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Hard Market Entry Pricing

I Want My Em-TV

#Telecommunications #Media
ProHub Comment

This is a pricing and market entry case requiring candidates to balance multiple constraints: achieving 25% margins while staying 15% below market prices. The case tests financial modeling skills, competitive analysis, and strategic recommendation-making. The key insight is recognizing that not all product tiers may satisfy both constraints simultaneously (notably the 400-channel package).

Estimated Time 15 minutes
Difficulty Hard
Source Duke
50 / 100
Emerson is a $10b company that offers landline phone and broadband internet services to an area with 20 million households and businesses. To diversify their revenue, Emerson has decided to enter the television market. They have invested in cable boxes that can be used by homes and businesses to watch tv. Emerson has sought our help to determine their pricing strategy, independent of their existing phone and internet plans, to maximize profit and whether they will be able to successfully beat competitors.

Clarifying Information

  1. Emerson has 50% market share in their region.
  2. 80% of their customers are households and 20% are businesses.
  3. Pay television networks (e.g. HBO, Showtime) have set rates that should not be considered in the pricing strategy.
  4. There are two other companies that provide cable boxes in the area and both are smaller than Emerson. They also compete with DirectTV (satellite tv provider).
  5. The infrastructure is already in place so startup costs are minimal and can be excluded for the purposes of this case.
  6. Emerson believes they need to be 15% below market prices in order to attract customers.
  7. Emerson wants at least a 25% margin on their services.