Atlantic Computer is a large manufacturer of servers and other high-tech products. They are known for providing premium high end servers. Atlantic Computer’s is in the process of introducing Tronn, a new basic server, which includes Performance Enhancing Server Accelerator (PESA) software. This software will allow Tronn to perform up to four times faster than its standard speed. Therefore these two new products were specifically designed to sell as a bundle or “Atlantic Bundle.” Jason Jowers, fresh off of his MBA degree is responsible for developing the pricing strategy for the “Atlantic Bundle. After much research Jowers narrowed down to four different routes on how the bundle can be priced: status quo, competitive, cost-plus, or value-in. …show more content…
Option 2- Competition based pricing
This pricing option will allow Atlantic to introduce a product that would compare with their competitions product. Atlantic’s main competition is Ontario Computer, Inc.’s Zinc server. The Tronn server will compete directly with Zinc, and with the collaboration of PESA will allow Tronn to perform up to four times fasters. In turn, a customer could possibly receive the same level of performance by buying one Tronn loaded with the PESA as compared to buy four of the Ontario Zinc server.
Consequently Atlantic could conservatively state two Tronn servers should be equal to four Zinc servers, and aggressively state one Tronn server will be equal to four Zinc servers. With the price of the Zinc server being $1,700 , Atlantic can conservatively price the “Atlantic Bundle” at $3,400 ($1,700 x 2) or aggressively at $6,800 ($1,700 x 4). The third option would find a happy medium around $5,100 ($1,700 x 3).
Option 3- Cost-plus pricing
Cost-plus pricing, it the industry pricing standard, and is a method to determine a price of the product by finding the cost per unit and then including a mark-up
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Since Matzer has been in the industry for over 20 years, he mostly likely be unwilling to charge for software. Matzer would relate more with the status quo pricing and belives that the software tools should be provided to customers for free. However, Matzer believes that Tonn should be advertised in conjunction with PESA. Matzer is also conservative so it would be important to introduce the recommendations with two Atlantic servers compared with four Ontario servers.
How is Cadena’s sales forece likely to react to your recommendation?
The sales force will most likely be hesitant to this recommendation because they are not use to this method of selling. They will have to sell a customer a more expensive product, when most are usually focused on the price and money-saving solutions. Although this product is superior, the cost is higher on a unit-to-unit basis. They will have to capture the attention of the customer and be able to continue the conversation in order to be able to explain the details of the transaction and future benefits.
What can Jowers recommend to get Cadena’s hardware-oriented sales force to understand and sell the value of the PESA software
Their price must be one that is attainable and reasonable for the offerings. The Kotler & Keller text suggests that facilities analyze competitors and their offerings, estimate their own costs, and determine demand, in order to set the appropriate price.
A couple of Squares has a limited capacity for which to produce their products and smaller companies tend to have larger fixed costs than bigger companies. Therefore, A Couple of Squares must maximize profits in order to ensure that they will stay in business. A profit-oriented pricing objective is also useful because of A Couple of Squares’ increased sales goals. A Couple of Squares increased their sales goals due to recent financial troubles. Maximizing profits is the easiest way to meet these sales goals due to the fact that A Couple of Squares has limited production capacity. The last key consideration favors a profit-oriented pricing objective because A Couple of Squares offers a specialty product. A specialty product often has limited competition, therefore can be priced on customer value. Pricing at customer value will maximize profits as well as customer satisfaction. A Couple of Squares’ lack of production capacity, increased sales goals, and specialty product favor a profit-oriented pricing
Pricing Strategy: We are going to take into consideration inflation, benchmarking and customer trade off. The pricing strategy for the new products/line extensions will be a penetration-pricing strategy to gain customers from other competitors and increase market share. Further, the volume discounts are going to be in the range of 25-40%. Taking into consideration Product lifecycle, those will be raised in the time where new products/line extension are launched.
Historically the personal computer (PC) industry has sold its products at reasonably high prices yet garnered only small profit margins. One reason for this is the high competition in the PC industry which led to competitive pricing among producers. Analyzing the competitive environment of the PC industry, it is evident that there is very little barrier to entry in this market. PC's have very low physical uniqueness and are made of standard components that require very little expertise to assemble.
Facing stiff competition the senior management needed to reconsider the pricing plan for Item 345. So in early 2004 they held a meeting to decide in which direction to go.
We shall apply the Porter's 5 Forces model to examine the PC market and see how forces of competition influence the profitability of the market players.
Hardware, software, support and maintenance costs grow each year with multiple systems in each local region running different types of software and hardware. The application and hardware support teams are larger than could be possible with one integrated solution.
Helgeson, James G., and Eric G. Gorger. "The Price Weapon: Developments In U.S. Predatory Pricing Law." Journal Of Business-To-Business Marketing 10.2 (2003): 3. Business Source Complete. Web. 15 Apr. 2014.
What are the three or four most important drivers of Microsoft’s business model over the past 10 to 15 years that have accounted for the company’s spectacular results?
One of the benefits of using ABC system is product and price mix decisions; one of the
After this decision internet distributors and Express respectively has to be considered as strong competitor due to the price-sensitivity of the electronic industry. Therefore A/S should work on its company image to highlight their advantages compared to discounters. Therefore A/S has to point out that they are aware of being not the cheapest but nevertheless will create more benefit for the customers by offering service and competence.
The pricing strategy will start out rather high for this product upon its release in order to draw a more selective crowd such as the upper class members of the urban society. Once the product has succeeded within this market there will be a development of additional variations of the product which will allow for certain models, with less features, to be sold at a lower price point in order to attract the members of society who are less willing to pay the high asking price for the top of the line version of the
All choices made by Seven-Eleven are structured to lower its transportation and receiving costs. For example, its area-dominance strategy of opening at least 50 to 60 stores in an area helps with marketing but also lowers the cost of replenishment. All manufacturing facilities are centralized to get the maximum benefit of capacity aggregation and also lower the inbound transportation cost from the manufacturer to the distribution center (DC). Seven-Eleven also requires all suppliers to deliver to the DC where products are sorted by temperature. This reduces the outbound transportation cost because of aggregation of deliveries across multiple suppliers. It also lowers the receiving cost. The information infrastructure is set up to allow store managers to place orders based on analysis of consumption data. The information infrastructure also facilitates the sorting of an order at the DC and receiving of the order at the store. The key point to emphasize here is that most decisions by Seven-Eleven are structured to aggregate transportation and receiving to make both cheaper.
The consumer can use the middleman’s equipment to develop his own program and deliver it to the users through internet and servers.
We have introduced the meaning of auctions and how they work, and explained the relationship between dynamic pricing concept and types of auctions. In addition to the benefits of online auctions, we talked also about the auction process and software development.