Question

an equipment producer produces a new type of paint sprayer for automobile body-repair shops. the sprayer not only saves labor time on the actual painting, but also reduces the need for polishing after the painting is done. the producer considers the money that auto-body repair shops will save on labor and polishing if they buy its new sprayer and sets a price for it that makes it slightly more expensive for them to buy and use the new sprayer than to continue with their existing equipment. which price setting approach is the producer using in this scenario?

Answer 1

The producer is using value-based pricing by setting the price of the new paint sprayer slightly above the current expenses of auto-body repair shops, factoring in the labor and polishing savings.

Step-by-step explanation:

The pricing approach used by the equipment producer in the scenario described is known as value-based pricing. This method sets the price based on the perceived value to the customer rather than solely on the cost of production or market prices. In this case, the producer is considering the savings that auto-body repair shops will realize from reduced labor and polishing costs when using the new paint sprayer. They set the price slightly above what shops currently spend, implying that the perceived value of the product includes these savings and potentially other benefits, such as improved paint quality or faster service times.