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    #1 Atlantic Computer Case

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    Tianxin Lei
    The document discusses pricing strategies for a new "Atlantic Bundle" product consisting of Tronn servers and PESA software. It analyzes status quo pricing of $2000, competition-based pricing of $3400, cost-plus pricing of $2245, and value-based pricing of $4200. The value-based approach is recommended as it could lead to over $23 million more in revenue over three years compared to the status quo.

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    #1 Atlantic Computer Case

    Uploaded by

    Tianxin Lei
    29 views8 pages
    The document discusses pricing strategies for a new "Atlantic Bundle" product consisting of Tronn servers and PESA software. It analyzes status quo pricing of $2000, competition-based pricing of $3400, cost-plus pricing of $2245, and value-based pricing of $4200. The value-based approach is recommended as it could lead to over $23 million more in revenue over three years compared to the status quo.

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    For hbsp case of pricing, Atlantic computer case solution

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    The document discusses pricing strategies for a new "Atlantic Bundle" product consisting of Tronn servers and PESA software. It analyzes status quo pricing of $2000, competition-based pricing of $3400, cost-plus pricing of $2245, and value-based pricing of $4200. The value-based approach is recommended as it could lead to over $23 million more in revenue over three years compared to the status quo.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    29 views8 pages

    #1 Atlantic Computer Case

    Uploaded by

    Tianxin Lei
    The document discusses pricing strategies for a new "Atlantic Bundle" product consisting of Tronn servers and PESA software. It analyzes status quo pricing of $2000, competition-based pricing of $3400, cost-plus pricing of $2245, and value-based pricing of $4200. The value-based approach is recommended as it could lead to over $23 million more in revenue over three years compared to the status quo.

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    © All Rights Reserved
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    Download as pptx, pdf, or txt
    of 8

    Atlantic Computer Case

    Q1.What price should Jowers charge DayTraderJournal.com for the Atlantic Bundle (e.g., Tronn
    servers +
    PESA software tool)?

    Jowers should charge DayTraderJournal.com for the Atlantic Bundle in a price of $4200.
    Reason :
    1)It can help us increase profits.
    2)Showing customers the value we provided can help us increase customer loyalty.
    3)This method can help us develop the products our customers want.
    4) It is unreasonable to compete price with Ontario since total cost of 1 Tronn Server is $5000 and that of 1
    Zink Server is only $4700
    4 pricing approaches:

    Price

    Status-quo pricing $2000

    Competition-based pricing $3400 (2*$1700)

    Cost-plus pricing $2245


    Estimated PESA sales: 10590
    Cost of PESA: 2000000/10590=$189
    Total cost of Atlantic Bundle: 189+1538=$1727
    Final price:1727*1.3=$2245

    Value-based pricing $4200(would be elaborated in the following slide)


    Value-based pricing(Conservatively)

    $ per server 1 Tronn Server 2 Zink Server

    Server Price $2000 $3400($1700*2)

    Electricity $250 $500($250*2)

    S/W Licenses cost $750 $1500($750*2)

    Labor $2000($80000/40) $4000($2000*2)

    Total Cost $5000 $9400

    50% of Savings $2200($4400*50%)

    Price $4200($2000+$2200)
    Q2. Think broadly about the top line revenue implications from each of the 4 alternative pricing strategies.
    Approximately how much money over the next 3 years will be “left on the table” if the firm were to give
    away
    the software tool for free (e.g., status quo pricing) versus utilizing one of the other pricing approaches ?

    Total estimate sales: (50000*4%+70000*9%+92000*14%)*50%=10590 unit


    Profits Money Left Over Versus
    Status-quo Pricing Approach

    Status-quo pricing $2,891,070 $0


    10590*($2000-$1727)

    Competition-based $17717070 $14,826,000


    pricing(Conservatively) 10590*($3400-$1727 ） $17717070-$2891070

    Cost-plus pricing $5,485,620 $2,594,550


    10590*($2245-$1727) ($5,485,620-$2,891,070)

    Value-based $26,189,070 $23,298,000


    pricing(Conservatively) 10590*($4200-$1727) ($26,189,070-$2,891,070)
    Q3. How is Matzer likely to react to your recommendation?

    He is likely to disagree with the price and thinks it too high.

    1. Software tools should generally be provided to customers for free. Server division had long relied on
    cost-plus pricing analysis to determine the price of $2000.
    2. Compared to the Ontario Company which claimed currently occupy the 50% revenue market share in
    the basic server market, our company will lose price advantage if we set the price at $4200 which
    almost twice as competitor’s product price.
    Q4. How is Cadena’s sales force likely to react to your recommendation?

    1. They are likely to accept the price because 30% of their income come from sales.
    2. They might ask how to generate consumer demands for a higher pricing, with charge of
    softwares.
    3. They will also be a little worried about the sales of new product since the price is much higher
    than other competitors and stated to charge for the software tools.
    Q5. How are customers in your target market likely to react to your recommended pricing
    strategy? What response can be provided to overcome any objections?

    Reaction :

    1. They will be confused about our high price and wonder why we start to charge for the software tools.
    2. They may need some reasons that why we set high price and what is our product’s advantage that
    other alternative products do not have.

    Response ：

    It is important to convey to prospective consumers that the first-order savings effect from purchasing the
    “Atlantic Bundle” derived from the need purchase fewer servers, and second-order savings effects included
    lower annual electricity charges, software license fees, and labor costs

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