Atlantic Computer

Bundle of Pricing Options 220101079 Pragya Mehta

220101009 Aman Vijay
220101025 Atul Salee

Case Analysis by APO 5 | PV | Section B 220101057 Kartik Sharma

220101141 Vivian Odello
220101206 Linn
Zacharias
220103062 Gaurav Singh

APO 5 | Pricing For Value | Section B

 Atlantic Computers Case Analysis

Situational Analysis
About Company
• Atlantic Computer was the most significant player in the overall
computer Industry
• Competing in the server market for 30 years
• Sells high-end performance servers to large enterprise customers
• Reputed for providing top-notch and highly reliable products with high-
quality post-sales

Server Market
The market was divided into two segments.

1. High-Performance Segment High Performance Servers

• Demand in 2001: 200,000 units
• CAGR : 3% Server Market
• Atlantic owns 20% revenue market share Basic Servers
2. Basic Servers Segment
(New Segment)
• Demand in 2001: 50,000 units
• CAGR: 36%
• New Segment for Atlantic, dominated by Ontario’s Zink

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 Atlantic Computers Case Analysis

Decision Problem

Atlantic Computer seeks to penetrate the basic server market

by leveraging its Tronn product, which boasts superior
performance when combined with PESA software, surpassing
competitors' substitutes by four times. In order to determine
the pricing strategy for this bundle, they have four options:
Pricing Options
1. Status Quo Pricing: Provide PESA software for free
and price the server using a cost-plus pricing
approach.
2. Cost Plus Pricing: Apply a cost-based pricing model
to the entire bundle. Status Quo Cost Plus Competitor based Value Based Pricing
3. Competitor Pricing Model: Set the price based on
the pricing strategies employed by competitors.
4. Value-Based Pricing Model: Establish the price
based on the perceived value and benefits
delivered by the Tronn and PESA bundle.

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 Atlantic Computers Case Analysis

Pricing Calculations and Profit After 3 Years [ Q1 , Q2]

Refer to Excel Attached For the Calculation

Bundle Pricing Without PESA’s Price Bundle Pricing Including PESA’s Price
Value-Based Pricing Cost Plus Pricing Status Quo Pricing Competition Based Pricing
One Time Cost One Time Cost One Time Cost One Time Cost
Price of Atlantic Bundle 3877.24 Price of Atlantic Bundle 2000 Price of Atlantic Bundle 2000 Price of Atlantic Bundle 6800
Price of PESA 0 Price of PESA 0 Price of PESA 0 Price of PESA 122.76
Price of Server 3877.24 Price of Server 2000 Price of Server 2000 Price of Server 6677.24
Profit Over Cost 138% Profit Over Cost 16% Profit Over Cost 23% Profit Over Cost 317%
Profit Over Price 58% Profit Over Price 14% Profit Over Price 18% Profit Over Price 76%

Revenue Over 3 Years Profit Revenue Over 3 Years Profit Revenue Over 3 Years Money on The Table Revenue Over 3 Years Money on The Table
8,21,19,943 4,75,45,288 4,23,60,000 57,85,529 4,23,60,000 77,85,344 14,40,24,000 10,94,49,344

Cost Plus Pricing Value-Based Pricing

Competition Based Pricing Status Quo Pricing
One Time Cost One Time Cost
One Time Cost One Time Cost
Price of Atlantic Bundle 2245.52 Price of Atlantic Bundle 4000
Price of Atlantic Bundle 6677.24 Price of Atlantic Bundle 2000
Price of PESA 245.52 Price of PESA 122.76
Price of PESA 0 Price of PESA 0
Price of Server 2000 Price of Server 3877.24
Price of Server 6677.24 Price of Server 2000
Profit Over Cost 30% Profit Over Cost 145%
Profit Over Cost 309% Profit Over Cost 23%
Profit Over Price 23% Profit Over Price 59%
Profit Over Price 76% Profit Over Price 18%
Revenue Over 3 Years Profit Revenue Over 3 Years Profit Revenue Over 3 Years Money on The Table Revenue Over 3 Years Money on The Table
14,14,23,943 10,68,49,288 4,23,60,000 77,85,344 4,75,60,114 1,09,85,642 8,47,20,000 5,01,45,344

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 Atlantic Computers Case Analysis

Matzer Reaction and Justification [Q3]

After Suggesting a value-based pricing without giving PESA for free , Bundle Price : $4000

Matzer’s Counter Justification

Why not cost-plus pricing, as it has been the norm for the Utilizing a cost-plus pricing strategy would result in the company undervaluing a superior
company for so long ? product, as there are no comparable substitutes currently available in the market.

Why is PESA not free? PESA software is the key feature that sets the Tronn server apart. Offering it for free would
result in a loss of 2.6 million in value. Additionally, customers are more likely to purchase
the entire bundle because, without PESA, the Tronn server is less competitive in terms of
pricing compared to Zink.

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Sales Team Reaction and Justification [Q4]
After Suggesting a value-based pricing without giving PESA for free , Bundle Price : $4000
Sales Team Reaction
Zink is highly cheap compared to standalone Tronn, The team
would not be able to sell the servers without PESA
Why is PESA not free? The team might lose customers if we
charge them additional charge for software tool ?
How to make the customer understand the value of Atlantic
Bundle ?
Atlantic Computers Case Analysis
Justification
The company has established a strong reputation for delivering top-tier enterprise servers
and maintains a professional and high-end brand image within the market. As a result, the
target audience for this bundle comprises customers who are seeking more than just
standalone single servers. Specifically, they are interested in acquiring four or more servers
that are optimized for web services and file-sharing purposes. The customer profile present
in Exhibit 4 fits this strategy .
It is crucial to effectively communicate the value proposition of PESA for Tronn, as it
significantly enhances performance by four times. Moreover, this software, priced at only
$122, has the potential to save $4000 in annual operating costs. Additionally, the bundle
itself costs $4000, which is $2800 less than purchasing four substitute servers separately.
To effectively persuade customers about the value offered by the bundle, it is
recommended to provide benefit sheets during each sales pitch, showcasing the specific
advantages and highlighting the annual savings. Additionally, it is important to emphasize
the attractive two-year break-even period for the bundle, illustrating how the investment
pays off in a relatively short timeframe.
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Target Audience Reaction and Justification [Q5]
After Suggesting a value-based pricing without giving PESA for free , Bundle Price : $4000
Target Audience Reaction
Expensive for users who only want single-server usage
Why do we have to pay for PESA separately?
Atlantic Computers Case Analysis
Justification
While the cost may appear high for single server usage, the differentiating factor in pricing
the product lies in its capacity to expand up to four times the workload. This scalability
option has been considered, emphasizing the value proposition beyond initial costs.
The combination of PESA with Tronn servers offers seamless integration, resulting in a
quadrupling of server performance. What sets this apart is that it can be achieved at a
fraction of the cost compared to purchasing three additional servers. Additionally, this
software is available at a modest price of $122 yet has the potential to generate savings of
up to $6000 over the next three years, breaking even its cost 49 times over. Thus, the
economic benefit it provides outweighs it’s price.
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THANK YOU

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