Atlantic Computer Case Study
The pricing strategy adopted will determine the sales volume and profits generated by the company. The best approach would be to price the product based on a cost-plus approach. This will involve selling the PESA software to buyers due to the benefits it is going to have on the server. Consumers are looking for highly effective servers that will be value for their money. The new server works four times faster when running on the PESA software. The consumer will have a liking for this server because it will prove way better and efficient that what they are currently using. They are likely to be more impressed if they are to pay for the PESA software. Paying for the software will more likely convince the consumer that the software is an integral part of the server (Ingenbleek, et al., 2003).
Consequently, this pricing strategy is likely to draw more consumers to the server. People are likely to trust software that is sold and touted to make improvements on the server than a freebie said to have the same effect. Consumers believe nothing valuable is given free by any company. Companies cannot spend millions of dollars developing a software and then give it for free. That is why they are very skeptical if a company decides to offer powerful software such as PESA for free. There are a few consumers who are likely to buy the server due to the free software but the majority of buyers especially those who would represent a substantial market segment are likely to snub it. This will result to a poor sales turnover given this is the most powerful and efficient server in its category. This pricing strategy will win both sets of buyers; those who buy expensive servers and those who prefer cheap but highly effective servers. This is because both categories base their decisions on quality (Ingenbleek, et al., 2003). The quality of Tronn is guaranteed which makes it a hit in both categories.
In addition, this pricing strategy will aid the sales department in branding the server. The server will have a selling point based on its high efficiency. This will be coupled by its highly competitive prices that will be based on cost plus approach. Technology growth is demanding for improved products that have improved efficiency. Consumers are willing to pay higher prices if they can be convinced that the product they are buying will be an improvement on what they already use (Ingenbleek, et al., 2003). Tronn will have its market cut out if it uses the right pricing. It is already the best server in its category and just needs a price that will set apart from Ontario Zink servers. The existing servers are not offered together with a software that boosts their performance. That in itself is one major difference between Tronn and other servers. This is a difference that should dictate pricing and branding strategy.
Furthermore, the benefits of the server are its main selling points. The company has dedicated its resources towards developing the best server in the market. The server on its own is not very powerful but working in tandem with PESA its efficiency quadruples. This is the kind of server companies are in need of to meet their increasing traffic. The existing options involve acquiring more than one server if a company is busy. This is a problem solved by Tronn. A demonstration to the consumer is enough to convince the consumer that the server not only saves money because of low number of servers to be acquired and license fees, but it is also more efficient. Administrators handle only 40 servers. A company that opts to buy from Atlantic competitors will have to buy four times the number of servers to handle its traffic. This may force the company to hire more administrators if it uses more than forty servers. This will eat into its profits. This is likely to convince many potential buyers to acquire Tronn due to the myriad benefits it represents both in the short-term and long-term (Kotler, 2011.
The pricing strategy should also consider the long-term objectives of the company. These objectives guide a company and act as a basis in its business dealings. Failure to put these into consideration may jeopardize the future and growth of the company. These objectives are laid down with the products developed in mind. The products developed are meant to assist the company meet its objective in terms of growth and profitability and also its obligations to its clients. A wrong pricing strategy may affect the company in a way that may make it hard for it to achieve its objectives. It may also affect the sales leading to huge losses that may end up crashing the company. The history of the company is also an important consideration. Companies have a history that they strive to preserve. This is important because it helps in retaining customers. Pricing must be set within what the company has historically sold its products. If it is higher than that, then the company must adopt a marketing strategy aimed at informing the consumer why the company has deviated from previous pricing strategies (Kotler, 2011).
Ingenbleek, P., Debruyne, M., Frambach, R. T., & Verhallen, T. M. (2003). Successful new product pricing practices: a contingency approach. Marketing letters, 14(4), 289-305.
Kotler, P. (2011). Reinventing marketing to manage the environmental imperative. Journal of Marketing, 75(4), 132-135.