# Analysis of Cambridge Software Case

Topics: Contribution margin, Cost, Marketing Pages: 2 (500 words) Published: July 9, 2011
CSC CASE ANALYSIS

Case 1 – Only Student software launched. In this case, the selling rate is \$50 , the Unit Contribution will be fixed to \$ 35 (50-15) for all other segments, and for student segment, it will be \$15.( (60% of 50) -15). Case 2 – only Commercial software – The optimal price should be taken as 225 as that covers all other categories except the students. Case 3 – only Industrial software – the price should be 600 as the incremental contribution below this segment is less than the segment development costs. Version| Optimal Price| Total Contribution| Net Total Contribution TC-PCC| “Commercial”| \$ 225| \$ 7,750,000| \$ 7,550,000|

“Industrial”| \$ 600| \$ 14, 805,000| \$ 14, 305,000|
“Student”| \$ 35 (15 for students)| \$ 8,020,000| \$ 7,920,000|
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Thus, the maximum profit is earned by selling the Industrial Version at price of \$600 Consumer Surplus with “Industrial” @ \$600 and “Student” @ \$50 -------- | “Student” version“Industrial” | Large Co \$100 (= \$150 - \$50) \$1900 (=\$2500-\$600)| Labs \$ 50 (=\$100 - \$50) \$1400 (=\$2000-\$600)| Consultants\$ 150 (=\$200 - \$50) \$ 0 (=\$600-\$600)| Now we have 2 options for multiple versions – Industrial and student , Industrial and commercial. Surplus from Maximum Price for|

“Student” version “Industrial” version| Large Co \$100 \$2400 (=\$2500-\$100)| Labs\$ 50 \$1950 (=\$2000-\$50)|
Consultants\$ 150 \$450 (=\$600-\$150)| The consumer surplus shows how many segments will change to other option. The incremental contribution from targeting a product to a specific segment is lesser than the segment development cost in case of consultants. Thus, large cos and labs will take industrial and consultants...

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