The Price of Atlantic Bundle - Assignment Example

Atlantic Bundle

# Question 1

In determining the price to charge DayTraderJournal.com, the company should consider utilizing four pricing approaches. The strategies they should use are status-quo pricing, competition-based pricing, cost-plus pricing, as well as, value-in-use pricing. The strategies are calculated and their results are outlined hereunder.

Status-quo pricing

In this case, Atlantic Computers will charge the customer for the hardware and offer the PESA for free.

Atlantic bundle = TRONN price + Free PESA= $2,000

Competitive based pricing

This is where the company sets its price based on the price offered by its competitors’ servers (Nagle, Hogan, and Zale 56-59).

Bundle price = 4*(Zink Cost)

Zink = $1,700

Atlantic Bundle =$6, 800

Cost-Plus Pricing

This is calculated under the assumption the company’s share market will be at 4% 9% and 14% for the three years respectively.

Per Unit PESA costs

R&D PESA Cost over three years- $2,000,000

Divided by 10590= $188.86

PESA unit price with 30% margin $188.86*1.3=245.51

Total Price (Servers) 2@$2000=$4000

Total price PESA 2@$245.51=$491.03

Thus, the Total price is $4000+$491=$4491

Value in Use Pricing

This option attempts to determine how much the customer would save by buying the organization’s product. This will include 50-50 sharing of savings (Campbell n.pg).

                       
Jowers should therefore charge DayTraderJournal.com $2,800 for the Atlantic Bundle.
# Question 2

The revenue forecast in 3 years assuming (1059 Tronn Plus PESA sold)* Price of each strategy

# Question 3

Usually, the trend of cost-plus with free software in the industry may result in resistance by Matzer. However, if he can be ensured that three aspects will be elaborated and that is the financial implication, the capability of the sales force to put into operation a pricing strategy, and the ability to deal with consumers’ objections, then Matzer should be okay (Bharadwaj and Gordon 3-5).
# Question 4

Cadena's sales force is likely to be unenthusiastic about the value-in-use pricing strategy. This is because, by using the cost-plus pricing strategy, they would sell more since the PESA would be provided for free. This would encourage more customers to buy the servers since they will be provided with the extra application for free.  Nevertheless, they would also be encouraged to sell using the value-in-use pricing strategy since it will offer a higher price thus a chance for a bigger commission (Bharadwaj and Gordon 4-6). Therefore, Jowers would recommend that the sales force should undergo training in order to comprehend and sell the value of PESA effectively. This will be achieved by convincing consumers that the represents higher productivity and greater savings.
# Question 5

In the beginning, consumers will likely question the company’s reasoning in deviating from their traditional approach of providing such performance-enhancing tools like PESA for free. This is one of the most difficult tasks that are associated with “Atlantic Bundle” pricing. Therefore Atlantic Computers should strive to demonstrate to their consumers that PESA fundamentally quadruples the number of usual and basic TRONN servers. Additionally, they will need to emphasize that the tool will provide a saving aspect depending on the number of servers being purchased as well as saving on other costs. It is also imperative to ensure that they continue to provide excellent after-sale service to encourage loyalty (Bharadwaj and Gordon 5-7).

# Question 6

It is projected that the “Atlantic Bundle” will take approximately 4% market share. Therefore, it is improbable that Ontario will have any concerns at that particular time and would likely not take any counteracting measures at the new product entry into the market.  However, Ontario is likely to take two to three years before taking any action. This means that since he would not have produced any tool, he would prefer to lower their server prices so as to stop any market loss. However, Ontario would take this action for a short period of time before radically decreasing its earnings. There is a chance that Ontario will start copying PESA in order to include it as a new tool in their server packages. Atlantic Computers will already have recovered much of their R&D costs that were associated with PESA and start providing it to their customers for free (Bharadwaj and Gordon 6-7).