Problem Statement Case Study
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Sales-pro CRM Technologies (2014)
Organizational change is a process undertaken to improve the performance of an organization. Sales-Pro CRM technologies have been implemented to evaluate the change process. The path used to reach the goal of price determination is usually a contested price determination issue. The price determination involves assessing the current performance of the organization’s core product sales – customer relationship management servers (CPX product). The performance of CPX product line hit the Sale-Pro customers with an impact of new technologies and support services. Therefore, the focus of this product is to manage the market trend and meet customer’s satisfaction through best pricing and increase in company’s margin trend.
Sales-Pro company sustainability was restricted to setting the end user final pricing for the upgrade of CPX capacity offered by the company. The CPX product is customized to accommodate companies with a sales force of 10 to 30 people. The price determination of Manufacturing suggested retail price (MSRP) ranges from $4,000 to $17,250. The aim is to determine the maximum price that could maximize the company’s profit in the long term given the concept of intermediate distributors’ referred to as value added resellers (VARs). Sale-Pro sold its product to the VARs at a discount of 50 percent but the issue relied more in the price determination upgrade from the 10 and 20 Seats capacity CPX servers.
Comparison and Analysis
The first proposed price focused more on the margin as the company’s and product department explicit desire. On the first price, the argument relies most in the pricing of the 20-seat downward, meaning that, if the highest production is at 30-seat unit with the highest margin, then by implication will assist in pricing upgrade. Calculating from the upgrade of 10-seat unit to 30-seat, the customer is creating an opportunity cost of $200 or $400 to the company, which means if the Price = Cost/(1-desired margin), then Price of 10-seat is; $400/(1-90%(rounded off))=$4,000. This formula maintain the original company profit margin for 10-seat at 87.5%.
The second proposal compares the first by analyzing the price and sales volume to be generated in the sense that, if the customer is upgrading to 30-seat from10-seat, it will mean charging the customer the price difference between MRSP highest and lowest prices. That is ($17,250-$8,000) =$9,250meaning that the customer part away with $9,250 for a 20-seat instead of $14,000 original MRSP. Logically, giving us the total value of 30-seat unit (8,000 + 9250 = $17,250). The application of this formula seemslogicaland affordable while increasing the company sales volume.
The recommended pricing strategy will be accompanied by several advantages, where the company will have the comparative and absolute advantage in production. This advantage will be achieved by upgrading the company’s product and appropriate number of seat.The philosophy of production will be achieved by manufacturing only the largest volume seller of 30-seat unit based on a uniform proposed manufacturing cost of $900 and at the original manufacturing suggested retail price (MSRP) of $8,000, $14,000, and $17,250 for 10, 20, and 30-seat capacities respectively. Also the company will enjoy an economy of scale by producing in large quantity; thereby decreasing the manufacturing cost and increasing the production, reduce expenses, and securecustomer’s confidence..
On the other hand, the uniform manufacturing cost will raise the company revenue by concentrating on the price determination that will convince the customer to buy the upgradable CPX product.With no other visible competitor in the market offering the similar product, the company is at liberty to dominate the market in price determination. On the same note, price pricing will be faced by the limitation such as resistance from the customer, customer sovereignty in deciding to purchase from competitors, competition from other companies in the same industry, decision war in the managementif the issue is not resolved with urgent
Price determination in the company will be determined and influenced by the fact that the company will be producing in large quantity, where lower cost of production will reduce the selling price. The upgradable factor with build in extra memory to enable the customer to purchase the lowest 10-seat enabled instead of buying a second or a third unit. The CPX products have unlocking access code to enable additional unit and therefore increase customer’s confidence and company’s reliability. Again this is a first product in the market with an upgrade and therefore, no competitor to offer substitute. Customers will be required to purchase an additional seat from the competitor to gain extra capacity and because customer had already grasped the pilot, it will be hard to shift though on a reasonable prices. Consequently, the company pricing will be affected negatively if the pricing decision; take long to mature, is of exploitation to the customer, and does not offer reasonable determination criteria.
The application of the business decision will determine the correct pricing.Different prices decision in recommendation takes different dimension; a 20-seat capacity recommendation based on the pricing decision is favorable.Taking a logic application of the price proposal, the company margin will still remain high. By comparison, the normal price of 10-seat is $8,000 and 20-seat is $14,000 at MRSP, giving us a profit margin of 90%, the highest in range, which means that the company maximizes margin at 20-seat capacity.Notably, the entity can as well maximize profit at 10-seat capacity recommendation. In upgrading the CPX product line, the cost of production will remain uniform at $900 as well as the price at $8,000 for 10-seat. This means that, the company do away with 20-seat and concentrate at proposed upgradable10-seat, thus maximizing revenue during upgrade while maintain the highest margin of 10-seat at 77.5%.
Price determination affects company revenue, margin, and sales volume. By implication, the logic applies that if the company is going to adopt a price discrimination and exploitation it will lose customers. Fair price retain the customer and according to the proposed prices, an upgradable 10-seat is favorable in maximizing revenue, sales, and margin.The concept is arrived as follows: 10-seat cost $8,000 at uniform production cost of $900 and actual unit margin of 77.5%. Upgrading to 20-or 30-seat will increase revenue depending on the option adopted, production cost remaining constant.
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