PriceWize The Value-Based Pricing Simulation. What you will do Working with a few others you will...
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Transcript of PriceWize The Value-Based Pricing Simulation. What you will do Working with a few others you will...
PriceWizeThe Value-Based Pricing
Simulation
What you will do
Working with a few others you will run a business for six periods making price decisions and seeing the impact on demand and profit for several market sectors.
You will explore the link between customer values, prices, costs and profit.
And through this make better price decisions.
Exploring Pricing & Profit
70 80 90 100 110 120 130 140 150 160
Price
Sales
Profit
Margin
Margin = Price-Cost
Profit = Sales x Margin
Price?
What you are sellingYou will be deciding the prices for a range of meal
boxes.
These provide all or most of the ingredients for a meal – vegetables, meat and, as appropriate, sauces etc.
Four sectors that differ in terms of needs, wants, values and price sensitivity.
Family Meal Box
for busy working families with the emphasis is in good nutrition and value
Just add lemonade
Organic Meal Box
Locally sourced organic and free-range vegetables and meat for people who are environmentally friendly
Just add sweet cider
Gourmet Meal Box
Unusual, exotic and exciting meals for the cook and friends for people who enjoy cooking and culinary challenge
Just add fine wine
Special Meal Box
for that special meal for that special friend, the in-laws or the boss where cooking the meal will not overwhelm or require special skills
Just add champagne
Financial Information
To keep numbers small and so you have no preconceived ideas the simulation uses a mythical currency – the Account Unit (AU)
All types of Meal Box are currently being sold at the same price (100AUs)
All sector boxes cost the same (60AUs)
Additionally each market sector has fixed costs of 400 AUs
Current Situation
Competitor’s Prices
Other box suppliers 63 –137 AUs
Supermarket ready meals 72 – 131 AUs
Supermarket ingredients 50 – 125 AUs
Takeouts 100 – 160 AUs
These range from being direct competitors to being indirect competitors but never-the-less
may impact demand for your offering.
Using the ComputerA computer will take your decisions, determine
sales, costs and profits.You will identify yourself to the computer with a
name consisting of up to SIX LETTERS.After entering your name you can change
prices.After confirming the changes the period will be
simulated and results produced.When you receive your results please use the
wall charts to share key results.
Your ObjectivesRun the business for six periods.Maximise profit contribution by
– Setting the “right” prices– Changes to value
Explore pricing and customer “values”Work as a team sharing thoughts
Have Fun
It takes time to get your feet wetBut the Tutor is there to help