Case Study 2
Atlantic Computer: A Bundle of Pricing Options
Question #1) What price should Jowers charge DayTraderJournal.com for the Atlantic Bundle (i.e., Tronn servers+PESA software tool)?
1) Under the status-quo pricing, Jowers should chard $4000 for the Atlantic Bundle. 2) Under the competition-based pricing, $6800 should be charged for the Atlantic Bundle. 3) Under the cost-plus pricing, $4491.04 should be charged for the Atlantic Bundle. 4) Under the value-in-use pricing (maximum value), $12800 should be charged for the Atlantic Bundle. 5) Under the value-in-use pricing (shared value), $8400 should be charged for the Atlantic Bundle.
Question #2) Think broadly about the top-line revenue implications from each of the four alternative pricing strategies. Approximately how much money over the next three years will be “left on the table” if the firm were to give away the software tool away for free (i.e., status quo pricing) versus utilizing on of the other pricing approaches?
1) The revenue from status-quo pricing will be $42,360,000.
2) The revenue from competition-based pricing will be $72,012,000. 3) The revenue from cost-plus pricing will be $47,560,113.60. 4) The revenue from value-in-use pricing (maximum value) will be $135,552,000. 5) The revenue from value-in-use pricing (shared value) will be $88,956,000.
The most advisable recommendation would be to sell the Atlantic Bundle at the cost-plus pricing approach of $4491.04. This is advisable for several reasons. The first being that although the revenues are the highest from value-in-use pricing approach, this pricing is significantly above what customers are currently paying. Since customers are paying $6800 for the competitors servers a payment of $12800 for our servers would be too steep of an increase. In addition, since we are marking up our products at 30%, we will guarantee a profit of at least 30%. Lastly, pricing our product...