A number of nodes have been enhanced so that they can handle Dynamic Costs. Dynamic Costs mean the incremental Cost of selling a Product can change. For example, the Cost To Make (CTM) a Product can decrease with scale as production volume increases. And the Cost To Serve (CTS) some Customers may be greater than the CTS of other Customers.
The enhanced nodes with Dynamic Costs include:
- Product Generator node
- Bundle Generator node
- Simulate Market node (shown here)
- Price Maximize node
- Price War node
- Scale Distributions node
- Demand Curve node
- Price Sensitivity node
Cost To Serve (CTS): The Cost To Serve (CTS) is the additional Cost that must be incurred when a Product is sold to a particular Customer. This is a Dynamic Cost as some Customers are cheaper to serve than others, and is only incurred if the Customer actually Purchases the Product. The ‘Cost To Serve’ column is identified by the Product’s Name followed by a trailing ‘CTS’. The ‘CTS’ designator can be upper-case or lower-case and may-or-may-not be separated by a space, underscore, or other single character. For example, ‘Product_01_CTS’ or ‘Product 02 CTS’ or ‘Product03cts’.
Cost To Make (CTM): The Cost To Make (CTM) depends not upon the individual Customer but upon the number of Customers who Purchase the Product. This ‘Cost To Make’ can be used to simulate the Law of Diminishing Returns. Starting from the first row in the column, each ‘Cost To Make’ row represents the incremental Cost of manufacturing each additional Product. If the Product is sold ten-times, then the total Dynamic Cost is the sum of the first 10 CTM rows. The ‘Cost To Make’ column is also identified by the Product’s Name followed by a trailing ‘CTM’ in a manner similar to the ‘CTS’ designator.
Example Workflow: MS-241 Dynamic Costs
The Product Generator node iterates through the Input Product Features table and aggregates together all of the matching Customer Distributions found in the Input Customer Distributions table.
The Scale Distributions node is designed to take Willingness To Pay (WTP) Customer Distributions for Products from the Input WTP Matrix and scale them by either a fixed amount or until a target Market Share is reached.
The Price Sensitivity node is designed to take a set of Products in a Market and determine the sensitivity each Product has to a change in Price by each of the other Products.
Dynamic Costs mean the incremental Cost of making and selling a Product can change. For example, the Cost To Make (CTM) a Product can decrease with scale as production volume increases. And the Cost To Serve (CTS) some Customers may be greater than the CTS of other Customers.