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Resumption of Aerial Pre-Launch Meeting One Week later Roth and Barren had spent much of intervening week reviewing the cost estimates.We are late to market and we'd be pricing at a substantial premium.Allen Roth concurred, pointing to the drivers of the cost increase: "Incorporating the satellite imagery requires five times as much memory as our standard graphics. That increases cost-but if you cut it, you undermine Aerial's value proposition. Then we also did some reconfiguration internally, and that increases the labor required to put one of these together."As Emma Richardson passed out copies of the new cost estimates, she explained that Roth and Barren had agreed to make minor changes to the Ariel prototype, and that they now felt it could be produced for approximately 8% less than the prior week's estimate.Ed Pryor and Richardson huddled together, while Allen Roth and Tony Barren carried on a conversation with Harold Whistler.When the team re-gathered on March 14, the participants seated themselves around the conference table (see Exhibit 5 for a seating chart).On this basis, the Aerial, could be priced at $ 475, about $ 100 more than the current full -featured TerraCog GPS.A long silence followed, then Cory Wu spoke up. "Eight percent-that's all? I don't understand it. I'd like to know where the differences lie between our costs and Post Haste's on Birdsl. There's got to be room for more cuts."The update speed is terrible, and switching between functions is just- ALLEN ROTH: Come on, don't start talking speed now.Becky Timmons, the CFO, was in attendance."We've cut what we can. Last time we got pressured into being too aggressive on cost estimates and then we got burned when the price of plastic went through the roof. I'm not making that mistake again."Garmin just announced their satellite-image version, which will hit shelves at somewhere around $395 MSRP.ED PRYOR: $475 tops-but we should be lower than that if are going to be aggressive at recapturing lost share.With fuel costs still rising, the cost to get these here from Shenzhen will only increase, and we run the risk of our margins really getting squeezed.Barren snorted derisively.He paused, surveying the frustrated faces around him."I don't like the situation any more than the rest of you do, but we've got to be realistic. Look at the numbers in front of you-there's nothing we can do to further reduce the costs."As everyone scrutinized the new cost estimates, the meeting broke into several conversations.ED PRYOR: We have to consider the selling price of the Aerial relative to competition.Posthaste is selling at around $250 to dealers, which means they retail for around$400.HAROLD WHISTLER: Okay, then how about a redesign?

Resumption of Aerial Pre-Launch Meeting One Week later
Roth and Barren had spent much of intervening week reviewing the cost estimates. When the team re-gathered on March 14, the participants seated themselves around the conference table (see Exhibit 5 for a seating chart). Becky Timmons, the CFO, was in attendance. At the last minute, Harold Whistler also decided to join the meeting.
As Emma Richardson passed out copies of the new cost estimates, she explained that Roth and Barren had agreed to make minor changes to the Ariel prototype, and that they now felt it could be produced for approximately 8% less than the prior week's estimate. On this basis, the Aerial, could be priced at $ 475, about $ 100 more than the current full -featured TerraCog GPS. A long silence followed, then Cory Wu spoke up. "Eight percent-that's all? I don't understand it. I'd like to know where the differences lie between our costs and Post Haste's on Birdsl. There's got to be room for more cuts."
Barren snorted derisively. "You can't wish away the costs," he said. "We've cut what we can. Last time we got pressured into being too aggressive on cost estimates and then we got burned when the price of plastic went through the roof. I'm not making that mistake again."
Allen Roth concurred, pointing to the drivers of the cost increase: "Incorporating the satellite imagery requires five times as much memory as our standard graphics. That increases cost-but if you cut it, you undermine Aerial's value proposition. Then we also did some reconfiguration internally, and that increases the labor required to put one of these together." He paused, surveying the frustrated faces around him. "I don't like the situation any more than the rest of you do, but we've got to be realistic. Look at the numbers in front of you-there's nothing we can do to further
reduce the costs."
As everyone scrutinized the new cost estimates, the meeting broke into several conversations. Ed Pryor and Richardson huddled together, while Allen Roth and Tony Barren carried on a conversation with Harold Whistler.
After several minutes, Richardson realized she needed to get the discussion back on track. She addressed the entire group, saying, "We have the estimates, so we just have to set a price that makes sense for the company.
What do you think, Ed?"
ED PRYOR: We have to consider the selling price of the Aerial relative to competition. Posthaste is selling at around $250 to dealers, which means they retail for around$400. Garmin just announced their satellite-image version, which will hit shelves at somewhere around $395 MSRP. You all are talking about$475 retail, and that's too high. We have to be in the ball park with our list price or we'll be shut out of the game.
EMMA RICHARDSON: What should list price be?
ED PRYOR: $475 tops-but we should be lower than that if are going to be aggressive at recapturing lost share.
Let's not kid ourselves. The way we're trending, same - store sales will be down 10% this year. And this is with the GPS handheld market growing.
HAROLD WHISTLER: What if we relax our margin requirements for once?
BECKY TIMMONS: Absolutely not. We're cutting it close already.
HAROLD WHISTLER: Okay, then how about a redesign? Let's go to market with what we have, and I'll have my team take another look at possible changes that we can incorporate later.
ALLEN ROTH: I'm afraid that's wishful thinking, Harold. Given the product requirements the sales team called for, the cost is as low as it will get.
CORY WU: I don't know about that. The changes we made to meet sales' requirements were not enormous. Why would they contribute to such a large increase, in projected labor costs?
TONY BARREN: Cory, you and Harold can run the numbers for yourself. Then you'll see that these high costs are real.
BECKY TIMMONS: I'd still feel more comfortable if we could price at$500 retail. With fuel costs still rising, the cost to get these here from Shenzhen will only increase, and we run the risk of our margins really getting squeezed. ED PRYOR: Becky, you don't understand how competitive this market is! Even at $475, why would anyone give us shelf space? We are late to market and we'd be pricing at a substantial premium. And is the product superior enough to justify that premium? I've been trying out prototypes and I'm concerned about the speed. The update speed is terrible, and switching between functions is just-
ALLEN ROTH: Come on, don't start talking speed now. We were clear from the start that we would trade some speed to get new functionality features.
ED PRYOR: Well, my sales managers are going to be fuming. Fiero told them Aerial would be available at $ 400, and now you are talking about minimum of $75 more than that. I still want to see Cory or Harold take a crack at reducing unit cost.
Emma Richardson took a deep breath. The company needed a "go/no-go" decision on the existing Aerial, and whether to do so at a competitive price in the hope that costs might be cut in the future, or at a high price. She wondered fleetingly what the consequences might be if the company abandoned Aerial altogether. As things stood, the arguments and finger-pointing were bound to continue, and the group would never come to a decision on its
Owil.
Richardson would have to push them to one.