Q 71Q 71
A small high-technology firm in Arizona recently developed a new component part that offers superior advantages over competing products. The component is used in high-speed production systems and, due to its durable composition, has a useful life of 12 months versus 3 months for competing products. By reducing downtime and frequent changeovers, the product will offer users a significant improvement in production efficiency. Of course, the exact savings will vary by market segment. The two executives, who launched the firm, are divided over the course that should be followed in pricing the component-one favors a high price for a quick payback while the other opts for a lower price and a more deliberate approach. Outline the critical issues that should be examined in setting the price.