Albatross departmental store is considering re-allocating PoS operation strategy due to new rules for

using payment gateway. The bankers’ association decided that they would charge Rs. 3 per
transaction of value less than Rs. 250 and 2.25% of value over Rs. 250 for payment through credit or
debit card. Albatross is considering charging Rs. 2/- from customers who are paying below Rs. 100/-
and Re. 1/- from their own pocket against customer loyalty for CC and DC payments. However, they
will charge Rs. 3/- to the customer paying amount between Rs. 100/- and Rs. 250/- for CC or DC
payment. Considering the profit percentage, Albatross would have no problem to pay the payment
gateway charges if they increase their prices by 65p for each product in an invoice amounting >250.
The analytics division produced the following joint probability table based on their historical data:

Cash Credit card Debit card

Less than Rs. 100 0.09 0.03 0.04

Rs. 100 – Rs. 250 0.05 0.21 0.18

More than Rs. 250 0.03 0.23 0.14

In our last discussion on this case, we arrived at two alternatives.

i) Increase price of each product by Re .65 for invoices above Rs. 250 (Facility charge)
for CC and DC payments along with other two mentioned policy changes. This would
reduce the revenue loss.
ii) Increase the price across all payment channels. Cash channel would provide extra
revenue but all three channels will face customer churn.

It has been found that the daily number of transactions in the store follows P(1000) distribution.
Further, the following random variables has been identified in order to take a call.

Y= no. of products per transaction

Z=amount in a transaction

The following table details their distribution:

Cash Credit Card Debit Card

< 100 X~P( ) X~P( ) X~P( )
Y~Bin(60, 1/3) Y~Bin(60, 1/3) Y~Bin(60, 2/3)
Z~N(60,2) Z~N(75,3) Z~N(60,2)
100 – 250 X~P(70) X~P( ) X~P( )
Y~Bin(60, 1/3) Y~Bin(60, 2/3) Y~Bin(60, 2/3)
Z~N(230,64) Z~N(230,41) Z~N(200,15)
> 250 X~P( ) X~P( ) X~P( )
Y~Bin(60, 1/3) Y~Bin(60, 2/3) Y~Bin(60, 2/3)
Z~N(800,100) Z~N(1230,900) Z~N(2800,2500)

The speculation is: per Re .5 increment of price/charges, all three X and Z will face a reduction of .5%
for cash channels and 1% for credit and debit card channels.

Are these strategies optimal? What could be your plan A? What could be plan B?