McDermott Company developed a new industrial component called IC-75 that offers superior performance relative to the...

Transcribed Image Text:

McDermott Company developed a new industrial component called IC-75 that offers superior performance relative to the comparable component sold by McDermott's primary competitor. The competing part sells for $1,380 and needs to be replaced after 2,180 hours of use. It also requires $290 of preventive maintenance during its useful life. The IC-75's performance capabilities are similar to its competing product with two important exceptions-it needs to be replaced after 4,360 hours of use and it requires $390 of preventive maintenance during its useful life. Required: From a value-based pricing standpoint: 1. What is the reference value McDermott should consider when pricing IC-75? 2. What is the differentiation value offered by IC-75 relative the competitor's offering for each 4,360 hours of usage? 3. What is IC-75's economic value to the customer over its 4,360-hour life? 4. What range of possible prices should McDermott consider when setting a price for IC-75? 1. Reference value 2. Differentiation value 3. Economic value to the customer 4. Range of possible prices McDermott Company developed a new industrial component called IC-75 that offers superior performance relative to the comparable component sold by McDermott's primary competitor. The competing part sells for $1,380 and needs to be replaced after 2,180 hours of use. It also requires $290 of preventive maintenance during its useful life. The IC-75's performance capabilities are similar to its competing product with two important exceptions-it needs to be replaced after 4,360 hours of use and it requires $390 of preventive maintenance during its useful life. Required: From a value-based pricing standpoint: 1. What is the reference value McDermott should consider when pricing IC-75? 2. What is the differentiation value offered by IC-75 relative the competitor's offering for each 4,360 hours of usage? 3. What is IC-75's economic value to the customer over its 4,360-hour life? 4. What range of possible prices should McDermott consider when setting a price for IC-75? 1. Reference value 2. Differentiation value 3. Economic value to the customer 4. Range of possible prices

Answer rating: 100% (QA)

1 Reference Value The reference value for IC75 should be based on the total cost of ownership for th... View the full answer