The main products of Atlantic computer are high-tech goods and servers. And in recent stage, the company has two segments including the basic market and the new market. Atlantic shows its relative advantages in the basic markets with the product Radia and it is a main product of this company. And it is fortunately that the new marketing grows so fast that could bring large profits for the company. The company has the premier products of the server named Tronn and the PESA which is a software tool that could enhance the speed of the server accelerator.
The PESA has improved the speed of the server for 4 times based on the original speed. And this company’s main competitor is Ontario which accounts for 50% share in new market. What price should Jowers charge DayTraderJournal. com for the Atlantic Bundle (i. e. Tronn servers + PESA software tool? There are four choices. First, the company could stay the price and provide the free PESA with Tronn server. Second, the company can use the competitive strategy to set price to win the customers in the price: four times the Ontario Zink servers. Third, set a price based on a cost-plus approach.
Fourth, value-in-use pricing method could be used. According to the article, the first option is about $2000 which ignore the R&D cost, the second option if you choose 4 times the Zinc, that is 1700*4= $6800, considering the third option, the expected sales in three are about 210500 and the so number of PESA installations would be 105250, so each installation would be about 200, therefore the total cost is about 1500+200=1700 and use 35% mark up, we set the price of 2295. The fourth method is a little bit complicated, we obey the equation that 2 server +PESA=4Zinc, therefore after a series of calculation, the price would be about 6000.
Actually, according to the consumer behavior, I recommend the company do not take the method of price war and the forth method is much more reasonable because this method show the customers that your machine have more value and the Atlantic should find a different niche which is much more different than Ontario. Think broadly about the top-line revenue implications from each of the four alternative pricing strategies. Approximately how much money over the next three years will be “left on the table” if the firm were to give away the software tool for free (i. e. , status quo pricing) versus utilizing one of the other pricing approaches?
As far as I am concerned that maybe he is more favor for the third method which is the cost-plus method. The reasons are: 1. although the value-in price which is the most valuable in four methods, the price is much more higher than the current price which may be cannot be accepted by the customers. 2. We would rather gain some profits rather than setting to high price which cause the situation of dead stock of the outflow of the customers. 3. We could make sure of the 30% of this pricing strategy which is of less risk. How is Cadena’s sales force likely to react to your recommendation?
What can Jowers recommend to get Cadena’s hardware oriented sales force to understand and sell the value of the PESA software effectively? The Cadena’s sales force would strengthen the free installation of the software and cut down the cost of the license fees and the cost of labors. Jowers would recommend making profits with the hardware and he would emphasis on the development of the software to improve the efficiency of the server. Therefore he would prefer the cost-plus pricing method. Furthermore, customer segments would help the company to get more profits through the classification of the software.
How are the customers in your target market likely to react to your recommended pricing strategy? What response can be provided to overcome any objections? The customers are likely not to accept the high price because it is much higher than they expected. And the customers may prefer the free software, however as we share our profits with the customers , and our products show some advantages in the market, we could target our customers in the middle and high-end market which could differentiate from other competitors and gain our own core competence through this kind of marketing strategy.
How is Ontario Zink’s senior management team likely to react to the Atlantic Bundle? As far as I am concerned, they may not react to the current change. But with the growth share of the Atlantic market, the company may use their price advantage through lowering the price. And the Atlantic company has to lower their price too finally.