New business sim: 'Universal Rental Car' Pricing Simulation

As discussed in earlier posts, we've been developing a new line of online business simulation games here at Harvard Business School Publishing.  Our first two simulations have launched and I'd like to give short overviews of them and provide information for interested folks to explore them in greater detail.  The first simulation is Universal Rental Car and it's a pricing simulation designed for use across a wide range of undergraduate, graduate, and executive education courses, including marketing management, pricing, business strategy, operations management, game theory, and microeconomics.

Our line of business simulations is designed to be topical in nature and short enough to play and debrief over just a class or two, so about 1 - 1.5 hours seat time.  They are specifically designed to be assigned just as professors would assign a business case, so these are NOT capstone simulations requiring extensive planning and support. More information on our our thoughts about simulation design and effectiveness can be found elsewhere on this blog -- click on the "simulations and games" category on the home page.

Development Model & Simulation Authors

The development model includes a three-pronged approach:

• Our HBS Publishing product development team serves as the product authority and contributes project management and product line design.
• Our simulation partners at Forio Business Simulations provide their Broadcast simulation platform (a feature-rich, web-based platform) as well as system dynamics modeling and business consulting experience.
• HBSP selects faculty authors to serve as subject matter experts and content authorities.

For the Pricing simulation we wanted representation from both academic and practitioner perspectives.  We selected HBS faculty member and marketing/pricing expert John Gourville and then two pricing experts from the Monitor Group: John Hogan and Tom Nagle (Hogan and Nagle are also authors of the leading text on pricing).

Simulation Synopsis

The following is taken from the Facilitator's Guide for the simulation:

This simulation presents a realistic and engaging set of managerial pricing decisions in the Florida car rental market.  In its most complete form, the simulation includes three regions—Orlando, Tampa, and Miami—which vary in size and customer mix.  It involves two car rental companies—Universal and its primary competitor—with players asked to make decisions for Universal.  The simulation lasts for 12 months, with players asked to make decisions each month.  In particular, whether assigned as individuals or teams, players must set weekday and weekend prices for each region for each period.  In addition, they are asked to make fleet size decisions (i.e., number of cars in their rental fleets) at several points throughout the simulation.

The general characteristics of the simulation, including the behaviors of the consumers and the competitor, have been drawn from the real-world experiences of one of the major car rental companies in the Florida market.  As a result, the simulation can incorporate factors such as seasonality of demand, differing price sensitivities for business and leisure travelers, and realistic competitive responses to a player’s pricing decisions.  Further, as would readily be available to managers of Universal, the simulation provides performance data for Universal (e.g., financial results, fleet utilization, etc.), as well as market research that sheds some light on its competitors’ performances. The net result is a true-to-life, but manageable, simulation that brings out the nuances of pricing in a competitive marketplace.   

Simulation Design

This simulation is designed to provide an engaging, experiential learning environment for students.  The basic architecture includes:

• a Prepare section which is used once and optionally referred to later by players (and players can be restricted to this section only until an administrator ‘opens’ the full simulation to students);
• an Analyze section that provides users with current information that they must peruse in order to make effective decisions;
• and a Decide section where players enter those decisions for processing by the simulation. 

This turn-based simulation then processes decision input data and adjusts the environment accordingly so players can assess the changes before making additional decisions (alternating between Analyze and Decide for as many turns as is configured for the simulation).

Features

The Universal Rental Car Pricing Simulation includes the following features:

• Students prepare once (with how-to, summary, and scenario-specific information); then each round of play requires students to analyze and set pricing decisions.
• Students learn fundamentals of a segment-based pricing approach.
• Students see how to optimize inventory through pricing to manage both stockouts and excess inventory.
• Students must account for the likely competitive and market responses to their pricing decisions.
• The simulation fosters a sense of competition among players by allowing students to view other students’ cumulative profit “scores” and notes on strategy.
• Students learn the nature of consumer sensitivity to changes in price.
• A market research report presents competitive and market data to provide the context for more informal decision making.
• A breakeven pricing tool allows students to learn fundamentals of marginal math calculations.
• The simulation filters information based on the city selected. Students learn to account for demand differences across regions as they relate to pricing strategy.
• The simulation includes 12 rounds (or “months”) in which players enter prices. Each “month,” students react to prior decisions and assess/interpret data to reinforce learning.
• The simulation measures students on cumulative net income and forces them to account for cost structure in decision making.
• Each set of information displayed on the dashboard can also be exported to Excel for detailed student analysis.

Simulation Sampling

Educators can sample the simulation as detailed below.  Some access is only provided to qualified educators and trainers who contact HBSP Customer Service as noted.  The full Facilitator's Guide with Teaching Note is available to qualified educators and trainers.

Video overview: Student version

• http://forio.com/simulation/harvard-pricing/public_main.htm?page=demo
• This short video explains the simulation from the student’s perspective. It uses voice-over and animated screenshots to step users through the simulation.

Video overview: Administrator version

• http://forio.com/simulation/harvard-pricing/public_main.htm?page=instructor
• This short video explains the administrator tools in the simulation. Similar to the Student version, thisvideo takes faculty through the administrative screens using voice-over and animated screenshots.

Student Experience Login

• http://forio.com/simulation/harvard-pricing-demo
• To experience the simulation as a student, visit the above URL and log in using the following information: login/password = user/user
• This will place you into a trial version of the simulation that will run for 3 rounds. You can navigatethrough the Prepare, Analyze, and Decide tabs, and submit decisions three times.

Administrator Login

• To experience the simulation as an administrator, contact HBSP Customer Service.

Contact HBSP Customer Service at 1-800-545-7685 (outside the U.S. and Canada, 1-617-783-7600)
to purchase or request educator access to the simulation:  Universal Rental Car Pricing Simulation
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