In the 1980s, American company, Amana, pioneered a new technology that would become the modern micro- wave oven. Although the technology used in micro- waves was well known and well understood in industrial contexts, Amana had long experienced difficulties developing a prototype that was small enough and cheap enough for domestic applications. Just when it seemed that the product concept was doomed, along came a new company director, George Foerstner, with a sales and marketing background. He issued the design team with a seemingly impossible challenge. Before it would be commercialised, the new product concept was to be shaped like an air- conditioner, should look like an oven, have buttons like an oven and be priced around the same as a conventional oven (at the time, not more than $500). Foerstner's challenge to the design team was an example of which type of pricing strategy?
A) pricing according to what the market will bear
B) economic value pricing
C) target costing
D) relationship based pricing
E) performance based pricing

Question

Quizplus · Accepted Answer

Foerstner's challenge to the design team was an example of target costing, which involves determining the cost at which a product must be produced in order to meet a specific price point or profit margin. In this case, the target price was set at $500, and the design team had to work backwards to create a prototype that could be produced at that cost.

In the 1980s, American Company, Amana, Pioneered a New Technology