AtlanticComputersisamanufacturerofServersandHighTechproducts Thecompanyhas20%marketshareinhighperformanceserverswithRadiabeingpremierproductover 30years Thecompanymanufacturestwokindsofproducts: HighPerformanceServers&BasicServers DecidedtointroducetheBasicServerintothemarketby2000 DevelopedanewserverTronn&asoftwaretoolPESAwhichenhancestheperformanceofthesame AtlanticComputersplannedtoselltheServer&thesoftwaretogetherasabundle JasonJowerswasresponsiblefordevelopingapricingstrategyforthebundle BASIC SERVER MARKET DETAILS Advent of Internet:

Need of low end performance servers or Basic Servers Collection of these basic servers could support a companys website Market Demand expected to be 50000 units in 2001 7. PRODUCT Tronn : Server developed to cater to the Basic Server Market PESA : Will enhance the speed of Tronn By 4 times Atlantic Computers want to bundle the products together 8. ADVANTAGES OF TRONN WITH PESA PESA will improve Tronn speed by 4 times Need to purchase fewer servers Lower annual electricity charges Lower software license fees and labour costs Customers in the web server and file sharing applications would benefit most from the same 9. COMPETITORS Major Competitor : Ontario Computer Inc. Product: Low End Server Zink, currently 50% market share in the basic server market Majority Sales were generated online Zinks server performed at approximately the same level as Tronns Rest competitors were Local Vendors 10. KEY FACTORS INFLUENCING THE PRICING STRATEGY Status Quo Pricing : Matzer believed that as per the companys tradition Software should be given for free along with the hardware Cost Plus Pricing : According to Matzer standard approach to pricing should be followed Competitive Pricing : Cost should be as per the industry standards i.e as in accordance with the Zink Server Value-in-use Pricing : Method of setting prices to capture a portion of customers savings by buying a firms products 11. STATUS QUO PRICING Offer PESA free of charge & price Tronn at $ 2000 In this case the cost of Software Development (PESA) would be a loss to the company i.e a loss of 2,000,000 The product would be competing head on with Zink, which is a market leader 12. COST PLUS PRICING Cost of one Tronn server = $1538 Cost of Developing the PESA Software = $ 2,000,000 So the total cost of the bundle would be higher than $1538. Whereas, the Cost of one Zink Server is $1214 So, the total price of the bundle for the company to make profits should be higher than $1538 13. COMPETITIVE PRICING Performance of one Atlantic Bundle is equal to that of 4 Zink Servers Zinks Market Price = $1700.Therefore,cost of Atlantic Bundle should be approximately 4 times This price would be very high as compared to competitors product 14. VALUE IN USE PRICING Atlantic Bundle needs to be projected as a new product with high value addition It is one basic server with 4 times speed Additional savings can be shown in terms of using one Atlantic bundle instead of 4 Zink Servers. Second order savings due to lower electricity charges, software licenses and labour costs should be shared with the customer. 15. CONCLUSION Status Quo Pricing : Loss of the software development costs Competitive Pricing : It would be very difficult to convince customers why the Basic Server is priced 4 times of its competitors price. Cost Plus Pricing : Customers would prefer buying Tronn alone than paying extra for the PESA software Value-in-use Pricing : The product should be launched as an all together new product with a separate approach highlighting the performance & cost savings. The pricing strategy should be in accordance