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A New Look And A New Strategy For Guitar Center

...to a more mainstream approach, with more varied musical cues. At the new open format stores, images of iconic electric guitarists such as Hendrix and Clapton have been downplayed to better showcase EDM products, acoustic instruments, and lessons and services. In addition, private label products including Mitchell electric guitars, Simmons electronic drums, Harbinger audio, and Williams digital pianos figure more prominently in the inventory mix.

This departure from a proven retail strategy has drawn skeptical comments from some suppliers and competitors. However, Tim Martin, CFO, says that the new-format stores are proving themselves financially. Ares Management, Guitar Center’s controlling shareholder, apparently agrees, as it has green-lighted plans for up to ten new stores in the coming year. The decision to add new stores is particularly noteworthy given the well-publicized store closings at many large chains including Macy’s, Cabella’s, and Bed Bath & Beyond.

Unlike many music industry marketing plans, which are based on intuition and anecdote, Guitar Center’s repositioning is the work of a management team steeped in quantitative consumer marketing methods. Amkreutz comes to Guitar Center after stints at Sears, Sharp Electronics, and New Egg; Frank Crowson, senior vice president of marketing, honed his retailing skills in a variety of posts at Target; Wayne Colwell, executive vice president of stores and an enthusiastic guitarist, was a store operations executive with Ralphs Supermarkets in Southern California; and Martin previously held senior posts at apparel retailer Land’s End. Embracing practices refined at these large chains, the team initiated a comprehensive consumer research project, probing the purchasing patterns and preferences of GC’s 30 million existing customers, surveying a national sample of 5,000 potential music customers, and engaging an additional sample in “digital ethnography.” This process, which involves interviewing consumers in their home or where they make music, via Skype or Facetime, yields more insight than a typical focus group conducted in a sterile meeting room. The reulting findings have guided every step of the repositioning initiative, from product selection to the casting of television commercials. They have also given Amkreutz confidence that the makeover will drive growth at Guitar Center and potentially even create more active music makers.

Don’t Pigeonhole Musicians
Crowson distills the research results down to three essential findings. The first of which—that music buyers love to shop—should hearten brick-and-mortar retailers everywhere. “Musicians shop a ton because they like the experience,” he says. “It’s not like buying insurance, where you just want to get the process over with. Musicians will shop eight stores and go to any new ones that open because they enjoy it.” The second insight is that “attitudinal divides” between musicians of different skill levels, genre preferences, and instrument types are unnecessarily and unproductively exaggerated. He concludes that musicians don’t actually pigeonhole themselves by categories like “rock or country,” “beginner or pro,” or “electronic or acoustic.” He elaborates, “Musicians rally around all types of music and will gravitate towards a place that respects the craft of music making.” Finally, the research indicates that the main motivation for musicians is not fame or money, but rather the opportunity to play more and to constantly improve. This isn’t limited to just beginners: Crowson cites acclaimed Grammy winner Vince Gill, who is on record saying, “I’m just trying to play and improve every day.”

The new Guitar Center stores are designed to be the place that respects all types of music making. Unlike previous GC formats that featured distinct rooms and departments for different product categories, the new stores have an open floor design where all product types are readily visible to customers upon entering the store. (The new stores still have a separate high-end acoustic guitar showroom to ensure proper humidity control.) Crowson says the open format is more inviting, especially for DJs and electronic musicians, who may not be aware of the full scope of Guitar Center’s product offering. In addition, he says it encourages more cross-shopping between product categories.

Small, bright red paper “tents” with the phrase “Play Me” are now placed on most products, giving customers an open invitation to pick up an instrument. It’s a small but significant shift in the company’s merchandising approach according to Crowson. “The new environment is all about encouraging people to play,” he says. “And an instrument in the customer’s hands is the best salesman.”

Getting Kids In The Store
All of the new-format Guitar Center stores, currently more than 100 out of a total of 275 stores, feature a lesson studio as well as a fretted instrument repair center. Amkreutz says that the teaching studios, staffed entirely by Guitar Center employees, are in keeping with the larger goal of “appealing to more generations.” Thanks to the lessons, approximately 22,000 kids a week (average age 12) now visit a GC location weekly. In addition to increasing store traffic, Amkreutz says, the lessons are also a profit center in their own right. But does an environment that’s amenable for young kids fit with a store still trying to cater to professionals? Crowson says it’s not a problem, citing research showing a lack of “divide” among musicians. “We’ve found out that all our customers love having lesson studios at GC,” he says. “The kids get inspired by the pros in the store, and the pros love the opportunity to show off in front of the kids.”

The Guitar Center lesson studios are augmented by an on-staff guitar tech with a formal job description that includes making sure instruments on display are in top playing condition and handling customer repairs. Crowson says that the presence of a tech also emphasizes the company mission of giving musicians the tools they need to express themselves. “Guitars in perfect playing condition make a big difference and reflect our mission,” he says.

It’s often been said that “retail is detail,” and the task of effectively translating corporate marketing plans down to the store level falls to Wayne Colwell, who has spent the better part of his career enforcing cleanliness and display discipline at grocery store chains. Colwell’s major initiative at Guitar Center is what he terms “The Gold Standard,” short for “Grand Opening Look Daily.” The program involves a daily and detailed checklist for store employees to ensure that each location is always spotless, properly merchandised, and with correct signage in place. “No dust, easy to find products, and clean floors lead to higher customer satisfaction scores, and a place that’s more conducive to making a purchase,” he says.

Guitar Center’s new more inclusive approach is also reflected in advertising, signage, and promotional messaging. The company’s longstanding ad template that promised to “help you on your way to stardom,” has been supplanted by a softer pitch that emphasizes the satisfaction of playing, while positioning Guitar Center as a place where you can develop as a musician. Dark, hard rock-themed imagery has been replaced with brighter, more open lifestyle photos, often featuring acoustic guitars and EDM products. Casting in the ads has expanded beyond what Crowson terms “the guitar dude,” to include women, kids, and middle-aged players. On the social media front, Guitar Center has found that photos of regular customers having a positive experience at a Guitar Center store are more potent than pictures of famous pros. Crowson sums up, “We had focused on the rock musician and built advertising around Jimi Hendrix and other gods of the electric guitar, but at the same time we overlooked important parts of the market, like EDM.”

Guitar Center categorizes customers in a hierarchy: at the top are the professionals, who earn money playing; then come the “passionates” who rank music making as a primary activity in their life; after that come the casual players, who view music making as one of several leisure activities; the on-offs, those who pick up an instrument periodically for a time, and then put it aside; and finally, the buy for others group. Between lessons and various in-store events, Crowson sees a rich opportunity to help customers move upwards on the hierarchy. “With lessons, the customer who starts with a ukulele could be interested in a guitar, and sometime later recording equipment,” he says. By facilitating these upwards transitions, GC management hopes to actually expand the total music products market.

These “up sales” are dependent on an inclusive, unintimidating sales environment. To that end, Guitar Center’s compensation strategy has moved away from a straight commission basis to a base salary, coupled with performance incentives. Company research indicates that contemporary customers are put off by the slightest whiff of “pushy salesmanship.” Efforts are also being made to improve employee retention, in part because time on the job typically translates into higher skill levels. However, Amkreutz and Crowson say getting sales associates to buy in to the company mission of creating more music makers has had the biggest impact on the in-store environment.

Guitar Center’s in-store repositioning carries over to the GC.com online portal, which makes use of the more “inclusive” imagery. In addition, earlier this year, the company began tightly coordinating all online and in-store promotions. Previously, customers who saw a special product offered online might visit their local Guitar Center to be told that it wasn’t available. Jeff Wisot, vice president of e-commerce, says the new “unified approach” has dramatically reduced confusion and enhanced customer satisfaction. GC has also developed a slick new mobile app that Wisot says is especially relevant given that somewhere between “30% and 50% of product searches now take place on mobile.” The app even includes a link to Uber to facilitate transportation to and from the store.

The repositioning of the Guitar Center stores has had little impact on the company’s other retail brands. Music & Arts continues with its focus on serving school music programs and beginners; the Musicians Friend portal caters to what Amkreutz describes as “the affluent, savvy, DIY customer who knows what they want and likes to avoid sales tax;” Woodwind & Brasswind offers an extensive inventory of wind instruments and accessories; and Music123.com is used for selling on platforms like Amazon and eBay. Amkreutz adds, “All of our brands have well-defined swim lanes.”

A Mom And Pop Store?
The original Guitar Center retail model was refined on Hollywood Boulevard in the years following the Beatles’ U.S. debut and the popularization of rock ’n’ roll. Over a decade passed before a second store was opened in San Francisco, and it wasn’t until 1982 that the company ventured outside of California, taking over a failed Chicago retailer. In 1996, the management team of Larry Thomas and Marty Albertson felt they had developed the internal controls and promotional tactics to support a national rollout of stores. Within the next decade, they expanded the chain from 28 to 245 retail locations, creating the industry’s first national chain. Some in the industry remain skeptical of any effort to alter the business model that drove previous success. As one supplier put it, “The new stores look more like a nice version of the ‘mom and pop’ stores that Guitar Center ran over than a Guitar Center store.” Amkreutz and his team remain unphased. They speak respectfully of past GC managements, but point out that in the past decade, retailing in general, and the music products business specifically, have been dramatically altered by a combination of internet competitors and shifting musical tastes. Amkreutz concludes that the new market demands “a new strategy.”

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