Harvard Case - BEWOOD - An Entrepreneur's Pricing Question
"BEWOOD - An Entrepreneur's Pricing Question" Harvard business case study is written by Eric Dolansky, Sabine Ruaud, Herve Didier. It deals with the challenges in the field of Marketing. The case study is 15 page(s) long and it was first published on : Sep 30, 2020
At Fern Fort University, we recommend that BEWOOD adopt a value-based pricing strategy for its premium wood flooring, focusing on differentiation and building brand equity. This strategy will involve communicating the unique value proposition of BEWOOD's sustainable and high-quality wood flooring to its target market, justifying a premium price point.
2. Background
BEWOOD is a small start-up specializing in sustainably sourced and handcrafted wood flooring. The company faces a critical decision: how to price its premium product in a competitive market. The founder, John, is passionate about sustainability and quality, but he needs to ensure financial viability. The case study explores the challenges of balancing ethical sourcing with market demand and profitability.
The main protagonists are John, the founder, and his business partner, who are grappling with the pricing dilemma. They need to consider the cost of production, market competition, consumer perception, and the long-term sustainability of their business model.
3. Analysis of the Case Study
This case study can be analyzed through the lens of Marketing Strategy and Pricing Strategy.
Marketing Strategy:
- Segmentation, Targeting, Positioning (STP): BEWOOD needs to identify its target market (e.g., environmentally conscious homeowners, architects, designers) and position itself as a premium brand offering sustainable and high-quality wood flooring.
- Value Proposition Development: BEWOOD's value proposition should emphasize sustainability, craftsmanship, durability, and aesthetic appeal.
- SWOT Analysis:
- Strengths: Sustainable sourcing, high quality, craftsmanship, unique product offering.
- Weaknesses: Limited marketing budget, small company size, potential for higher price sensitivity.
- Opportunities: Growing demand for sustainable products, expanding into new markets, online marketing opportunities.
- Threats: Competition from lower-priced alternatives, fluctuating wood prices, economic downturns.
- Marketing Mix (4Ps):
- Product: Premium, sustainably sourced wood flooring with unique features and craftsmanship.
- Price: Value-based pricing strategy, emphasizing the unique value proposition.
- Place: Direct sales, partnerships with retailers, online sales channels.
- Promotion: Content marketing, social media engagement, partnerships with influencers, targeted advertising.
Pricing Strategy:
- Cost-Plus Pricing: This method is not recommended as it focuses solely on production costs and may not reflect the true value of the product.
- Value-Based Pricing: This strategy is ideal for BEWOOD as it allows them to charge a premium based on the perceived value of their sustainable and high-quality flooring.
- Competitive Pricing: While considering competitor pricing, BEWOOD should focus on differentiation and avoid price wars.
4. Recommendations
1. Develop a Value-Based Pricing Strategy:
- Conduct Market Research: Identify the target market's willingness to pay for sustainable and high-quality wood flooring.
- Quantify Value: Clearly communicate the benefits of BEWOOD's flooring, including environmental impact, durability, and aesthetic appeal.
- Price Premium: Set a price point that reflects the value proposition and justifies the higher cost of sustainable sourcing and craftsmanship.
2. Focus on Differentiation and Brand Building:
- Brand Positioning: Position BEWOOD as a premium brand that offers sustainable and high-quality wood flooring.
- Marketing Communications: Develop a compelling brand story that highlights BEWOOD's commitment to sustainability and craftsmanship.
- Content Marketing: Create valuable content that educates consumers about sustainable flooring options and BEWOOD's unique offering.
- Social Media Marketing: Engage with the target audience on relevant social media platforms, showcasing the product's features and benefits.
3. Explore Strategic Partnerships:
- Retail Partnerships: Collaborate with retailers specializing in sustainable home improvement products.
- Influencer Marketing: Partner with relevant influencers to reach a wider audience and build brand credibility.
4. Leverage Technology and Analytics:
- Website Optimization: Create a user-friendly website that highlights BEWOOD's value proposition and facilitates online sales.
- CRM (Customer Relationship Management): Implement a CRM system to track customer interactions, preferences, and purchase history.
- Marketing Analytics: Use data-driven insights to optimize marketing campaigns and measure ROI.
5. Basis of Recommendations
These recommendations are based on the following:
- Core Competencies: BEWOOD's core competencies lie in sustainable sourcing, craftsmanship, and product quality. The recommendations focus on leveraging these strengths to create a unique value proposition.
- External Customers: The recommendations consider the needs and preferences of environmentally conscious homeowners, architects, and designers, who are willing to pay a premium for sustainable and high-quality products.
- Competitors: The recommendations emphasize differentiation and brand building to stand out in a competitive market.
- Attractiveness: The value-based pricing strategy, coupled with effective marketing and brand building, is expected to increase profitability and market share.
6. Conclusion
By adopting a value-based pricing strategy and focusing on differentiation and brand building, BEWOOD can successfully position itself in the premium wood flooring market. This strategy will allow the company to command a premium price, generate strong brand equity, and achieve long-term sustainability and profitability.
7. Discussion
Alternatives:
- Cost-Plus Pricing: This option would be less attractive as it does not account for the value proposition and could lead to lower profit margins.
- Competitive Pricing: While competitive pricing can be effective in the short term, it can lead to price wars and erode profitability.
Risks:
- Price Sensitivity: The target market may be sensitive to price increases, requiring careful market research and price adjustments.
- Competition: New competitors may enter the market, requiring BEWOOD to continuously innovate and differentiate its product offering.
Key Assumptions:
- The target market is willing to pay a premium for sustainable and high-quality wood flooring.
- BEWOOD can effectively communicate its value proposition and build brand equity.
- The company can manage its costs and maintain a competitive advantage.
8. Next Steps
- Conduct Market Research: Gather data on target market preferences, willingness to pay, and competitive landscape.
- Develop a Value-Based Pricing Strategy: Determine the optimal price point based on market research and value proposition analysis.
- Refine Brand Positioning and Marketing Communications: Create a compelling brand story and develop marketing materials that highlight BEWOOD's unique selling points.
- Implement Marketing Channels: Launch online and offline marketing campaigns targeting the identified target market.
- Monitor and Evaluate: Track key performance indicators (KPIs) to measure the effectiveness of the pricing strategy and marketing efforts.
By taking these steps, BEWOOD can successfully navigate the competitive wood flooring market, achieve profitability, and fulfill its mission of providing sustainable and high-quality products to discerning customers.
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Case Description
Created in 2015, BEWOOD was a sustainable fashion brand start-up in Lille, France that sold a range of products with wood as their primary component. The company's best-selling product was a wooden bow tie named "Mr. Divergent." In March 2018, Laury Bonjean, founder and owner of BEWOOD, had four options for growth available to her and had to decide which of these to act on and, most importantly, how to price them. She was considering offering two new products (a Father's Day box set and a subscription box) and had two new channel opportunities (a trendy shop wanted to sell her products and a pop-up store had invited her to participate). While these began as product and distribution decisions, Bonjean felt that pricing formed a huge part of the strategizing. Using qualitative and quantitative information she needed to decide how to proceed and needed to do so very soon.
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