Clearwater Technologies Case Essay

1317 Words6 Pages
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)
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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
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