Bistro Game:

The game is a simulation of real market for Vadapav. Each FAS group is a separate business unit
(Vadapav Seller) and are competitors in that market. All are operating in that market and their
objective is to attract more customers. Each group has Rs.1500 which they can spend as marketing
expenditure per week. The initial price of Vadapav is Rs. 10 per piece. Each group has to decide
pricing for Vadapav and has Rs. 1500 as marketing expenditure per week to attract maximum
customers in the market. This exercise repeats for 8 weeks and group which has the maximum
cumulative profit for 8 weeks combined will be the winner.

Game Simulation Analysis:

Pricing Objective:

1. In week 1, every group’s pricing objective is to obtain Maximum Market Share. Every group
want to capture maximum share of customers and maximize their profits. So, the groups
with less prices around Rs.9 and Rs.10 per Vadapav has earned maximum profit in week 1.
2. After week 2, the objective changed to Maximum Current Profit. Most groups (which are in
the middle and lagging in terms of profits) increased their unit prices to maximize current
profits.
3. After week 4, the teams which are in the losses and very low profits main concern is to
survive. So they adopted Survival Pricing i.e. their objective is to cover their marketing
expenditures.

Maximum Market Skimming:

If we observe this market from Week 1 to Week 8, the pricing of Vadapav, which started of with
relatively high prices dropped slowly from Week 1 to Week 8. Every group reduced their unit prices
over this period from Week 1 to week 8.

In week 1, unit prices were in range Rs.10 to Rs.15 whereas in week 8 unit prices of groups were in
the range of Rs.8 to Rs.9.5.

Price Elasticity of Demand: The change in demand of a product per unit increase in price is called
price elasticity of demand. The Vadapav market simulation in the game is price sensitive.

1. From price range Rs.13 to Rs.20, the demand is extremely price sensitive. It is evident
through the profits earned. For unit price of Rs. 13, profit = Rs. 1630.For unit price of Rs. 20,
loss varied from Rs. 200o to Rs. 750 depending on the marketing expenditure.
2. But for the price range Rs.10 to Rs.13, even though the demand is price sensitive it is very
less when compared to above.
3. For the price range of Rs.8 to Rs.10, the price sensitivity is very less. The profits earned only
differed mostly because of Marketing expenditure.

Analyzing Competitor’s Prices: As every team is competing for market share, the objective is to
maximize their profit. So after Week1, every team started analyzing other teams prices and their
profits earned before deciding their unit price of Vadapav for next week.

Analyzing immediate competitor’s prices makes us understand if both are selling same product and
he is selling for lower price then if there is no additional value you are offering then it is viable to cut
your price to increase your market share.
Pricing Method:

As the market is highly competitive and given high price elasticity of demand, after week 2, the unit
price of each group was decided based on the competitor’s unit price as they don’t want to lose out
the market share to the other groups. This is called Going-Rate Pricing.

In Going-Rate pricing, the firms base its price largely on the competitor’s prices to give tough
competition.

Anticipating Competitive Response:

After Week2, every group started anticipating the other groups prices and started deciding their
prices based on that. For instance, in Week 4, we expected that every group will reduce their prices
(Rs. 8 to Rs. 9) to maximize profit and decide our unit price as Rs.10.50 to maximize our profit.

Responding to Competitor’s price changes:

As the market is highly competitive and given high price elasticity of demand, every group started
responding to other groups price and started modifying their prices for their next week.
Competitor’s prices also became a factor in deciding their unit price for the next week.

Our Pricing Strategy

In week 1, our objective is to maximize profit through minimum sales and marketing expenditure. So
we kept the price of Vadapav as Rs. 13 and we spent only Rs.800 as marketing expenditure. Even
though there are competitors who priced their Vadapav as lo as Rs.9 and Rs. 10. The maximum profit
was earned by group which priced at Rs. 11 as their marketing expenditure was Rs. 1100 which was
highest.

In week2, we analyzed the competitor’s prices for week 1 and decided to price Rs. 9 per Vadapav.
The objective is to gain maximum profit based on week 1 pricing trends. So, we have spent entire Rs.
1500 for marketing. The result is profit =Rs.1264, sales= 544. Even though we offered lowest price,
we spent too much on marketing but it didn’t make much difference and resulted in less profit.

In week 3, we priced Vadapav at Rs. 10 and had spent Rs. 800 as marketing expenditure. Our profit
was relatively higher than week 1 and week 2. We made more profit than groups who priced at Rs. 9
and spent more amount as marketing expenditure. We lagged behind groups who offered the same
price and spent more amount in marketing expenditure.

In Week 4, the price elasticity of demand was very less. The demand hadn’t varied much with
change in prices.

In Week 5 also, the price elasticity of demand was less. The sales varied mostly depending on
marketing expenditure.

From Week 6 to Week 8, the sales varied mostly because of marketing expenses. Even though
pricing affects the sales, its impact decreased over the period as every group is pricing at almost
same price with small variations.

In week1, the demand is highly price sensitive as there is substantial variation in prices of each
group over the weeks the variation decreased and the marketing expenditure became a deciding
factor for sales because the product offered by each group is same (Vadapav) and the pricing is
almost in the same range. So only differentiating factor is marketing. This is directly proportional to
your marketing expenditure.