Economic Value to the Customer (EVC) - Husk Inc.
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.
- 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)?
- Does this suggest that the planned price for the Diacetylin is too high or low?