Atlantic Computer: A Bundle of Pricing Options

Christoper Janwar Saputra Sinaga 29113528
Jowers has four alternatives in pricing strategy for Atlantic Bundle. They are:
1. Status-quo pricing
With this alternative, Atlantic had to give away the PESA software tool for free and charge for Tronn server only. Hence, the price
of Atlantic Bundle would be $2,000.
2. Competition-based pricing
With this alternative, Atlantic had to charge a price equal to what customer would pay for four Zink servers. The price of Zink
server is $1,700. Hence, the price of Atlantic Bundle would be 4*$1,700 = S6,800.
3. Cost-plus pricing
With this alternative, Atlantic had to charge a price based on software tool’s development cost. Assumptions for this strategy are:
- Atlantic will be able to sell all of Tronn servers it can produce.
- Atlantic could get share of the basic server segment (in units) at 4% in 2001, 9% in 2002, and 14% in 2003.
- 50% of Atlantic’s basic servers will be loaded with PESA.
- Costs of PESA software development ($2,000,000) will be paid over three years.
- The target markup is 30% above costs
These assumptions could use for calculating the price. According to page 2, demand in 2001 is 50,000 units, demand in 2002 is
68,000 units, and demand in 2003 is 92,480 units. The calculation is shown below:
a. The expected sales for three years = 4%*demand in 2001 + 9%*demand in 2002 + 14%*demand in 2003
` = 4%*50,000 + 9%*68,000 + 14%*92,480
= 21,067.20 units.
b. The number of servers loaded with PESA = 50%*the expected sales for three years = 50%*21.067.20 units = 10,533.60 units.
c. The cost for installing one PESA = costs of PESA software development/ the number of servers loaded with PESA
= $2,000,000/ 10,533.60 units
= $189.87
d. The total cost = the cost of Tronn server + the cost for installing one PESA = $1,538 + S189.87 = S1,727.87
e. The profit = the markup = 30%*the total cost = 30%*$1,727.87 = $518.36
f. The price of Atlantic Bundle = the total cost + the profit = $1,727.87 + S518.36 = $2,246.23
1
Atlantic Computer: A Bundle of Pricing Options (continued)
Christoper Janwar Saputra Sinaga 29113528
4. Value-in-use pricing
With this alternative, Jowers needs to compare the savings to the customer from purchasing the Atlantic Bundle against buying
four Ontario Zink servers. Jowers had to assume that a 50-50 sharing of the savings gain with the customer.
For basic server, an administrator can manage 40 servers.
With annual salary $80,000 for an administrator, cost of labor per server = $80,000/40 servers = S2,000 per server.






From this calculation, the price of Atlantic Bundle should be:
a. Full Savings
Suggested price = ($9,400 - $5,000) + $2,000 = $6,400
b. Shared Savings (50-50 sharing of the savings)
Suggested price = 50%*($9,400 - $5,000)+ $2,000 = $4,200
Based on those alternatives, Jowers should charge DayTradeJournal.com at $4,200 for the Atlantic Bundle. The reasons are:
 Status-quo pricing strategy will let go the cost of PESA development
 Competition-based pricing strategy will force Atlantic to depend on Orion’s pricing strategy. Atlantic Bundle will be hardly survived
in Orion lower its price on Zink.
 Cost-plus pricing strategy will give customer greater value of having Atlantic Bundle even the price is a lot lower than buying four
Zink servers. Besides, the price rising is the lowest.
 Value-in-use pricing strategy will allow Atlantic to have price higher than cost-plus approach and be able to give 50-50 value
sharing. The price is still lower than price of buying four Zink servers.

Therefore, Jowers should choose value-in-use pricing strategy for Atlantic Bundle. The price should be at $4,200

2
1 Atlantic Server 2 Basic Server (Zink)
Annual electricity cost S 250 $ 500
Cost of application software license 750 1,500
Annual salary of server administrator 2,000 4,000
Price per server 2,000 3,400
Total Costs $ 5,000 $ 9,400
Metabical
Christoper Janwar Saputra Sinaga 29113528
The first method:







The second method:


3
Metabical
Christoper Janwar Saputra Sinaga 29113528
The third method:









4