3. jamie's motor home sales currently sells 1,000 class a motor homes, 2,500 class c motor homes, and 4,000 pop-up trailers each year. jamie is considering adding a mid-range camper and expects that if she does so she can sell 1,500 of them. however, if the new camper is added, jamie expects that her class a sales will decline to 950 units while the class c campers decline to 2,200. the sales of pop-ups will not be affected. class a motor homes sell for an average of $125,000 each. class c homes are priced at $39,500 and the pop-ups sell for $5,000 each. the new mid-range camper will sell for $47,900. what is the erosion cost?

Price erosion occurs when you are obliged to cut your price—and thus the perceived worth of your product—in order to compete with unlicensed sellers or sellers who have broken your pricing policy. It is the gradual erosion of product pricing over time. If your brand is experiencing price erosion, it's a good indication that there's a problem with your retail partners somewhere down the line. All it takes is one severe offender to set off "race-to-the-bottom pricing," in which all of your retail partners violate your pricing policy in order to compete with the initial offender, and your price eventually drops so low that retailers must sell at cost to compete.

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