THE ‘AX’ MAN COMETH

| April 10, 2012 | 0 Comments

Guitar Manufacturers Share Their
Expertise, Observations

By Dan Ferrisi

When people think about musicianship and music-making in general, it is probably a fair bet that one of the first instruments to spring to mind would be the guitar. After all, it is among the most popular and, perhaps not coincidentally, it is the instrument most commonly associated with the biggest, most lionized rock performers to have ever graced the stage. In this article, we speak to four individuals whose expertise in the guitar segment is unquestioned, asking them to gauge the current strength of guitar retailing (including the market for acoustics vs. electrics), discern what trends are presently capturing market share, discuss the strengths and weaknesses of retailers themselves, and close with a summary of a recent product innovation.

Our distinguished group of contributors is Paul Meisenzahl, Senior Vice President, Marketing – Acoustics, Fender Musical Instruments Corp.; Courtland Gray, Chief Operating Officer, Peavey Electronics; Joe Arias, Vice President and General Manager, Crafter USA; and Dennis Webster, Marketing Manager, Yamaha Guitars.

The Music & Sound Retailer: We have seen over the years that acoustic guitar sales and electric guitar sales do not always move in unison. Assess the relative strength of acoustic guitars vs. electric guitars currently, and into the medium-term future.

Paul Meisenzahl: The acoustic guitar market has always tracked differently from the electric market. The acoustic customer is very different from the electric customer. There is a far broader range of potential acoustic guitar customers: men, women, children, etc. A great many acoustic customers purchase an instrument for its purely recreational value. A person can buy a reasonably good acoustic guitar for a relatively small amount of money, and get lots of personal enjoyment from it.

The acoustic guitar is a portable piano. The electric guitar customer is slightly more complicated, as the instrument is typically used in an ensemble, and requires additional equipment. This customer often has different aspirations: playing in a band, etc. If we look at the difference between the acoustic and the electric market, historically, it appears that the acoustic market is more stable and less likely to experience sharp increases/declines, as we have seen with the more fashion-driven electric market.

Courtland Gray: Acoustic guitars have been very active in the market over the last couple of years, despite the fact that there is little differentiation between most lines. Our Composite Acoustics brand of high-end carbon-fiber acoustic guitars is a notable exception, because players recognize the benefits they bring. The CA line is consistently in high demand, and we are making efforts to increase production weekly. The enthusiasm for Composite Acoustics continues to spread.

The market has also shown great interest in the new Peavey AT-200 self-tuning and self-intonating guitar. For a lot of beginning players, tuning and intonation are two barriers to learning how to play guitar. Having a guitar that is out of intonation and won’t tune properly can take away the motivation and joy in playing. But, giving players the ability to correct those deficiencies easily can encourage beginners to stick with the instrument.

Joe Arias: Over the last several decades, I have witnessed that, during times of economic trial, recession, political strife, etc., sales of acoustic guitars and acoustic instruments seem to grow at a faster pace. We have reason to believe that this trend will remain for the foreseeable future. The wild card is always the emergence of the next great rock guitarist to drive newcomers to the market and, thereby, affect sales.

Electric guitar sales tend to fluctuate much more wildly depending on what’s fashionable in pop music and culture. Sales and interest in acoustic guitars is much more stable and far less affected by trends and fads.

Dennis Webster: There is no question the acoustic guitar market is moving in a different direction from the electric market. To be more specific, the acoustic electric market is the real winner. I believe this will continue to be the trend in the medium-term future.

Players want the acoustic sound, but they are looking for something more versatile with better playability. There are two aspects contributing to increased acoustic electric sales. The first is that manufacturers have improved the playability of their acoustic and acoustic electric guitars. To me, this goes back to Clapton’s “Unplugged” album. At that time, everyone wanted to add an acoustic to their collection, but they wanted the playability of an electric. Over the course of time, manufacturers have complied, and the playability of acoustic electric guitars has drastically changed.

The second aspect is the ability to get a quality acoustic electric guitar at lower price points than where they have historically been. It used to be a few hundred dollars more for an acoustic electric. Now, the price differentiation from a great acoustic to a great acoustic electric is nominal.

The Retailer: Discuss some of the general trends you have discerned in the guitar space. Are sales of beginner-level products, mid-priced ones and higher-end ones diverging? What, if anything in particular, are guitar players currently looking for?

Webster: The market is seeing a decrease in sales of beginning guitar packages. If you dissect last year’s acoustic guitar package sales, the race to the bottom has begun. What we are seeing is more retailers offering packages as a quick, one-box solution, and then offering the customers a step-up option to a better-grade guitar with an accessory bundle at a compelling price. In the beginning-level products $99 to $399, acoustic electrics will continue to grow and cannibalize the acoustic sales.

Again, the price differentiation between a good acoustic and a good acoustic electric is nominal, so the buyer goes for value. The mid-priced market ($599 to $999) will still see increases in acoustic electrics. In this segment, the U.S. companies have designed down guitars to hit some of these lower price points and are seeing an increase in sales. Yamaha has just launched the new A Series acoustic electric guitars, which have taken the opposite approach: offering models in this price range with all solid woods and mic modeling electronics. In the higher-end price range, brand name and tradition are still king. This market still fluctuates with the stock market and economy. That will not change this year.

Meisenzahl: I don’t think that we’re seeing entry-level, mid-priced and high-end price points diverging. We are living in a time when acoustic guitar quality is at an all-time high. Due to advances in computer-controlled manufacturing, it is now possible to produce an instrument at an entry-level price point that exhibits far better tone, playability and tuning stability than at any time in the past. And, the high end still has relatively few players, with three or four of the historically significant U.S. brands dominating, plus an increasing number of limited-production boutique makers. The middle price points are interesting in that, here, we see the low-end offerings of the major U.S. brands, with minimal cosmetics and budget specifications, competing with imported guitars boasting advanced cosmetics, such as wood binding, bone nuts/saddles, pearl inlay and all-solid-wood construction. It appears that there are plenty of customers for both types. In 2012, as always, acoustic guitar customers are looking for high value in terms of tone, playability and quality materials.

Gray: Although traditional electric guitars continue to sell, I think dealers and manufacturers who have something new and exciting to talk about have a great advantage. Our officially licensed Peavey Marvel guitars and accessories, which feature super heroes Captain America, Ghost Rider, Avengers and more, have made a big impact at the entry level, giving retailers an opportunity to capitalize on the popularity of Marvel characters—especially with all the Marvel theatrical releases that continue to roll out. The new Peavey AT-200 guitar utilizes the proprietary Antares Auto-Tune for Guitar technology to digitally self-tune and intonate at the push of a button for less than $500. With the ability to self tune, maintain perfect intonation and easily use alternate tunings all in one quality instrument, the AT-200 has the potential to be the biggest guitar of the year.

Composite Acoustics guitars utilize carbon-fiber technology to create acoustic guitars that are stronger, louder and more durable than traditional wood guitars are.

They’re impervious to moisture and temperature changes, so they hold tuning well from one environment to another. Sonically, their tone is as bold, rich and nuanced as any other fine guitar is…and many CA converts say better! Innovations like these truly differentiate Peavey and give our dealers unique, salable products.

Arias: I believe guitar players are looking for the same thing in 2012 that they’ve always been looking for: the most bang for their buck in any price range. Of course, in tough economic times like these, lower price points will always move the most.

However, we are enjoying respectable sales in all price ranges, because we are able to offer high quality guitars built in Korea. We can deliver a level of quality for a price that’s tough to beat in any price range in which we compete.

The Retailer: What are the strengths of the MI retailer channel with respect to the guitar market? What are some areas in which retailers could improve in their handling of guitar product sales?

Arias: As a former MI retailer, I have an inside understanding of what is involved in running a store. Educating the end user is Job Number One. I have seen customers walk in, pull out an Internet ad and ask if the retailer will match the price.

Surprisingly, some do, without asking, probing, qualifying and trying to fit the customer to the correct instrument. The smart retailers—the ones that we see thriving and making money—are those that expend the time and effort to sell the products that might not be household names but that offer great profit margins, like Crafter.

Anyone can open a store, stand behind the counter and ring up sales for the “marquee name”: products that are in every box store and electronics mart. However, more retailers are starting to realize that these sales don’t necessarily translate into profit.

Our successful retailers make money because they are knowledgeable about the products they sell, and are enthusiastic about educating their customers. More often than not, a product like Crafter delivers higher quality and a better fit and value for a customer than does the “catalog” guitar that they came in looking for. Most customers are waiting to be educated by a guitar professional in the store. Taking the time to educate a customer and sell a guitar—as opposed simply to ringing up what the customer walked in the door asking for—can be the difference between making 48 points versus 10 points on a sale.

Some of the better shops send out reminders: Protect your warranty. It’s time to humidify your guitar. Protect your guitar. It’s time to bring it in for a complimentary neck adjustment. How many new sales and service-related sales are created by getting the customer back in your store? Car dealers do this with great success.

Also, acoustic guitar rooms that are humidified and isolated from the noise in the rest of the store are a great selling sanctuary. The customer is not intimidated, because he or she can play without an audience, and he or she can actually hear the instrument.

Since no two guitars sound exactly the same, why would that person want to try one somewhere else, and especially somewhere that does not offer post-sale service?

Webster: Service, Service, Service. Before the sale, during the sale and after the sale. As we all know, more and more consumers are researching everything online and are being bombarded with more marketing messages than any person can process in one day. The customer is savvier than before but, still, the MI salesperson can and should be viewed as a very reputable resource to help customers get what they really want—not what customers think they want. Great salespeople will not just sell a guitar to the customer but, in fact, will take the time to find out what the customer needs and get the proper instrument in his or her hands. Once they have closed this sale, then they need to continue soft selling the store’s service, lesson programs and future purchases. Always make customers feel welcome in the store and always invite them back. The more they feel they are part of the family, the more they come in and the more they buy! Sales training is an area that can always be improved. Not just product knowledge, but also sales-process knowledge.

Meisenzahl: The main strength of the MI retailer channel in acoustic guitar sales is that a customer can actually compare a number of instruments, side by side, in order to make an informed buying decision. Those retailers that offer a compelling environment to evaluate an instrument will be able to be successful with higher-priced instruments. And, an acoustic guitar is a relatively delicate instrument, constructed of wood materials under tremendous string tension. A good service capability can only add value to the experience of purchasing and owning an acoustic guitar, making customers for life.

Gray: In today’s market, not every potential purchase or player will be exposed to the products for the first time in a true MI store. But, brick-and-mortar dealers still have a tremendous ability to develop and maintain a person’s interest in guitars and earn repeat business. Creating lesson programs and progressive-achievement notoriety and competitions can keep players challenged and engaged in developing their skills. It’s all about getting them to your store so that you can convert a sale.

The Retailer: Share a brief description of one of your latest product developments. Why is this product innovation an important and valuable addition to the broader marketplace?

Gray: Peavey has always been unique in many ways: from our brand loyalty and product reliability, which we back with our free extended five-year warranty, to our constant drive to innovate. We are always looking forward to new products and innovations that will bring our dealers continued success with the Peavey family of brands. That commitment has led to significant innovations in MI, such as guitars made with CNC machinery that created the modern era in instruments, not to mention field-replaceable speakers, lightweight power amplifiers and even enduring tube guitar amps like the Peavey 6505. The Peavey AT-200 and Composite Acoustics are two of the most innovative products to hit the guitar market. Without anything innovative to talk about, you’re just selling on price.

Arias: Over the years, we’ve found that a lot of guitar players don’t realize how crucial it is to keep their guitar, of any brand or price, properly humidified. This is important for two reasons. First, dried-out wood and glue can have a devastating effect on the guitar itself, resulting in costly repairs. Second, in the fine print of almost any guitar maker’s warranty, you’ll find a clause voiding that warranty if you fail to keep your guitar properly humidified.

One of the newer products from our growing accessory line, the GHC-200 Guitar Humidifier, addresses this issue. It’s a simple-to-use humidifier that fits in the sound hole of almost any acoustic. An LED display tells you when to add more water, as well as the relative temperature and humidity, making it easy for anyone to figure out and use.

Most importantly, an accessory like this can be sold to anyone buying an acoustic guitar or anyone who owns an acoustic that they care about. This manner of branding is important to Crafter in the marketplace. It reinforces that we not only are a quality guitar maker, but are also the people to come to when you need quality accessories to enhance or protect any of your guitars.

Webster: Yamaha is a technology-based company. The sharing of technology between divisions of Yamaha ensures that we are always on the cutting edge of technology. There is no better example than the new DXR speakers and the THR series of personal amplifiers. The THR series marries the technologies from our audio division, music production division and guitar division. Yamaha’s new THR amplifiers are the world’s first hi-fi stereo units that feature both realistic guitar multi-effects and classic amp modeling, with the ability to function as an exceptional guitar recording interface. All this and more, offered in a modern-retro, aesthetically pleasing, lightweight package that fits perfectly in an office, bedroom or living room.

This not your typical practice amp, which is normally a smaller version of your stage rig. This amplifier is designed for times that guitarists are not on stage.

Meisenzahl: The majority of acoustic guitar customers seem to want to buy designs that were established decades ago…not particularly innovative. The great innovations that have come since those times have happened from the manufacturing side. The use of computer-controlled cutting machines, advancements in finishing materials/techniques, efficient neck joint designs, etc., all have resulted in a wide range of instruments of consistent quality that can appeal to most any customer. In our Guild factory in New Hartford CT, we have chosen to combine the efficiency and accuracy of modern computer-controlled manufacturing with a strong tradition of hand craftsmanship that produces an instrument that is technically accurate, but that also possesses the soul of the builder. It’s a combination that seems to hold great appeal with the customer.

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