Analysis of Cambridge Software Case
CSC CASE ANALYSIS
Case 1 – Only Student software launched. In this case, the selling rate is $50 , the Unit Contribution will be fixed to $ 35 (50-15) for all other segments, and for student segment, it will be $15.( (60% of 50) -15).
Case 2 – only Commercial software – The optimal price should be taken as 225 as that covers all other categories except the students.
Case 3 – only Industrial software – the price should be 600 as the incremental contribution below this segment is less than the segment development costs. Version | Optimal Price | Total Contribution | Net Total Contribution TC-PCC | “Commercial” | $ 225 | $ 7,750,000 | $ 7,550,000 | “Industrial” | $ 600 | $ 14, 805,000 | $ 14, 305,000 | “Student” | $ 35 (15 for students) | $ 8,020,000 | $ 7,920,000 | | Thus, the maximum profit is earned by selling the Industrial Version at price of $600 Consumer Surplus with “Industrial” @ $600 and “Student” @ $50 -------- | “Student” version “Industrial” | Large Co $100 (= $150 - $50) $1900 (=$2500-$600) | Labs $ 50 (=$100 - $50) $1400 (=$2000-$600) | Consultants $ 150 (=$200 - $50) $ 0 (=$600-$600) |
Now we have 2 options for multiple versions – Industrial and student , Industrial and commercial. Surplus from Maximum Price for | “Student” version “Industrial” version | Large Co $100 $2400 (=$2500-$100) | Labs $ 50 $1950 (=$2000-$50) | Consultants $ 150 $450 (=$600-$150) |
The consumer surplus shows how many segments will change to other option. The incremental contribution from targeting a product to a specific segment is lesser than the segment development cost in case of consultants. Thus, large cos and labs will take industrial and
Case 1 – Only Student software launched. In this case, the selling rate is $50 , the Unit Contribution will be fixed to $ 35 (50-15) for all other segments, and for student segment, it will be $15.( (60% of 50) -15).
Case 2 – only Commercial software – The optimal price should be taken as 225 as that covers all other categories except the students.
Case 3 – only Industrial software – the price should be 600 as the incremental contribution below this segment is less than the segment development costs. Version | Optimal Price | Total Contribution | Net Total Contribution TC-PCC | “Commercial” | $ 225 | $ 7,750,000 | $ 7,550,000 | “Industrial” | $ 600 | $ 14, 805,000 | $ 14, 305,000 | “Student” | $ 35 (15 for students) | $ 8,020,000 | $ 7,920,000 | | Thus, the maximum profit is earned by selling the Industrial Version at price of $600 Consumer Surplus with “Industrial” @ $600 and “Student” @ $50 -------- | “Student” version “Industrial” | Large Co $100 (= $150 - $50) $1900 (=$2500-$600) | Labs $ 50 (=$100 - $50) $1400 (=$2000-$600) | Consultants $ 150 (=$200 - $50) $ 0 (=$600-$600) |
Now we have 2 options for multiple versions – Industrial and student , Industrial and commercial. Surplus from Maximum Price for | “Student” version “Industrial” version | Large Co $100 $2400 (=$2500-$100) | Labs $ 50 $1950 (=$2000-$50) | Consultants $ 150 $450 (=$600-$150) |
The consumer surplus shows how many segments will change to other option. The incremental contribution from targeting a product to a specific segment is lesser than the segment development cost in case of consultants. Thus, large cos and labs will take industrial and