In determining the pricing strategy for the Spoke N’ Rider, the key factor to consider is the primary target market, which consists of students.  Because of the limited funds of most college students, the primary deciding factor for a student in purchasing a bicycle is price.  This market factor has resulted in competitive pricing between the 3 bike shops in Mountain City, USA.  The markup on bikes is 30-40% and for accessories 40-50%.  The price range for bikes is $300 to $600 depending on the quality of bike purchased.  Accessories range anywhere from $10 for a water bottle to $100 for a bike rack.

When purchasing a new bike from the Spoke N’ Rider, the consumer is given 90 day service at no charge and 10% off all accessories for one full year.  The cost to the shop for the 90 day free service offered with all new bikes is built into the price of the bike.  As stated earlier, bikes carry a 30-40% profit margin, and 3% of this margin is allocated to the labor cost of service.  Accessories carry a 40-50% profit margin, 5% of which is attributed to the 10% discount offered to all new bike customers.  

The consumer has the option of paying via cash, check, credit card or one year financing at 18% finance charge.  Credit cards and the financing option better enable most students to purchase large ticket items.  The only drawback to the shop-sponsored financing option is that most students at this age do not have established credit so when applying for financing most students are required to have a co-signer, typically their parents.

Along with the bike lines and accessories, The Spoke N’ Rider offers maintenance and repair on all new and used bikes.  The service sector of the business does not draw as much of a profit margin as the product lines, but is a critical part of the business offering.  

Next year The Spoke N’ Rider will introduce a new volume discount plan to attract local area families to the shop.  Any family who purchases 2 or more bikes at the same time will receive a 10% discount off of both bikes.  This discount will not apply to students.