Clearwater Technologies’ problem is that end-user pricing for a capacity upgrade to the QTX server needed to be agreed upon in the upcoming meeting. Finance wants to increase revenue, sales wants to keep prices fair and management wants prices to stay within the margin model. Mark Jefferies, Vice President of Marketing, is presiding over the meeting of Hillary Hanson, Brian James, and Rob Erickson. After listening to the suggestions of the three people, he realizes that they all have valid plans but all of them fail to meet the three goals he feels the new price should meet. 1) The price of the upgrades shouldn’t be lower than the current price of the 30 seat QTX. 2) Customers need to be enticed to buy the largest possible seat capacity the first time they buy. You’re never 100% sure that they’re going to come back for upgrades. 3) The company should capitalize on the fact that customers are committed to them but not rip them off. Analysis
Hillary Hanson, Clearwater’s Financial Analyst, was instructed by her boss, Alicia Fisher, to push for the highest possible price. Alicia had pointed out that customers were already committed to the company and had no alternative to upgrade their current customer relationship management server unless they purchased it from Clearwater. In addition, Alicia was concerned with increasing revenues for their year-end report which they needed to illustrate to Clearwater Technologies’ shareholders. Hillary’s strategy was to see what others proposed for a price and to argue for a considerable premium over what they had anticipated. On the other hand, Clearwater’s District Sales Manager Brian James believes it will be hard to justify higher prices when the available upgrade is essentially already built into the customer’s system. Brian is hoping for a reasonable price; something straightforward and fair that will be in the best interest of the company and the...