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ATLANTIC COMPUTER: A Bundle of Pricing Options
Case# 4, Donny Hamilton
June 29th, 2014
ATLANTIC COMPUTER: A Bundle of Pricing Options
Case# 4, Donny Hamilton
June 29th, 2014
Problem Definition: We need to develop a pricing strategy for our ‘Atlantic Bundle’ – the new Tronn Server and the PESA (Performance Enhancing Server Accelerator) software before the SME trade show.ATLANTIC COMPUTER: A Bundle of Pricing Options
Case# 4, Donny Hamilton
June 29th, 2014
ATLANTIC COMPUTER: A Bundle of Pricing Options
Case# 4, Donny Hamilton
June 29th, 2014

Basic Server Market Details: * Advent of Internet: Need of low end Performance servers or Basic Servers * Collection of these basic servers could support a company’s website * Market Demand expected to be 50,000 unit in 2001
Product:
* Tronn: Server developed to cater to the Basic Server Market * We will bundle the products together!
Alternative Development: Competitors: * Major Competitor: Ontario Computer Inc. * Low End Server Zink, currently 50% markets share in the basic server market * Majority Sales were generated online * Zink’s server performed at approximately the same level as Tronn’s * Rest of competitors were Local Vendors Key Factors Influencing the Pricing Strategy: * Status Quo Pricing: Matzer believed that as per the company’s traditional Software, should be given for free with the purchase of the hardware * Cost Plus Pricing: According to Matzer’s 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: Setting prices to capture a portion of customer’s savings by buying a firms product Advantages of Tronn with Pesa: * PESA: Will enhance the speed of Tronn by 4 times * Need to purchase fewer servers * Lower annual electricity charges * Lower software license fees and labor costs * Customer segments which will gain advantage by using PESA: Customers in web server & file sharing application segments (Table 1)

Decision Criteria: Competition Based Status Quo Pricing OR Pricing OR Cost Plus Pricing

OR Value-in-use-Pricing

Analysis of Alternatives: Customers (Table 2): * “Web Server” Basic Server {New SME} Customer - * This customer will be the target customer as they stand to benefit the maximum from Tronn with PESA * “File Sharing” Basic Server {New SME} Customer - * As computing power without PESA is same as the competitors, pricing will have to be considered in this case. PESA is not giving any added advantage for graphical application * “Heavy computing application Customer - * As computing power without PESA is same as the competitors, pricing will have to be considered in this case. PESA is not giving any added advantage for high computing application. Available options for Pricing Strategy:
Recommendation and Brief Tactical Implementations Steps: * Cost Plus Approach! (Table3) * Our Cost = $2,246. Zinc’s cost = $4,856 (4 servers are needed, $1,214*4). Tronn earns a Savings of $2,611 * Zink’s management may come up with an identical software, at that time we can provide the PESA software for free
Appendix:

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