Question
The growth in the infrastructure spending has created demand for jackhammers used to drill through concrete pavements. The device consists of two parts: a compressed
The growth in the infrastructure spending has created demand for jackhammers used to drill through concrete pavements. The device consists of two parts: a compressed air motor that is connected to a rotating drill that is jabbed into the hard surface to break it up.
A large number of small manufacturers make the motors and very small forge shops make the drills. Both products are sold through independent rental companies that rent construction equipment to drilling contractors.
These rental companies own the motors and rent them to drilling contractors at $50 per day. They also sell the drills for $ 60 each, which lasts for about 20 hours, and before being discarded. The cost of a drill to the rental company is $ 25.
The contractors get drilling projects from construction companies for about $24 an hour per jackhammer. Upon receiving a contract, a contractor puts together a drilling crew that costs about $10 per hour per person for an 8-hour day. One person runs one jackhammer.
MForge is a medium-sized company that has developed an innovative jackhammer drill that can be attached to a conventional compressed air motor and has the following characteristics:
-Its lasts for around 100 hours of use.
-It increases the drilling speed by about 25%.
The novel spinning motion reduces dust by about 50%.
MForges cost of making this unique drill is about $8 and the company can meet current demand without capacity expansion. The company is currently trying to figure out the most appropriate price and marketing plan for the product.
Numerically compute a value-based price for MForges drill? State your assumptions clearly.
What price would you recommend to them for launching the product?
How would the price depend on the other elements of the marketing mix?
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