Atlantic Computer Essay

Topics: Price, Pricing, Costs Pages: 3 (1016 words) Published: December 9, 2012
The first option followed Atlantic’s tradition of only charging customers for hardware and giving away the PESA software for free, assuming that each Tronn server costs $2,000. While free software is believed to be the “industry norm,” it puts Atlantic at a considerable disadvantage as they would not be reimbursed for the fixed cost of $2 million spent to develop their proprietary performance-enhancing software. This price, however, ensures that the company would enable Atlantic to rapidly increase its share in the basic server market. would benefit the most from this price, saving a total of $4,800 over the one-year period versus the Zink offering (Exhibit 2). As depicted in Exhibit 1, this approach is the least beneficial for Atlantic Computer in terms of the top-line implications. The second option priced the Atlantic Bundle equal to Ontario Computer’s equivalent offering of two Zink servers. In this case, all cost savings including lower licensing fees and electricity costs are transferred to the consumer. This pricing strategy implies pure performance-based pricing. This option should be carefully thought about considering the novelty of the Atlantic Bundle as well as high price-sensitivity of the customer, which is looking to save in both the initial purchase as well as subsequent maintenance requirements.

Like the first option, Option 3 does not take into account the competition’s offering. Instead, the Atlantic Bundle is simply priced at 30% above cost. The $2 million PESA development cost distributed over the 10,590 Tronn servers estimated to be sold with the software results in a PESA development cost of $189 per Tronn server. Charging $4,490 for two Atlantic Bundles would cover the company’s fixed and variable costs and sustain a 30% margin. In this scenario, all of the benefits would be passed to the customer and the company would lose $4,310 in potential...
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