The document discusses pricing options for Atlantic Computer's new server bundle. It considers maintaining status quo pricing, competition-based pricing, cost-plus pricing, and value-in-use pricing. It recommends value-in-use pricing to set the price at $3,200 per unit. This option frames the bundle's value in terms of savings versus competitors and shares that value between the supplier and consumer. The price allows Atlantic to recover expenses from developing its software within three years while leveraging direct sales over online sales.

1. Atlantic Computer: A Bundle of
Pricing Options

2. Context…
• Signode Industries Inc. Is the Technology and Price Leader in Steel
Strapping Industry since 1914.
• The Net Sales Revenue of the Firm is $ 658 Million in 1993
• The Steel Strapping Market has reached maturity level and slowly
moving toward declining stage in PLC with avg. 2% drop every
year.
• The Alternate material i.e. Plastic Strapping is gradually replacing
Steel strapping @ 4% CGPA.
• Signode is the Price leader in Steel strapping Industry enjoying 5-
10% premium over its competitores
• The Market Share of Signode has fallen down from 50% in 1987 to
40% in 1993
Group 11 - NMP -27 2

3. Uses: Major grades of Strapping Steels
Apex:
1. Used in Packages and Corrogated Boxes
2. Contributes 33.3 % of Signode sale
3. Widely used in Paper and Forest Product Industries
Box Band Magnus (BBM)
1. Used in Bricks and Medium weight Steel packages
2. Contributes 26.8 % of Signode sale
3. Widely used in Bricks and Synthetic fibre Industry
Heavy Duty Magnus (HDM):
1. Used in Rolls of Steel and freight car bracing
2. Contributes 33.3 % of Signode sale
3. Widely used in Cotton & metal Service Industries
Group 11 - NMP -27 3

4. Option 1: Status Quo Pricing
• This option includes charging for Tronn server only and
give PESA software for Free as per prevailing Industry
practice
• Cost of Atlantic Bundle= $2000.00 per Unit.
• Atlantic would have to forgo the amount of R&D investments
done in PESA software here. The software development cost is
significantly high as $2000000,00
Group 11 - NMP -27 4

5. Option 2: Competition Based Pricing
• Conservatively, we can assume 1 Tronn server = 2 Zinc
server
• Aggressively, we can assume 1 tronn server= 4 Zinc
Server
• Price of 4 Zinc server= $1700 x 4= $ 6800.00
Conservative Aggressive
Recommended Price $ 3400.00 $6800.00
Group 11 - NMP -27 5

6. Option 3: Cost Plus Pricing
• Assuming Target Market share in intial 3 years to be
10%,20% & 30% respectively.
• Assuming, 1 tronn server= 4 Zinc Server
Description Cost Remarks
Expected sales in 3 Years 46600 (10*50000+20*70000+3*90000)
/100
Unit Sale of Tronn Server 11650 1 tronn= 4 Basic Server
Expected Nos. Of PESA
11650
Installation
Cost of PESA Unit Installation $172 $2000000/11650
Cost of PESA Software Licensing $750
Total Cost of Atlantic Bundle $2460 $1538+$172+$750
Mark up (@30% of Cost) $738
Final Unit Cost Of Tronn Server $3198.00
Group 11 - NMP -27 6

7. Option 4: Value in use Pricing
• Assuming, as per Conservative Estimate 2 tronn server=
4 Zinc Server
• Calculating customer value for 1 year period
Description 1 tronn server 2 Zinc Server Remarks
Price of Server 2000 3400
Electricity 250 500 $250 per server
Software License 750 1500 $750 per Server
Total Cost 3000 5400
Saving By Tronn 2400 0
50 % Shaving 1200 0 50:50 sharing by
supplier & consumer
Group 11 - NMP -27 7
Final Unit Cost Of Tronn
Server
$3200.00

8. Recommended Course of action by
Atlantic Computer.
As value in use Pricing and Cost Plus pricing are yielding to more
or less same price based on the assumptions, the
Recommended Price is $ 3200 per unit of Tronn Server
However, if the derived Price for Option 3 & 4 are significantly
different then the Consumer Value in use pricing is
recommended
With this Consumer value in use pricing, the Direct sales Force
can convince the prospective consumers in a more lucid way.
Atlantic has an edge over Ontario in form of Direct selling in
place of Online sale.
The Expense on PESA Software development would be
recovered in 3 years span paving way for further R&D.
Group 11 - NMP -27 8

9. Thank You
Group 11 - NMP -27 9