Atlantic Computer is a manufacturer of servers and other high tech products. With a brand presence known to provide top notch, highly reliable servers, they currently are the largest overall player in this segment of the industry. At the time of the case Atlantic computer has been competing in the server market for over 30 years, best known for their high-end Radia. Up until this point Atlantic used a high touch direct sales channel with sales agents being the primary lead generator to fulfill demand and provide sales assistance. Compensation was structured 70% salary and 30% commission.
The issue in this case is derived from the Company’s entry into the new “budget server” market space and surrounds developing a pricing strategy for the “Atlantic bundle” consisting of the Tronn server and the PESA (Performance Enhancing Server Accelerator), before the SME trade show. The key to identifying the most appropriate pricing option for Atlantic will be in understanding the market in which the Atlantic bundle is built to compete and the strategic advantages and disadvantages of the hardware and the bundle pricing.
The hardware and software components have pros and cons to each. and although the bundled hardware software package allows improved product performance. We will explore the strategic advantages or disadvantages from the four pricing options from providing PESA software with the system to creating a valued-in-use pricing component.
Option one: Traditional pricing would charge only for the hardware and include the PESA software free of charge. The cost to the consumer for this option per exhibit 3 is $2,000.
Option two: 4x price of competitor would carry a market price of $6,800 for the Tronn bundle as compared to the $1,700 Zink by Ontario.
Option three: Cost Plus pricing based on PESA development costs, Based on a three year $2M R&D recovery period and based on the exhibit project market volumes and footnote 5 the product volumes over the...