Atlantic Computers By: Abhinav Priyadarshi
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- INDIAN INSTITUTE OF MANAGEMENT INDORE PGP-1 Marketing Management II Group 5 Atlantic Computers By
- Nihar Ranjan Sethi (2016PGP448) Nikita Kakkar (2016PGP234) Sahil Puri (2013IPM075) Shreya Babbar (2016PGP362)
- Analysis of Internal and External factors (5C analysis) Context
- Issues involved in using this approach : Internal Resistance: Sales force
- External Resistance: Customers
- How to manage(Managing Psychological pricing)
INDIAN INSTITUTE OF MANAGEMENT INDORE PGP-1 Marketing Management II Group 5 Atlantic Computers By: Abhinav Priyadarshi (2013IPM005) Akshay Utkarsh (2013IPM116) Mayank Abhay Chidri (2016PGP208) Nehal Bhatia (2016PGP226) Nihar Ranjan Sethi (2016PGP448) Nikita Kakkar (2016PGP234) Sahil Puri (2013IPM075) Shreya Babbar (2016PGP362) Atlantic Computer: A bundle of Pricing Options Case Description- Atlantic Computers is a manufacturer and market leader (20% share) of high tech servers, recently the market for basic servers has shown a tremendous growth (CAGR 36%), owing to an increase in internet penetration. In order to leverage this opportunity Atlantic has come up with an Atlantic bundle called as ‘Tron’ which includes a package for the basic server and a software tool called PESA, which will increase the speed of the server upto 4 times. Currently, as per industry trends software tools are provided free to customers along with the server, Atlantic has incurred a cost of 2 million USD for the development for PESA and now has to decide which pricing strategy to opt for this offering. Analysis of Internal and External factors (5C analysis) Context- Emerging growth of internet has created a new market segment that requires the use of basic servers for repeatable jobs, specially file sharing and hosting web servers. (exhibit 2, page 8) Company- Atlantic is currently the market leader in the segment of high performance servers, and has been in this segment since 30 years. It is known for its high quality, responsive post sales assistance. Competition-Atlantic’s main competitor in this segment is Ontario Zink, which has a 50 percent share in basic server but focuses on flexible and innovative supply chain strategy and doesn’t focus on product innovation. Customer-The customer base we should target is the market which does web hosting and file sharing activities because they are mostly interested in minimizing acquisition costs and possession costs. Collaborator- Since the company uses direct sales channels (B2B), there are no collaborators. The options that Atlantic has are as follows- Maintain status-quo and go with the company tradition of providing PESA free of charge. Competitive pricing to match Ontario Zink Cost plus method (based on cost+ profit margin) Value in use pricing (wherein price is set on the basis of customer saving by using own product as opposed to competition) An analysis of the pricing points arrived at from each of the above methods is available in the attached excel sheet. Decision: We recommend going with the value in pricing approach as it not only covers the development cost for PESA,but also gives the company the maximum per server profit. (attached excel sheet).It also allows Atlantic to show the customer the true lifetime value of its product in comparison to Ontario’s Zink. Issues involved in using this approach : Internal Resistance: Sales force:This pricing method is likely to face resistance from the company’s sales force. The sales force is trained to sell hardware and now has to pitch the software, PESA as well. They also need to exert extra efforts to charge for PESA as opposed to industry norms. How to manage: The current pay structure for the sales force, allocates 70% as the fixed component and 30% as a variable commission. In order to decrease the resistance from the sales force, Atlantic should share a portion of its increased profits as calculated from the value in use pricing approach and give this to the sales force as increased variable component as an incentive to sell more. In order to ensure that the sales force is adequately prepared to handle queries related to the bundle, the salesforce should be provided with brochures and training material, and role play exercises.Inspiration for the type of questions can be derived from exhibit 4, which mentions the requirements of the customer. External Resistance: Customers: The reference price in the mind of the customer for a basic server is very low- 1700 per server. It is with this price that the customer will compare Atlantic’s offering. Traditionally, the customer is habitual to getting the software for free, and will resist paying a price for PESA. How to manage(Managing Psychological pricing): Atlantic will need to emphasise how 2 servers in the Tron bundle are equivalent to 4 Zink servers in their functional benefits and better in terms of economic benefits over the lifetime of the product. (USD 4400 savings for the customer, ref excel sheet attached). Atlantic can consider employing a specialised sales force to communicate the technical supremacy of Tron over Zink. Since the case is in the B2B context, Atlantic can demonstrate the gross value of savings in using the Atlantic bundle which will be directly proportional to the ticket size. Since B2B relationships last longer, Atlantic can project the savings for 10 yrs to convince the customer. Competitor: After the first year, it is projected that the “Atlantic Bundle” will only take approximately 4% of the market share of the basic share market. It is unlikely that Ontario would be concerned at this time and would not take any steps to counter-act. It would take until at least the second year and likely the third year before Ontario would begin to take action. One action that Ontario can take could be to lower the price, however this is unlikely since they are already competing largely on price, currently at 1700USD. Worst case scenario, if Ontario does decrease its prices Atlantic has enough margin to compete. Directory: knowledge knowledge -> Knowledge of the Moving Stars knowledge -> Knowledge organisation by means of concept process mapping Knowledge organisation by means of concept-process mapping knowledge -> Section – a 2 Marks Questions knowledge -> Dear friends, The Broadband Speed does not alone depend upon the Broadband Plan of the connection knowledge -> Key principles respondent costs respondent safety and confidentiality knowledge -> Altiris Notification Server knowledge -> Version 6 Invisibility report knowledge -> J. T. O. Phase II (Switching Specialisation) : axe-10 axe-10 Contents Page Download 20.41 Kb. Share with your friends:
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