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