INTRODUCTION

Jason Jobers is the new product manager at Atlantic Computer. He was responsible for defining
the pricing strategy for a new product called “Atlantic Bundle”. This package includes a server
named Tronn and a software tool called PESA. The team believes that the success of this new
product depends on being able to sell Tronn using PESA software. Tronn was designed to meet a
specific opportunity in the US market, and PESA made it work much faster than usual. During a
meeting, the team discussed two main server market segments. The first segment involves using
the server for complex tasks such as business management, resource planning, and intelligence-
related work.
The second segment is emerging due to the growth of the Internet, where servers are used for
simpler tasks like displaying information on a web page. Atlantic Computer aims to compete with
another company, Ontario Computer, which is dominating its target market.
Jason needed to find the right price for the Atlantic package. This involves identifying the
companies that will benefit the most from this package, anticipating how customers and
competitors will react to the pricing, and planning pricing. Jason's deadline was set for a trade
show called "Small and Medium Enterprise System Solutions Show" (SME for short), an important
exhibition for Atlantic Computer. They wanted to perfect their pricing strategy before the event
for a strong impact.

SITUATION ANALYSIS

It's important to look at the company as a whole, the market, competitors, and key players in the
industry.To better understand the situation.
All of these analyzes can be considered in more detail in Appendix.
After performing a SWOT analysis on the Atlantic, we were able to determine that some the
strength of the company lies in the fact that it is the largest company in the computer industry
and has a strong foundation, brand image, as well as the dramatic reduction in the number of
servers that their new products, Tronn and PESA, can deliver. The demand for low-end systems
is increasing, one of the reasons that led to the birth of "Atlantic Package.” Expected growth of
the core server market (36% over the next 3 years, compounded annually) represents a great
opportunity for Atlantic to penetrate a new market and increase brand awareness.
However, they lack knowledge and experience of the underlying server market and the fact that
they competitor, Ontario, that dominates the core server market (50%) will pose a major threat
and cause Market penetration is extremely difficult.
However, Atlantic has built a reputation for providing high-quality, responsive after-sales
support, as opposed to an emphasis on manufacturing in Ontario, can serve as the key
differentiator for the new product. (Full analysis is in Appendix A) There are two markets in Server
industry:
High performance server and basic server. Server market in history is characterized by complex
and powerful systems capable of handling business-critical applications. However, the internet
and the popularity of apps in the late 1990s changed the game.
Powerful server the market is the largest and is dominated by Atlantic with 20% market share of
revenue. Basic things The server market is expected to grow 36 GR in the next 3 years. Ontario
now accounts for 50% revenue market share. (Appendix B) This is the market that Atlantic is
trying to penetrate with the new product “The Atlantic Bundle”. Ideally, Tronn and PESA would
be sold and used together, as PESA allows Tronn to run up to 4 times faster than its standard
speed, giving it a competitive edge and product differentiation in Ontario.
(Appendix C) The important decision now is to determine the right one price of the product and
to do this, there are a number of key players involved.
Main Contributors and the decision-maker was Jason Jobers, Atlantic's youngest product
manager, tasked with delivering exact price for "Atlantic Package".
(Appendix D)

How can Jason Jowers proceed with pricing approach for the
newly developed server at Atlantic Computers?
Certainly, Jason Jowers can proceed with a value-in-use pricing approach for the newly developed
server, considering the following aspects:

1. Identify Customer Segments:

Jason should analyze the customer segments that would benefit the most from the Tronn server
and PESA software. Based on internal tests, he has identified the web-server and file-sharing
application segments as the primary beneficiaries.

2. Calculate Value for Customers:

Using the data from internal tests, Jason can quantify the value that customers would gain from
using the Tronn server with PESA software. This includes cost savings from needing fewer servers,
reduced electricity charges, lower software license fees, and decreased labor costs.

3. Cost Structure Analysis:

Jason should evaluate the cost structure of producing the Tronn server and PESA software. This
analysis will help him set a competitive price that covers costs while offering customers a
compelling value proposition.

4. Customer Savings Comparison:

Jason should compare the total cost of ownership for customers using the Atlantic Bundle versus
alternative options, such as purchasing multiple basic servers. This comparison will showcase the
significant savings customers can achieve with the Atlantic Bundle.

5. Communicate Value to Customers:

Jason should develop clear and concise communication materials that explain the value of the
Tronn server and PESA software. This can include case studies, cost comparison charts, and data-
driven explanations of how the Atlantic Bundle outperforms other solutions.
6. Sales Team Training:
Jason needs to work closely with Jairo Cadena, the director of sales, to train the sales team on
the value-in-use pricing approach. This includes preparing them to effectively communicate the
cost savings and benefits to customers during sales interactions.

7. Addressing Tradition and Objections:

Since the company traditionally provided software tools for free, Jason needs to address any
objections or questions from colleagues and stakeholders about deviating from this practice. He
should emphasize the unique value of the Tronn server and PESA software that justifies the
pricing approach.

8. Customer Engagement and Feedback:

At the trade show, Jason should engage with potential customers and gather feedback on the
value-in-use pricing approach. This real-time feedback will help him fine-tune his pricing strategy
and address any concerns that customers may have.

9. Competitive Positioning:
Jason should analyze how competitors, like Ontario Computer, are pricing their products. By
offering a value-based pricing approach, Atlantic Computer can position itself as offering a
superior solution with tangible cost savings.

10. Monitoring and Adjustment:

After implementing the value-in-use pricing strategy, Jason should closely monitor customer
responses and sales performance. If necessary, he can make adjustments based on market
feedback to optimize the pricing strategy.

11. Long-Term Strategy:

Jason should consider the long-term implications of the value-in-use pricing approach. As the
market evolves, he should continue to assess customer needs, competitive dynamics, and
technological advancements to ensure the pricing strategy remains effective.

By proceeding with a value-in-use pricing approach, Jason can position the Tronn server and PESA
software as a compelling and cost-effective solution, effectively acquiring market share while
maintaining a strong profit margin.

ALTERNATIVE SOLUTIONS

There are four pricing options that the company can deploy. We will discuss the benefits.
and disadvantages of each alternative based on our calculation results in this section.
First calculation
First, we calculate total projected sales over the next three years to help keep your efforts going.
calculation, as shown in Appendix E. Next, we calculate the price of the product based on each
pricing alternative,
as set out in Appendix F-I. From these results, we can calculate the total benefit over three years.
for each pricing option. (Appendix J) Know Now we can have a clear view of the difference.
pricing options.

option 1
Current price:
Charge only for Tronn and provide free PESA.
Benefits
• Competitive low prices.
• Free software for customers.

The inconveniences
• Does not include PESA development costs.
• Doesn't emphasize its software advantage. Product placement may appear like Ontario Zink.

Option 2
Competitive pricing:
Charge at competitor rates and offer free PESA. In this
In this case, the company will charge 4 times the price of the Zink server; we have calculated the
price carefully,
i.e. double the price of Zink server.

Benefits:
• The second highest total profit after 3 years.
• Free software for customers.

Inconveniences:
• High price can be quadruple or double the price of Zink server.
• Customers may prefer to have four pieces of hardware rather than two better pieces of
software.
• Doesn't emphasize its software advantages.
• Not all clients can derive value from four Zink servers.

Option 3
Cost plus price:
Add all the extra costs and percentages to get the price of the product.

Benefits:
• Consider all costs associated with the product.
• Relatively low and reasonable prices.
Inconveniences:
• The second lowest total income after 3 years.
• Do not focus on pricing customer needs.

Option 4
Value to use:
Payment according to product value to customers. In our case, the price of PESA
the software is priced based on 50% of the amount the customer would save if they decided to
use it the Tronn server.

Benefits:
• Customer-oriented pricing strategy.
• Consider operating costs for customers using the product.
• Give reasons to justify the sales strategy.
• Generate the most revenue

Inconveniences:
• Relatively high price compared to other pricing options.
• Customers may not want to pay for PESA.

Recommendation
For the Atlantic Bundle to perform at its best in the core server industry, it must match.
market price of $4,199 (Appendix J). This number is calculated using the value in the usage
method.

ONE the reason behind this price is that it will generate the highest profit, $54,381,160 (Exhibit
J), compared to remaining three options. Similarly, this method will also bring in revenue of
$88,956,000 (Appendix J).
According to Appendices I and J, the suggested price for this product is $4,200. The reason why
our team I chose $4,199 because of the even price.
This is a psychological pricing strategy that makes.

Customers feel the price is lower than it really is although this pricing strategy goes against
Atlantic's tradition of providing software tools to customers, free client, the PESA software tool
runs the Tronn computer at four times the normal speed operating speed.
We choose to charge for more speed and ease because we want targeting the upper tier of the
basic server market. This is known as a price skimming strategy.
That's when you enter the market at a higher price because people are willing to pay for quality.

A value-based pricing strategy is used because it is customer-centric.

It evaluates all costs that the customer will have to bear over the life of the product and evaluate
its value in comparison to client.
As shown in Exhibit I, the total cost of competitive Zink is $8,800 higher than that of Tronn.
Because customers will save a lot of money, in the long run this is a reason to charge for PESA
software.
While customers may notice long-term savings, this long-term savings idea will communicate by
the sales team.
The sales team won't be particularly thrilled when Atlantic.

charge for PESA software, as traditionally there is no charge for additional software.

However, if the sales team could inform the customer that even if they bid a higher price,

initial cost, they will have a superior product that can be used for a long time and save money
compared to competitors.
Castle. This way of thinking will not require additional training of the sales force, even if.
they must be able to communicate to the customer all added value or added products,
that Atlantic will provide them.
An example of fortified products offered by Atlantic is their outstanding quality, customer
service. Atlantic's main competitor, Ontario, has two options. The first is the introduction of the
Atlantic package could cause Ontario to lower prices to maintain its market hold medium to lower
level of the underlying server industry Second, it may put pressure on Ontario to do so.
do more research to come up with software tools that can compete with PESA.
Either way, Ontario will be in a tough spot.
location. They won't be able to research and develop technology in an era where it can instantly
compete with Atlantic, so they will lose some market share.
However, if they fall their prices, they may not be profitable enough to continue and will fade
over time.

APPENDIX

Appendix A - SWOT Analysis

Strength
Large company in the IT industry · Strong brand image and positive perception · Reputation for
providing responsive, high-quality after-sales support · Product differentiation · Downsizing
servers with Tronn + PESA ( 4 out of 1) · Long-term savings for customers (electricity, license fees,
etc.) Based on customer loyalty and product differentiation

Weakness
The sales force doesn't know how to sell software like PESA. · They previously offered free
software. · I don't know how much to charge the product. Implementation cost can be an issue.
· Lack of knowledge and experience in core server market (too many competitors) · No online
marketing or sales. Internal conflicts in departments.
Opportunity
Basic server market growth (36% in next 3 years) vs high performance server (only 3% in 3
years) Potential for online sales and marketing use Advantage is reduced number of servers
from 4 to 1 and provide higher speed Enter new market version to boost your image
Threats
· Ontario dominates the commodity server market (50%) (significant market penetration) ·
Brand loyalty in the commodity server market · Tronn and PESA can compete with other
products of Atlantic · Ontario has an efficient and innovative "one-stop" supply chain system;
Ontario offers cheaper servers

Appendix B - Market Analysis

High Performance Server
Largest segment · Traditional use of servers to run complex applications · i.e. supply chain mgt.,
enterprise resource planning, business intelligence, etc. · Demand ~200,000 units next year
(exhibit 1) · 3% growth in the next 3 years · Atlantic has 20% of revenue market share
Basic Performance Servers
· Basic computing capabilities · Simple, repeatable tasks (i.e. showing website information on the
internet) · Demand ~50,000 units in 2001 (exhibit 1) · 36% CAGR in the next 3 years · Ontario
captures 50% of revenue market share
• Server market was historically characterized by complex, robust systems capable of handling
critical business applications
• Internet and proliferation of applications in late 1990’s changed the market

Appendix C - Product Analysis

The Tronn
Developed specifically to meet an emerging U.S. market opportunity · Product success is going to
be our ability to sell the server with our new software tool
PESA
 · Allows Tronn to perform up to 4 times faster than its standard speed · Specifically designed to
make frequently requested information extremely accessible
Appendix D - Key Players Analysis
Jason Jowers
- Youngest product manager
- Joined recently (4months ago) after MBA
- Rotations in product management
- Responsible for pricing strategy

Emily Jones
- Director of R&D Team

Jario Cadena
- Director of Sales
Chris Matzer
- Head the server division
- 20 years veteran (experience)
- Software tools should be free

Harry Fowler
- Director of New Product Marketing
- Jason Jower’s boss

Appendix E – Projected sales units.

2001 2002 2003

Total # of Units Atlantic's Share of Units

50,000 70000 92000

Atlantic's Percentage of Share
 Total Cost (1 bundle unit)
4% 9% 14%

Required Profit (%)

2000 6300 12880

Total Share of Units in 3 Years 21180 Final Price

$1,538

Appendix F – Status- $2,000,000

quo pricing 21180

calcula ons and final
10590
price.
$188.86
Price

$1,726.86
Cost of Produc on $1,538
30.00%

Final Price $2,000

$2,245

Appendix I – Value-in-use pricing calcula ons and final price.

Appendix G –
2 Tronn Servers 4 Zink Servers
Compe on-based
pricing calcula ons Price of Servers 4000 6800
and final price
Cost of Electricity 500 1000

Price Cost of Licenses 1500 3000

Cost of Server (Tronn) $1,538 Cost of Labor 4000 8000

Compe tor Price $1,700 Total Cost 10000 18800

Final Price $1,700

Savings over Zink 8800

Conserva ve Price (2 units) $3,400

50% of Savings 4400

Appendix H – Cost- plus
pricing calcula ons and
final price. 2 Tronn + 2 PESA 8400
P
r
i
c Final Price 4200
e

Cost of Server (Tronn)

Development Cost of PESA

Number of units (over 3 years)

Number of units with PESA

Cost of PESA (per unit, over 3 years)

Appendix J – Projected profit a er three years.