Atlantic Computer Pricing
Essay by Andi Novianto • April 10, 2017 • Essay • 667 Words (3 Pages) • 1,024 Views
ATLANTIC COMPUTER
Pricing Strategy for Atlantic Bundle
Atlantic Computers is one of the strongest players in the servers and high tech product industry. Atlantic currently has 20% of the revenue market share, but that is expected to increase with our new “Atlantic Bundle”. Their new server, the Tronn and the new software PESA are going to help the company enter into a new market. 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’s main competitor in basic market segment is Ontario, which commands 50% market share with its product Zink.
There are four method for pricing strategies which Atlantic Computers can choose :
- Atlantic Computers could stay with the status quo and offer software tools for free.
- Atlantic Computers could choose competitive based pricing.
- Atlantic Computers could choose from cost-plus pricing.
- Atlantic Computers could choose value-in use pricing.
Atlantic Bundle = 1 Tronn Server + PESA
Method 1 : Status Quo Pricing
Price per unit for 1 Tronn Server included PESA is $ 2.000
This option incude charging for Tronn server only and they will give free for PESA tool software development. Neglected PESA software development costs is $ 2.000.000. And it will not be the best option, as the company will lose $2.000.000 R&D cost for PESA.
Method 2 : Competition Based Pricing
2 Tronn Server + PESA = 4 Zink Basic Server
Price per unit for 1 Zink Basic Server is $ 1.700
Pricing (competition based) | |
4 Zink Basic Server | $ 6.800 |
2 Tronn Server + PESA | $ 6.800 |
1 Tronn Server + PESA | $ 3.400 |
Based on the calculation above from the competitor the price of Atlantic Bundle is $ 3.400.
Method 3 : Cost Plus Pricing
Assumed market captured : 4% in 2001, 9% in 2002, and 14% in 2003
Cost Plus Pricing where the price of the product and another tools is combined.
Sales | 2001 | 2002 | 2003 | Total |
Market volume basic server | $ 50.000 | $ 70.000 | $ 92.000 | $ 212.000 |
Assumed total sale of Tronn | $ 2.000 | $ 6.300 | $ 12.880 | $ 21.180 |
Assumed total sale of PESA (50%) | $ 1.000 | $ 3.150 | $ 6.440 | $ 10.590 |
PESA software development cost | $ 2.000.000 |
PESA cost per unit for 3 years | $ 188,86 |
Cost per server | $ 1.538 |
Total PESA cost per unit for 3 years + cost per server | $ 1.727 |
Price, markup 30% cost for margin | $ 2.244,91 |
Based on the calculation above from the competitor the price of Atlantic Bundle is $ 2.244,91 $ 2.245.[pic 2]
Method 4 : Value In Use Pricing
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