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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