PriceWize™ - the value-based pricing simulation

A business simulation exploring the commercial, financial and operational practicalities of value-based price setting.

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Price setting is perhaps the most crucial and most difficult decision that a business person can make. This simulation allows participants to explore pricing and develop an understanding of the problems, issues and opportunities taking into account costs and value to the customer. At the end of the simulation participants will in a position to review and critique their own prices and improve how they price.

Participants take over a business where prices have previously been set on a cost-plus basis. The business sells "menu boxes" to family cooks, organic cooks, gourmet cooks and novice cooks. These four sectors provide a fun way for participants to form opinions on price sensitivities, customer values and use these to set prices. Later, participants make additional decisions that impact customer value and costs in an attempt to improve profits further.

Thus this simulation provides an in depth introduction into the practicalities of price setting that lead to profit improvement.

Summary Description

Key Learning

Ways of Use

Prices

Documentation

Download

Summary Description

TARGET AUDIENCE: SME owners and leaders, marketing and product managers from larger companies.

DURATION: The simulation 2 hours. The short duration means that the simulation means that is is suitable for use as part of a half-day workshop, as part of a longer marketing or business course or on a company conference.

METHOD: After a short briefing the training group is divided into several teams of four to five learners. These learners consider the problem facing them and then make decisions for a trading period. These decisions are fed, by them into a microcomputer that simulates the impact. The results are analysed by the learners before making the next decision. This decision-making cycle should be repeated for six periods. At the end of the simulation phase the learners reunite to discuss and compare results.

The simulation can be used with any number of teams but each team must have access to a computer and printer.

AVAILABILITY: Because of the newness of the simulation, PriceWize is run on a fully tutored basis. But, for training consultants it can be made available after training for their use.

Key Learning

The simulation covers the following key areas

PRICING STRATEGY

Cost-Based Pricing: Here prices are set by adding a margin to unit costs without concern for the characteristics of the market served. Participants take over a business where pricing has been done on a cost-based basis. Can they improve profits by appropriate price changes?

Competitor-Based Pricing: Here prices are set based on what competitors are charging. In the simulation, participants must evaluate the prices of direct and indirect competition and think about their offering - realising that competition is not just from businesses offering the same product or service!

Value-Based Pricing: Here prices are set based on the values placed on the offering by the customers. During the simulation participants move to value-based pricing - a move that, if done well, should increase profits. But it requires a deep understanding of customer needs, wants, value and price sensitivity.

Pricing Issues: Although, in practice, value-based pricing leads to higher profits but it takes time and requires a good understanding of customer needs, wants and values. As a result it is time consuming and judgemental - issues that are explored during the simulation.

FINANCIAL ASPECTS

Pertinent Costs: What costs need to be taken into account when pricing? During the simulation, each market sector is treated as a profit centre allowing participants to assess profitability.

Influencing Costs: How might you improve profitability by increasing value through adding cost or increase profits by cutting costs without cutting value?

Profit Contribution: Relevant profit measures and goals are explored.

Capacity Use: Many businesses optimise profit by working at full capacity and hence eliminating idle resource costs. This waste can be reduced or eliminated and profits maximised by setting prices appropriately taking into account prices sensitivity and margins.

VALUE TO CUSTOMER

Needs and Wants: Central to value-based pricing (and any marketing activity) is a clear understanding of customer values. This is explored in the context of four market segments each with different needs, wants, values and propensity to pay.

Price Sensitivity: Cost-based pricing assumes that all customers have the same sensitivity to price. In contrast, value-based pricing assumes that different types of customer have different sensitivities to price and taking this into account allows one to maximise profits and profitability. To do this one must assess price sensitivity - a difficult task. During the simulation participants must assess sensitivity and think about the factors that influence price sensitivity in the simulation and their own businesses.

Influencing Value: During the simulation participants will have to influence value but this influence may increase or reduce value and will have a cost and be appropriate for some market sectors and inappropriate for other sectors. During the simulation have the opportunity to selectively improve value by offering celebrity chef based recipes, using "ugly vegetables", increasing preparation and providing a preparation video.

Prices

This simulation is available for company training on a per course rental basis (rather than on a per participant basis) and for academic (university) and school use on a per course and an annual unlimited use basis. For you convenience you can pay in pounds sterling (£), US Dollars ($) or Euros (€).

Learn more about the rental process

Training Type

£

$

Company Training

£250

$450

€350

SME

£100

$200

€150

Academic (annual use)

Free!

Free!

Free!

School (annual license)

Free!

Free!

Free!

Notes:

  1. Single company training course is up to 30 participants Beyond that for each group of 30 a copy of the business simulation must be rented.
  2. Rentals in the UK and the European Union will incur VAT (Value Added Tax) at 20%. For the rest of the world VAT is not charged.
  3. Company Training use is invoiced after successful use.
  4. SME prices are for workshops for micro, small and medium sized businesses/
  5. Academic use up to first degree level and school use is free - see School and University Use.

Way of Use

This business simulation can be used:

 

Documentation

To help you review the simulation you can download the participants' brief and briefing slides. You should email me to ask for:

  1. The Background Notes (Tutor's Manual)
  2. Period Handouts (as the simulation progresses handouts are provided to introduce new issues and tasks)
  3. An optional decision form.
  4. Research Sheet (to allow teams to share key data).
  5. Result Summary (to record key results if no printer is available)
  6. PriceWize Review - a Power Point presentation that can be used for the review.
  7. Feedback: suggested actions by the tutor.
 

UK Version

US Version

Click button to download the participants' brief Download UK Participant's Brief Download US Participant's Brief
Click button to download the briefing slides Download Power Point Briefing Slides Download Power Point Briefing Slides

Simulator Download

This is provided to allow you to download an evaluation version of the simulation. 

The table below shows the files to download, their description and size. You should copy them to a folder, a USB Flash Drive or even to floppy discs! Run setup.exe. The program will then install.

Note: When downloading the setup.lst file you must right click and then select Save As. (If you left click the file will open - this is a feature of Windows XP, Vista, Windows 7 and Windows 8.)

If, instead of installing from the Web, you are installing from the CD-ROM version of this resource you can install directly by clicking setup.exe and opening the file.

File Description Size
setup.exe Installation Program 137 Kbytes
Setup.lst Installation Data 5 Kbytes
PriceWize.cab Simulator Files 2,334 Kbytes
 

© 2014 Jeremy J. S. B. Hall

Most recent update: 30/09/15
Hall Marketing, Studio 11, Colman's Wharf, 45 Morris Road, London E14 6PA, ENGLAND
Phone +44 (0)20 7537 2982 E-mail
jeremyhall@simulations.co.uk