None McDermott Company developed a new industrial component called IC-75 that offers superiorperformance relative to the comparable component sold by McDermott's primary competitor.The competing part sells for $1,320 and needs to be replaced after 2,120 hours of use. It alsorequires $260 of preventive maintenance during its useful life.The IC-75's performance capabilities are similar to its competing product with two importantexceptions-it needs to be replaced after 4,240 hours of use and it requires $360 of preventivemaintenance 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 each4,240 hours of usage?3. What is IC-75's economic value to the customer over its 4,240-hour life?4. What range of possible prices should McDermott consider when setting a price for IC-75?1. Reference value2. Differentiation value3. Economic value to the customer4. Range of possible prices<= Value-based price<=

Value-based pricing is frequently applied to goods and services that have distinctive features,…

What is the reference value McDermott should consider when pricing IC-75? What is the differentiation value offered by IC-75 relative the competitor's offering for each 4,240 hours of usage? What is IC-75's economic value to the customer over its 4,240-hour life? What range of possible prices should McDermott consider when setting a price for IC-75?

What is the reference value McDermott should consider when pricing IC-75? What is the differentiation value offered by IC-75 relative the competitor's offering for each 4,240 hours of usage? What is IC-75's economic value to the customer over its 4,240-hour life? What range of possible prices should McDermott consider when setting a price for IC-75?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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