As a restaurant manager, you have the option to work with an online company and offer a 40% off coupon on any meal. Currently, your monthly revenue is $50,000 with no offers or discounts, and the total profit is $30,000.
This means that a $50 meal sold to one of your regular customers costs you $20 on average and profits $30. If you start advertising online coupons, some of your regular customers will get to know it and just take advantage of it.
This will causing you an immediate loss of profit, because the $50 meal is discounted to $30 and the profit is now only $10. However, the new discount will attract new customers, who will hopefully
a. If after you advertise the coupon, a $10,000 portion of the old $50,000 revenue from your regular customers is now discounted, and an additional $20,000 discounted revenue arrives from new customers, what is the new profit?
b. Create a formula that links the profit with the portion of the old revenue that has to be discounted and the additional already discounted revenue that arrives from new customers.
c. Create a two-way table that shows all the possible profits. The two revenue levels can be shown with increments of $10,000.
d. What would make this a decision model?
e. Explain the relationship between this business process and the concepts of customer segmentation and yield management.