Atlantic Computer Case Study

Executive Summary

Atlantic Computer is a large manufacturer of servers and other high-tech products headquartered in Amberville, New York. Their current business model has been driven by high performance servers. Since the advent of the internet, a new segment for basic servers has emerged. Companies are increasingly in need of basic computing capabilities to perform simple, repeatable tasks.

Given the tremendous growth opportunity in the basic server segment, Atlantic recently developed a new server called Tronn. The Tronn itself is a basic server but the true star and game changer for Atlantic is their PESA (Performance Enhancer Server Accelerator) software that will drastically improve speed and perform up to four times faster than their standard server for those customers using file sharing and running websites.

Atlantic's Tronn and their PESA software enhancer would compete directly with Ontario Computer's Zink product line. Ontario Computer, Inc. is a firm that concentrates its efforts solely on low-end servers, currently claiming 50% of the market. Atlantic had to ensure that they are able to compete in this new marketplace while proving their software enhancer is a valuable proposition for their customer.

Pricing and the sales strategy will be key drivers for their success. Target customer type would be only those using the server to run websites. A value-in-use method of pricing would be used to share in the savings with the customers in this new market for Atlantic. The sales staff would be educated on the performance testing results and prepared to explain the benefits of the PESA software on the basic server performance when hosting websites.

Introduction

The key to success for Atlantic is all about the way they market and sell their services. Atlantic traditionally sold high-end performance servers, called Radia, to large enterprise customers. They have been known for providing top-notch, highly reliable and quality products. They also have a strong customer support team that is very responsive after the sales process. The new market they are entering will test their ability to market and subsequently sell their services.

The traditional sales force and compensation structure may need to change given their competition's reliance on online sales. Pricing will also be a key part of the sales equation. The way Atlantic bundles its services and pricing will need to be very important in the success of their new business segment. Unfortunately, the customer does not view high-end and basic servers as substitutes, so their consumer will change. With these changes Atlantic needs to review some basic pricing options and market share estimates to complete a final pricing strategy. They really need to understand the demographic factors, such as the number of potential buyers and the location of those buyers. This will be even more important if they continue to use their existing sales force.

Atlantic's deployment strategy will play a crucial role in converting sales. Psychological factors will also be essential in pricing. For example, will buyers use price as an indicator of quality? How much are the potential buyers willing to pay for the new product? These are extremely important questions and will play a significant effect on the pricing strategy, especially when Atlantic's biggest competitors currently do business without knowing their customer.

Traditionally, Atlantic has sold their servers at a set price while generally providing software tools free of charge. Unfortunately, the applications that would see the greatest performance results were those hosting web servers. Since these were the least complex server applications, but witnessed the greatest performance improvements from Tronn with the PESA software, the customer will likely be reluctant to accept premium pricing. Atlantic needs to clearly articulate the points of difference that will illustrate how their product is far superior to the next best alternative; Ontario's servers.

In order to price PESA at a premium, they would have to demonstrate customer value in advance. Fortunately, Atlantic has an optimal opportunity to showcase their product and help differentiate it from the competition. At an upcoming trade show, Atlantic would be able to meet some prospective customers face to face while being able to showcase the new server and software tool at Atlantic's SME booth at the trade show.

In reviewing some of the sales leads, DayTraderJournal.com could serve as an exemplary customer that would be visiting the sales booth. This customer was seeking four basic servers as well as minimizing their initial purchase costs. This customer could give Atlantic the perfect opportunity to demonstrate and outline the savings Tronn with PESA software could have for their organization.

The true dilemma for Atlantic would be how to illustrate the need for the PESA software enhancer while charging a premium. The trick would be in Atlantic's ability to mathematically illustrate how their product offering would be less expensive and more efficient while proving to be the best alternative on the market.

Strategy

Having identified the target customers (web applications), recognized the elastic demand for basic servers and acknowledged the strength and competitive cost structure of Ontario, Atlantic's management formulated their pricing and marketing structure. The Tronn and PESA software would be marketed primarily to customers running websites. Secondary markets available are for those customers needing data backup applications and shared storage. A value in pricing method would be implemented and customized for each potential account. (See Pricing section for details)

In addition to the newly developed pricing structure, the sales force would be educated by the customer. Specific usage and cost savings by account would help overcome the potential objections that the customer might raise. This approach would consist of the main points of differentiation between the Tronn/PESA and other alternatives, specifically the need for fewer servers and the decrease to their electric, labor and licensing costs. While this approach requires intense customer value research, it allows the sales force to penetrate a new market armed with as much (or more) customer specific knowledge than the current suppliers who have been working with the customers for years.

This strategy would be tested at the upcoming trade show by Atlantic. Researching DayTradeJournal.com in advance will prepare them to test their theory on the new price strategy and the accuracy of their customer research. From this interaction, a sales script and other marketing collateral would