Monday, April 23, 2018

Premium strategy and the importance of a strong start


Elegant furniture at Good Brews
Our general strategy: We'd rather be Starbucks than Coffee Time. That means spending money to make money. Premium offerings at a premium price.

A caveat about this blog--there very well could be other decisions and strategies that are effective in this game. I have no idea if it's possible to run a bargain-basement coffee shop and be as profitable as we were. It very well could be. But because we followed this strategy from the start, it's the only one I know worked. There are some areas in the game where you can adjust your strategies, change tactics and compare the results, but there are some where you have to choose a road to follow, and you don't get to explore the road not taken.

I'll say this much, though--in our game, the teams that went up-market and charged premium prices sold more cups and earned far more revenue than the teams that went down-market.


Start strong to finish strong

Cumulative net income for the top 4 teams in our game.
The top two teams did $2k better in week 1 net income.
That gap just got wider.
Your startup decisions are very important. Especially in an 8-week game--it's a sprint. If you stumble out of the starting block, and another team has a better plan and gets off to a good start, there's a good chance you'll never catch up.

In our market, there were two shops that did significantly better than the rest during week 1 (we were one of them), and from then on, it was a two-horse race. The third-place team finished week 1 $2,800 behind. That means they would have needed to out-earn the first-place team by $2,800 the next week to catch up.

If you're not out-earning the first place team, you're falling farther behind.

Good teams learn from their mistakes, and therefore continuously improve. I'm also guessing that there are customer loyalty and word-of-mouth factors built into the simulation, possibly a function of brand awareness and customer satisfaction. This rewards the successful teams; the rich get richer. So it's very important to start strong.


Branding

Now, in our game, it didn't end up mattering what you named your shop, or if you made a logo and created ads, but I didn't know this at the start, so I figured: if the game gives you the option of doing it, do it. You never know what matters. Following are the logo (two variations), cup design, and ad I created.

Given that this game is played in business classes, you're probably going to get a better grade if you take branding seriously. In my class, at the end of the semester, we had to do Dragon's Den-style pitches, asking for investment in our business, and it helped my pitch to show that I had thoughtfully created a brand image that suited our offerings. Also, there was an award for the team who created the best logo (another team won that). So I'm glad I invested a few hours in developing creative.

(Image credits:

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