Discounts and Promotions: The Abercrombie & Fitch Case

1.What is the pricing problem present in the case?

The Abercrombie and fitch struggle on price cutting and promotion discount on their lunch that
result to a big drop on their revenue. They are using low price strategy which focus on low prices
and high volume. Ignoring the high cost per unit and hoping to regain it in holiday shopping
season, but eventually fail because of lacking promotions to inform costumers.

2. What is the appropriate pricing model which could have helped Abercrombie & Fitch avoid
the given pricing problem?
They could use the freemium pricing instead of giving discount to their all-new design, they can
select what costumer can get if they avail or purchase their product. In that way it will minimize
and control the cost or expenses of the company. For example, they select a on design that has a
free if the buyer avails it and also lessen the pressure on its gross margin. One of the good traits
of freemium it is not just seasonal promotion they can use it on regular season. For this method
to be successful the company must have a Deep market research  from the beginning of the
product design process. To have an understanding about the features customers will value and
pay for.

3. What is/are the indicator/s of crisis present in the case?

The Abercrombie and fitch struggle on capacity utilization that resulting a big drop on their
revenue. The sales drop they also facing inventory stock since the unsold inventories will pile up.
Price pressure their trying to sell a product at a discounted price and disregard the cost per unit
that affect and take toll to their gross margin.

4. What appropriate course of action should Abercrombie & Fitch undertake based on the
concept of pricing in crisis?
Improve their capacity utilization, discounts and future promotion must be carefully discuss
before applying it to the market. Limit the production by 75% - 80% in that way the company
has a room for adjustment and control to their inventory. Invest on advertising and to have a
wide rage costumer. Use Benchmarking to compare their company’s outputs and processes to
competitors in the industry.  It involves looking outside of the business to examine how industry
competitors achieve a high level of performance and the processes they use to maintain their
success. This enables Abercrombie and fitch`s to identify performance gaps and achieve a
competitive advantage.