The Profit At Risk node is designed to take a set of Products in a Market and determine how easy or difficult it would be for Competitive Rivals to win those Customers away.

A Vendor’s Revenue stream from a Product Portfolio that could be easily reduced by a Competitor offering a simple Price Discount is a Competitive Weakness. Similarly, a Competitor who can attract customers away from the Vendor’s Product Portfolio by simply increasing the Marketing or adjusting the Positioning of the Competitor’s Products is an example of a weakness in the Vendor’s Product Portfolio.

On the other hand, a Vendor’s Product Portfolio that is impervious to the Discounts of other competing Products is a Competitive Strength. If a very substantial Discount were offered by a Competitor, or even if the competitive Product was offered for free, Customers would continue to buy the Vendor’s Products.

Product Portfolios with Competitive Strengths offer a unique and differentiating value that is more important to Customers than a cheaper Price.

Product Portfolios have different strengths and weaknesses with respect to different Competitors. For example, luxury Products may only be threatened by other luxury Products, and not by mainstream Products.

A Vendor is threatened by Competitors who can easily attack and reduce their Revenue and Profitability. This node calculates the degree of threat the Vendor has from every Competitor in the Market.

But a Vendor also has an opportunity when it is easy to attack and reduce the Revenue and Profitability of a Competitor. This node calculates the degree of opportunity the Vendor has with respect to every Competitor in the Market. Vendors are advised to protect their weaknesses while exploiting their opportunities.

In addition, the Profit At Risk node also generates a number of Willingness To Pay (WTP) metrics which can be used to generate the following charts:

1. Blue Ocean: The Blue Ocean chart plots Price against WTP and identifies gaps in the market where new Products can be Profitably placed.
2. Value Created: The Value Created chart plots Profit against Value Created. Value Created equals WTP minus Cost. When a Vendor improves a Product but at a Cost, that Vendor may not have created any additional value. The Value Created chart visualizes how effective a Product is at generating Profit and guides a user to determine whether to increase the Value or lower the Cost of that Product.

This Premium Node is not available as part of the free Community Edition. Premium Nodes help clean and connect real-world data to Market Simulations, and provide advanced Market Science analysis. Note that these descriptions are often deliberately vague.

The Profit At Risk node is designed to take a set of Products in a Market and determine how easy or difficult it would be for Competitive Rivals to win those Customers away. A Competitor may design a coupon that precisely identifies those Customers who would have bought the Competitive Product offering the exact value that would induce the Customer to switch.

Blue Ocean Chart

The Blue Ocean chart plots Price against WTP and identifies gaps in the market where new Products can be Profitably placed.

Value Gap

The average Value Gap between the Purchased Product and each Rival Product that falls within the ‘Top-N’ bin. The size of the ‘Top-N’ bin is set in the Value Gap Options. The Value Gap is measured as the difference between Consumer Surplus of the Purchased Product and the Rival Product.

Profit At Risk

The number of Virtual Customers that the Competitive Rival would take from the Purchased Product if the Competitive Rival were to increase Value (or lower Price) by the ‘Value Change’.