Question

In: Economics

Your employer is introducing a new laundry robot that replaces a washer and dryer. Consumers toss...


Your employer is introducing a new laundry robot that replaces a washer and dryer. Consumers toss in their dirty clothes, it sorts them, decides the best way to wash, dry and fold or hang them. It does this immediately after they put in each garment so they never have dirty laundry. You just pick them up and take them to the drawer or closet.

You are tasked with setting the price of this unit. Work through the process and important thinking you will do to set this price.

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Expert Solution

Answer:
The best way to price any new product is to understand how much value does it generates to the customer and how much similar product is being charged in the market. So the process and thinking process that i will go through before defining a price for this product is mentioned below:

  • The new robot does two jobs and replaces washer and dryer and its much more efficient and has bare minimum human interventions. So first of all i will fetch the average price of premium washer and dryer in the market.
  • I will monitor what is the maintenance cost of running the robot and how much was the maintenance cost of their competitive product here washer and dryer.
  • Now one advantage that robot provide is user doesn't need to bother about when to wash and all which saves lot of time for the user, it will have some value for the user.
  • Brand which is releasing this product will have some reputation in the market earlier which should also be taken into account while pricing the product.
  • After combining all these factors, there would be many other factors as well like manufacturing cost, breakeven cost and cost needed for marketing ignoring those for the time being and considering price only from usability perspective, we can predict the price of the product in average sense by below formula for this product.
  • Price of Robot = P(washer, dryer, - maintenance cost of robot, +time benifit that user gain )
    condition being this should be > manufacturing cost + advertising cost

(plz give me a thums up...if my answer helped you and if any suggestion plz comment, Yr thums up boost me)

Rahul Sunny answered 1 year ago
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