PriceWize The Value-Based Pricing Simulation. What you will do Working with a few others you will run a business for six periods making price decisions.

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Presentation transcript:

PriceWize The 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 Sales Profit Margin Margin = Price-Cost Profit = Sales x Margin Price?

What you are selling You 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 Computer A 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 Objectives Run 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 wet But the Tutor is there to help