Marketing Math

H. Economic Value to the Customer (EVC)

Husk Inc. is Iowa's leading manufacturer of corn-related novelties and
paraphernalia. After years of producing the newest line of corn-related novelties,
Husk Inc. perfected software that deduces the composition of plastic polymers
needed for various structural aspects of their figurines.

Husk sees a potential opportunity in selling the software to other businesses that
make similar products. These businesses usually rely on engineers to come up with
the specifications for materials in their products.

The average business uses one full-time engineer for this purpose at an annual
salary of $70,000. Additionally, technological advances in plastic polymers are rapid,
so there is an annual cost of $30,000 in ongoing support and training. For new hires,
the support and training cost is 50% higher for the first year. Husk is planning to
price the software at $10,000. The purchaser would spend another $2,000 for
installation and training, but Husk does not plan to provide these services, The
software can be run by an entry-level technician whose annual salary is about
$30,000. Updates that incorporate the latest technological advances will be
provided by a plastics industry research firm 4 times a year at a price of $500 each.


a. What is the EVC for a start-up firm or an existing firm adding plastics
manufacturing capabilities (assuming a 5 year lifetime for the
software)?

b. Does this suggest that the planned price for the software is too high or
low?
Anonymous User
Anonymous User
Asked Feb 12, 2014

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