Executive Summary

Cambridge Software Corporation

Cambridge Software Corporation (CSC) has developed a new modeling software product called Modeler . Chuck Kennedy CEO of CSC hired tony Atkinson to head new product line management function and look into the possibility of marketing several model of Modeler. With the help of SMRG, CSC divided the market for modeler into five segments: Large Multidivisional Corporations, Corporate R&D and university laboratories, Consultant and professional companies, Small business and students. Each segment has its own segmental development cost. CSC is mainly looking into launching 3 versions of Modeler: Student, Commercial and Industrial. Each version has product completion cost. CSC has also gathered data of maximum price willingness to pay by each segment for each version. If multiple versions are offered, Consumer will buy that version which maximizes their consumer surplus. Problem Statement: 1) How many version of Modeler should be launched? And what all versions?? 2) What should be the price of each version? Objective: 1) Maximize Profit and Consumer Surplus. Pricing Point for a particular model is defined as such that it maximizes consumer surplus as well as the Profit.In case of Student version, Price of modeler is kept at $ 50, because if we increase the price than the incremental revenue earned from other segment is less than the loss incurred by loosing high value student segment. For multiple version cases (2 models), various price points to compare are taken such that consumer surplus for the next segment by choosing pricier version is just above that of choosing less costly version. When taking pricing decisions within one type of combo, product development cost are not important but they do matter when comparing different combinations. While for all the 3 version possibility, it yields 125 combinations and hence 2 version case has not been considered. Single Version Version Student Commercial Industrial Price ( in $ ) 50 225 600 Profit ( in $) 8,020,000 7,750,000 14,805,000

Multiple Version

Student + commercial Total Contribution Product Dev Cost Net Contribution 15,200,000 300,000 14,900,000

Student + Industrial 22,130,000 600,000 21,530,000

Commercial + Industrial 19,800,000 700,000 19,100,000

Hence, I recommend to launch Student and industrial version combo, where student version price =$50 & commercial = $1950 to maximize the profit as well as consumer surplus.