Identify And Evaluate Clearwater Technologies Existing Pricing On The QTX Line
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 dollars.
The pricing objectives:
For the financial department, the objective is to maximize the profit, so they want the price could be as high as possible; for the sales department, they want the price to be low enough so they can sell more; for the product department, they want the price to be consistent and fair enough as the current product margin model.
Now the objectives for each department are different, according to their own interests. So they must have a compromised pricing strategy as soon as possible.
Should Clearwater reconsider its pricing strategy?
Yes, it is necessary for Clearwater to reconsider its pricing strategy right now. Because they are changing their product strategy, the costs should be change along with the products.
If they don’t change the pricing strategy, it will cost the company more when customers buying 10 and 20 seats server. It will cost Clearwater 400=(900-500) more in 10-seat server, and 200=(90-700) more in 20-seat server.
What’s more, after all the final goal of the company is to generate more revenue, the main reason why they changed their server package is to gain more profits. So all in all, the pricing strategy should be reconsidered.
2. Evaluate Jefferies' pricing considerations for the upgrade. Are there other pricing factors that Jefferies might consider?
Jeffries
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 dollars.
The pricing objectives:
For the financial department, the objective is to maximize the profit, so they want the price could be as high as possible; for the sales department, they want the price to be low enough so they can sell more; for the product department, they want the price to be consistent and fair enough as the current product margin model.
Now the objectives for each department are different, according to their own interests. So they must have a compromised pricing strategy as soon as possible.
Should Clearwater reconsider its pricing strategy?
Yes, it is necessary for Clearwater to reconsider its pricing strategy right now. Because they are changing their product strategy, the costs should be change along with the products.
If they don’t change the pricing strategy, it will cost the company more when customers buying 10 and 20 seats server. It will cost Clearwater 400=(900-500) more in 10-seat server, and 200=(90-700) more in 20-seat server.
What’s more, after all the final goal of the company is to generate more revenue, the main reason why they changed their server package is to gain more profits. So all in all, the pricing strategy should be reconsidered.
2. Evaluate Jefferies' pricing considerations for the upgrade. Are there other pricing factors that Jefferies might consider?
Jeffries