Question

unit 4 - challenge 4.3: marketing and brand

following multiple quarters of robust consumer confidence, michelle phans company observes that customers are increasingly willing to pay a premium for higher-quality skincare products. stores are rapidly selling out, and suppliers are experiencing record-breaking orders.

given these circumstances, which of the following steps should michelle take to capitalize on the strong economy and growing demand?

a.) restrict production to preserve exclusivity
b.) postpone new product launches to prevent supply strain
c.) reduce marketing expenses to save cash
d.) raise prices and ramp up production to satisfy increasing demand

Explanation:

Analyze market conditions

The scenario describes a strong economy with robust consumer confidence, where customers are willing to pay a premium for higher-quality skincare products. Stores are rapidly selling out, and suppliers are experiencing record-breaking orders, indicating that demand exceeds current supply.

Evaluate strategic options

To capitalize on this high demand and willingness to pay a premium, a business should adjust its pricing and production levels:

• Raising prices helps capture the consumer surplus from customers willing to pay a premium.
• Ramping up production addresses the stockouts and satisfies the growing market demand, maximizing revenue and profit.

Select the correct choice

Option (d) directly aligns with these economic principles by suggesting raising prices and ramping up production.

Answer:

• a.) Restrict production to preserve exclusivity
• b.) Postpone new product launches to prevent supply strain
• c.) Reduce marketing expenses to save cash
• d.) Raise prices and ramp up production to satisfy increasing demand (Correct answer)