Welcome onboard to Alfred St. James Fine Living. I’ve noticed that sales of our boxes of Fine Cigars in our New
York 5th Avenue store have been sluggish compared to the London rollout. Last month, our sales in London were signifcantly higher than those of New York. I think the high New York price (currently $262.50) is diminishing our sales and capping our profits in the market. I want you to evaluate if we should bring our New York mark-ups back in line with, or maybe even lower than, the London price (currently $225.00 after conversion). Those chaps in London know their business and they are using a good rule of thumb when they markup nine times our $25 marginal cost per box.
This is what I received from our sales teams in the two markets, and both inverse demand curves are quoted in dollar terms: London: PLD = 3750.2QLD and then New York: PNY = 5000.5QNY. I’d like you to take a look at these functions and give me a strategic review of our pricing strategy in the two markets. Again, I think we are leaving profits on the table in New York.
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