Marketing Chapter 1 Homework There are a number of factors that influence price sensitivity other than “economic value.” Consequently, it may be the case that customers would not be willing to pay as much as this product is really worth

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Miracle Shield Auto Finish

Instructor’s Note

A) Making any reasonable assumptions that you need to make, estimate the economic value of

Miracle Shield. (You may assume that Miracle Shield is the only alternative to car wax

available in this market. You may assume a labor cost of a person’s leisure time who waxes

his/her own car. Ignore the time value of money.)

Answer: There are two segments relevant for determining the economic value of Miracle Shield:

Segment 1

Segment 2

Reference value:

($4.00 or $2.00 per application)

$2.00

Differentiation value:

Oxidation cleaner

$2.50

Labor savings of 2 hrs for not

applying cleaner ($5.00/hr)

Saving in labor (20% of $10.00)

Saving in wax (20% of $2.00)

Total Economic Value

B) There are a number of factors that influence price sensitivity other than “economic value.”

Consequently, it may be the case that customers would not be willing to pay as much as this

product is really worth, or may pay even more than it is worth according to economic value