Tavis Robotics Corporation has developed a new robot-model FI-73-that has been designed to out perform a competitor's best-selling robot. The competitor's product has a useful life of 10,000 hours of service, has operating costs that average $4.60 per hour, and sells for $109,000. In contrast, model FI-73 has a useful life of 30,000 hours of service and its operating cost is $2.60 per hour. Tavis has not yet established a selling price for model FI-73.From a value-based pricing standpoint what is the reference value that Tavis should consider when pricing model FI-73?
A) $155,000
B) $109,000
C) $187,000
D) $327,000

Question

Quizplus · Accepted Answer

The reference value from a value-based pricing standpoint should be the price of the competitor's best-selling robot, which is $109,000. This is because Tavis Robotics Corporation is positioning its product as a superior alternative to the competitor's product. It is important to consider the value that customers currently assign to the competitor's product when determining the pricing strategy for the new product. Choosing a price significantly higher than $109,000 may make it difficult for Tavis to convince customers to switch to its product.

Tavis Robotics Corporation Has Developed a New Robot-Model FI-73-That Has