Case—Inkjet Printer Pricing

The inkjet printer business had adopted the “bait and hook”, also known as the “razors and blades” or “tied-products”, business strategy, offering the basic printer product at a very low (possibly below cost) price but charging a highly marked-up price for its proprietary ink cartridge. This case explores the pricing of two interrelated products: printer and its ink cartridge to maximize the overall profit. This case is designed as an introductory level case study that emphasizes the basics of spreadsheet modeling. The real learning points of this case are to improve the students’ skills of modeling a business problem of this nature, determine the parameters involved, explore the tradeoffs between different pricing criteria and analyze how profit can be affected by variations in the input parameter values such as printer cost, cartridge cost, printer price elasticity, and cartridge-to-printer projected sales ratio