Tom's comparison of two printers for his small business

Printer A has a purchase price of $1,000 and maintenance and operations costs of $400. On the other hand, Printer B has a higher purchase price of $1,500 but offers increased productivity by $100 and reduces maintenance and operations costs by half. The expected lifetime value of both printers is one year.

The Economic Value to the Customer (EVC) concept states that a customer will choose to buy a product only if its value exceeds that of the next-best alternative, regardless of the price. To calculate the EVC of Printer B, we need to go through the following steps:

Identify value elements to the customer:

For Printer B, there are two main value elements: increased productivity and reduced maintenance and operation costs.

Assign monetary value to each element:

Printer B increases productivity by $100 and reduces maintenance and operation costs by $200 (half of the $400 maintenance cost for Printer A). The total additional value is $300 ($100 + $200).

Determine the purchase price for the next-best alternative (Printer A):

Printer A's purchase price is $1,000.

Calculate the EVC:

The EVC is calculated as the sum of the total additional value and the purchase price of the next-best alternative. For Printer B, the EVC is $1,300 ($300 + $1,000).