Primary Question to be addressed

software tools with the hardware. Atlantic Computers has always practiced this pricing strategy This would require Atlantic Computers to offer the PESA software tool for free with the Tronn Server. This would require Atlantic Computers to essentially lose the $2,000,000 cost of research and development of PESA. Additionally, the Tronn Server would appear to customers as very comparable to the Zink servers and it would make it difficult for Atlantic Computers to compete with and gain market shares in the basic servers segment.
2. Competition-Based Pricing:
Competition-Based pricing uses the prices of competitors as a benchmark for pricing products rather than considering costs The price of Ontario’s Zink servers is $1700 and conservatively speaking, the Tronn loaded with the PESA software tool is equivalent to two of Ontario’s Zink servers Therefore, under the Competition-Based Pricing, the cost of the Atlantic Bundle would be $1700 xor. While selling at this price would generate more profits for Atlantic Computers, it is not certain that consumers would purchase the Atlantic Bundle at this price. Consumers would see that they are only getting two Tronn server that costs 4 times the cost of the Zink server. While the addition of the PESA software tool would make the Tronn servers the equivalent of 4 Zink servers, the PESA software does notwork on all software applications Furthermore, customers would need further justification to have only half of the hardware and run the risk of one or both servers being out of commission for any given amount of time. Customers would likely not consider purchasing the Atlantic Bundle based on Competition-Based pricing because they would not see it as a fair price and worth the risk.
3. Cost-Plus Pricing:
Cost-plus pricing is determined by adding the direct, indirect and fixed costs associated with a product and converting it into a per-unit cost for the product A predetermined percentage is then added to these costs to provide a profit margin The cost of a Tronn server is $1,538 and based on a $2,000 price, this additional markup is approximately 30% . Adding
30% to the cost of PESA would make the price $189. As the chart below details, under the cost-plus method, the price of a Tronn loaded with PESA would be $2,246 which is $546 above the Zink server. Because we are looking at this conservatively, we will assume that two
Tronn servers are the equivalent of four Zink servers. Therefore, it would cost $4,492 as compared to $6,800 for the Zink servers Again, It would be difficult for Atlantic to
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Neeraj Bharadwaj, John Gordon, Atlantic Computers A Bundle of Pricing Options,
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http://www.businessdictionary.com/definition/competition-based-pricing.html
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Neeraj Bharadwaj, John Gordon, Atlantic Computers A Bundle of Pricing Options Id Id Id Zink servers are priced at $1,700 each.

persuade customers to purchase the servers based on the Cost-Plus pricing because customers would still only see that they are getting two servers for $4,492 whereas they could get two
Zink servers for $3,400 and that is $1,092 more expensive than Ontario’s Zink servers. Without further justification, customers are not likely to accept this additional cost.
Cost-Plus Pricing
Total Number of Tronn servers sold in 3 years
21,180
Total installations of PESA assuming 50% attach rate
10,590
Cost of PESA per installation (Price of Tronn without PESA installed (Cost + 30% markup)
$2000
Price of Tronn with PESA installed (Cost + 30% markup)
$2,246
Price of 2 Tronn servers loaded with PESA
$4,492
4. Value-in-use Pricing:
Using the Value-in-use pricing method, Atlantic Computers would determine the value that each customer would realize from the purchase of the product. Customer value can be defined as the worth, in monetary terms, of the technical, service, social, and economic benefits a customer receives in exchange for the price it pays fora product In this case, the customer value would be the annual cost of electricity and software licensing for each server It would then calculate the difference between the two figures and assume a 50-50 share of savings.
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As the chart below illustrates, when the total costs are added, a customer would potentially realize a $4,800 savings when using two Atlantic Bundles as compared to four
Zink servers After a 50-50 share, the total final price would be $6,400. Under this method, it is easy to show customers that they will be saving $2,400 when they buy two Atlantic Bundles This would help demonstrate in monetary terms the customer’s true value of buying the Atlantic Bundle

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