A competitor sells heavy machinery priced at $14,000. Your firm has been working to enter the heavy machinery market and has developed a new product with a marginal cost of $8,500. Your firmAc€?cs new machine is superior to its competitors in some ways but inferior in others. Its speed is limited which reduces the value to customers by $1,000 per engine. However, it requires less maintenance delivering labor saving of $3,500 per engine.
What is the reference price for the New Product?
What is the differential value of the New Product in comparison to Old Product?
What is the total value of New Product?
What range would you suggest to marketing for pricing New Product?
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