Zach's Garage Marketing Analysis

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Figure 1.1

By running an analysis with a representative sample of Zach's garage customers the Model Predictions demonstrates that the optimal price for the highest revenue is set at $3.58 with a 44% likelihood of purchase.

If the average attendance is now about 250 per night with an average of 12 events per month (250x12=3,000), then the total market is 3,000.

Given this information, we can calculate the optimal price that would be sufficient to cover Zach's costs of $3,000 per month by using the formula below:

Revenue = (Total Market x Likelihood of Purchase) x Price 

This would bring in a revenue of $4722.96.

$3.58 will cover the costs, as the revenue is greater than $3,000. Profit= Revenues-Costs, the profit of $1,722 can be invested for future renovations like building supplemental fire exits and in high-quality speakers, computer equipment and more security personnel. This value can also be reduced to attract a larger % of the crowd.  

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By looking at Figure 2.1 it shows that the price would need to be approximately $3.15 for the attendance to decrease at an average of 125. We can interpret from the model predictions that half the attendee will stop coming if the entrance fee reaches $3.15. If the fee was dropped to $3.00 the attendance rate would increase to 52%, which would make sense considering the ease of taking exact change at the door.

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Figure 2.1,

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To determine the price level that would exactly cover Zach’s monthly costs of $3,000; we would need to figure out the breakeven points on Figure 3.1. Breakeven will be achieved when his revenue is at 1.0 as it will indicate a revenue of $3,000 per month and a profit of $0.

There are 2 points at which the revenues reach a value of 1 which can be reviewed below in figure 3.1. With each price respectively being approximately $1.25, and $7.60.

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Figure 3.1,

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To find the optimal pricing strategy of maximizing revenues that do not include entrance fee for people of 21 or younger, we reran the analysis by leaving out 21 years old respondents and under. By taking into consideration that 1/3 of the attendees are 21 years old or younger, it means that the total market of above 21 years old is 2,000 attendees.

$3.86 per attendee will be the optimal pricing strategy that will maximize the revenue. The likelihood of purchase for attendees above 21 years old will be 48% in this case.

(2000 x 0.48= 960) 960 people above 21 years old will still attend the event, and with a price of $3.86 the revenue will be (2000 x 0.48) x $3.86 = $3,705.6, the entrance fee at this price can cover the fixed costs at $3,000.

$3,705.6-$3,000 = $705.6, Zach will make $705.6 in profits.

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Figure 4.1,

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The optimal price that would maximize profit for the younger segment of the population that is 21 years old and younger is $2.82. It is reasonable to assume that two-thirds are over the age of 21 and one-third is 21 and younger, which indicates that 1,000 attendees are 21 years old or younger. The likelihood of purchase is 40 percent and expected revenue per attendee is $1.13. Selling to the younger segment at a discounted price of $2.82 will generate an additional $1,128 in both revenue and profit per month for Zach’s Garage. However, if Zach only focused on this segment, it would not cover his costs and thus would not be profit. If it is in addition to his other segments and entry fee plans, it would provide a nice boost to his revenues.