Weakly Industrial Products Incorporated has developed a new industrial instrument, model CT-60, that is designed to offer superior performance to a comparable instrument sold by Weakly's main competitor. The competing instrument sells for $22,000 and needs to be replaced after 1,000 hours of use. It also requires $4,000 of preventive maintenance during its useful life. Model CT-60's performance capabilities are similar to the competing instrument with two important exceptions-it needs to be replaced only after 2,000 hours of use and it requires $6,000 of preventive maintenance during its useful life.
Required:
From a value-based pricing standpoint:
a. What is the reference value that Weakly should consider when pricing model CT-60?
b. What is the differentiation value offered by model CT-60 relative to the competitor's instrument for each 2,000 hours of usage?
c. What is model CT-60's economic value to the customer over its 2,000 hour life?
d. What range of possible prices should Weakly consider when setting a price for model CT-60?

Question

Quizplus · Accepted Answer

The Answer of Weakly Industrial Products Incorporated has developed a new industrial instrument, model CT-60, that is designed to offer superior performance to a comparable instrument sold by Weakly's main competitor. The competing instrument sells for $22,000 and needs to be replaced after 1,000 hours of use. It also requires $4,000 of preventive maintenance during its useful life. Model CT-60's performance capabilities are similar to the competing instrument with two important exceptions-it needs to be replaced only after 2,000 hours of use and it requires $6,000 of preventive maintenance during its useful life.
Required:
From a value-based pricing standpoint:
a. What is the reference value that Weakly should consider when pricing model CT-60?
b. What is the differentiation value offered by model CT-60 relative to the competitor's instrument for each 2,000 hours of usage?
c. What is model CT-60's economic value to the customer over its 2,000 hour life?
d. What range of possible prices should Weakly consider when setting a price for model CT-60?

Weakly Industrial Products Incorporated Has Developed a New Industrial Instrument