Atlantic Computer: A Bundle of Pricing Options

Case Insights:
 Atlantic Computers is a large manufacturer of servers and high-tech products, mainly
into high performance servers. The company has been into this segment since last 30
years with the high-end performance server ‘Radia’. The company is well known for
its top-notch quality and trustworthy products and has a good reputation in the
industry.
 With the growth of internet, a new segment has emerged for basic servers and the
company wishes to tap that segment. In the opinion of Chris Matzer, head of the
server division, there is no scope of cannibalisation for the two different products.
 Hence, Jason Jowers is asked to determine the pricing strategy for ‘The Atlantic
Bundle’ which will be an entrant in the new segment.
 The new segment already has a presence of a strong competitor ‘Ontario Computer’
with its reputed and highly sold product line Zink.

The Atlantic Bundle:

 Product Differentiation
 Tronn server was proposed to be bundled with PESA software, which will enhance
its performance by four times compared with other basic servers available in the
market.
 This bundle will lead to dual benefits to the customers:
 Maximizing the utility of the server and thus reducing the number of
servers required.
 It will lead to savings through lower annual electricity charges, lesser
software license fees and lower labour costs.
 Target Market
Performance test results show that usage of Tronn combined with PESA will double
the speed for file sharing application (812/404) and becomes four times for web
servers application (2222/542). Hence, these two segments will reap the maximum
benefit of this bundle.
 Sales Strategy
The company has been following a high-touch direct sales approach till now. This
approach is effective in case of high performance server segment. However, the entry
into basic server segment will demand conventional sales strategies.
 Pricing Strategy
 Traditionally, the company has been following ‘hardware oriented’ approach and
has been giving software tools without charging anything.

 There are four alternatives for pricing the product and amongst them we suggest
to follow the value-oriented approach for pricing of this bundle. Here, the PESA
 software will be given as an add-in with the product without explicitly charging
the customers but absorbing half of their savings which will reimburse towards
the cost of PESA software.
 Customer’s Reaction
Basic servers market was highly dominated by Ontario Computers. So, when Atlantic
launches Tronn in the market bundled with PESA software, it will have a higher
customer perceived value. Higher customer perceived value is due to increase in
benefits received by the customers for the price paid.
 Competitor’s response
 To compete with the Atlantic’s bundle, Ontario might come up with some
additional features in its existing products or launch new products that will have
higher performance level.
 Also, there is a chance of Ontario charging its product at competitive price.

Key Learning of the case:

The factors taken into consideration while pricing a product.