ElectroWares, a company that manufactures and markets electric lights, is trying to increase sales of its deluxe light bulb. The marketing director of the firm believes that sales of the deluxe light have declined because customers have learned to use the deluxe light more efficiently. He suggests that the company discontinue the economy light. While there may be some truth to his claim, it is more likely that consumers have become dissatisfied with the economy light. Contemporaneous sales statistics for the economy light and the deluxe light indicate that the deluxe light sells for 50% more than the economy light. Since the economy light sells for 50% more than the economy light, the marketing director of the firm is assuming that customers like the deluxe light more than the economy light. That assumption may not be supported by sales data. The days when the deluxe light sold for nearly twice as much as the economy light may be a distant memory. Over the past ten years, the deluxe light has consistently sold for less than the economy light. Since the company has not reported regular sales figures over the past ten years, the marketing department of the firm is unable to determine the precise difference between the deluxe and light sales over the years

The marketing director of the ElectroWares company assumes that the economy light is an inferior light. That assertion does not hold up well under scrutiny. The deluxe light consumes more electricity than the less expensive light. The deluxe light is also 25% larger than the economy light. The size difference is not significant, but the economy light consumes 25% less energy than the deluxe light. It would be unreasonable for a consumer to purchase an economy light if he or she expected to use the light for the same amount of time as a deluxe light. The marketing director’s assumption that the deluxe light lasts longer than the less expensive light may also be incorrect. Consumers do not always purchase economy bulbs with the expectation that they will outlast deluxe bulbs. The many inferior economy lights that ElectroWares sells probably suffer more from the effects of age than the deluxe light. Inferior bulbs tend to burn out faster than deluxe bulbs. Consumers tend to replace economical bulbs with deluxe bulbs when they burn out. If the marketing director is correct that the economy light lasts longer, sales statistics would have to support it. If Deluxe Light A lasts longer than Deluxe Light B, Deluxe Light B would not sell nearly as well as Deluxe Light A

The marketing director of the ElectroWares company is suggesting that the company discontinue the economy light to maximize profits. The company’s profit margins are higher on the deluxe light than they are on the economy light. One explanation for that difference may be that deluxe bulbs are more expensive to manufacture. Deluxe bulbs contain more, and thus more expensive, materials than economy bulbs. The deluxe light lasts longer and costs more to produce, so ElectroWares can sell more deluxe lights than the economy lights. The marketing director’s assumption that customers will not continue to purchase the economy light even if the price is reduced to match the price of the deluxe light is not based on facts. Consumers are willing and able to purchase the economy light at the same price as the deluxe light. The marketing director must consider all of the factors affecting ElectroWares’ pricing strategy before making such a decision

The ElectroWares company must also consider how much longer Deluxe Light A lasts. If the deluxe light continues to cost twice as much as the economy light, Deluxe Light A probably lasts longer than Deluxe Light B. Deluxe Light A also burns more electricity than Deluxe Light B. Consumers who purchase economy lights may be willing to pay more for a longer-lasting light. Consumers who purchase deluxe lights are usually concerned about the cost of electricity. If the deluxe light lasts longer, but burns more electricity, consumers will prefer the economy light. ElectroWares should consider all of the factors affecting its marketing strategy before making a decision about discontinuing the economy light.