The GoGo had been variously described as combination of a hoverboard and a self-driving scooter. Weighing 18 pounds, it would be sold through wholesale distributors to retailers who would sell to final consumers. The GoGo would be initially priced at retail for $375.00. Initially the GoGo would be sold to Wholesalers who would store inventory and distribute the product to retailers. The wholesale margin was initially set at 15%. Retailers, generally specialty stores but also “big box” retailers would hold inventory, merchandise the product in-store and provide some sales assistance to potential customers. Retail margins averaged 40% across all types of retailers.

The $375 retail price was believed to be exceptionally low compared to early versions of the Segway Personal Transporter, which had been priced at around $5000, so Dani was very optimistic in her sales forecasts. The market for the GoGo and its direct competitors was forecast to be 13,000,000 units annually in the GoGo’s first selling year.

Whoyser had direct variable manufacturing costs of $131.00 per GoGo, coupled with fixed manufacturing costs of $12,500,000. The annual advertising budget for the GoGo was $13,000,000. Direct management salaries and expenses totaled $1,400,000. The GoGo salespeople working for Whoyser were paid solely through a 10% commission on Whoyser’s sales. Shipping costs, breakage and insurance for Whoyser were forecast to be $5.50 per unit.

Dani reviewed the economics of the GoGo she thought about how her manager would react to the analyses she produced for the impending launch. Initially, Dani had forecast that the GoGo would achieve an 6.5% market share in its first year at the $375 price point. However, she recalled that the original Segway Personal Transporter had been introduced in 2001 to wide technical acclaim. The Segway, which was initially forecast to sell tens of thousands of units per week, sold only 300,000 total units over six years, and lost hundreds of millions of investment dollars.

What is the per unit dollar contribution for the GoGo?

What is Whoyser’s break-even point in units?

What unit market share does Whoyser need to break even?

What will Whoyser’s total profit be if Dani reaches her original unit market share forecast?

Dani wanted to present an alternative pricing strategy to Whoyser management. She had market research conducted to determine the price elasticity of the GoGo around the $375.00 retail price. That research concluded that the price elasticity of demand for the GoGo was approximately – 1.2. Dani considered the impact of raising or lowering the GoGo retail selling price as high as $425 or as low as $325.

What is the impact on Go Go’s profits if Dani raises the retail selling price to $425?

What is the impact on GoGo’s profits if Dani lowers the retail selling price to $325?