Summary of the case –

Atlantic Computer is a large manufacturer of servers and other high-tech products and a strong player in this market for 30 years with 20% of revenue share, its premium product being ‘Radia’.

There are two segments namely traditional High-Performance Servers and newer Basic Servers. It has recently developed the “Atlantic Bundle”- the new Tronn server and the PESA (Performance Enhancing Server Accelerator) software tool, particularly to meet an emerging US market opportunity.

Competitors –

With the approach of entering the market of Basic Servers, Atlantic Computer faces competition from Ontario Computer which has dominated this segment claiming 50% of revenue share solely through its low-end Zinc servers, performance if which is similar to that of the Tronn.

USP of PESA –

PESA allowed Atlantic’s low-end servers to perform up to four times faster than their standard speed when loaded with the PESA software tool.

Factors that are affecting the pricing strategy –

·         For Atlantic Bundle, the present server division was hardware eccentric. They had not emphasized much on developing and selling software tools. A belief developed that software tools should usually be provided for free.

·         Primitively, the division had long relied upon cost-plus pricing analysis to determine the prices of the servers. Matzer had used convention methods to set the price of Tronn at $2,000.

·         Careful consideration of customer segment as the server could be indifferent towards a particular segment, benefiting only a few segments like customers using web server and file sharing application.

·         Customers are dedicating the basic server to only one application, so PESA could have been underutilize and hence they could not have fully experience the benefits of the features.

·         Second order expenses like electrical charges software license fees, labor cost, etc. gets accrual with PESA server.

 Sales channel –

·         High touch direct sales channels.

·         Sales force was having about 70 % salary and 30 % commission.

·         Trade show, interaction with prospective customers at Atlantic’s SME booth. The information gained through it would ultimately help the sales team and third-party business partners in developing the sales script.

 Review of Cadena’s input by Jason Jowers –

DayTraderJournal.com could serve as an excellent customer that would visit their sales booth.

From the sales lead sheet, it was clear that it was seeking four basic servers, minimizing initial purchase cost and possession cost.

Jowers inference –

Instead of first order and second order savings, customer could benefit by purchasing the Tronn server in conjunction with the PESA as opposed to buying four basic servers.

 Pricing strategies considered by Jowers –

·         Status – quo pricing

·         Competition – based pricing

·         Cost – plus pricing

·         Value – in – pricing