Determine the amount the customer is willing to pay

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ECONOMIC ASSIGNMENT

Macy's has recently closed many stores and gained a new CEO as Terry Lundgren, long-time CEO, has stepped aside. This is only one of the many changes that are to be put in place. Wall Street says that the company has a long way to go until their stocks climb back up, but the new CEO is a start. Jeff Gennette has announced some of the changes he plans on making. One of his plans includes creating areas designated for marked-down goods. This has already began and it called "Last Act". Another change being implemented focuses on a change in coupons. It would alter the coupons to offer a certain dollar amount off a purchase. One last change that has been announced is a self-service shoe department. They are aiming to compete with other off-price retailers. They have said that they will be aiming to cut costs and increase sales with these new changes.

My girlfriend works at Macy's and she was complaining the other day that they are going to start the self-service shoe department. She says it will really lower expectations of customers and they will make a mess of the department. It will also make customers think that they are getting lower prices than they are actually getting because it will look like a discount store when, as of now, they are not. But it will most-likely reduce customer-employee friction.

By separating the sale and regular price items, they are more specifically targeting their customers. This is aimed to increase sales in both sections. This will definitely increase the optimal decision because it will target specific customers and better serve the needs of the customers pushing for the greatest total utility of the customers. They seem to be aiming to please the customer by trying to find the marginal utility. The change in coupons offers an exact amount off. This could help determine the amount the customer is willing to pay. The self-serve shoe department will cut costs. It will lessen the need for shoe associates. This means less employees will work at each store and it is possible they will lay-off more employees. This would allow them to lower some prices if they cut enough costs and their sales will increase according to the law of demand. Overall, these changes could prove to be what the company needs in order to stay in business.

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Reference no: EM131447289

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