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$7.50 (tax not included) or $8.00/$8.25 (tax included)
My friend and I are opening a mini-golf course here in Vegas and have run into a disagreement about pricing. Do we include tax in the posted price? The desired pricing is $7.50 for kids, $8.50 for adults. Having it as such means that with Nevada's 7.75% sales tax, Kids are actually $8.08 and adults $9.16
Arguments for including tax: -Looks professional. -Don't have to keep, and deal with, large amounts of small change. -If we go with $8.25/$9.25 we'll make an extra $6900 per year. -Most entertainment options charge in whole dollar(whole quarter) amounts - Movies are $9.25 tax included, museums, baseball games, etc. -Charging tax on top and giving people .92c change would, in the words of a gambling friend, "cause massive tilt." Arguments for not including tax. -The perceived cost is $7.50, not $8.08. People remember the number the saw, $7.50, and not the number the paid, $8.08 -If we were to go with $8/$9 (instead of $8.25/$9.25) we'd make an extra $6500 per year by not including the tax in the price. -People now have change in their pockets for use in our video games and vending machines. (obv, if we were to charge 8.25, this would also be true) -The increase in perceived cost would cause a loss of business. -There is a theory of marketing that says that value is perceived in odd numbers, luxury in even numbers (observe car pricing). -People assume you're going to charge them tax anyway. summary of profits assuming change in price does not effect # of customers: $7.50/$8.50 (tax not included) = Base + $6500 $8/$9 (tax included) = Base $8.25/$.9.25 = Base + $13,400 The crux of the question is, How will adjustments in pricing effect our bottom line. Which pricing plan will create the most business and generate the most profit. I'm having quite a contentious argument with my business partner, so I'd really love some outside input. |
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