Cup size strategy and other incidents

Special decision entering period 7: Multiple cup sizes

In our BizCafe simulation, the opportunity to offer small and large cup sizes as well as medium didn't come into play until period 7. (We bought the smallest quantities possible, given how little time was left in the simulation.) Given that our simulation was only 8 periods long, that didn't give me much opportunity to play around with the pricing of the different cup sizes. I managed to learn a lesson pretty quickly, though.

"Tightly bunched" strategy

Maxed out customer base?

Given that we had stopped advertising by this point, my thinking at first was that we were dealing with roughly the same volume of sales as the week before. There must be a minimum difference of twenty cents between the sizes, and I didn't want the lower-margin small cups to cannibalize sales of the higher-margin medium and large sizes. So I thought, let's make the price of a small as unattractive as possible, and let's make the price of a large as attractive as possible. I called it the "tightly bunched" strategy.

Cup sales with the "tightly bunched" strategy: Not good!

Strategy backfires

While we managed to come in first in net income that week, what jumped out at me was that we had a minuscule increase in cup sales that week, while our competition saw substantial gains. It turns out that offering the new sizes expands the market. And our small cup was $0.66 more expensive than the next most expensive competitor's.

So I decided to go with a more traditional strategy for week 8, and this time I remembered to hire more servers to accommodate the increased demand.

Much better pricing strategy

Corrections made

The results? For the first time all game, we came in first in cups sold. It was the first time in our simulation that a shop came in first in cups sold, revenue, and net income in the same week.

Our revenue from coffee sales increased by $2,090.90. We sold 369 more small cups than the previous week, which yielded a $1,306.95 increase in revenue. Even our large cups, of which we sold 38 fewer than the previous week, saw a $90.40 increase in revenue. And our medium sales increased as well.

Cup sales with a 50-cent difference: first place!

(And hiring two additional servers at an incremental cost of $388.29 led to a reduction in lost revenue of $957.57.)

The lesson: adding the new cup sizes leads to an increase in overall cup sales, so be sure to accommodate that additional demand for small cups.


Other special decisions and incidents

Our final dashboard, and our best period.
We stuck with our supplier. They were happy about that.

There are several presentations posted online, mostly on Prezi, in which students have discussed their BizCafe experiences and the lessons they learned. There were things that happened in other versions of the simulation that didn't happen in ours, so I can't comment on them. There were also a few things that happened in our game that I haven't mentioned yet.

I will say this as a general bit of strategy regarding special decisions and incidents--don't spend money on your shop if there isn't enough time left in the game to recoup the expense.

Other incidents from our simulation

• We had the chance to switch suppliers. It came during the last week, and we could have made an extra $100, but I figured it wasn't worth the risk of potentially alienating our regular customers, especially when we already had the award for Best Quality.
• We had a "problem employee" one week. We fired her. She threatened to sue, but nothing became of it.
• We came close to running out of medium cups. I was prepared to let them run out. There's no point in buying branded cups in bulk if it's the last round of the game.

Incidents I read about in other simulations

• We bought insurance in the starting decisions, and in other simulations, there was a fire. If you didn't buy the insurance, you had to pay for a new espresso machine.
• You can buy a coffee roaster. Don't know how much it costs. (Only worth it if there's enough time left.)
• You can install "green" lighting and toilets. Don't know how much it costs. (Only worth it if there's enough time left.)
• You can change your furniture, or renovate, or something like that.
• Apparently, you can offer fair trade coffee, and you have the option of lying about serving fair trade coffee. In both versions I read, lying came back to bite them in the ass.
• You can offer entertainment in your shop to bring in customers. Live music, karaoke, possibly other stuff. I don't know what costs are involved in that.
• You can pay $500, I think, for a more detailed customer satisfaction survey. Seems like there could be valuable stuff in there, though I managed to ascertain what makes customers satisfied without it. If I had the option and a decent lead, I probably would have spent the $500.

There could have been more, but that's all I can remember, and I don't feel like researching again.

Conclusion

And that's it for our BizCafe experience. Final score after 8 weeks:

Total revenue: $126,194.40

Net income: $39,483.50

Total assets: $64,483.50

Net increase in cash: $30,255.31

Final bank balance: $47,639.99