3. Case help (This summarises what you should do for each pricing calculation) Status-quo pricing - Current pricing practice. Traditional pricing suggested by Matzer Competitor pricing - Use competitor price as

a reference. Match competitor (Ontario Zink) price. Cost-plus pricing - Consider variable cost and fixed costs per unit (total fixed cost divided by expected unit sales). In this case, there is useful information to be used. Unit sales for the basic segment (and its projection). Atlantic's share of the basic segment will give the total unit sales figure for Atlantic. Note that only 50% of units will have PESA. No variable costs involved (simple installation) Total Fixed cost: R&D cost. Markup (%) = 30% Combining the above information, you should be able to compute how much the bundle should cost. Value-in-use pricing - Compute savings, i.e., economic value, achieved by purchasing Atlantic Tronn + PESA instead of Ontario Zink. Less number of servers (2 Tronn servers versus 4 Ontario Zink) Less labour for each server (each labour can manage 40 servers) Less electricity Less additional software application licenses. Total savings are equal to the maximum value of PESA 50-50 value sharing between Atlantic and customers. So, the final pricing of PESA equals 50% of the maximum economic value of PESA. This is the additional value- added to hardware. Answer the following questions What price should Jowers charge DayTraderJournal.com for the Atlantic Bundle (i.e., Tronn servers +PESA software tool? Think broadly about the top-line revenue implications from each of the four alternative pricing strategies. Approximately how much money over the next three years will be "left on the table" if the firm were to give away the software tool for free (i.e., status quo pricing) versus utilizing one of the other pricing approaches? How is Matzer likely to react to your recommendations? How is Cadena's sales force likely to react to your recommendation? What can Jowers recommend to get Cadena's hardware-oriented sales force to understand and sell the value of the PESA software effectively? How are customers in the firm's target market likely to react to your recommended pricing strategy? What response can be provided to overcome any objections?