Marketing Simulation
Studying of the data under analysis reveals the changes in pricing strategy over the duration of the 6 simulations. When specific reference is made to the Unit Price it can be noted that for the first 3 simulations the Unit Price for the backpack, targeted primarily towards Urban Computers, was $45. But, in the 4th and 5th rounds of sales, the Unit Price was decreased to $34. Lastly, in the 6th and final simulation of analysis the Unit Price was decreased to a final price of $28. Analysis of the Price Score KPI suggests varying target segment reaction to the Unit Price of the backpack. In the first three rounds, the Price Score was 4, indicating $45 as being an ideal price for the target segment. However, when the Unit Price was decreased to $34 in the 4th and 5th simulations, the Price Score decreased to 3, indicating that $34 was extremely too low for the target segment. This was also the case in the 6th quarter, with the Unit Price of $28 also receiving a Price Score KPI of 3. However, when the Price Score is compared against competitor scores, it is apparent that the firm’s backpack was priced consistently more accurately than competitors.
Determining pricing strategies is critical to a firm’s success because price has a direct effect on a firm’s profits (Kerin, et al., 2008). Because of the importance of finding an appropriate price, an ‘approximate price level’ was determined. In determining this price, an integrated demand-competition orientated approach was decided upon, emphasising consumer preferences above factors such as cost, while stressing competitor’s pricing (Kerin, et al., 2008). Furthermore, the penetration pricing strategy was used as a basis for entering the market.
Determining pricing strategies is critical to a firm’s success because price has a direct effect on a firm’s profits (Kerin, et al., 2008). Because of the importance of finding an appropriate price, an ‘approximate price level’ was determined. In determining this price, an integrated demand-competition orientated approach was decided upon, emphasising consumer preferences above factors such as cost, while stressing competitor’s pricing (Kerin, et al., 2008). Furthermore, the penetration pricing strategy was used as a basis for entering the market.