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    Atlantic Computers: A Bundle of Pricing Options Analysis

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    Kartik Mehrotra
    The document discusses pricing options for Atlantic Computer's new basic server called Tronn and its accompanying software PESA, including status quo pricing based only on server cost, competition-based pricing to match the price of their main competitor's server, cost plus pricing which calculates production costs and adds a markup, and value-in-use pricing based on the savings customers obtain through reduced costs of electricity, licensing, labor, and the server itself and sharing the savings 50-50 with Atlantic. It recommends adopting the value-in-use pricing strategy and training the sales force to emphasize the savings and performance benefits to customers.

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    Atlantic Computers: A Bundle of Pricing Options Analysis

    Uploaded by

    Kartik Mehrotra
    21 views8 pages
    The document discusses pricing options for Atlantic Computer's new basic server called Tronn and its accompanying software PESA, including status quo pricing based only on server cost, competition-based pricing to match the price of their main competitor's server, cost plus pricing which calculates production costs and adds a markup, and value-in-use pricing based on the savings customers obtain through reduced costs of electricity, licensing, labor, and the server itself and sharing the savings 50-50 with Atlantic. It recommends adopting the value-in-use pricing strategy and training the sales force to emphasize the savings and performance benefits to customers.

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    The document discusses pricing options for Atlantic Computer's new basic server called Tronn and its accompanying software PESA, including status quo pricing based only on server cost, competition-based pricing to match the price of their main competitor's server, cost plus pricing which calculates production costs and adds a markup, and value-in-use pricing based on the savings customers obtain through reduced costs of electricity, licensing, labor, and the server itself and sharing the savings 50-50 with Atlantic. It recommends adopting the value-in-use pricing strategy and training the sales force to emphasize the savings and performance benefits to customers.

    Copyright:

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

    Atlantic Computers: A Bundle of Pricing Options Analysis

    Uploaded by

    Kartik Mehrotra
    The document discusses pricing options for Atlantic Computer's new basic server called Tronn and its accompanying software PESA, including status quo pricing based only on server cost, competition-based pricing to match the price of their main competitor's server, cost plus pricing which calculates production costs and adds a markup, and value-in-use pricing based on the savings customers obtain through reduced costs of electricity, licensing, labor, and the server itself and sharing the savings 50-50 with Atlantic. It recommends adopting the value-in-use pricing strategy and training the sales force to emphasize the savings and performance benefits to customers.

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    You are on page 1of 8

    Atlantic Submitted by :

    Computers: Group 8
    Antarleena Datta –

    A Bundle of
    P182A41
    Deepanshu Kalra –
    P182A30

    Pricing Options Kartik Mehrotra –


    P182A20

    analysis Neeraj Talele – P182B71


    Atlantic Computer is a manufacturer of servers
    and high-tech products.
    Currently there 2 market segments: Traditional
    and Basic server markets.

    Case Atlantic is a market leader in traditional market


    with its product Radia, which is a premier product.
    Analysis Basic market is a new market and is a fast
    growing one.
    For basic market, Atlantic has developed a server
    Tronn. Also Atlantic has developed a software tool
    PESA, Performance Enhancing Server Accelerator
    PESA enhances the Tronn server’s speed by 4 times
    f ro m its normal speed
     Atlantic’s main competitor in basic market
    segment is Ontario, which commands 50% market
    share with its product Zinc.
    Status Quo Pricing
    This option consider only the cost of server and treats PESA software as free
    product along with servers:

    Price of 1 Tronn Server: $2000


    2 Tronn Servers + PESA Software (Free) $4000
    ($2000 x 2)
    Price of Atlantic Bundle = $4000
    Competition Based
    Pricing
     Pricing the Tronn servers based onprice of competitor server
    (Zink by Ontario) and PESA forfree.
     Since 2 Tronn Server with PESA software is equivalent to
    4 Zink servers:

    Price of 1 Zink Server is 1700$


    2 Tronn Server + PESASoftware is $6800 (4 x $1700)

    Price of Atlantic Bundle = $6800


    Cost Plus Pricing
    Market 2001 2002 2003 Total
    volume (in
    units)
    Market 50000 70000 92000
    volume of
    basic server
    Atlantic share 4 9 14
    (in %)
    Estimated 2000 6300 12880 21180
    total sale of
    tronn server
    Estimated 1000 3150 6440 10590
    total sale of
    PESA
    software( 50%
    of tronn server
    sales)

    Cost of tronn software $1538


    PESA software developent cost
    $2000,000
    Cost Plus Pricing
    Cost of Atlantic Tronn $1,538
    Server

    Cost of PESAper 2,000,000/10,590 =


    Server $189

    Total Cost of Atlantic 1,538 + 189 =


    Bundle $1,727

    30% Mark-up 1,727 * 0.3 =


    $518

    Final Price 1,727 + 518 =


    $2,245

    After the markup 30% as calculated in above table: cost of atlantic


    bundle = $ 2245
    Value-in-use Pricing
    Considering four Zink servers equal two Tronn servers and 50-50 savings sharing

    Savings Information Two Zink Servers One Tronn Server


    Electricity Savings 250 * 2 = $500 $250
    Software License Savings 750 * 2 = $1,500 $750
    Labor Costs Savings 80,000/40 = 2,000 * 2 = $4,000 $2,000
    Cost of server 1,700 * 2 = $3,400 $2,000
    Total $9,400 $5,000

    Savings: (9,400 – 5,000) = $4,400

    Profit Sharing: 50-50 = $2,200


    Price of Atlantic Bundle = $2,000 + $2,200

    = $4,200 9 of 13
    Go with Strategy 4, Value-in-use Pricing: second highest revenue,
    second lowest BEP
     Provides better foundation for sales strategy
     Captures the essence: savings that the customer accrues from
    buying the product
     Offering Tronn at the price that is the same level of Zink ($2,000)

    Recommendations for Cadena’s Sales Force


    Recommendation The sales force needs to be trained to sell products on the basis of
    the following points:
     Communicate on the savings/gains/value to the customer
     Performance increase in Tronn, especially with PESA softwaretool
     Emphasize on the lower acquisition and possessioncosts
     Ensure excellent after sales service for customers Motivation for the
    salesforce:
     Business model intact: 70% salary and 30% commission
     Higher the revenue, higher is the commission per sale of aserver

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