Product details

The case describes the introduction by Global Illuminating North America (GINA) of a very innovative light bulb that lasts ten times longer than an incandescent bulb and uses about one fifth the energy. The cost analysis focuses on two different potential customers for the new bulb, called the 'compact fluorescent lamp' (CFL). The CFL product has a very different value to different users, depending on how the bulb is used. This case deals with a topic, economic value to the customer (EVC), which is potentially very important in managerial accounting but which receives very little attention in textbooks or casebooks. We see this topic, EVC, as a major component of the rapidly evolving focus on customers in cost analysis. The basic idea is to study the customer's cost for buying and using a product over its useful life (life cycle cost) as a basis for establishing the selling price, product positioning, and marketing strategy. This is a very different way of viewing 'cost- based pricing'. The focus is the customer's costs, not the manufacturer's costs. The teaching note was written by J Shank.