Memorandum: Info-Tech Research Group Harvard Case Solution & Analysis

Memorandum: Info-Tech Research Group Case Study Solution

More of it, the company should select the price that generates high return on investment (ROI). The return on investment on low, medium and high level of sales are -0.24, 0.06 and 0.09 respectively. It is evaluated that high level of sales have high return on investment (ROI). Additionally, the low payback period is favorable for the company. The medium level of sales shows a high payback period, while the high level of sales shows low pay back period.

Shortly, the price skimming strategy recommended to the company is $995. The price level is comparable to the market rivals and acceptable by the customers. Not only this, it would also generate positive cash flows, which would be easier for the company to recover cost in minimum period of time, and would have high return on investment as well.

Info Tech Advertisement Budget

It is evident to note that the company would spend its advertisement budget on the direct mailing method, due to the fact that it involves sending information which is related to the 6 packages to its potential customers with the intent to place the order in an easy manner through email. The approximate annual cost of advertisement budget is provided in the exhibit which the company could further use in other market arena in case of success of campaign in the Canadian market.

To develop the direct mailing program for the purpose of advertising the 6 methodologies for IT decision managers; the required services are the professional printer to print and design the envelops, packages, sealing, stuffing and delivery cost, mailing cost and lists of companies’ name or brand cost.

McLean’s one-year payback goal

Following the quantitative analysis, one year payback period goal for the purpose of launching the IT package provides the best practice knowledge in a concise as well as clear manner, in order to help the IT managers to accomplish the projects independently and with the help of professionals and experts, is not making any sense due to the fact that the low payback period at the high level of price in which the ROI is higher as compared to other level of price is around 10 years.

Exhibit A

United States Dollars Low Medium High
Price 295 495 995
Sales 250 200 100
Revenue 73750 99000 99500
Sales Discount 3687.5 4950 4975
Net Revenue 70062.5 94050 94525
Initial development cost
Technical Staff 43859.64912 43859.649 43859.649
External review cost 7017.54386 7017.5439 7017.5439
Total Production Cost 50877.19298 50877.193 50877.193
Post Production Cost 3508.77193 3508.7719 3508.7719
Total Initial Development Cost 54385.96491 54385.965 54385.965
Production Cost
CD Production cost 526.3157895 421.05263 210.52632
Printing and Packaging Cost 6043.859649 4835.0877 2417.5439
Total Production Cost 6570.175439 5256.1404 2628.0702
Advertisement Cost 29239.76608 29239.766 29239.766
Total Cost 90195.90643 88881.871 86253.801
Cash Flows from each methodology -20133.4064 5168.1287 8271.1988
Cash flows from six methodologies -120800.439 31008.772 49627.193
Return on Investment -0.26018748 0.0667886 0.1068901
Payback Period –                3.84 14.972611 9.355401

Exhibit B

Required Investment  Low Medium High
External review cost         60,000      60,000      60,000
Initial development Cost       375,000    375,000    375,000
Post production cost 30000 30000 30000
Printing and packaging cost            8,613         6,890         3,445
Account payable               718            574            287
Initial Investment       464,282    464,426    464,713

Exhibit C

Advertisement Budget  US$
Brochure Design Cost               225
Printing Cost            6,250
Sealing and Delivery Cost            3,750
Mailing Cost         11,200
List of Company Names Cost         13,750


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