We can look at following 4-pricing strategy options considering that client daytradejournal.

com is looking for

minimizing acquisition cost, minimizing possession cost and allow their website to process many information
request -
a. Status Quo Pricing: Tronn server will be priced at $2000 and PESA software will be given for free
Implications -
i. Problem with this strategy is Tronn will be perceived as a sever same as that of Zink from the
Ontario and so product differentiation will take a hit
ii. Jowers will be compromising the investment done on the PESA development ($20,00,000) which
will eventually shoot the number of servers needs to be sold to achieve break even
b. Competition pricing: Tronn will be priced against competition product based on the savings it will
brought to the customers
Implications
i. As per Matzers conservative statement regarding efficiency of Tronn server, this server when
bundled with PESA can perform 2 times faster than existing Zink server from the competitors. That
means:
Tronn Cost Zink Cost 1 Tronn = 2 Zink Tronn price
$2000 $1700 1700*2 = 3400 $3400
ii. There will be additional cost for PESA
iii. This will make Atlantic bundle hugely priced product and will not appeal its consumers
c. Cost plus pricing: Tronn will be priced as per market growth of 36%, also making an assumption that
Atlantic sells all the units produced
i. Calculations:
Year 2001 2002 2003 Total
Market Requirement (in units) 50000 70000 92000
Atlantic's Market share 2000 6300 12880
PESA bundle (50%) 1000 3150 6440 10590

R&D cost for PESA (in $) 2000000
PESA cost per unit (in $) 188.86
Mark up cost @30% (A) 245.51
Tronn cost per server (in $) 1538
Mark up cost @30% (in $) (B) 1999.40
Total Cost bundled with PESA (in $) (A+B) 2244.91
ii. Cost of 1 Zink server is $1214
iii. With this costing cost of Tronn will be way high than that of Zinc


d. Value in use pricing: Tronn will be priced such that part of clients savings (value in use) will be passed
on to the Atlantic computers
i. Calculations: assuming that Jowers goes by conservative approach
Costs 1 Atlantic Bundle 2 Zinc Server
Price 2000 3400
Electricity 250 250
License 750 750
Total Cost 3000 4400
Savings 1400
50% of Savings 700
Final Price (server price + 50% of savings) 2700
ii. This costing so far looks lucrative majorly for following reasons:
1. This way if sales increase Atlantic will have increase in the revenue
2. Atlantics sales force can convey the value to the customer
3. Atlantic will save in getting into price wars with Ontario
4. Atlantic can actually promote Tronn server as a same price Zink server and have balance
price for the PESA

I recommend Value in Use pricing for daytraderjournal.com
e. Matzer
Reaction: PESA should be given free and this pricing is not only putting additional price for PESA but
also relying a lot on performance of the bundle to support the price.
Resolution:
i. Matzer needs to be understood the whole value preposition given to the customer and the
fact that Atlantic is not virtually not charging for the PESA rather its taking its share from
the long term benefit Atlantic Bundle is providing its customers
ii. This way we are putting some logic in the market for the pricing instead having random
mark-up profit margins.

b. Cadena & Salesforce
Reaction: With increased price it will be difficult to position the product in such sales driven dynamic
market
Resolution:
i. Sales team has to convey value and savings this bundle is bringing to the client
ii. Long term benefits has to be communicated like number of servers purchased will be down
4x which will eventually have savings in terms of overheads
iii. Given that customers will catch on perceived benefits this product has it can earn more
incentive for the sales per unit sold (looking at higher price)
iv. Sales people can use PESA as a selling tool to accelerate the servers performance


c. Sr. Management at Atlantic:
Reaction: Management will resist such steep increase in the price also traditional approach will hinder
relying so much on the software tool accelerating the hardware performance
Resolution:
i. If we dont believe in the tool we have developed who will?
ii. We have to get the benefit of being the pioneer in developing the software that elevates
performance of the hardware
d. Customers:
Reaction: Why is this price hike? Are you saying that your product is so superior?
Resolution:
i. This bundle has been made to perform 4x faster than that of any server in the category that
means you save on
a. Multiple purchases
b. Electricity
c. Licenses
d. And any other overhead on your part to take care of number of servers you posses
ii. The promise is coming from industrys veteran organization which has given you top notch
products in the past
iii. We will ensure after sales is excellent
e. Ontario Zinks Sr. Management
Reaction: Firstly they will reduce their servers price. Second reaction we can expect is Ontarios will also
come up with similar software but it will take its time for R&D
Resolution:
i. Atlantic doesnt have to get into the price wars, in fact news about Zinks price getting
reduced can be used by Atlantics sales force in their favor.
ii. If at all Ontario does comes with their software Atlantic would have captured sizable
amount of market, also later Atlantic can give PESA for free to their regular or bulk buying
customers

Pricing Price
Unit sales per year
Total revenue Total Cost* Profit
2001 2002 2003
1000 3150 6440
Status Quo 2000

2,000,000

6,300,000

12,880,000

21,180,000

16,287,420

4,892,580
Competitive 3400

3,400,000

10,710,000

21,896,000

36,006,000

16,287,420

19,718,580
Cost plus 2245

2,245,000

7,071,750

14,457,800

23,774,550

16,287,420

7,487,130
Value in use 2700

2,700,000

8,505,000

17,388,000

28,593,000

16,287,420

12,305,580


Cost 2001 2002 2003 *Total cost

1000 3150 6440

1538

1,538,000

4,844,700

9,904,720

16,287,420