According to Michael Porter, a company can gain competitive advantage if it distinguishes its products/services from those of the competitors by providing exceptional quality or unique features that are not offered by other market players.
Atlantic Computer is pursuing a differentiation strategy by offering a product that demonstrates superior performance, and allows customers to reduce costs in the long-run. However, since cost advantage is not apparent from the purchase price, as the unit price of the Atlantic Computer’s servers and software is higher than that of the competitors, it is relatively easy to engage in price competition with Atlantic Computer. This fact is especially dangerous, since the market leader, Ontario Zink, is pursuing price leadership strategy and possesses a strong reputation among the existing customers. That is why Atlantic Computer should emphasize the performance and cost advantage of their product in the long-run in their communication strategy, as well as leverage on the existing sales channels, that could help to differentiate the product further by offering complementary customer service.
Since the company is targeting cost-sensitive customers in the existing server market, price is an important attribute of the marketing strategy. That is why Atlantic Computer should focus on keeping their selling price as low as possible. Moreover, it is more effective to follow industry practice and to provide customers with a unique price for both PESA software and the server. However, it is risky to charge the price equivalent to four Ontario servers or using value-in-use pricing, since customers are unlikely to perceive the full extent of the cost savings, therefore, they will prefer the less expensive offer of the competitors. Hence, cost-plus approach is the safest pricing method, as it allows covering development and manufacturing costs, while attracting customers by relatively low price of the product.
