Atlantic Computer is developing a pricing strategy for a new basic server called Tronn that will be bundled with performance-enhancing software called PESA. Jason Jowers must determine the price of this "Atlantic Bundle". The case discusses four potential pricing strategies: maintaining the status quo of free software; competitive-based pricing relative to main competitor Ontario; cost-plus pricing; and value-in-use pricing based on cost savings. After analyzing the options, value-in-use pricing is recommended as it would be cheaper than competitors' servers while providing equal performance and generating high revenue.

1. Case study on
Atlantic Computer: A Bundle of
Pricing Options
Group – 4
Marketing Management Case Study

2. Group Member’s

3. Introduction
 Atlantic computer, a large
manufacturer of servers and other
high-tech products
 Atlantic computers known for
providing premium, high end servers
 Atlantic computers introducing Tronn ,
new basic server, which includes
PESA software( performence
enhancing server accelerator)

4. Introduction
 Jowers responsible for developing the
pricing strategy for the atlantic bundle
(i.e. The new tronn server plus the
PESA software tool)

5. Projected market volumes by segment (in
units)

6. Management Team of Atlantic
Computer
 Jason Jowers
- youngest product manager at atlantic computer
 Chris Matzer
- Head of atlantic’s server division
 Emily jones
- Director of atlantic’s R&D team
 Jairo cadena
- Director of sales
 Harry Fowler
- Director of new product marketing

7. Problem of the case
 What pricing strategy should Atlantic
Computers implement to price the
Atlantic Bundle ?

8. Solution
 Pricing Strategy
 There are four main types of pricing strategies which
Atlantic Computers can choose.
 First, Atlantic Computers could stay with the status quo
and offer software tools for free.
 Second, it could choose competitive based pricing.
 Third it could choose from Cost-plus pricing.
 Finally , it could choose value-in use pricing.

9. Status Quo Pricing
This option consider only the cost of server and
treats PESA software as free product along with
servers:
Price of 1 Tronn Server: $2000
2 Tronn Servers + PESA Software (Free) $4000
($2000 x 2)
Price of Atlantic Bundle = $4000

10. Competition Based Pricing
 Pricing the Tronn servers based on
price of competitor server (Zink by
Ontario) and PESA for free.
 Since 2 Tronn Server with PESA
software is equivalent to 4 Zink
servers:
Price of 1 Zink Server $1700
2 Tronn Server + PESA Software
$6800
(4 x $1700)
Price of Atlantic Bundle = $6800

11. Cost Plus Pricing
Market
volume (in
units)
2001 2002 2003 Total
Market
volume of
basic server
50000 70000 92000
Atlantic share
(in %)
4 9 14
Estimated
total sale of
tronn server
2000 6300 12880 21180
Estimated
total sale of
PESA
software( 50%
of tronn server
sales)
1000 3150 6440 10590
Cost of tronn software $1538
PESA software developent cost
$2000,000

12. Cost Plus Pricing
Price per
server
Cost 30%
markup ($)
Total($)
PESA cost
per server
188.9 56.658 245.52
Cost per
tronn server
1538 461.4 1999.4
Pesa cost per server = total cost invovled /total estimated sales
= 2000000/10590
= $188.9
After the markup 30% as calculated in above table:
cost of atlantic bundle = $ 2245

13. Value-in use Pricing
 Considering 4 Zink server is equivalent to 2
Tronn server + 2 PESA software
Cost saving amount
Saving in electricity 500
Software licenses 1500
labour 4000
Cost of server 2800
total 8800
As per value pricing model of 50-50% price of
PESA
4400
2tronn + 2 pesa 8400
Cost of Atlantic bundle 4200

14. Alternative solutions
option 1

16. Option 2

18. Option 3

20. Option 4

22. Recommended solution
option 4 .. Value-in-use pricing
 Cheaper than the cost of four zink
servers while still delivering equal
performance.
 Second-lowest with regards to the
number of units required to breakeven
 Second highest revenue of the four
options
 Provides a better foundation for a
sales strategy.

23. SWOT analysis of case
 Strengths
o Brand image
o Previous success
o Size
o Saving to customers
o Server reduction
• Weakness
o Marketing team
o Sales force
o Online marketing/sales
o Software pricing
o Implementation costs

24. SWOT analysis of case
 Opportunities
o Basic server growth
o Atlantic bundle
o Trade show
o Development of low-end basic server
• Threats
o Ontario’s market dominance
o Supply chain
o Brand loyalty
o Competitor retaliation

25. Conclusion
 On detailed comparative study of 4 different pricing
approach for Tronn Servers & PESA Software, it is
evident from the above chart that Competition Based
pricing is the most suitable option.
 This approach takes into consideration competitors prices
and provides superior services at same rate.
 The market share is already owned by competition to an
extent of 50%, hence price plays a vital role. It needs to
highly competitive and at par with the pricing of competitive
products.
 Low price does not always means that product will be
accepted by the market. If the prices are very low, the market
even presumes that the quality of product if inferior.

26. Conclusion
 If the pricing are very low, competitors can also
reduce there prices to that extent as there product
already command certain share in the market.
 If prices are too high as given in Value in Use
Pricing, then consumer may not accept the product
and would prefer to buy two products of
competition in place of one Tronn Servers.

27. THANK YOU