Ed Oakley is interested in expanding his successful lawn service into a neighboring town. Several competing services are well-entrenched in this town, charging $25 to $30 for each mowing of an average-sized lawn and $300 to $350 per season for fertilizing and lawn treatments. Most customers use the same lawn service throughout a season and there is a considerable amount of repeat business from year to year.
(a) Ed is considering offering low introductory prices to gain the attention of homeowners in this town. What might these low prices be? Describe an advertisement that would effectively communicate these introductory prices.
(b) What factors would determine whether the use of promotional discounts would be an appropriate strategy for Ed’s business?