Atlantic Computer-a Bundle of Pricing Options Case Solution

1. What is the key problem issue in this case? Is it important? Why or why not?

Atlantic Computer is planning to enter a new segment in the server market, basic server, with its newly launched product, Atlantic Bundle. The price should be set for the new product with consideration of reaction from competitors and customers as well as customer segment.

There are four alternative approaches to set the price.

2. Do a F-B-V analysis, per our Economic Value slide deck.

See Exhibit 1.

3. Do a value-based pricing analysis for the Atlantic Bundle (i.e., Tronn + PESA software tool). Be complete, use the EVE structure you learned in class, make and document assumptions as necessary.

See Exhibit 2.

Price level: $6,800 ~ $23,300

4. Based on your value estimation, what price should Jowers charge DayTraderJournal.com for the Atlantic Bundle (i.e., Tronn + PESA software tool)? Discuss this in terms of key considerations such as value capture, contribution margin, pricing strategy, etc. Do a breakeven analysis contrasting your recommended price with one other alternative price – either higher or lower, and discuss why your price makes more sense.

Taking into consideration both the estimated price level of $6,800-$23,300 and the traditional norm in the industry, I would suggest Atlantic pass 70% of savings to clients;

Price of Atlantic Bundle = $6,800 + ($23,300 - $6,800) * (1-.7) = $11,750

Under this price point and the baseline of cost-based scenario (see part 5 for price calculation of cost-based scenario);

%CM(base line) = ($6,800-$1,538)/$6,800 = 77%

%Price change = ($11,750-$6,800)/$6,800 = 73%

%BE Sales Change = -73%/(77%+73%) = -48.5%

BE sales volume with new price = 21,180 * (1-.485) = 10,914

BE Market share over 3 years = 10,914/(50,000+70,000+92,000) = 5.15%

The estimated market share over three years for cost-based scenario is;

(50,000*4%+70,000*9%+92,000*14%)/(50,000+70,000+92,000)=21,180/211,200 = 10%

The price point of...