Read the Cambridge Software case  In answering the questions below, let's assume that Cambridge Software should charge the same price per segment for a given release, even though it may charge different prices for different versions of Modeler. That is, let's say Cambridge Software can't differentiate between different segments in price (for example, it can't offer discounts to customers who show their student ID and want to buy the student version).

a) If Cambridge Software can only offer one version of Modeler, which version should it offer? At what price? EXPLAIN YOUR THOUGHTS AND ALL EQUATIONS USED.

b) Should Cambridge Software offer more than one version of Modeler? If so, what versions should it offer? At what prices? If not, explain why not. EXPLAIN YOUR THOUGHTS AND ALL EQUATIONS USED.

Exhibit 1 summarized the collected market research data. The exhibit specifies five market segments, the expected size of each segment, and each segment's willingness to pay for Modeler's proposed releases.

Exhibit 1 Estimates of Cost, Demand and Willingness to Pay
			"Student"	"Reklam"	"Sanayi"
Estimated product completion cost			100.000 $	200.000 $	500.000 $
Variable cost (per unit)			15 dollars	25 dollars	35 dollars
Market Segment	Boy	Section Dev. Cost	Payment Request
			-----------------------(per unit)----------------------- -
Large, multi-divisional companies	5.000	150.000 $	150 dollars	$1,200	$2,500
Corporate R&D and university laboratories	2.000	100.000 $	100 dollars	$1000 dollars	2.000 $
Consultants and professional companies	20.000	200.000 $	$200 dollars	$ 300	600 dollars
small businesses	15.000	200.000 $	175 dollars	$225	$ 300
students	500.000	300.000 $	50 Dollars	60 dollars	100 dollars

Case:

In early 2008, Kennedy decided that Cambridge Software (CSC)  should be open to multi-release product lines. But it was difficult to convince his manager that such a change was necessary. Kennedy and senior CSC executives teamed up to develop a strategy to explore the possibility of a multi-version product line with Modeler, a new cross-operating software product. Seeing a large market for the new product in business, education, consulting organizations, and research labs, Kennedy hired Atkinson to explore the marketing possibility and various versions of Modeler.

SMRG has identified five market segments for the product. The segments were distinguished by their modeling requirements: at one extreme were multi-departmental organizations using complex analytical models to aid multi-site programming, and corporate and university labs using complex models to assist the experimental data analyst; there were consultants, professionals and small businesses using modeling to assist with production planning, budgeting and financial reporting; and at the other extreme were college students doing basic modeling during their studies.

Next SMRG estimated the size of each market segment, taking into account price, competition and the possibility of substitute products. As for the price, CSC was new to this market and hadn't made a decision yet. Accordingly, Atkinson asked SMRG to determine the maximum number of customers in each segment who would be willing to pay for different versions of Modeler. A high-end industrial version, a mid-range commercial version, and a low-end student version were created.

Marketing plan targeting 5 identified market segments. Exh 1 gives the estimated spend to develop each market segment. Atkinson planned to sell Modeler directly to buyers in the top four market segments; For the "student" segment, csc would sell through university bookstores and the bookstore would take a 40% commission (and net 60% of the csc selling price). Should csc offer a version of the modeler? Which one? or two? or all three?