1. Identify and evaluate Clearwater Technologies existing pricing on the QTX line. What are its pricing objectives? With the introduction of the upgrade, should Clearwater reconsider its pricing strategy?
The existing pricing:
Number of seats | To end users | Unit cost | Actual unit cost |
10 | 8,000 | 500 | 900 |
20 | 14,000 | 700 | 900 |
30 | 17,250 | 900 | 900 |
According to table 1 and 2, because Clearwater is upgrading its products right now, they will design the 30-seat server, so even the customer just want 10-seat or 20-seat, Clearwater will still ship them the 30-seat server with just 10 or 20 seats usable. So in this case, the actual cost of the server will all be 900 ...view middle of the document...
2. Evaluate Jefferies' pricing considerations for the upgrade. Are there other pricing factors that Jefferies might consider?
Jeffries considered 3 main concerns in this case. First is that the upgraded price shouldn’t be lower than the current price, the second one is that he wants to motivate the customers to purchase as more as possible right now, and the last one is that he believes the current customers are already have their customers loyalty because they are committed to the server system and it’s hard for them to change to another one.
I think the factors that Jefferies should consider are:
1. Yes I agree with the new price shouldn’t be lower than the previous one, but it shouldn’t be too high as well. The customers are already got used to their QTX server system, if the price suddenly increased sharply, it will be difficult for them to accept and they might be consider changing another server company.
2. Jefferies was a little bit shortsighted because he only sees the immediate interests. For Clearwater, since it is the leading company in the server field, it must be consider the long-term interest rather than current interests, other wise it might lost their customers gradually in the long run.
3. The current customers are already committed to their technology indeed, but it can’t be guarantee that whatever how much the price increases, the customers are still willing to pay for it just because they are already got used to it. If the new price is increased unreasonably, of course the customers can buy another server and learn how to use it. May be the cost of buying a new server and training the employees would be even lower than the new price of QTX.
3. Evaluate the price options presented at the meeting described in the case.
1. The Product Manager Rob Erickson:
If a customer upgrades from 10-seat unit to 30-seat unit, the cost increased will be 400, and the Original Unite Margin is 90%, so he uses 400/(1-0.9)=4,000 dollars for the resellers, and the price for the...