Atlantic Computers-

A Bundle of Pricing
Options
Group - 06
Tavishi Mehta- 2101168
Ishika Agrawal- 2101017
Shaurya Jha - 2101118
Shreysi Batra - 2101183
Surabhi karekar - 2101162
 Company
Company Profile Profile
Profilev Company Company
Competitive Profilev Company
Positioning Profile
of Tronn+PESA

Largest player in the overall computer industry Tronn loaded with PESA will be new product for
the market

Competing for 30 years by selling high

performance server
Projected growth of market segments:
• High performance server- 3%
• Basic server- 36% CAGR
Hence, Tronn was developed to capture the high
potential basic server market
Currently, Ontario Computers Inc. has 50% market
share in low end server market with its Zink
product line
Atlantic do not have major clients in basic server
segment and hence, it will be a type of modified
rebuy with outside supplier

Tronn loaded with PESA performs upto 4 times

faster than their standard speed
Positives of Tronn+PESA
Management Plan
The ratio shows that how effective
Tronn with PESA will work when
compared to Tronn without PESA.
01 04 Here you could describe the
topic of the section
Tronn
Tronn with
without
Application tested PESA (A)/(B)
PESA
(A)
(B)

Operating Plan
High performance 180 187 0.96
Ratio of 4.10 means that Tronn with
PESA is 4.10 times effective than Tronn
without PESA.
02 05 Here you
Graphic application could280
describe the
topic of the section
281 1.00

Enterprise Application 264 254 1.04

E-mail Application 341 300 1.14

File sharing 812 404 2.01

Financial Plan
04 06
Hence, PESA will be effective for
Web service 2222 542 4.10
File sharing and Web service Here you could describe the
topic of the section
Customer Profiling
DayTraderJournal.com serves as exemplary
customer

This customer have server need which can host the

company’s website where day traders can review
articles and training information.

This customer was originally seeking 4 basic servers

while wanting to minimize acquisition and
possession cost.

PESA was designed for accessing frequently

requested information effectively. Purchasing Tronn
loaded with PESA as opposed to buying 4 servers
will help the customer to save cost as Tronn with
PESA for Web services is 4.10 times more effective
than Tronn without PESA
Pricing Strategy- Status Quo Pricing

Option 1: Charging only for hardware

Particulars Amount
Price per Tronn (basic) server (A) $2,000
Price for PESA software (B) $0
Price of the bundle (A+B) $2,000

Price of 1 Zink server $1,700

Price of 4 Zink servers $6,800
Price of 2 Tronn loaded with PESA $4,000

Devalues the package

R&D costs cannot be recovered and has to be forgone
Pricing Strategy- Competition Based Pricing

Option 2: Charging price equivalent to 4 Zink servers

Particulars Amount

Price of 4 Zink servers $6,800

Price of 2 Tronn serves $6,800

Price of single bundle $3,400

At least some portion of R&D cost will be recovered

Pricing Strategy- Cost Plus Pricing

Option 3: Charging based on cost plus approach

Particulars 2001 2002 2003 Total Particulars Amount

Cost of Tronn Server (A) $1,538
212,00
Market volumes (from Exhibit 1) 50,000 70,000 92,000 0
$2,000,
Atlantic's share (from footnote) 4% 9% 14% PESA software development cost 000
Total number of PESA software
Sales of Tronn server 2,000 6,300 12,880 21,180 tools 10,590
Attach rate for PESA 50% 50% 50% Cost of PESA per Tronn server (B) $189

Sales of Tronn loaded with PESA 1,000 3,150 6,440 10,590 Total Cost of the bundle (A+B) $1,727
Markup % 30%
Markup cost $518
R&D cost will be allocated and will be recovered Total price of the bundle $2,245

Price of 2 Tronn loaded with

PESA $4,490
Price of 4 Zink servers $6,800
Pricing Strategy- Value-in-use Pricing

Option 4: Charging based on Value-in-use pricing

Cost For Zink Server Cost For Tronn Server Amou

Particulars
(A) Electricity cost (F) $250 nt
Electricity cost $250
Software application license cost (B) $750 Software application (G) (E-J) $8,80
license cost $750 Cost saving 0
Labor cost
Labor cost 50% of savings shared $4,40
Server administrator's annual with customers 0
salary $80,000 Server administrator's $80,0
annual salary 00 Savings for 2 Tronn
No. of server administrators
servers loaded with $4,40
required 40
No. of server PESA 0
Labor cost per server (C ) $2,000
administrators required 40 Savings per Tronn
Server price (D) $1,700 server loaded with $2,20
(H) $2,00 PESA 0
Labor cost per server 0
(A+B+C
Total cost of 1 Zink server +D) $4,700 (I) $2,00
Server price 0 Price of the bundle = $4,20
Total cost of 4 Zink servers (E ) $18,800 $2000 + savings 0
Total cost of 1 Tronn (F+G $5,00
server +H+I) 0
R&D cost will be allocated and will be Total cost of 2 Tronn
recovered (J) $10,0
servers 00
 Impact on Bottom Line Revenue
Value in use pricing will result in breakeven in first year itself as opposed to cost
plus strategy

Cost of R&D
Price of the Contribution Number of Total Breakeven Year to
Tronn Basic expenses Profit
Particulars bundle per server units sold Contribution Units Breakeven
server on PESA

(A) (B) (C )= (A-B) (D) (E )=(C )*(D) (F) (F)/(C ) (E )-(F)

Option 1: Charging only for hardware $2,000 $1,538 $462 10,590 $4,892,580 $2,000,000 4,329 2003 $2,892,580
$17,718,58
Option 2: Charging price equivalent to 4 Zink servers $3,400 $1,538 $1,862 10,590 $19,718,580 $2,000,000 1,074 2002 0

Option 3: Charging based on Cost plus approach $2,245 $1,538 $707 10,590 $7,486,226 $2,000,000 2,829 2002 $5,486,226
Option 4: Charging based on Value-in-use pricing $26,190,58
approach $4,200 $1,538 $2,662 10,590 $28,190,580 $2,000,000 751 2001 0

The profit under Valu-in-use is $26,190,580 as opposed to profit of $2,892,580 under cost plus strategy. This means Vaue-in-
use pricing will give additional $23,298,000 to the company.
 Reaction of Matzer and Cadera Salesforce

Matzer Cadera
● Believes that the software tool like PESA should be free ● Cadena is Sales director and was excluded from the
and not hardware to be charged original meeting by Matzer

● Value-in-use pricing charges for PESA and breaks the ● Cadena’s salesforce compensation structure was 70%
tradition of not including cost of software tool in pricing salary and 30% commission

● Hence, Matzer will favor Cost plus strategy and will not ● Due to this compensation structure, Cadena will
be open to discuss Value-in-use pricing agree to Value-in-use pricing as sale of PESA will
mean higher commission
Implementation strategy

We can take help of Cadena and his

salesforce to reach out to potential Get sales from
customer, DayTraderJournal.com DayTraderJournal.com

Discuss the order and benefits to Actual order from DayTraderJournal.com and
Atlantic Computers due to Value-in- its impact on Atlantics profit will make it easier
use pricing over Cost plus pricing to demonstrate the benefits of value-in-use
strategy with Matzer and the team pricing to Martzer and the team
Thank you!