Case study on

Atlantic Computer: A Bundle of Pricing Options

Group – 4Marketing Management Case Study

Group Member’s

IntroductionAtlantic computer, a large

manufacturer of servers and other high-tech products

Atlantic computers known for providing premium, high end servers

Atlantic computers introducing Tronn , new basic server, which includes PESA software( performence enhancing server accelerator)

Introduction Jowers responsible for developing

the pricing strategy for the atlantic bundle (i.e. The new tronn server plus the PESA software tool)

Projected market volumes by segment (in units)

Management Team of Atlantic Computer Jason Jowers- youngest product manager at atlantic

computerChris Matzer- Head of atlantic’s server divisionEmily jones - Director of atlantic’s R&D team Jairo cadena- Director of sales Harry Fowler- Director of new product marketing

Problem of the caseWhat pricing strategy should

Atlantic Computers implement to price the Atlantic Bundle ?

Solution Pricing Strategy

There are four main types of pricing strategies which Atlantic Computers can choose.

First, Atlantic Computers could stay with the status quo and offer software tools for free.

Second, it could choose competitive based pricing.

Third it could choose from Cost-plus pricing.

Finally , it could choose value-in use pricing.

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 PricingPricing the Tronn servers based on price

of competitor server (Zink by Ontario) and PESA for free.

Since 2 Tronn Server with PESA software is equivalent to 4 Zink servers:

Price of 1 Zink Server $1700 2 Tronn Server + PESA Software $6800 (4 x $1700) Price of Atlantic Bundle = $6800

Cost Plus PricingMarket volume (in units)

2001 2002 2003 Total

Market volume of basic server

50000 70000 92000

Atlantic share (in %)

4 9 14

Estimated total sale of tronn server

2000 6300 12880 21180

Estimated total sale of PESA software( 50% of tronn server sales)

1000 3150 6440 10590

Cost of tronn software $1538PESA software developent cost $2000,000

Cost Plus PricingPrice per server

Cost 30% markup ($)

Total($)

PESA cost per server

188.9 56.658 245.52

Cost per tronn server

1538 461.4 1999.4

Pesa cost per server = total cost invovled /total estimated sales = 2000000/10590 = $188.9After the markup 30% as calculated in above table: cost of atlantic bundle = $ 2245

Value-in use PricingConsidering 4 Zink server is

equivalent to 2 Tronn server + 2 PESA software Cost saving amount

Saving in electricity 500Software licenses 1500labour 4000Cost of server 2800total 8800As per value pricing model of 50-50% price of PESA

4400

2tronn + 2 pesa 8400

Cost of Atlantic bundle 4200

Alternative solutionsoption 1

Option 2

Option 3

Option 4

Recommended solutionoption 4 .. Value-in-use pricingCheaper than the cost of four

zink servers while still delivering equal performance.

Second-lowest with regards to the number of units required to breakeven

Second highest revenue of the four options

Provides a better foundation for a sales strategy.

SWOT analysis of caseStrengthso Brand imageo Previous successo Sizeo Saving to customerso Server reduction• Weaknesso Marketing teamo Sales forceo Online marketing/saleso Software pricingo Implementation costs

SWOT analysis of caseOpportunitieso Basic server growtho Atlantic bundleo Trade showo Development of low-end basic server• Threatso Ontario’s market dominanceo Supply chaino Brand loyaltyo Competitor retaliation

Conclusion On detailed comparative study of 4 different

pricing approach for Tronn Servers & PESA Software, it is evident from the above chart that Competition Based pricing is the most suitable option.

This approach takes into consideration competitors prices and provides superior services at same rate.

The market share is already owned by competition to an extent of 50%, hence price plays a vital role. It needs to highly competitive and at par with the pricing of competitive products.

Low price does not always means that product will be accepted by the market. If the prices are very low, the market even presumes that the quality of product if inferior.

Conclusion If the pricing are very low, competitors can

also reduce there prices to that extent as there product already command certain share in the market.

If prices are too high as given in Value in Use Pricing, then consumer may not accept the product and would prefer to buy two products of competition in place of one Tronn Servers.

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