Harvard Case - Workbench Pricing Strategy
"Workbench Pricing Strategy" Harvard business case study is written by Gwendolyn K. Ortmeyer. It deals with the challenges in the field of Marketing. The case study is 21 page(s) long and it was first published on : May 23, 1990
At Fern Fort University, we recommend that Workbench implement a value-based pricing strategy focused on differentiating its product offerings and building brand equity through high-quality craftsmanship, personalized service, and a strong focus on sustainability. This strategy will involve a combination of premium pricing for its core product line and competitive pricing for its new, more accessible 'Workbench Essentials' line.
2. Background
Workbench is a successful, family-owned furniture manufacturer facing a challenging market. While known for high-quality, handcrafted furniture, its high prices are hindering growth. The company is considering introducing a new, less expensive line to attract a wider customer base, but faces internal resistance and concerns about brand dilution.
The main protagonists are:
- Mark: The CEO, concerned about the company's growth and the need to attract a broader customer base.
- Chris: The marketing director, advocating for a new, more affordable product line to expand the market reach.
- David: The production manager, concerned about the impact of a lower-priced line on the company's image and quality standards.
3. Analysis of the Case Study
SWOT Analysis:
- Strengths: Strong brand reputation, high-quality craftsmanship, loyal customer base, experienced workforce.
- Weaknesses: High prices, limited market reach, potential for brand dilution, resistance to change.
- Opportunities: Expanding market reach with a new product line, leveraging digital marketing, emphasizing sustainability, building brand partnerships.
- Threats: Increasing competition, economic downturn, rising material costs, consumer preference for mass-produced furniture.
Porter's Five Forces:
- Threat of new entrants: Moderate. The furniture industry has barriers to entry, but new competitors with innovative business models and lower costs are emerging.
- Bargaining power of buyers: High. Consumers have many choices and are price-sensitive.
- Bargaining power of suppliers: Moderate. Workbench relies on skilled labor and specialized materials, but there are alternative suppliers.
- Threat of substitute products: High. Consumers can choose from a wide range of furniture styles and materials, including mass-produced options.
- Competitive rivalry: High. The furniture market is fragmented, with many competitors vying for market share.
Consumer Behavior Analysis:
- Target market: Workbench's current target market consists of affluent consumers seeking high-quality, handcrafted furniture. The new 'Workbench Essentials' line targets a broader audience, including younger, budget-conscious consumers.
- Purchase motivations: Consumers value quality, craftsmanship, sustainability, and design.
- Decision-making process: Consumers research online, seek recommendations, and prioritize value for money.
Competitive Analysis:
- Direct competitors: Other high-end furniture manufacturers with similar price points and product offerings.
- Indirect competitors: Mass-produced furniture retailers, online furniture marketplaces, and DIY furniture companies.
Product Lifecycle Management:
- Mature product line: Workbench's core product line is in the maturity stage, with declining growth and increasing competition.
- New product launch: The 'Workbench Essentials' line is a new product introduction, requiring careful market research, product positioning, and marketing strategies.
4. Recommendations
- Implement a value-based pricing strategy: This involves pricing products based on their perceived value to the customer, not just their cost of production. Workbench should differentiate its offerings based on quality, craftsmanship, sustainability, and design.
- Introduce a new, more affordable product line: The 'Workbench Essentials' line should be positioned as a more accessible option, targeting a broader audience. This line should be designed with a focus on affordability while maintaining Workbench's quality standards.
- Develop a clear brand positioning strategy: Workbench needs to clearly communicate its value proposition to both existing and new customers. This involves defining its target markets, highlighting its unique selling propositions, and building brand equity through consistent messaging and branding.
- Leverage digital marketing channels: Workbench should invest in digital marketing to reach a wider audience, including social media, search engine optimization (SEO), and online advertising.
- Emphasize sustainability and ethical sourcing: Workbench's commitment to sustainability and ethical sourcing should be prominently communicated to attract environmentally conscious consumers.
- Build strategic partnerships: Workbench should explore partnerships with interior designers, architects, and other businesses to expand its reach and create new opportunities.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Workbench's core competency lies in its high-quality craftsmanship and commitment to sustainability. The proposed strategy aligns with these strengths and allows the company to expand its reach while maintaining its brand identity.
- External customers and internal clients: The recommendations address the needs of both existing and potential customers, while also considering the concerns of internal stakeholders, such as production and marketing teams.
- Competitors: The recommendations acknowledge the competitive landscape and differentiate Workbench from its competitors by emphasizing its unique value proposition.
- Attractiveness: The proposed strategy offers the potential for increased revenue, market share, and profitability. The new product line will attract a broader customer base, while the premium pricing strategy will maintain profitability for the core product line.
6. Conclusion
By implementing a value-based pricing strategy, introducing a new product line, and leveraging digital marketing, Workbench can achieve sustainable growth while maintaining its brand reputation and commitment to quality. This strategy will allow the company to attract a broader customer base, expand its market reach, and remain competitive in the evolving furniture industry.
7. Discussion
Alternatives not selected:
- Lowering prices across the board: This could lead to brand dilution and damage the company's reputation for quality.
- Focusing solely on the existing high-end market: This would limit growth potential and expose the company to increased competition.
Risks and key assumptions:
- Brand dilution: There is a risk that the new product line could dilute the brand image if it is not carefully positioned and marketed.
- Consumer acceptance: There is no guarantee that consumers will accept the new product line and its price point.
- Cost of implementation: Implementing the proposed strategy will require significant investment in marketing, product development, and distribution.
8. Next Steps
- Conduct market research: Gather data on consumer preferences, competitor offerings, and market trends.
- Develop the 'Workbench Essentials' product line: Design and develop a new product line that meets the needs of the target market while maintaining quality standards.
- Develop a marketing strategy: Create a comprehensive marketing plan that includes digital marketing, public relations, and customer relationship management (CRM).
- Implement the new pricing strategy: Set prices for both the core product line and the new product line based on value and competitive analysis.
- Monitor and evaluate results: Track key performance indicators (KPIs), such as sales, market share, and customer satisfaction, to assess the effectiveness of the strategy.
By following these steps, Workbench can successfully implement its new pricing strategy and achieve sustainable growth in the competitive furniture market.
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Case Description
An abridged version of Workbench, most notably the results of two customer surveys, given in their complete form in Workbench. Focuses on the pricing decision for a small contemporary furniture retailer. Should Workbench continue its highly promotional pricing policy or adopt Everyday Fair Pricing?
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