Clearwater Technologies
Amanda Moore
Problem
Clearwater Technologies’ problem is that end-user pricing for a capacity upgrade to the QTX server needed to be agreed upon in the upcoming meeting. Finance wants to increase revenue, sales wants to keep prices fair and management wants prices to stay within the margin model.
Mark Jefferies, Vice President of Marketing, is presiding over the meeting of Hillary Hanson, Brian James, and Rob Erickson. After listening to the suggestions of the three people, he realizes that they all have valid plans but all of them fail to meet the three goals he feels the new price should meet. 1) The price of the upgrades shouldn’t be lower than the current price of the 30 seat QTX. 2)
…show more content…
QTX is a sales support server that allows multiple users to maintain their sales account databases simultaneously. The databases control contact information, quote histories, copies of communications, and links to the customer’s corporate database for shipping records. The basic package consists of a processor, chassis, hard drive, and network interface and provided simultaneous access for 10 seats. Manufacturing costs for the basic QTX package is $500. Each 10 seat upgrade adds an additional $200 in manufacturing costs. Yearly sales were around 4,000 units. (See Appendix V.) Clearwater sells its products to value-added resellers (VARs); who provide sales and support to end users. The usage of VARs reduces the expense of sales and service for Clearwater and increases market coverage. QTX is sold to VARs at a 50% discount of the MSRP. (See Appendix I.) As of now, Clearwater is essentially giving away extra capacity and absorbing the higher manufacturing costs. The 30 seat units were sold no matter how many seats the customer actually bought; so if someone bought a 20 seat unit and then decided to upgrade to the 30 seat unit they would only need an access code to do so. (See Appendix II.)
Rob’s Proposal
Rob’s goal is to keep margins consistent. As an example, he explained that if a customer wanted to upgrade from 10 seats to 30, an additional $200 in manufacturing costs would be added to
Increased marketing budget costs to launch the new product and provide incentives to “Maintenance users
5. An analysis of the individual customer accounts suggest that TFC’s current pricing model is ineffective. They are undercharging an alarming number of their customers thereby reducing their overall profitability. Based on this information, managers will hopefully elect to implement the services based pricing model so that customers are charged based on the services they are actually consuming. Ideally, changing the current pricing model will resolve the issue of customers reducing profit by 140% and 60% (Exhibit 8, numbers 3 and 4). If there are still profit draining customers, management should revisit and assess accordingly, either further increasing fees to those customers so their contribution is positive, or perhaps dropping these customers to increase overall profitability.
He argues that idle capacity is worse since it has no contribution to overheads whereas a lower price above variable costs would have some positive contribution to the fixed costs and therefore improve profitability for the division. He believes a price of $40 is insufficient to cover the total costs and that the systems division does not want to subsidize the overheads of outside buyers.
All pricing decisions the team took are recorded in detail in appendix A, B and C. A summary of the same is presented in figure 1 below. Decisions were made with an informed understanding of the elasticity of demand, fleet utilisation, the gross profit, the contribution, the net profit, seasonal demand changes, the competitors pricing decisions and the context of the scenario.
→ high focus on sales/technical knowledge; high customer-centric outlook; flexibility in meeting needs of customer key to success; unique/comprehensive business structure (engineering, manufacturing, and distributing of various filtration products and systems
A $2 increase on admission prices has the potential to increase revenues with a low risk of profit loss. A loss would only occur if the price change were to lose more than 572 visitors. An increase to $14 a ticket will bring in extra profits and still remains below the competitors and the ROM’s regular hours
Pricing is a relevant issue in procurement at all levels. Individuals purchasing the commodities of an organization should receive clarity on pricing. There is confusion in this
This sourcing strategy report represents the result of our analysis of four potential suppliers both domestic and international in an attempt of the company to outsource many key product components and subassemblies, including the 9000x series DVD drives. The identified suppliers include:
the vendor, it is now paying great attention to the value of the business that the
i. Why was Dakota’s existing pricing system inadequate for its current operating environment? (Hint: Consider why ABC might be a good idea)
“Ensuring the requisite skills” - disagreement on price with Sales, Design, and Development teams causes conflict and lack of collaboration;
The Primary marketing objective is to achieve a 4-7% increase in fares per route flown by the increase of ticketing prices even with fewer seats on the aircraft. Status matching will be offered to competing airline frequent flyers to encourage them to travel more with American than their current choose airline. Airlines represents a $783 billion a year industry (Fact Sheet: Industry Statistics, 2014). Being able to expand the market to the high-end segment would create an attraction to a unique service not offered by other major US airlines. Break even cost would be the first year goal while there would be an increase in cost to retrofit aircraft.
Leisure travelers overall will be made better off by the new fare structure. These travelers have more flexibility and can take advantage of the advance purchase discounts and Saturday-night stay discounts. An exception to this is leisure travelers who had found “loop holes” in the old fare system by using “creative ticketing” and waiting for deep discounts. These leisure travelers may pay higher rates because the deep discounts will no longer be offered.
After analyzing the results from the previous quarter, it was determined that the prices set for each segment were not sufficient. Product sales priority were also not properly adjusted. With the R&D investments, sales priorities needed to be changed for the main focus to become the most profitable market segments. Prices were not competitive which in turned decreased revenue, market share, and profitability. To become more competitive we altered the prices in each market segment. The Workhorse product was the first to change, the price was lowered to $2500 in an attempt to increase sales; at this price Team 4 was still making a profit on this product, as well as making the price much more competitive. The Workhorse sales priority was also lowered to 3rd in Americas and 4th in APAC and EMEA. This product was not selling as well as we had hoped, and was no longer as profitable as it once was which led to this decision. Next, the Innovator product’s price was adjusted; this involved a price increase to $4100. This price was adjusted to include the new
To make his business successful, Colin must consider an integration of price, promotion, place, and product. He must also try and distance themselves from their competition. To do so the brothers must maintain the quality of their merchandise and customer service, reasonable prices, and improve their promotion strategies. For one thing, the price of his products must be within a