MKT421T Wk 4 – Apply: Signature Assignment: Washburn Guitars: Pricing Decisions

Washburn Guitars

The modern Washburn Guitars Company started in 1977 when a small Chicago firm bought the century-old Washburn brand name and a small inventory of guitars, parts, and promotional supplies. At that time, annual company sales of about 2,500 guitars generated revenues of $300,000. Washburn’s first catalog, appearing in 1978, told a frightening truth.
“Our designs are translated by Japan’s most experienced craftsmen, assuring the consistent quality and craftsmanship for which they are known. At that time, the American guitar-making craft was at an all-time low. Guitars made by Japanese firms, such as Ibanez and Yamaha, were in use by an increasing number of professionals.”
“We offer a guitar at every price point for every skill level,” explains Kevin Lello, vice president of marketing at Washburn Guitars. Washburn is one of the most prestigious guitar manufacturers in the world, offering instruments that range from one-of-a-kind, custom-made acoustic and electric guitars and basses to less-expensive, mass-produced guitars.
Lello has responsibility for marketing Washburn’s products and ensuring that the price of each product matches the company’s objectives related to sales, profit, and market share. “We do pay attention to break-even points,” adds Lello. “We need to know exactly how much a guitar costs us, and how much the overhead is for each guitar.”
With that statement in mind, watch the video describing how Washburn prices its guitars and how it uses the pricing variable as a strategic tool for positioning its various guitars in the market place.

Click the ► button to watch the video. Then, answer the questions that follow.

If Washburn Guitars were to lower the price of the Maya Pro DD75 to $2,499 from $2,699, sales of the guitar would increase 30 percent. This illustrates

• a product with elastic demand.
• an increase in the unit variable cost.
• a product with inelastic demand.
• a shift in the demand curve

Washburn Guitars makes signature series guitars to enhance the credibility of the Washburn brand. Creating signature series guitars would have a positive effect on all of the following except

• brand awareness.
• unit variable cost.
• demand.
• brand loyalty.

If the mass-produced guitar sells 100,000 units annually at $175 per guitar, what is the total revenue?

• $6,175,000
• $17,500,000
• $175,000
• $1,750,000

Washburn has four distinct price points for its guitar lines—entry, intermediate, professional, and collectors—based on the fact that each line has very different production costs, market demand, and sales level. Thus, Washburn has implemented a ________ pricing objective.

• survival
• social responsibility
• market share
• unit volume

Washburn’s fixed costs for producing mass-produced guitars are $500,000. Its variable costs are $150 per guitar. If it prices these guitars at $250, what is the break-even quantity for this line?

• 2,500 guitars
• 5,000 guitars
• 1,500 guitars
• 1,000 guitars

With the typical downward-sloping demand curve like the one shown for Washburn, as price per unit falls, demand

• remains unchanged.
• decreases.
• increases.
• is minimized.

If employees of Washburn guitars want to travel to Asia to meet with guitar craftspeople, what is the best choice of who to send if diversity is considered a primary factor in the visit?

• A team of the most senior executives in the company
• A team comprised of a diverse group of gender and race
• A team comprised of a diverse group of gender, race, sexual orientation, economic backgrounds, educational attaintment and generational differences.
• It should be a random selection

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