gives ₹680; selling a bundle gives ₹492 but clears a trouser whose standalone contribution is ₹800 − ₹300 = ₹500 (before commission). Compare like with like: bundle contribution ₹492 versus jacket plus trouser sold separately, which would earn ₹680 + ₹500 = ₹1,180 before commission on the trouser. The bundle is therefore worthwhile only if it increases total volume enough to offset the lower per-unit contribution. During the 10% sale week, ₹360.80 per bundle is thin and should be limited to stock-clearing of trousers, not jackets.
2. Recommend a pricing and channel plan for the season given the stock constraint, and explain the marketing reasoning.
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Stock position. 5,000 jackets and 3,000 trousers. A bundle uses one of each, so at most 3,000 bundles are possible, leaving 2,000 jackets for solo sale.
Channel. Website sales avoid the 18% commission. Only 22% of customers buy there, so Aarohi should push website traffic during the season through email, social content and a website-only incentive, because each bundle shifted to the website gains ₹288 in avoided commission. If even 1,000 bundles move to the website, that is ₹2.88 lakh saved.
Pricing. Survey data show low sensitivity above ₹1,800 and high below ₹1,500. The bundle at ₹1,600 sits in the sensitive band. Since the marketplace discount is mandatory only during sale week, Aarohi should hold the bundle at ₹1,600 outside sale week and use the sale week to clear trousers, not jackets, because the discounted bundle contribution of ₹360.80 is weak.
Plan. (1) Sell 3,000 bundles, prioritising the website. (2) Sell remaining 2,000 jackets solo at ₹1,200, resisting discount because jacket contribution is healthy. (3) During sale week, offer trouser-led promotions only while stock lasts. (4) Do not chase volume at the expense of contribution; fixed costs of ₹42 lakh require roughly 62,000 jacket-equivalent contribution units at ₹680, so the season alone cannot cover fixed costs and the plan must protect margin for the rest of the year.