Scribd
Upload
9 views9 pages

APO-4 Atlantic SecB

Jowers proposes using value-in-use pricing for Atlantic's new software bundle, which would result in the highest profits of $8.9 billion over three years, far more than providing the software for free or using other pricing methods. However, getting approval may be difficult as the bundled price appears higher than competitors. Jowers needs to effectively communicate the total cost savings and performance advantages to convince stakeholders. Customers may also initially resist the higher price but can be persuaded by the long-term cost-effectiveness of the bundle.

Uploaded by

Krishna kishor tiwari
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
9 views9 pages

APO-4 Atlantic SecB

Jowers proposes using value-in-use pricing for Atlantic's new software bundle, which would result in the highest profits of $8.9 billion over three years, far more than providing the software for free or using other pricing methods. However, getting approval may be difficult as the bundled price appears higher than competitors. Jowers needs to effectively communicate the total cost savings and performance advantages to convince stakeholders. Customers may also initially resist the higher price but can be persuaded by the long-term cost-effectiveness of the bundle.

Uploaded by

Krishna kishor tiwari
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 9

ATLANT IC

COMPUT
A BUNDLE ERS
OF PRICING
OPTIONS

APO-4

ABHI SEK RATH - 220101001


ANISH - 220101012
BHAVANSH-220101030
GAZAL- 220101042
JITENDRA-220103085
SHIVANI - 220101111
VISHAL - 220101139
Q1. What price should Jowers charge for the Atlantic Bundle based on the following methods:

Status - Quo Cost-plus Pricing

In cost plus pricing, total cost is recovered along with


In Status Quo Pricing, we go with the
30% margin.
traditional pricing of giving software PESA
as free.
• Total units of Tronn produced over 3 years : 2000 +
6300 + 12880 = 21180
• Price of one Tronn Server = $ 2000
• No. of Tronn units along with PESA = 21180/2 =
• Total cost of Bundle = $2000 + 0 =
10590
$2000
• PESA development cost = $2000000 (recovered
over 3 years)
• Cost of one PESA = 2000000/10590 = $189.
• Cost of one Tronn server = $1538
• 30% margin = 0.3 * (1538 + 189) = 575
• Total cost of Bundle = 1538 + 189 + 575 = $2302
Value-in-use- Competition based
pricing pricing

Electricity cost = 250$


License cost = 750$
Labor cost per server = 2000$
One Atlantic Bundle = 4 Zink Servers
Cost of 4 Zink Servers = 6800 + 1000 + 3000
+ 8000 = 18800 Cost of 4 Zink Servers = 1700*4 = 6800 $
Value-in-use = 18800 - ( 2000 +
250 + 750 + 2000 ) = 13800 Going by the conservative approach we can price
1 Atlantic bundle at the price of 2 Zink Servers =
Considering 50 - 50 Sharing of the savings
3400 $
Value in use = 13800/2 = 6900
Value - in - use Pricing = 1538 + 6900 = 8438 $
( PESA'S Cost has not been taken into account)

*All costs are calculated on annual basis


Q2:How much money will be left on the table over a three year period if they were to give the software tool
for free compared to each of the 4 options above.

Status - Quo Cost-plus Pricing

In Status-Quo pricing model, the company is providing In cost plus pricing, total cost is recovered along with
PESA for free. 30% margin.

As per the data provided the company can make these • No. of Tronn units along with PESA = 21180/2 =
number of units in the given three years: 10590
2001: 1000 units
2002: 3150 units • Revenue-Cost: 10590*(2308-1727)= $ 6152790
2003: 6440 units
Total: 10590 units

Revenue: 10590*2000= $21180000


Value-in-use- Competition based
pricing pricing

One Atlantic Bundle = 4 Zink Servers


Considering 50 - 50 Sharing of the savings

Cost of 4 Zink Servers = 1700*4 = 6800 $


Value in use = 13800/2 = 6900
Value - in - use Pricing = 1538 + 6900 = 8438 $
Going by the conservative approach we can price 1 Atlantic
bundle at the price of 2 Zink Servers = 3400 $
Revenue: 10590*8438= $89358420

Revenue: 10590*3400= $36006000


Q3. How do you think Matzer is likely to react to Jowers’ proposal, and what could Jowers to do get Matzer to agree
to his proposal?

• After comparing all the 4 Pricing Strategies Jower is likely to suggest Value - in - use of Pricing Strategy as it
leads to a higher profit margin: One Atlantic bundle is sold at approx. 5 times its cost of making.

• It might get difficult for Jower to convince Matzer because the on-paper price of one Atlantic bundle is 8438 $
whereas 4 Zink servers are 6800 $. Customers might not consider the added costs like Electricity, Labor, and
Software licenses in both cases while making the purchase.

• Hence, Jower may go ahead and create a campaign explaining the value proposition of buying 1 Atlantic bundle
vs 4 Zink Servers.
.
Q4: What issues could Jowers face from the sales team for the proposal, and what can he to do get the team to
understand & sell the value of the PESA tool effectively?

ISSUES WHAT JOWERS CAN DO

The sales team might not be fully aware of the PESA tool's features, In-depth training sessions or workshops can be conducted to
advantages, and value proposition inform the team of the tool's features, benefits, and potential to
enhance their sales process

Sales team might not perceive any immediate advantages or rewards By offering commission or performance-based compensation for
for selling the PESA technology, they can be unmotivated to sell that effectively selling the tool, Jowers can motivate the team

Sales team can be unwilling to change their current sales techniques Jowers can address this by highlighting the advantages of
and get familiar with new pricing strategy and product bundle providing customers with a bundled solution and how it matches
with industry trends and customer preferences

The sales team can face customers' concerns about the Atlantic Jowers can arm the team with strong justifications and evidence
Bundle's pricing and the value of the PESA tool that show the Atlantic Bundle's cost-effectiveness and
performance advantages, allowing them to firmly respond to
customers’ objections
Q5. How do you think the target market may react to the new pricing proposal? What issues/fears/ objections could
they have and what would you do to tackle these?

• The new pricing policy that would be adopted by Atlantic on Jower’s recommendation is – Value-in-use pricing.
• It is a method of setting prices in which an attempt is made to capture a portion of what a customer would save by
buying a firm’s product.
• According to the customer profiles, it can have a mixed reaction. Some customers are looking for low cost of
acquisition, some want less cost of possession, readily available data, etc. Customers looking for fast services and
good quality products will be inclined towards buying it.
• Customers who are looking primarily for low acquisition cost might initially refrain from buying the Atlantic
bundle due to pricing. However, if explained it can be convinced on the basis of long-term pricing. The sales
representative will have to explain how the product provides better and much more efficient services while being
more cost-effective in the long run. Therefore they need to probe them to look at the larger picture.
Thank You

You might also like