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|
|
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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