Initially for pricing I used the price sensitivity meters as following I used the
price category under which most people would fall taking lower threshold as 1
person and those under upper threshold as half person (assuming only half of
them would buy). For burgers and mostly for cookies at least I followed same
throughout.
I also analysed the content analysis and assumed that marketing does not have
much impact for the initial stage. Also since it was near a school, service levels
would not be imp and hence only 1-2 worker which I kept constant throughout.
I kept most factors same as I thought I had received good result. In fact, slightly
increased prices a bit to realise increased profits.
I changed my advertising position to as against competitor 3 from selling
highest quality burgers as I had 30% switching from RedMeat Express to Comp
3
I still had highest revenues but 2nd overall market share, so did not again
changed much except reducing prices a little bit. I reduced the prices of soda as
it had low variable cost and competitor had lowered too and was steadily losing
market share on that.
I increased the advertisement budget too as I had not increased it from 500$ and
realised that school children would be drawn to advertisement (from content
analysis). I increased staff to 2 to observe effect.
I observed that competitor one had the highest market share because of lower
prices and high allocation to advertisement. Following suit, I reduced soda and
fries (now the burger-fries and burger-soda combo was cheaper as many
customers were looking for that) and increased advertising budget to $1500.
This helped me get back to highest market share as competitors too had
increased prices. I increased employees to 2 to maintain service levels in
increased demand.
Increasing employee had had no significant effect so bought it down back to 1
I saw that competitors were increasing prices, but I held them steady as they
had high -ve price elasticity. Moreover, bought the soda and fries price up as
competitors had also increased it and I couldnt miss out on revenues but I kept
it slightly less than competitors. I again switched my advertising strategy to
against competitor 3 to hedge against competitor switching.
I saw the projection and realised that the total market sales would be very high
and hence allocated the highest possible advertising budget, and advertised
against all competitors and any %age shift from would yield high revenues.
I kept on realising high revenues and profits due to keeping cookie prices at a
steady 4.49-3.99$. Its price elasticity was +ve (though very small) and hence no
point in lowering prices. Also variable cost for cookie was very low and hence I
realised good profits from it.
SIMULATION SUMMARY (please copy the entire text below and email to your
instructor):
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Cumulative Profits : $82,732
RMX444/1,65,464/99924-03-2017 23:09:410100229
DECISIONS FOR MONTH 1
Price for burgers: $2
Price for fries: $1.49
Price for soda: $1.99
Price for cookies: $4.49
Advertising budget : $500
Number of employees : 1
Unique Selling Proposition : VALUE BASED BURGER
Average monthly salary of an employee: $1,500
Fixed costs (excluding salaries): $1,500
Total variable costs: $6,058
Number of our customers : 4,324
Profits: $14,138
DECISIONS FOR MONTH 2
Price for burgers: $2
Price for fries: $1.49
Price for soda: $1.99
Price for cookies: $4
Advertising budget : $1,000
Number of employees : 1
Unique Selling Proposition : TASTY BURGERS
Average monthly salary of an employee: $1,500
Fixed costs (excluding salaries): $1,500
Total variable costs: $7,583
Number of our customers : 5,383
Profits: $17,398
DECISIONS FOR MONTH 3
Price for burgers: $1.99
Price for fries: $1.49
Price for soda: $1.49
Price for cookies: $4.49
Advertising budget : $1,000
Number of employees : 2
Unique Selling Proposition : BEST COOKIES
Average monthly salary of an employee: $1,500
Fixed costs (excluding salaries): $2,100
Total variable costs: $4,912
Number of our customers : 3,561
Profits: $6,768
DECISIONS FOR MONTH 4
Price for burgers: $1.99
Price for fries: $.99
Price for soda: $.99
Price for cookies: $3.99
Advertising budget : $2,000
Number of employees : 1
Unique Selling Proposition : BEST COOKIES
Average monthly salary of an employee: $1,500
Fixed costs (excluding salaries): $1,500
Total variable costs: $4,046
Number of our customers : 2,936
Profits: $3,361
DECISIONS FOR MONTH 5
Price for burgers: $1.99
Price for fries: $1.49
Price for soda: $1.99
Price for cookies: $4.49
Advertising budget : $2,000
Number of employees : 1
Unique Selling Proposition : BEST COOKIES
Average monthly salary of an employee: $1,500
Fixed costs (excluding salaries): $1,600
Total variable costs: $6,647
Number of our customers : 4,714
Profits: $14,056
DECISIONS FOR MONTH 6
Price for burgers: $2.19
Price for fries: $1.49
Price for soda: $1.49
Price for cookies: $4.49
Advertising budget : $2,000
Number of employees : 2
Unique Selling Proposition : BEST BURGER
Average monthly salary of an employee: $1,500
Fixed costs (excluding salaries): $1,900
Total variable costs: $12,136
Number of our customers : 8,462
Profits: $27,011
