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A Report Submitted To: Assignment: Individual Assignment 2 - Atlantic Computer

This report summarizes an individual assignment submitted by Vinay Kumar for a business to business marketing course. The assignment provides an analysis of Atlantic Computer's server market segments and pricing strategies. It identifies the high performance and basic server segments, outlines their characteristics and business potential. It also calculates the cost+ pricing for a bundle of servers and support services, and discusses how the sales team may react to an alternative value-based pricing approach.

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Vinay
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42 views

A Report Submitted To: Assignment: Individual Assignment 2 - Atlantic Computer

This report summarizes an individual assignment submitted by Vinay Kumar for a business to business marketing course. The assignment provides an analysis of Atlantic Computer's server market segments and pricing strategies. It identifies the high performance and basic server segments, outlines their characteristics and business potential. It also calculates the cost+ pricing for a bundle of servers and support services, and discusses how the sales team may react to an alternative value-based pricing approach.

Uploaded by

Vinay
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Assignment:

Individual Assignment 2 - Atlantic Computer

A Report submitted to

Prof. Prakash Satyavageeswaran

In partial fulfilment of the requirements of the course Business to Business Marketing

By

Vinay Kumar

Roll No. 1911293

Section B

On

16-08-2020
Q1. Provide an overview of the market segments and their potential

Ans. High Performance Server segment :-

1) This is the largest segment of server industry.


2) Customers of this segments use traditional use of servers to run complex applications and
want to maximize the speed of mathematical computations in complex model
simulations.
3) Customer in this segment prefers highly reliable products with high quality and
outstanding post sales assistance or customer support.
4) Atlantic computer is the largest player in this segment. Their strategy is based on product
differentiation and customer intimacy.
5) Business Potential:
i) The demand in this segment is around 200,000 units for the upcoming year 2001
ii) Market is expected to grow with 3% annual growth rate

Basic Server segment :-

1) It’s a low-end service market


2) Customers in this segment need basic computing capability to perform simple and
repeated tasks example exhibiting website information on the internet.
3) This market is made up of many small vendors
4) 50% revenue of this market is claimed by Ontario Computers and majority of their sale
sales generate through online
5) Industry leader of this segment i.e. Ontario Computers, their business model is based on
operation excellence and they compete largely on price
6) This segment is mainly price driven and customer wants to minimize acquisition cost
7) Business Potential:
iii) This segment is emerging with the growth of internet
iv) Market would create demand around 50,000 units in 2001 and grow with 36%
compound annual growth rate till 2003.
Q2. Calculate the cost+ (cost plus) pricing for 2 Servers + 2PESAs bundle

Ans.

Year 1 Year 2 Year 3


Software development Cost $ 20,00,000    
Cost of Server $ 1,538    
Projection % of Basic Server Market 4% 9% 14%
Basic segment Units 50,000
70,000 92,000

Projection of Basic Server Market 2,000


6,300 12,880

No. of PESA installation 2,000 6,300


12,880

$ 94 = 20,00,000/(2000+
Cost of PESA  
6300+12880)

Cost of Server + PESA $ 1,632    


30% mark up $ 490    
cost+ pricing for Server + PESA $ 2,122

cost+ pricing for 2 Servers +


2PESAs bundle $ 4,244.31

3. What would be the sales team's reaction to value based pricing for the bundle?

Ans.

(Bundle) 2 Tronn+ 2PESA 4 Zinc Servers


Price of Servers $2000*2= $4000 $1700*4= $6800
Electricity Cost $250*2= $500 $250*4= $1000
Labour Cost $80,000*2/40= $4000 $80,000*4/40= $8000
License Cost $750*2= $1500 $750*4= $3000

Total $10,000 $18,800

Atlantic bundle Savings= $18,800 - $10,000 = $8,800


Sharing 50% profit = $4,400
Atlantic Bundle price = $4000 +$4,400 = $8,400

Reaction of sales team would be:-


1) They have missed out completely about the saving they can generate to their customers.
They should communicate about the savings and gains their product can give to them

2) They can easily charge premium price to their customer

3) Performance increase of Tronn due to software PESA tool is phenomenal.

4) Their overall monetary benefits compromise of 30% commission. So higher the revenue
of server higher will be their commission.

5) They may also think that marketing expense has not been considered in cost analysis only
research and development cost has been considered there. So the standard prices
($2000*2= $4000) considered in value based pricing may not work here. They will have
to charge more than standard price to the customer. Because of which the overall savings
benefit to the consumer will decrease.

6) Consumers in basic sever segment is sensitive to pricing. They will prefer a $1700 sever
instead of $2000 one.

7) Consumers in this segment buy products which are commonly used by industry. They are
adopted to less risk aversive product and don’t go for innovative products as more costs
are associated with it.

8) Ontario computer has 50% market share in basic server market and their majority of sales
happen on online platform. So, this would be a new challenge for Atlantic sales force to
convert online customers. As it is very difficult to maintain relationship and convey
savings benefit to a online customer.

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