Atlantic Computer:

A BUNDLE OF PRICING OPTIONS

FAS P2
ANANYA P 16F307
COLLINS CHACKO 16F314
NIDHEESH K 16F338
NISHANT JOSHI 16F343
TIA MARY BOBEN 16F366
VIKAS R 16F368
What are the pricing options in front of Jowers? Analyse each one of them with respect to Matzer,
Cadenas sales force and Ontario Zink.

There are four pricing strategies available:

Option 1:

Charge only for hardware and give away the software for free

Option 2:

Charge price equal to what customer pays for four Ontario Zink servers

Option 3:

Charge a price based on cost-plus approach to pricing PESA

Option 4:

Charge a price based on value-in-use pricing

According to the case facts Tronn comes in two models:

1) with PESA

2) without PESA

Its mentioned that one Tronn server with PESA is performing at the level of two standard Tronn
servers; also one PESA server is equal to one Zink server. Therefore, we are assuming that two
standard servers performance is equal to four Ontario Zink servers.

Option 1:

This option is to charge for Tronn server only and give away the software for free

Price of one Tronn server = $2000

Option 2:

Competitive based pricing

Price of one Zink server = $1700

1 Tronn with PESA = 4*1700 = $6800

1 Tronn without PESA = 2*1700 = $3400

Option 3:

Cost-plus approach

2001 2002 2003 Total

Total server sales 2000 6300 12880 21180
Bundle attach 1000 3150 6440 10590
rate

Expected sales of Tronn servers = 21180

Expected number of installations = 10590 (50% of Sales)

Cost per one unit of PESA installation = 2000000/10590 = $189

Hard costs per unit = $1538

Total costs per unit = 1538+189 = $1727

30% mark-up = 518.1

Total price = 1727 + 518.1 = $2245.1

Option 4:

Value-in-use pricing

Comparing with Ontarios Zink

2 Tronn server 4 Zink server

Basic price of server 4000 6800
Value added
Electricity 500 1000
s/w licence cost 1500 3000
Total cost 6000 10800

Savings by Tronn 4800 0

50% of savings 2400 0
Final cost of Atlantic 6400 10800
Unit price of one Atlantic = $3200

Analysis:

Matzer is a firm believer that software tools should be given for free. So, he would prefer giving
PESA without additional cost, i.e. traditional pricing. He may not approve other pricing models until
proven.

Cadenas sale force had their pay based on commission. 30% of the pay they receive are through
commissions which is to say they would be biased towards a particular model that yields a higher
price.

Ontario Zinx may reduce the price to basic cost i.e., 1214. This might affect the behaviour of the
consumers. The major strategic choice of Atlantic would be communicating to consumers effectively
about the value added by Atlantic over Zinx through Cadenas force.