Pricing case: Harborline Ferries
Client: Harborline Ferries, which already runs a slow ferry to Marlow Island.
Question: what should a one-way ticket on the new 25-minute fast ferry cost?
What you have: the cost of a crossing, what commuters pay today and how much time the fast ferry saves, and a demand estimate at four prices.
Done looks like: a price, the daily profit it earns, and a risk to watch. All figures are fictional.
A pricing case asks what to charge. Three questions bound the answer:
- Cost floor: what does serving one customer cost? Pricing below it loses money on every sale (unless there's a reason, such as winning share).
- Value ceiling: what is it worth to the customer? Their alternative's price plus the extra value you offer, such as time saved.
- Alternatives: what do substitutes and rivals charge?
The price sits between the floor and the ceiling. Then demand decides where: a higher price usually means fewer customers, so compare total profit at each price, not the margin per ticket.
The trap in this case is the load factor: cost per passenger depends on how full the boat is, not on how many seats it has.
Floor: cost per trip / passengers per trip
Ceiling: alternative's price + value of time saved
Then: profit at each price = price × riders - costs
pick the price with the most profit, not the highest price
The case works through these in order.