Atlantic Computers: A Bundle of Pricing Options | Case Analysis | Group 6

IDENTIFICATION OF ISSUES
a.
i.
ii.
iii.
iv.
b.

Which pricing strategy to follow?

Charge only for hardware and give software for free
Charge an equal price as offered by the competitor (Ontario Zink servers)
Charge price based on cost-plus approach
Charge a price based on value-in-use pricing
Implementation issues that could possibly arise based on the pricing strategy

followed.
c. How would Ontario react based on the strategy selected?
ANALYSIS

OF THE ISSUES

a. Pricing Strategy
i. Charge only for hardware and give software for free
Advantages
Will be following traditional pricing strategy hence, there will be no
customer resistance
Reduce the pressure on sales force to convince customers of the utility
of the software
Disadvantages
The value of the software is undermined and there would appear to be
no substantial difference between our product and Zink
As the competitors price is at $1700, we would have to compete for
market share if we price our product at $2000
R&D cost of developing PESA wont be recovered
ii. Charge an equal price as offered by the competitor
Advantages
Would fetch high margins for Atlantic Inc. ($ 5073 per server)
Disadvantages
$6800 is much higher than the competition price and customers may
not be willing to buy if the sales force cannot convince them of the
value addition that PESA will bring
It will put a lot of pressure on the salesforce
It is a one-time investment and customers may not want to pay 4 times
the price of a basic server
The customer may not want to take the risk of the Tronn server getting
decommissioned they might prefer to buy the low-priced Zink software
to reduce this risk
iii. Charge price based on cost plus approach
Ajay Krishnan | Amit Jat | Boddu Chandra Hasa | Karkhanis Rucha Umesh | Pratik Patel | Shanmugapriya Thiagarajan |
Varun Sharma

Atlantic Computers: A Bundle of Pricing Options | Case Analysis | Group 6

Advantages
Easy pricing model
Low price, so easy for sales force to convince customers
Sales will go up
Disadvantages
Low margin (30%)
Perceived value of PESA will go down since we are offering the
bundle at a low price (comparable to $2000 for basic server)
iv. Charge a price based on value-in-use pricing

Advantages
Very high margins (240%-270%) so R&D cost would be recovered
quickly
Value proposition would be that we are creating value for customers by
helping them save on electricity and license costs and splitting the
savings equally (50-50%)

Ajay Krishnan | Amit Jat | Boddu Chandra Hasa | Karkhanis Rucha Umesh | Pratik Patel | Shanmugapriya Thiagarajan |
Varun Sharma

Atlantic Computers: A Bundle of Pricing Options | Case Analysis | Group 6

Easy for the sales force to convince customers of the value of the
bundle as we are using value-based pricing so the customers can look
at the amount they will be saving by using the bundle
Create a brand image of a premium product
Disadvantages
Some customers still may not want to buy the product due to the high
price as compared to competition ($1700 for Zink)
Sales force will have to be trained in using the value based approach
since this is not the traditionally used pricing approach
b. Implementation issues:
a. Initially market share would be very low (4%, 9% and 14% in the first
three years) so it might be difficult to convince the management to opt
for this option.
b. Training the sales force to adapt to the requirements of value based
pricing would need time and money
c. Difficult to change customers perception of getting the software free
with the server since it is the industry norm
c. How would Ontario react?
Since Ontario can no longer compete on price, they would have to
come up with a long-term strategy. For this might come up with a
software addition like PESA but that will take a considerable amount
of time till then we would have captured a significant market share so
Ontario coming up with a new product wont be a threat at that point.
RECOMMENDATION
Based on the analysis of alternatives and evaluation of the options, we recommend
Value based pricing for Atlantic Inc.

Ajay Krishnan | Amit Jat | Boddu Chandra Hasa | Karkhanis Rucha Umesh | Pratik Patel | Shanmugapriya Thiagarajan |
Varun Sharma