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) …show more content…
Brian’s Proposal Brian disagreed with Rob’s proposal pointing out that in order to justify prices to the consumer, they would have to reveal their margins which was not ideal. Brian suggested that the customer should pay the difference between the original price of QTX and the upgrade price. So: New 30 seat unit
Original 10 seat unit
Price for 20 seat upgrade | $17,250$8,000$9,250 |
Brian’s method would be much easier for the customer to understand and would still drive revenues. Here, the price for a 20 seat upgrade would be $9,250; and a brand new 20 seat upgrade would be $14,000.
Hillary’s Proposal While Hillary understood what Rob and Brian were suggesting, she felt as though neither of them were most concerned with the company’s best interest. She explains that customers will stay loyal to Clearwater because they don’t want to go through the process of being trained on a new software. She feels as though they can charge as much as they want for the product because the customers don’t have much of an alternative. She suggests that Clearwater take advantage of this fact and charge anywhere from $15,000 to $20,000. Hillary believes that the company can and should be as aggressive as possible with the pricing.
In order to follow Mark’s suggestions, Rob, Brian and Hillary need