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Atlantic Computer: Case Study Questions

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1.- What Price should Jowers charge DayTraderJournal.com for the Atlantic Bundle (that is, Tronn servers + PESA software tool) according to the following four criteria? Option A): Status-quo pricing

$4000 for the Atlantic Bundle.
Option B): Competition-based pricing
$6800 for the Atlantic Bundle.
Option C): Cost-plus pricing
$4491.04 for the Atlantic Bundle.
Option D): Value-in-use pricing
$8400 for the Atlantic Bundle.

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 for free (that is, status-quo pricing) versus utilizing each 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.

3.- How is Matzer likely to react to your recommendation?
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

4 a).- How is Cadena´s sales force likely to react to your recommendation? 4 b).- What can Jowers recommend to get Cadena´s hardware-oriented sales force to understand and sell the value of the PESA software effectively?

5.- How are customers in your target market likely to react to your recommended pricing strategy? What response can be provided to overcome any objections?

6.- How is Ontario Zink´s senior management team likely to react to the Atlantic Bundle?

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