GoVenture CEO Business Simulator Pricing Tutorial for Students

This video will help explain product

pricing and break-even analysis. Make

sure to watch the other videos and read

the user guide for additional


Product price is what consumers will pay

to purchase your product. It is how you

generate revenue. Pricing is one of the

key challenges you face when running a


Here we'll want to set a price that is

high enough for you to generate as much

revenue and profit as possible, but the

price cannot be so high that it will

drive customers to buy from a lower

priced competitor or one that offers

more value. To determine a profitable

price, you have to determine your

break-even point and then add an extra

amount for profit to the company. For

example: if a product costs $10 to

manufacture, ship, market, and sell - then

you should set the price of the product

at more than $10 otherwise you will be

losing money on every sale. Let's take

this example further. Let's say that you

are going to manufacture 100 products.

Each product costs $5 to manufacture for

a total cost of $500. You are also going

to spend $500 on shipping, marketing

selling, and all other costs combined.

Your total costs are now $500 for

manufacturing plus $500 for everything

else which equals $1,000 in total costs.

Assuming you plan to sell all 100

products then your break-even price is

$1,000 in total costs divided by 100

products, which equals 10 dollars. This

means that if you sell all 100 products

at $10 each you will generate one

thousand dollars in revenue which

matches your $1,000 costs. Your profit

will be $0. To make a profit you will

have to sell each product for more than

$10. If you sell each product for $11,

you will make $1.00 in profit for each

product you sell for a total of $100


Is $1.00 in profit per product enough?

That's for you to determine. How do you

know if you can raise our prices

there is no preset price that consumers

are expecting to pay for your product. The amount of money consumers will pay

for your product depends on two factors.

One:How well your product fits customer

needs. You can discover this by reviewing

the consumer pyschographics in the

consumer profiles report. [and] Two: How

well your product is priced compared to

competing products. For example: If a

consumer is completely price conscious

and does not care about brand or product

features then they are going to buy the

lowest priced product on the market. If a

consumer wants specific features or a

brand and their psychographics show that

they are not very price sensitive then

this consumer will likely be willing to

pay more for a product that matches

their needs. There are two other

considerations when doing your

forecasting. First: If there is a reseller

discount sales commission or other

compensation earned by the seller of the

product, your price will need to be even

higher in order to cover these amounts.

Second: Keep in mind that forecasts only

work as long as you sell all of your

products. If you manufacture 100 products,

but do not sell all 100 of them, your

revenue will be lower than expected and

this will negatively affect your


Review your budget and use the strategy

journal and WHAT IF? calculator to help

with your price planning. As the

simulation advances each period you will

be able to discover new information

about the market and your competitors.

Use that information to adjust your

pricing strategy so that you can best

reach your business goals. Good luck and