...ATLANTIC COMPUTER: A BUNDLE OF PRICING OPTIONS Situation Analysis Atlantic Computer is a manufacturer of servers and high-tech products. Two market segments exist in the server industry: High performance and Basic Servers. Atlantic Computers has held a 20% share of the High Performance market with their Radia servers being their premier product. However, the market for Basic servers is growing and this has caused Atlantic Computers to develop and introduce a Basic Server called the Tronn and a software tool called the “Performance Enhancing Server Accelerator” (PESA). The Tronn was developed mainly for the emerging US market opportunity for basic servers. The PESA would allow the Tronn to perform up to four times faster than its standard speed and make frequently requested information more accessible. Thus, bundling the Tronn and PESA made more sense. Atlantic is not concerned that the Tronn will be considered a substitute for its High Performance servers. Primary Concerns: What pricing strategy should Atlantic Computers implement to price the Atlantic Bundle? Model Customer In order to decide which pricing strategy to use, it is best to identify and use the basic server needs of a model customer. In this case, DayTraderJournal.com will be used as the model customer. DayTrader.com is seeking four basic servers for their new website where day traders will be able to review articles and relevant training information. Their top requirements for a basic server purchase...
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...Introduction Jason Jowers, who had recently been hired by the computer manufacturer, Atlantic Computer, needed to devise a pricing plan for the company’s newest products: The Atlantic Bundle. This bundle contained the Tronn server and its corresponding software, the PESA. After an initial marketing meeting with a few key players, Jowers had input from the head of the server division (Matzer), the director of the division’s R&D team (Jones), and the director of new product marketing (Fowler). In addition, Jowers also needs to take into consideration the thoughts of the sales department, lead by Jairo Cadena. Atlantic’s biggest competitor is Ontario Computer, Inc, which is a cost cutter in the industry, and Atlantic Computer needs to bear in mind the customers and products that Ontario is after as well. Problem Identification Jowers was faced with a challenge of recommending a right price for the new bundle that Atlantic was planning to launch. According to the Tronn performance test results, he knew that one Tronn server equipped with the PESA tool was equivalent to four Zink (competitor’s basic server). This, among other things, made Jowers’ decision extremely difficult. Jowers had four options in front of him. 1. Continue the company tradition of charging for the server and provide the PESA tool for free 2. Charge a price equivalent to four Zink servers 3. Charge a marked-up price based on development cost of PESA tool 4. Charge a price based on value-in-pricing ...
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...Atlantic Computers Case Study Analysis: A Bundle of Pricing Options Margaret Bednarowicz MKT 520: Marketing Management Morris Graduate School of Management Robert Morris University Mr. William Briner January 29, 2011 Case Background Atlantic Computer is a company which specializes in high performance servers and high tech products. With its Radia server, the company is considered to be one of the most important competitors in the high performance server market. Market trends are showing, however, that basic server market is steadily growing, and faster than the high performance server market. The company’s objective is to enter the basic server market by introducing their new basic server called “Tronn. This new server will be combined with the PESA software which would allow the Tronn to improve its overall performance so it can successfully compete against the leader of the market, Ontario Computer, and their basic server “Zink. Problem Statement The key problem of this case is competition. Currently, the basic server market is dominated by Ontario Computer. This competitor holds 50% revenue market share of the basic server market. Ontario Computer has achieved this with cutting pricing and utilizing a flexible and innovative supply chain strategy. Besides competition, the following concerns need to be addressed when determining a pricing strategy such as: Price of the Tronn server is higher than Zink. The Zink server costs $1...
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...Executive summary Atlantic Computer is a firm that specializes in high performance servers and is known for selling top notch and highly reliable products. It has been the market leader of the high performance server segment with its Radia server for the last 30 years. However, the trend shows that the basic segment is growing significantly faster than the high performance segment in terms of growth. Now, this firm’s mail goal is to enter the basic segment by launching its new basic server “Tronn”. Ontario Computer, the leader of this market, with its basic server “Zink” is the main competitor. Ontario Computer has got 50% of the market share and offers lower prices. Atlantic computer’s basic server Tronn, when combined with the PESA software, performs four times faster than Zink. To enter this new market successfully, it is necessary to choose the right pricing strategy that is value in use pricing strategy, focus on target customer segment and use a proper marketing and promotion tactic. Problem statement Atlantic computers faces some issues before the launch of the product. These are which pricing strategy to use, the competition from Ontario Computer, difficulty of entering a new market, Matzer’s and sales force’s reaction to the pricing strategy, the customers’ perception in the target market and the competitor’s reaction. Situation Analysis Competition: Ontario holds 50% revenue market share of the basic server market. It has been able to drive out many non-value...
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...Atlantic Computer is known for providing top-notch, highly reliable products and had developed a reputation for providing high quality, responsive post-sales assistance. Atlantic Computer has produced the ‘Atlantic Bundle’ (Tronn+ PESA), 4 times faster, to compete against Ontario’s Zink in the basic server market. The challenge is to get the right pricing strategy for the Atlantic bundle keeping in mind consumer behavior as well as reaction of competitors in the same market especially Ontario. Competition Analysis Ontario is a firm focused on the low-end server market with its Zink Product line. It currently claims 50% of the basic server market share. Performance of the Zink is approximately equivalent to that of the Tronn without PESA. Ontario’s mode of sales is mostly done online as their business model aims at providing leading technology to customers by way of the most flexible and innovative supply chain strategy possible. This has led to Ontario being able to drive out non value added costs and compete on price ($1,700) since it is able to produce at a lower cost ($1,214), indicating operational efficiency. Pricing Strategy for Atlantic Bundle After careful observations of the facts surrounding our competitor as well as consumer behavior in the target market segment (refer to Appendix 1), we hereby propose for Jower to give a price of $2,436 to Day Trader Journal.com using the Value –in-use pricing strategy which is a method of setting prices in which an attempt is...
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...Individual’s Assignment Atlantic Computer: A Bundle of Pricing Options As Atlantic computer was largest manufacturer of servers and other hi-tech product, Jason Jowers has been assigned the task of developing the pricing structure for the Atlantic Bundle, a unique combination of the TRONN server along with the software tool - Performance Enhancing Server Accelerator – called PESA. The TRONN server has been specifically designed to address the current US market demand. In conjunction with the PESA, the TRONN ‘s performance capacity is four times faster than standard speed. Atlantic has continued to hold a significant portion (20% revenues) of the high-performance sector, but as the continual growth of the internet reached new heights, the demand of a basic server increasing rapidly. Hence, in order to meet the demand of market, the Atlantic company is planning to launch a basic server TRONN with a software tool PESA which will grow up the efficiency of server approximately four times. First of all, apart from choosing the suitable pricing method for Atlantic computers, the broad of this company also need to consider about the lifecycle of their product. Basing on the case of IBM HTTP Server or The server products of Microsoft, it seems that the lifecycle of high tech products is decreasing rapidly nowadays. According to some experts in this field, they believe that the average life expectancy of these products is around 3 or 4 years depending on many factors which include...
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...Summary Atlantic Computer is computer hardware manufacturer of servers and other high tech products. Recently, there was the announcement of the development of a new server called the Tronn. This new product was specifically developed to address an emerging market in the US and would be sold with a piece of software called Performance Enhancing Server Accelerator or PESA. This software was designed to accelerate the performance of the aforementioned Tronn server and would allow this one server to replace up to four servers. Prior to the announcement, Atlantic Computer was primarily known for selling high end premium servers. This is a new product for the firm as they look to enter into an existing, emerging market. This creates challenges for the leadership team. Historically, Atlantic Computer had tried to introduce new products into the marketplace but they had not been successful. The problem with Atlantic Computer is determining an appropriate pricing strategy and then communicating such a strategy. Therefore, it is recommended that a value added pricing model should be established. A marketing communication plan should follow this new pricing strategy. Review of the marketplace is necessary so that the product can be placed and priced appropriately so that Atlantic computer can ensure success. The largest competitor was Ontario Computer, a firm which had been the leader in the proposed new target market of the Tronn server. The leadership team of Atlantic Computer...
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...Situation: * Atlantic Computer is a manufacturer of servers and high-tech products * Two market segments: High performance and Basic Servers * The Tronn was developed mainly for the emerging US market opportunity for basic web servers * The Performance Enhancing Server Accelerator (PESA) allows Tronn to perform four times faster than its usual speed for standard procedures * Atlantic has 20% market share in High Performance Servers with Radia * Two Tronn servers equivalent to four Zink servers Decision to be made: * The management team needs to decide the pricing strategy for the Atlantic Bundle: Tronn&PESA Alternatives and Pros&Cons: Alternatives: | Pros: | Cons: | Result: | Status quo pricing | * Keep the tradition, which will offer the PESA for free * Two Tronn will be priced at $4,000 | * Lose the $2 million R&D cost on PESA * PESA will be viewed invaluable to the customers * Customers will then view no substantial difference between the Tronn and Zink servers | Not a good decision | Competition based pricing | * Two Tronn will be $6,800 since one Zink server is $1,700 and two Tronn is equivalent to four Zinks * Most Profit per unit | * Customers would view as getting less hardware with the same prices * Does not make the bundle a unique product | Not a good decision | Cost plus pricing | * Make the PESA valuable * Two Tronn will be priced at $4,492 in compare to $6,800 of Zinks' (See Exhibit...
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...Atlantic computers are the largest manufacturer of servers and other high tech products with a 20% market revenue share in the segment. The company plans to launch a basic server TRONN and software PESA due to growth in demand for basic servers. Important Details * competitor: ONTARIO ZINK * CAGR: 3%(BS segment) * TRONN along with PESA works FOUR times more efficiently. * Value of 2 TRONNs = Value of 4 ZINKs Four types of pricing strategies: * Competition based pricing * Cost plus pricing * Charging only for TRON * Value in use pricing RECOMMENDATION: The company should adopt COST PLUS PRICING with a price of $2245.5 because: * Charging for PESA would increase its value and act as a key feature * Although revenues will not be the highest, but the possibility is that the customers might not be willing to pay a very high price as in case of value in use. * It has a 30% margin which means that the company will surely make 30% profit CALCULATING PRICE IN EACH MODEL(* all calculations done based on assumptions and figures given in case) MARKET SHARE | 2001 | 2002 | 2003 | Total | Basic server | 50000 | 70000 | 92000 | 212000 | Market share | 4% | 9% | 14% | | Share | 2000 | 6300 | 12880 | 21180 | 1. Competition based pricing Price for 2 TRONN = 2 * $2000 = $4000 Price for 4 ZINK = 4 * $1700 = $6800 Acc to competition based pricing, Price for 2 TRONN= $6800 Price for 1 TRONN= $ 3400 2. Charging only for TRONN Price for 1 TRONN= $2000 3. Cost...
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...Atlantic Computers: A bundle of pricing options In the case, it mentioned that, conservatively, one Tronn server equals to two Zink servers; Aggressively, one Tronn equals to four Zink servers. Within the premise that Matzer and his colleagues were quite conservative, he decided to compare two basic servers loaded with the PESA versus four basic servers. In this case, therefore, we calculate the price of Atlantic Bundle with the assumption that two Atlantic Bundles is the equivalent of four Ontario Zink servers. 1. * Status-Quo Pricing This pricing strategy considers only the cost of server and gives PESA software tool away for free. Therefore, the price of two Atlantic Bundles is $4,000. ------------------------------------------------- Price of 1 Tronn server $2,000 ------------------------------------------------- 2 Tronn servers + PESA software (Free) $4,000 This pricing strategy gives the lowest price. However, by giving PESA for free, there is no substantial difference between Tronn and Zink. This would be difficult for Atlantic Computer to gain market shares in the basic servers segment. * Competition Based Pricing Using price of competing products as a benchmark instead of considering own costs or the customer demand, we price the Tronn server based on the price of competitive server, Zink by Ontario, rather than considering costs and give PESA away for free. ------------------------------------------------- ...
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...your team recommendation should the company launch Mountain Man Light? Consider all the factors including the current brand associations and loyalty. In your answer include the following: • Why you chose that particular strategy? • What are your assumptions ? • What are the consequences of your decision? • How would you implement it? Atlantic Computer: A Bundle of Pricing Options 1. Determine the price for two Tronn servers plus PESA according to the following pricing methods: • Status-quo pricing • Competition-based pricing • Cost-plus Pricing (Hint: footnote # 5) Note: Jowers makes a conservative estimate that two Tronn servers plus PESA equals the performance of four Ontario Zink servers. To calculate the prices you could use the spreadsheet file included in the course content (Week 3). 2. Determine the Value-based price for two Tronn servers plus PESA. Follow these steps use the spreadsheet file included in the course content (Week 3): a) Calculate the costs of running for a year 4 Ontario Zink serves, and 2 Atlantic Tronn servers with PESA b) Calculate the annual savings of owning 2 Atlantic Tronn servers with PESA c) Determine the Value-based price for two Tronn...
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...Optical Distortion Inc. – Questions for Discussion 1. What characteristics of the ODI contact lens are likely to make it appealing or unappealing to different types of chicken farmers? [If desired, this question can be rephrased to include a specific reference to literature on diffusion of innovations.] Appealing: Like many other fowl, the chickens are social birds and their society has a definite social structure. They establish a hierarchical social organization, though fighting and pecking after the birds reach sexual maturity. The comb on the head of chicken is a means of preserving the peck order, and a submissive bird raising its head too high would be pecked by one or more its superiors until its head was lowered. The more productive strains tend to be more cannibalistic, even sometimes had to put a sack over the extremely productive one. In order to reduce chicken mortality due to cannibalism , the chicken farmers use debeaking, which doesn’t interfere with the formation of the peck order but reduces the efficiency of beak as a weapon. The debeaking process make the chicken subject considerate trauma resulting in a temporary weight loss and the retardation of egg production for at least a week. The debeaked chicken would enter a permanent regression or own its deadly weapon again if the beak is cut too short or too long. Compare to debeaking operation, ODI contact lens which would cause cataract to poultry is the product to actually confront the cause of...
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...Date: 12/9/12 To: Chris Matzer, Head of the Server Division, Atlantic Computer Subject: The Current Situation at Atlantic Computer Company Introduction Atlantic Computer Company is currently in a crisis, determining how to price the Atlantic bundle is a decision that is crucial at this time. Atlantic is a manufacturer of servers and highly technological products and is currently in the process of entering a market that is led by Ontario Computers. This market is within the basic server segment, where Ontario Computers has 50% market share, meaning that Atlantic has less experience and knowledge of the market in regards to what is valued and expected. A complete evaluation and analysis of the benefits and drawbacks of different pricing strategies will help determine the proper pricing strategy. In addition to the problem of the pricing strategy, Atlantic also has to determine the proper marketing approach for salespeople to utilize in order to communicate the reasoning behind this price. Atlantic will also have to take steps in regards to problems related to our marketing organization. With the upcoming Small and Medium-Sized Enterprise Systems Solution Trade show, Atlantic has the ability to communicate our pricing strategy for the PESA software to potential customers, gauge both the competition’s and customer’s reactions to the pricing strategy and organize the Salesforce and business model in a more effective and efficient manner. Problems * First Problem:...
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...Analisis Situasi • Atlantic Computer adalah sebuah perusahaan manufaktur komputer server terbesar dan produk lain yang berteknologi tinggi, juga memiliki pangsa pendapatan sebesar 20% di segmen server berkinerja akhir tinggi. Server yang memiliki performa tinggi, yaitu “Radia” telah dijual kepada perusahaan besar dan telah dikenal akan kualitas dan reliabilitasnya serta memiliki layanan pasca penjualan yang baik. • Oleh karena adanya perkembangan di dunia internet, permintaan akan BS (Basic Servers) meningkat secara drastic; untuk memenuhi permintaan tersebut, perusahaan sedang merencanakan untuk memperkenalkan sebuah serve (BS), yaitu TRONN dengan software khusus “PESA” yang dapat meningkatkan tingkat efisiensi dari server tersebut hingga kurang lebih empat kali lebih cepat. • Mengenai kondisi competitor, yaitu “Ontario” dengan produknya yang dikenal dengan sebutan “ZINK” telah lama berada di segmen dasar dan memiliki hampir 50% pangsa pasar di pendapatan dan produk. Untuk kinerjanya, “ZINK” memiliki kemampuan yang sama dan sejajar dengan pesaingnya “TRONN”. Jason Jowers memiliki rencana untuk meluncurkan produk TRONN agar tetap dapat terjaga di dalam pikirannya, sedangkan ancaman terbesar datang dari kompetitornya, yaitu Ontario dimana sebagian besar pendapatannya berasal dari bisnis online. Beberapa rincian mendasar di pasar server • Kelahiran dari internet – kebutuhan akan server-server berkinerja akhir rendah atau BS (Basic Servers) • Koleksi dari BS ini dapat...
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...Team 7 Atlantic Computer2011. december 16. Atlantic Computer Case Study Group 7 Olivér Szabó Péter Hrobár Written by János Wicha 1 Team 7 Atlantic Computer2011. december 16. Recommendation: Use the value-in-use pricing method. 2. Recommended sales price for server: 5.500 USD/Unit 3. Recommended charge for PESA Harware as a Service (HaaS): 280 USD/month for 3 years contract. 4. For sales force new motivation package, 10% commission from every sold server and 5% from monthly fee/ month. 1. Problem statement: Jason Jowers has to develop a pricing strategy for the new Tronn server and the PESA software before the SME trade show. Server Market Overview: ● ● ● High Performance Servers ○ For Complex Applications ○ Next year marker potential 200.000 units ○ 3%/year Growth possibilities. ○ Atlantic Computer has a 20% market share. Basic servers ○ For single task, without the need of high computing performance ○ Next year market potential 50.000 units ○ Growth potential 36% till 2003 Competitor ○ Ontario Computer Inc. ZINK server is a main brand in the low end market On-line sales Low prices Company Overview: Atlantic Computer is a producer of High Performing Servers Jason Jowers joined AC four months ago and his main task is to develop the pricing strategy of the new Tronn Server with PESA support. Tronn is developed for low end market. PESA (Performance Enhancer Server Accelerator) is a software tool that was developed to allow Tronn to perform 4 times...
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