Read the exert of the Cambridge Software case (HBS) posted below. When answering the following questions, assume that although Cambridge Software can charge different prices for different versions of Modeler, it must, for a given version, charge the same price to each segment. That is, assume for the following that Cambridge Software cannot price discriminate across the different segments (e.g., it cannot give a discount to customers who show student IDs and want to purchase the student version).

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

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

Exh 1 summarized the market research data collected. The exhibit indentifies the five market segments, the anticipated size of each segment, and each segment's willingness-to-pay for the proposed versions of Modeler.

Exhibit 1 Cost, Demand, and Willingness-to-Pay Estimates
			"Student"	"Commercial"	"Industrial"
Estimated product completion cost			$100,000	$200,000	$500,000
Variable cost (per unit)			$15	$25	$35
Market Segment	Size	Segment Dev. Cost	Willingness-to-Pay
			-----------------------(per unit)------------------------
Large, multidivisional corporations	5,000	$150,000	$150	$1,200	$2,500
Corporate R&D and university laboratories	2,000	$100,000	$100	$1,000	$2,000
Consultants and professional companies	20,000	$200,000	$200	$300	$600
Small businesses	15,000	$200,000	$175	$225	$300
Students	500,000	$300,000	$50	$60	$100

Case:

In early 2008, Kennedy decided that CSC had to be open to multi-version product lines. But convincing her manager that such a change was necesary was difficult. Kennedy and senior CSC managers met to work out a strategy to explore the possibility of a multi version product lines with Modeler, a new cross operating software product. Seeing a large market for the new product in business, education, consulting orgs and research labs, Kennedy hired Atkinson to look into the possibility of marketing and several versions of Modeler.

SMRG identified five market segments for the product. THe segments were distinguished by their modeling needs: at one extreme were multidivisional organizations that used complex analytical models to help in multiplant scheduling and corporate and university labs that used sophisticated models to help with experimental data analyst; in the middle were consultants, profesionals and small business that used modeling to help with production scheduling, budgeting and financial reporting; and at the other extreme were college students who built elemantary modelings in the course of their studies. Next SMRG estimated the size of each market segment, taking into account price, competition and the possibility of substitute products. As for price, CSC was new to this market and had yet to make a decision. Accordingly, Atkinson asked SMRG to determin the max customers in each segment 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. The marketing plan that targeted the 5 market segments identified. Exh 1 gives the estimated expenditure for developing each market segment. Atkinson planned to sell Modeler directly to buyers in the first four market segments; for the "student" segment, csc would sell through collge bookstores with the bookstore getting a 40% commision (and csc netting 60% of the selling price). Should csc offer one version of the modeler? Which one? or two? or all three?