Cambridge Software Corporation Case Study Ppt Templates

Cambridge Software Corporation Case

Question 1: If Cambridge Software is obliged to launch just one product, which one should it be, and how should it be priced?

For every single version, we have calculated the total contribution for each price that segments are willing to pay, and chosen the price that can maximize the total contribution.

Sell only "student" version

Price

Segments

unit cost

Unit Contribution

Seg. Dev. Costs

Demand

Total Contribution

$200

Consultants

$15

$185

$200,000

$20,000

$3,500,000

$175

Small business& Consultants

$15

$160

$400,000

$35,000

$5,200,000

$150

Large Corporate & Small business & Consultants

$15

$135

$550,000

$40,000

$4,850,000

$100

Corporate R&D & large Corporate & Small business & Consultants

$15

$85

$650,000

$42,000

$2,920,000

$50

Student & Corporate R&D& Large Corporate& Small biz&Consultants

$15

35,15

$950,000

$42,000,500,000

$8,020,000

The optimal price for the "student version" is $ 50 at which all 5 segments would be included and the total contribution from selling this version amounts to $ 8,020,000.

Sell only the "commercial" version

Price

Segments

unit cost

Unit Contribution

Seg. Dev. Costs

Demand

Total Contribution

$1,200

Large Corporate

$25

$1,175

$150,000

$5,000

$5,725,000

$1,000

Corporate R&D& large Corporate

$25

$975

$250,000

$7,000

$6,575,000

$300

Consultants& Corporate R&D &large Corporate

$25

$275

$450,000

$27,000

$6,975,000

$225

Small Business &Consultants& Corporate R&D &large Corporate

$25

$200

$650,000

$42,000

$7,750,000

$60

Students& Small Biz & Consultants& Corporate R&D &large Corporate

$25

$35,$11

$950,000

$42,000,500,000

$6,020,000

The optimal price for the "Commercial version" is $ 225, at which four segments, excluding the "student segment" would serve and the total contribution from this version equals $7,750,000.

Sell only the "Industrial" version

Price

Segments

unit cost

Unit Contribution

Seg. Dev. Costs

Demand

Total Contribution

$2,500

Large Corporate

$35

$2,465

$150,000

$5,000

$12,175,000

$2,000

Corporate R&D& large Corporate

$35

$1,965

$250,000

$7,000

$13,505,000

$600

Consultants& Corporate R&D &large Corporate

$35

$565

$450,000

$27,000

$14,805,000

$300

Small Business & Consultants& Corporate R&D &large Corporate

$35

$265

$650,000

$42,000

$10,480,000

$100

Students& Small Business & Consultants& Corporate R&D &large Corporate

$35

65,25

$950,000

$42,000,500,000

$14,280,000

The optimal price for "Industrial" version is $ 600, at which three segments, excluding the "student segment" and "small business segment", would serve and the total contribution from this version sums up to $14,805,000.

The net contribution for each single version are following:

Net contribution for each version

Version

Optimal Price

Segments Served

Total Contribution

net total contribution

Student

$50

Student & Corporate& Large& Small& Consultants

$8,020,000

$7,920,000

Commercial

$225

Small & consultants & corporate & Large

$7,750,000

$7,550,000

Industrial

$600

Consultants & Corporate& Large

$14,805,000

$14,305,000

From the table above, we suggest that the company chooses to sell the "Industrial" version. The optimal price is $600, targeting the consulting, corporate R&D and large corporate segments.

Question 2: If several versions are allowed, which should be launched, and how should they be priced?

Assumption and related concept:

Consumer surplus is an economic measure of consumer satisfaction, which is calculated by analyzing the difference between what consumers are willing to pay for a good or service relative to its market price.

To predict the consumers' purchasing behavior, we assume that customers would buy the product with a higher surplus, which means customers would get more satisfaction.

Decision: Student Version (S) + Industrial Version (I)

Based on the result of Question 1, we have reached the conclusion that Industrial version (I) is the most profitable one. And we also noticed that I version only caters for the first three segments, which means I version is more profitable among high-end customers. Meanwhile, under the optimal price, Student version (S) caters for all the segments and Commercial version (C) caters for the segments apart from students, which means S version can earn more from low-end customers and C version can earn more from middle-end customers.

Therefore, if CSC wants to make more profit, it can use I version to attract high-end customers and use C or S version to attract middle-to-low-end customers. So based on these logics, we have two choices, which are S+I and C+I. In these combinations, we cannot directly know which situation is the most profitable one since there are many situations where different versions cater for different segments. To achieve the precise result, we listed all the possibilities and calculated all the profits based on the assumption of consumer surplus to see which combination is most profit. (Detailed calculation process can be found in Appendix.)

S version + I version:

Segments

Situations

C version + I version:

Segments

Situations

From the above tables we can see that, S version + I version can achieve the biggest profit, which is $21,180,000. And the price should be set at $50 for S version and not more than 1950 for I version.

In conclusion, the Student version and Industrial version should be launched and the price should be $50 and no more than $1950 respectively.

Regarding this combination, we also discussed its PROs and CONs as follows:

PROs:

1. By launching more versions, CSC could maximize their profit in building larger volumes through reaching more customers, rather than merely focusing on high end customers.

2. Expanding the customer segment and product line can help CSC set barrier for potential competitors. If different segments are satisfied with CSC offerings, they are unlikely to turn to other products.

3. The students have great potential in their future to become our highest profitable customers. Investing them earlier can help to build their brand loyalty and make them familiar with the product.

4. Offering students version may increase the image of the brand as CSC cares about students and offers them an affordable option to use the software.

CONs:

1. It may cause customer confusion, because customers have several options which might create uncertainty which would be the right one to buy.

2. Cannibalization between the product lines could lead to inefficiency in creating profit.

3. Endangers the image of a premium brand

Appendix:

Situation A:

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large, multidivisional corporations

I

$175

$140

$550,000

$100,000

2,000

Corporate R&D and university laboratories

I

$175

$140

$180,000

$200,000

20,000

Consultants and professional companies

I

$175

$140

$2,600,000

$200,000

15,000

Small businesses

I

$175

$140

$1,900,000

$300,000

500,000

Students

S

$50

$15

$7,200,000

 

 

  Total Profit for Situation 1

$12,430,000

Situation B

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large, multidivisional corporations

I

$450

$415

$1,925,000

$100,000

2,000

Corporate R&D and university laboratories

I

$450

$415

$730,000

$200,000

20,000

Consultants and professional companies

I

$450

$415

$8,100,000

$200,000

15,000

Small businesses

S

$50

$35

$325,000

$300,000

500,000

Students

S

$50

$15

$7,200,000

 

 

  Total Profit for Situation 2

$18,280,000

Situation C

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large, multidivisional corporations

I

$1,950

$1,915

$9,425,000

$100,000

2,000

Corporate R&D and university laboratories

I

$1,950

$1,915

$3,730,000

$200,000

20,000

Consultants and professional companies

S

$50

$35

$500,000

$200,000

15,000

Small businesses

S

$50

$35

$325,000

$300,000

500,000

Students

S

$50

$15

$7,200,000

 

 

Total Profit for Situation 3

$21,180,000

Situation D

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit 

$150,000

5,000

Large, multidivisional corporations

I

$2,400

$2,365

$11,675,000

$100,000

2,000

Corporate R&D and university laboratories

S

$50

$35

-$30,000

$200,000

20,000

Consultants and professional companies

S

$50

$35

$500,000

$200,000

15,000

Small businesses

S

$50

$35

$325,000

$300,000

500,000

Students

S

$50

$15

$7,200,000

 

 

Total Profit for Situation 4

$19,670,000

Situation E

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$500

$465

$2,175,000

$100,000

2,000

Corporate R&D and university laboratories

I

$500

$465

$830,000

$200,000

20,000

Consultants and professional companies

I

$500

$465

$9,100,000

$200,000

15,000

Small businessed

S

$100

$85

$1,075,000

$300,000

500,000

Students

 

 

 

Total Profit for Situation E

$13,180,000

Situation F

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$2,000

$1,965

$9,675,000

$100,000

2,000

Corporate R&D and university laboratories

I

$2,000

$1,965

$3,830,000

$200,000

20,000

Consultants and professional companies

S

$100

$85

$1,500,000

$200,000

15,000

Small businessed

S

$100

$85

$1,075,000

$300,000

500,000

Students

 

 

 

 

$16,080,000

Situation G

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$2,450

$2,415

$11,925,000

$100,000

2,000

Corporate R&D and university laboratories

S

$100

$85

$70,000

$200,000

20,000

Consultants and professional companies

S

$100

$85

$1,500,000

$200,000

15,000

Small businessed

S

$100

$85

$1,075,000

$300,000

500,000

Students

 

 

 

 

$14,570,000

Situation H

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$600

$565

$2,675,000

$100,000

2,000

Corporate R&D and university laboratories

I

$600

$565

$1,030,000

$200,000

20,000

Consultants and professional companies

S

$200

$185

$3,500,000

$200,000

15,000

Small businessed

 

 

 

 

$300,000

500,000

Students

 

 

 

 

$7,205,000

Situation K

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$135

$100

$350,000

$100,000

2,000

Corporate R&D and university laboratories

I

$135

$100

$100,000

$200,000

20,000

Consultants and professional companies

I

$135

$100

$1,800,000

$200,000

15,000

Small businessed

I

$135

$100

$1,300,000

$300,000

500,000

Students

C

$60

$21

$10,200,000

$13,750,000

Situation L

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$360

$325

$1,475,000

$100,000

2,000

Corporate R&D and university laboratories

I

$360

$325

$550,000

$200,000

20,000

Consultants and professional companies

I

$360

$325

$6,300,000

$200,000

15,000

Small businessed

C

$60

$35

$325,000

$300,000

500,000

Students

C

$60

$11

$5,200,000

$13,850,000

Situation M

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$1,060

$1,025

$4,975,000

$100,000

2,000

Corporate R&D and university laboratories

I

$1,060

$1,025

$1,950,000

$200,000

20,000

Consultants and professional companies

C

$60

$35

$500,000

$200,000

15,000

Small businessed

C

$60

$35

$325,000

$300,000

500,000

Students

C

$60

$11

$5,200,000

$12,950,000

Situation N

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$1,360

$1,325

$6,475,000

$100,000

2,000

Corporate R&D and university laboratories

C

$60

$35

-$30,000

$200,000

20,000

Consultants and professional companies

C

$60

$35

$500,000

$200,000

15,000

Small businessed

C

$60

$35

$325,000

$300,000

500,000

Students

C

$60

$11

$5,200,000

$12,470,000

Situation O

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$525

$490

$2,300,000

$100,000

2,000

Corporate R&D and university laboratories

I

$525

$490

$880,000

$200,000

20,000

Consultants and professional companies

I

$525

$490

$9,600,000

$200,000

15,000

Small businessed

C

$225

$200

$2,800,000

 

500,000

Students

 

 

$0

$15,580,000

Situation P

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$1,225

$1,190

$5,800,000

$100,000

2,000

Corporate R&D and university laboratories

I

$1,225

$1,190

$2,280,000

$200,000

20,000

Consultants and professional companies

C

$225

$200

$3,800,000

$200,000

15,000

Small businessed

C

$225

$200

$2,800,000

 

500,000

Students

 

 

$0

$14,680,000

Situation Q

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$1,525

$1,490

$7,300,000

$100,000

2,000

Corporate R&D and university laboratories

C

$225

$200

$300,000

$200,000

20,000

Consultants and professional companies

C

$225

$200

$3,800,000

$200,000

15,000

Small businessed

C

$225

$200

$2,800,000

 

500,000

Students

 

 

$0

$14,200,000

Situation R

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$1,300

$1,265

$6,175,000

$100,000

2,000

Corporate R&D and university laboratories

I

$1,300

$1,265

$2,430,000

$200,000

20,000

Consultants and professional companies

C

$300

$275

$5,300,000

 

15,000

Small businessed

 

 

$0

 

500,000

Students

 

 

$0

$13,905,000

Situation S

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$1,600

$1,565

$7,675,000

$100,000

2,000

Corporate R&D and university laboratories

C

$300

$275

$450,000

$200,000

20,000

Consultants and professional companies

C

$300

$275

$5,300,000

 

15,000

Small businessed

 

 

$0

 

500,000

Students

 

 

$0

$13,425,000

Situation T

Segment Dev.Cost

Size

Segment

Version

Price

Unit Profit

Segmental Profit

$150,000

5,000

Large,multidivisional corporations

I

$2,300

$2,265

$11,175,000

$100,000

2,000

Corporate R&D and university laboratories

C

$1,000

$975

$1,850,000

 

20,000

Consultants and professional companies

 

 

$0

 

15,000

Small businessed

 

 

$0

 

500,000

Students

 

 

$0

$13,025,000


Cambridge Software Corporation Case solution

2011 WordsMar 4th, 20149 Pages

CAMBRIDGE SOFTWARE CORPORATION CASE

QUESTION 1: IF CAMBRIDGE SOFTWARE IS OBLIGED TO LAUNCH JUST ONE PRODUCT, WHICH ONE SHOULD IT BE, AND HOW SHOULD IT BE PRICED?

For every single version, we have calculated the total contribution for each price that segments are willing to pay, and chosen the price that can maximize the total contribution.

SELL ONLY "STUDENT" VERSION

Price

Segments

unit cost

Unit Contribution

Seg. Dev. Costs

Demand

Total Contribution

$200

Consultants

$15

$185

$200,000

$20,000

$3,500,000

$175

Small business& Consultants

$15

$160

$400,000

$35,000

$5,200,000

$150

Large Corporate & Small business & Consultants

$15

$135

$550,000

$40,000

$4,850,000

$100

Corporate…show more content…

And we also noticed that I version only caters for the first three segments, which means I version is more profitable among high-end customers. Meanwhile, under the optimal price, Student version (S) caters for all the segments and Commercial version (C) caters for the segments apart from students, which means S version can earn more from low-end customers and C version can earn more from middle-end customers.

Therefore, if CSC wants to make more profit, it can use I version to attract high-end customers and use C or S version to attract middle-to-low-end customers. So based on these logics, we have two choices, which are S+I and C+I. In these combinations, we cannot directly know which situation is the most profitable one since there are many situations where different versions cater for different segments. To achieve the precise result, we listed all the possibilities and calculated all the profits based on the assumption of consumer surplus to see which combination is most profit. (Detailed calculation process can be found in Appendix.)

S VERSION + I VERSION:

SEGMENTS

SITUATIONS

C VERSION + I VERSION:

SEGMENTS

SITUATIONS

From the above tables we can see that, S version + I version can achieve the biggest profit, which is $21,180,000. And the price should be set at $50 for S version and not more than 1950 for I version.

In conclusion, the Student version and Industrial

Show More

0 thoughts on “Cambridge Software Corporation Case Study Ppt Templates”

    -->

Leave a Comment

Your email address will not be published. Required fields are marked *