Case Study:Washburn Guitar

Washburn Guitar is no newcomer to the music industry, being founded in Chicago, Illinois, in 1883 with its guitar factory being just blocks away from Maxwell Street. In the early 1920s, Maxwell Street emerged as a hotbed for Delta Blues music as thousands of African-Americans moved to Chicago from the Mississippi Delta. "There, on Maxwell Street, as well as in alleyways, city sidewalks, bars, and honky-tonks around the country, Washburn guitars were embraced as the very embodiment and reflective spirit of the hard-working musicians who played them as well as the employees who designed and crafted them. It is the same spirit that guides Washburn to this day."[1]

A hundred years after its founding, Washburn Guitar was acquired by Rudy Schlacher and became known as Washburn International.[1] Then in December 2002, Washburn International announced that it had acquired the assets of U.S. Music Corporation

including intellectual property and goodwilland that as of January 1, 2003, Washburn would be renamed U.S. Music Corporation.[1]In the press release, Schlacher said, "[t]his acquisition gives us the opportunity to clearly separate the parent corporation from the name of its producing division Washburn Guitars. It also helps us to provide more equality and focus on our other producing divisions, which are helping to provide us with growth in revenues and excitement in the marketplace."[1]

Today, Washburn Guitar is but one of the brands owned by U.S. Music Corporation, which is based in Mundelein, Illinoisjust north of Chicago. Schlacher, president and chief executive officer, oversaw the development of U.S. Music into a manufacturer and distributor of musical instruments to guitar players and musicians throughout the world.[1] U.S. Music "produces and imports mass-market acoustic and electric guitars at prices of up to $3,000. One of the United States' top guitar makers (behind Fender, Gibson, and Martin), U.S. Music also makes banjos, mandolins, and basses under the Washburn name. In addition, it manufactures Parker guitars and basses, Oscar Schmidt autoharps and ukuleles, Randall amplifiers and Eden bass amplifiers, Vinci guitar strings, and SoundTech professional audio equipment."[1]

From its early days near Chicago's Maxwell Street and onward into the contemporary music scene, Washburn has encouraged people to enjoy music and to learn to play musical instruments. For instance, several years after Schlacher acquired Washburn Guitar, the company partnered with the International House of Blues Foundation in developing a national music network to give students an opportunity to learn to play the guitar. Chicago-area schools and community centers without resources to fund music education were the first targets of the partnership, with subsequent expansion to other major American cities. Intended in part to help at-risk youngsters stay out of trouble and encourage them to complete school, the Washburn/House of Blues partnership trained instructors and provided guitars, textbooks, sheet music, and videos for the students.[1] Programs such as the Washburn/House of Blues partnership help to stimulate interest in and demand for quality guitars at the lower end of the company's guitar price range.

Lower-cost, quality guitars are but one group of offerings in the Washburn brand. Washburn sells a wide array of electric guitars in its RX Series, XM series, Hollow Bodies, and Idol Series; these guitars are priced from a few hundred dollars to just under $1,000. Washburn's electric guitars also include a Signature Series featuring artists Paul Stanley, Greg Tribett, and Nino Bettencourt; price points in the Signature Series range from just over a $1,000 to several thousand dollars.[1] The company also sells a vast array of acoustic guitars, banjos, and mandolins, which are priced from a few hundred to a couple thousand dollars. There is also a premium-priced Signature Series featuring the George Lynch acoustic guitar, the Sonny Smith banjo, and the Richie Owens mandolin.[1] In addition, Washburn sells basses in its Taurus Series, Force Series, Acoustic/Electric Series, and Signature Series. Prices for basses in the Taurus, Force, and Acoustic/Electric series range from a few hundred dollars to around $1,500. The Stu Hamm Signature Series sells for just above $1,500 to over $3,000.[1]

With its product line of stringed instruments selling at various price points, Washburn seems well-positioned to continue supplying instrument to musicians at all levels of the musical-talent spectrumand to do so well into the foreseeable future. As the company states on its website, "Washburn continues to be a consistent leader in combining design, innovation, and technology to deliver the rich, bold sounds for a vast musical landscape."[1]

Questions:

1.How does the concept of segmentation pricing relate to Washburn Guitar's four different price points?

2.How does Washburn's four different price points reflect customer wants and needs?

3.Are Washburn's four price points an accurate indicator of differential quality? Why or why not?