Brain and Company is a consulting group that offers a fool-proof pricing and revenue optimization service guaranteed to deliver $2 million in benefit to a customer. It costs Brain and Company $500,000 to provide this service. Unfortunately, they have a competitor, Dissenture that provides a similar, but somewhat inferior service that only delivers $1.5 M in guaranteed benefit. It also cost Dissenture $500k to provide this service.
1. When competing with Dissenture, what price do Brian and company need to charge in order to guarantee that they win the business? Assume that neither Dissenture nor Brian and company will price below cost and that both of them know each other’s costs and the customer benefits in each case.
2. How would Brian’s price need to change if it only cost Dissenture $400K to provide their service?