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    Atlantic Computers

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    Nipun Duhan
    Atlantic Computers developed a new basic server called Tronn and an accompanying software tool called PESA that enhances Tronn's performance by 4 times. Jason Jowers must determine a pricing strategy to bundle Tronn and PESA together before an upcoming trade show. The document analyzes various pricing strategies such as status quo, cost plus, competitive, and value-in-use pricing. It concludes that value-in-use pricing, which highlights the product's performance and cost savings compared to competitors, is the best approach for bundling and pricing Tronn and PESA.

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    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd

    Atlantic Computers

    Uploaded by

    Nipun Duhan
    217 views16 pages
    Atlantic Computers developed a new basic server called Tronn and an accompanying software tool called PESA that enhances Tronn's performance by 4 times. Jason Jowers must determine a pricing strategy to bundle Tronn and PESA together before an upcoming trade show. The document analyzes various pricing strategies such as status quo, cost plus, competitive, and value-in-use pricing. It concludes that value-in-use pricing, which highlights the product's performance and cost savings compared to competitors, is the best approach for bundling and pricing Tronn and PESA.

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    Atlantic Computers developed a new basic server called Tronn and an accompanying software tool called PESA that enhances Tronn's performance by 4 times. Jason Jowers must determine a pricing strategy to bundle Tronn and PESA together before an upcoming trade show. The document analyzes various pricing strategies such as status quo, cost plus, competitive, and value-in-use pricing. It concludes that value-in-use pricing, which highlights the product's performance and cost savings compared to competitors, is the best approach for bundling and pricing Tronn and PESA.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    217 views16 pages

    Atlantic Computers

    Uploaded by

    Nipun Duhan
    Atlantic Computers developed a new basic server called Tronn and an accompanying software tool called PESA that enhances Tronn's performance by 4 times. Jason Jowers must determine a pricing strategy to bundle Tronn and PESA together before an upcoming trade show. The document analyzes various pricing strategies such as status quo, cost plus, competitive, and value-in-use pricing. It concludes that value-in-use pricing, which highlights the product's performance and cost savings compared to competitors, is the best approach for bundling and pricing Tronn and PESA.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 16

    Case Issue

    Develop a pricing strategy for Atlantic Computers:

    Bundle of the new Tronn Server & PESA software tool before the SME trade show

    Company overview
    Atlantic Computers is a manufacturer of Servers and

    High Tech products The company has 20% market share in high performance servers with Radia being premier product over 30 years The company manufactures two kinds of products: High Performance Servers & Basic Servers Decided to introduce the Basic Server into the market by 2000 Developed a new server Tronn & a software tool PESA which enhances the performance of the same

    Atlantic Computers planned to sell the Server & the

    software together as a bundle. Jason Jowers was responsible for developing a pricing strategy for the bundle.

    Characters:
    Chris Matzer : Head of server Division
    Emily Jones : Director of Division R&D team Harry Fowler : Director of New Product team

    Jason Jowers : Product Manager

    Basic Server Market details


    Advent of Internet: Need of low end performance

    servers or Basic Servers Collection of these basic servers could support a companys website Market Demand expected to be 50000 units in 2001

    Product
    Tronn : Server developed to cater to the Basic Server

    Market PESA : Will enhance the speed of Tronn By 4 times Atlantic Computers want to bundle the products together

    Advantages of tronn with PESA


    PESA will improve Tronn speed by 4 times
    Need to purchase fewer servers Lower annual electricity charges

    Lower software license fees and labour costs


    Customers in the web server and file sharing

    applications would benefit most from the same

    Competitors
    Major Competitor : Ontario Computer Inc.
    Product: Low End Server Zink, currently 50% market

    share in the basic server market Majority Sales were generated online Zinks server performed at approximately the same level as Tronns Rest competitors were Local Vendors

    Key factors influencing the pricing strategy


    Status Quo Pricing : Matzer believed that as per the

    companys tradition Software should be given for free along with the hardware Cost Plus Pricing : According to Matzer standard approach to pricing should be followed Competitive Pricing : Cost should be as per the industry standards i.e as in accordance with the Zink Server Value-in-use Pricing : Method of setting prices to capture a portion of customers savings by buying a firms products

    Status Quo pricing


    Offer PESA free of charge & price Tronn at $ 2000
    In this case the cost of Software Development (PESA)

    would be a loss to the company i.e a loss of 2,000,000 The product would be competing head on with Zink, which is a market leader

    Cost plus pricing


    Cost of one Tronn server = $1538
    Cost of Developing the PESA Software = $ 2,000,000 So the total cost of the bundle would be higher than

    $1538. Whereas, the Cost of one Zink Server is $1214 So, the total price of the bundle for the company to make profits should be higher than $1538

    Competitive pricing
    Performance of one Atlantic Bundle is equal to that of

    4 Zink Servers Zinks Market Price = $1700.Therefore,cost of Atlantic Bundle should be approximately 4 times This price would be very high as compared to competitors product

    Value In use Pricing


    Atlantic Bundle needs to be projected as a new

    product with high value addition It is one basic server with 4 times speed Additional savings can be shown in terms of using one Atlantic bundle instead of 4 Zink Servers. Second order savings due to lower electricity charges, software licenses and labour costs should be shared with the customer.

    Conclusion
    Status Quo Pricing : Loss of the software development

    costs Competitive Pricing : It would be very difficult to convince customers why the Basic Server is priced 4 times of its competitors price. Cost Plus Pricing : Customers would prefer buying Tronn alone than paying extra for the PESA software Value-in-use Pricing : The product should be launched as an all together new product with a separate approach highlighting the performance & cost savings. The pricing strategy should be in accordance

    Thank You

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