Business modeling to simulation is often viewed as an approach that is limited solely to “academic” analysis with little real-world usefulness. The potential of modeling to simulation in business, however, can extend well into actual daily use across an enterprise with powerful results.
A Real-World Example
An international firm was introducing a new turnkey subscription-based training program that included hardware, software, and educational content. The program involved certain one-time fees and ongoing subscriptions with price adjustment based on quantity, type, and term of the contract.
The product would be sold by the independent sales teams across three separate businesses and around the World. Project executives mandated that sales personnel must provide a preliminary quotation to the customer in the field that was reliably consistent across all sales representatives and would ensure an acceptable profit.
The broad executive mandate for a turnkey subscription pricing approach was used to create a document that developed and clearly stated the required detail for the underlying pricing principles. During weeks of refinement, the pricing principles document was adopted and approved for implementation by the project executives.
Given the complexity of the pricing principles, an Excel workbook was created with formulae and logic that reflected the program pricing principles.
Over weeks of iteration and refinement, various safeguards were programmed into the Excel tool to ensure that sales representatives could not inadvertently exceed guidelines and generate unacceptable pricing.
Trial quotes generated by the Excel workbook were reviewed by sales management and the program executives who approved the use of the pricing tool by the sales teams.
The pricing tool was initially adopted as the sole in-field instrument used by US sales teams to create quotations. The tool was updated as the program matured to generate different types of quotes, including extensions to service during the term of coverage, and renewal at the end of the term.
An international version of the pricing tool was also developed and enabled customization by marketing and sales management in the local markets, including currency, list price, costs, discounts and language labels.