Washburn Guitars Pricing Strategy for Products & Services

Discussion: Washburn Guitars Pricing Strategy for Products & Services

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MBA630 – STRATEGIC MARKETING
Unit 5: Discussion
READ ALL INFORMATION THOROUGHLY
Pricing Strategy for Products and Services
Firms successful at creating customer value with the other marketing mix activities must capture this value in the prices they earn; price being the sum of all the
values that customers exchange to gain the benefits of having or using a particular product or service. A company does not set a single price, but rather a pricing
structure that covers different items in its line. This pricing structure changes over time as products move through their life cycles. The company adjusts its prices
to reflect changes in costs and demand and to account for variations in buyers and situations.
Pricing structures are also determined by how a firm might view itself as an integral partner in a value network. It may be thought of as an overall system of formal
and informal relationship within which the firm participates to procure, transform, enhance, and ultimately supply its offering in final form within a market space.
This value network is a strategic approach to cut costs and maximize process efficiencies, in the pursuit of the ultimate objective; to co-create value, a most
important component of the pricing structure.
Washburn Guitars: Using Break Even Points to Make Pricing Decisions
Washburn Guitar manufactures instruments in four categories—one-of-a-kind, batch custom, mass customized, and mass produced—and must set prices in each category that
enable it to stay in business. Bill Abel, Washburn’s VP of sales, is responsible for setting the prices for the firm’s guitar lines. Looking at a new line whose
suggested retail price is $349, Abel estimates elements of Washburn’s fixed and variable costs to project the likely break-even point and profit. You should calculate
break-even points and profits under various conditions and assess the effects of moving two production facilities to a single new location.
To do this, you must first understand how to calculate the following:
Key terms and equations defined and explained in Chapter 13: Price (P), Total Revenue (TR), Total Cost (TC), Fixed Costs (FC), Variable Costs (VC), Unit Variable Costs
(UVC), and Break-Even Point (BEP). Also, ask the following questions:
• How do you compute Unit Variable Cost (UVC)?
• How do you compute total cost (TC)?
• What is a break-even point? How do you calculate it?
• What is the profit equation?
THIS IS PART OF THE DISCUSSION ASSIGNMENT ALSO….Once you understand these cost equations, compute the break-even point for the new line of guitars if the retail price
is (a) $349; (b) $389; and (c) $309. Also, (d) if Washburn achieves the sales target of 2,000 units at the $349 retail price, what will its profit be?
Assume that the merger with Parker leads to the cost reductions projected in the case. Show the (a) new break-even point at a $349 retail price for this line of
guitars and (b) new profit if it sells 2,000 units.
Sources
Kerin, R. A. & Hartley, S. W. (2017). Marketing. (13th ed.). New York, New York: McGraw-Hill Education.
Washburn History. (n.d.). Retrieved July 8, 2016, from Washburn.com: https://www.washburn.com/community/

Below is a hint for your Unit 5 discussion. Please take note of it thanks!

Unit 5 Discussion
Answer
Key terms and equations defined and explained in Chapter 13: Price (P), Total Revenue (TR), Total Cost (TC), Fixed Costs (FC), Variable Costs (VC), Unit Variable Costs
(UVC), and Break-Even Point (BEP). Also, ask students the following questions:
How do you compute Unit Variable Cost (UVC)?
UVC= VC ÷Q
How do you compute total cost (TC)?
TC= FC + VC
What is a break-even point? How do you calculate it?

BEPQuantity = Fixed Cost ÷ (Unit Price – Unit Variable Cost) = FC ÷ (P – UVC)*
*Note: Make sure to find the Net Price using the Mark up before computing your BEPQuantity
What is the profit equation?
Profit = Total Revenue – Total Cost
= (Unit Price × Quantity Sold) – Total Cost

Directions
Initial Post
Please review the following information about the pricing considerations for Washburn Guitars:
Background on Washburn Guitars
• Read the video case in the textbook on pages 367-368.
• Watch the Washburn Guitar case video:
https://www.viddler.com/embed/ce85a490/?f=1&autoplay=0&player=full&disablebranding=0
• Review the following online websites and articles:
• S. Music Aims for the ‘Perfect Experience,’” Music Trades, July 2012
https://www.washburn.com/news/pdf/MusicTrades-US%20Music.pdf
Washburn Guitars (business operations) Factory Tour
https://www.youtube.com/watch?v+kXyM89SAQG
Based on the information provided, put yourself in the position of a marketing consultant brought in to the company to critically examine the campaign’s ability to
meet its’ pricing objectives, and then formulate a set of well-developed and supported recommendations to the company’s senior leadership team. The recommendation
should be logically presented, well-supported, and thoroughly vetted.
IMPORTANT! Your grade for each weekly thread discussion will be determined by your analytical, integrative, problem-solving and critical thinking skills demonstrated
by your posts
Your response should integrate external resources, which should be consistent with APA writing style and format (6th edition) and reflect higher level cognitive
processing (analysis, synthesis and or evaluation). APA writing style and format (6th edition) and reflect higher level cognitive processing (analysis, synthesis and
or evaluation).