Computer Essay

882 Words Feb 2nd, 2012 4 Pages
Evaluate the four pricing options available to Atlantic Computer. What would be the most effective pricing strategy for Atlantic Computer? Why?
Jowers has four pricing options for Atlantic Computers. He must decide to either: 1) keep the company's tradition of charging for software and providing PESA software for free, 2) charge a price equal to what the customer would pay for four Ontario Zink servers, 3) charge a price based on a cost-plus approach to pricing PESA, or 4) charge a price based on value-in-use pricing.
The traditional pricing strategy involving charging for software and giving the PESA software for free. This strategy does not allow major emphasis on developing and selling software tools tlo enhance their servers'
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This strategy can cause a diminshed incentive to control costs since total dollar profits increase as costs rise. This can result in consumers paying inflated price. According to Simon et al (2003), cost-based pricing leads to lower than average profitability. This strategy does not account for how customer demand affects price. Demand for a product will directly affect how much people will pay. If, due to heavy demand, customers believe a product is in short supply, they may be willing to pay more. On the other hand, if demand is very low the customer will look for a discount on the price (Government of Alberta, 1999). Cost-based pricing does not include competition. Competition should play an important role in deciding how to price a product. This strategy would only be sufficient in a market with little to no competition. Since Atlantic Computers is in competition with Ontario Zink, this strategy would not be the best option.

Although the above pricing strategies are the most common, these approaches may prevent firms from fully realizing the benefits that are due to them (Bharadwaj & Gordon, 2007). The most effective pricing strategy for Jowers and Atlantic Computers would be the fourth option: charging a price based on value-in-use pricing. This pricing strategy involves examining the value that a company's offering creates for the customer, and using the savings generated as the basis for

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