Serving A Market Of "One"

With a data-driven approach and a treasure trove of exclusive gear, Chicago Music Exchange looks to individualize music retail for the wants and needs of each consumer.

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THE MOMENT SOMEONE FIRST COMPARED the market to a pie, the object became capturing a slice of it—but there are more precise ways to divide up a market. Cut in closer and you get a sliver, then a fragment. Eventually you’re down to an individual customer, and that’s who Andrew Yonke wants to market to. Since coming on as CEO of Chicago Music Exchange in 2015, Yonke has been looking at some of the most compelling developments in modern retail and thinking about how they can be combined. For starters, it’s never been more possible to customize product—and CME is certainly doing that, stocking covetable exclusive models from Fender, Gibson, and more. Sophisticated data systems have contributed new tools to track numbers and analyze trends, while video and social media marketing have delivered ways to engage customers on a level beyond “selling.” For Yonke, the sum of these factors is the chance to customize retail for the consumer, understanding and delivering exactly what they want from their gear, their music, and their relationship with Chicago Music Exchange. The upshot, in short, is that there is no generic consumer and CME isn’t after one.

“When I post something from our store online, I don’t care if my post has a thousand views or a million views,” says Yonke. “I care about whether it reached the person that it’s supposed to reach. I need one—that’s it. Everything we do, I need one person to react. And we will never run out of things at this store to put out there for someone to experience.”

"I need one—that’s it.
Everything we do,
I need one person to react."

Dating back to 1990, when it was established by Scott Silver on Chicago’s Clark Street, CME has been admired for years for its deluxe, gallery-like showroom. Now located on Lincoln Avenue, where it moved in 2007, its 20,000-square-foot space displays gleaming new and vintage gear amid chandeliers, plush sofas, and oriental rugs, placing it on any shortlist of the industry’s most beautiful stores. Last year its showpiece acoustic room was expanded to twice its original size, now doubling as a spacious venue for live events. For around a decade, though, its impact has been felt at least as much online as in the showroom. In 2010 the store was purchased by David Kalt—now known as the founder of Reverb—whose background in computer coding and finance, as well as music, instilled a unique combination of art and analytics in the business. During Kalt’s tenure as CEO, the store’s inventory flipped from mostly vintage to majority new gear, though high-quality vintage stock remains one of its calling cards. CME’s ratio of new to used instruments now stands at around 65/35. Kalt also established CME as a serious player in ecommerce, though that’s hit new levels in both volume and sophistication since he stepped down to focus exclusively on Reverb, handing the reins off to Yonke. (The two companies are wholly independent of one another—a separation that became absolute with Kalt’s exit from CME. In 2019, Reverb was acquired by Etsy.) CME now transacts 70% of its sales online and placed last year at number 14 on Music Trades’ ranking of the music industry’s top ecommerce sellers worldwide.

“Chicago Music Exchange has never been more efficient or more well run,” says Yonke, “and it’s a testament to the people we have here. We have an incredible mix of intelligent people and intelligent technology.”

Chicago Music Exchange CEO Andrew Yonke.

By “technology,” these days, the CME team increasingly means “data:” deep dives into the metrics of sales, market demographics, social media impressions, and more. At the backend of that effort is NetSuite, the comprehensive business software CME adopted in 2017 after switching over from rival Lightspeed. Digitally speaking, says Yonke, the company turned into a construction zone, operating in a state of upheaval while the transition was underway. Sales didn’t obviously suffer for it, rising around 15% from the year-earlier period. 2020, however, is the year CME expects to truly capitalize on the new tools at its disposal. In Yonke’s words, “It will be like adding a fifth gear to a four-speed car.” Through the new technology at hand, he says, CME is now tapping unprecedented detail in sales analytics, inventory, and the market at large. What Yonke stresses, though, is that the numbers are useless without the human insight to go along with them. “The data is there,” he says. “But it doesn’t just give you the answers. You have to ask the right questions. You have to set the right searches. And now we have searches on top of searches.”

One of the main benefits to having data, Yonke explains, is seeing where the gaps are—and that’s where CME’s metrics meet the physical world where its exclusive gear is made and sold. By comparing sales and consumer data with existing inventory, it becomes possible to see what’s missing: a popular color or feature that isn’t yet offered in a given line, a promising combination that no one has delivered yet. “You can find holes in what’s being built and say, ‘Hey, blue is a popular color, but they don’t seem to build it,’” Yonke poses. “‘Let’s go build some blue.’”

"We need to differentiate
our Cadillac from the others
in the market.
We’re creating an exclusive experience
that isn’t about being
the cooler kid in the lunchroom—
it’s about listening to our customers."

With that information at hand, CME is developing targeted additions to what’s already a prodigious range of exclusive name-brand gear. It maintains a deep selection with Fender—where the options are “almost limitless”—meeting several times a year with Fender builders to decide on body styles, woods, colors, pickup configurations, and even where each model will be manufactured, from Fender’s bases in the U.S. to Mexico and even Japan. Smaller manufacturers, notably Reverend Guitars, have also collaborated on exclusive instruments, and Marshall has partnered on several custom models on the amp side. Soon after becoming CEO three-plus years ago, Yonke brought a team to Nashville for a sit-down with Gibson—then notoriously prickly in dealer relations—and went home with an agreement to make Gibson-brand exclusives too. There’s now a pallet of wood set aside for CME at the Gibson Custom Shop, along with a string of CME-exclusive Gibson serial numbers. Multiple unique color and pickup options have emerged from the collaboration, available only from Chicago Music Exchange. “Every month, we grow more and more in these exclusives,” Yonke says. “Even when it’s just an exclusive color, we literally can’t keep them in the store.”

The Lincoln Avenue store was built to make a statement.

There’s more to this, he adds, than the novelty and prestige of exclusive models, or even the impetus to fill unfilled niches. For CME, the real promise of customized gear is breaking the stalemate with other retailers over the same products at the same prices. “We need to differentiate our Cadillac from the others in the market,” says Yonke. “It becomes customer-specific. We’re creating an exclusive experience that isn’t about being the cooler kid in the lunchroom—it’s literally about listening to our customers and getting better for our customers.”

Media analysts have focused for years on “market fragmentation,” the scattering of consumers from a shared mass culture into countless niche music styles and entertainment options. At Chicago Music Exchange, that phenomenon is not just understood—it’s baked into every strategy and marketing effort. Developing custom gear based on consumer wish lists is part of that, but so is individualizing each consumer interaction between sales, says Yonke. On that front, events in the grand CME showroom sometimes make the best opportunities to establish a connection with customers—and understand their tastes. In an appearance by the eminent studio musician Steve Jordan, for example, the store drew a crowd of hundreds without attempting to “monetize” the experience at all, Yonke says. What it did do is make a note of who was there, using that information to gauge the customer’s interests and preferences. In follow-up communications—emails, social media posts, etc.—CME can use what it’s learned from this and other interactions to alert consumers to only what they want to hear about.

“I don’t want to send them spammy emails,” Yonke says. “I want to get them what they actually want. I tell my marketing guys all the time: ‘I don’t want you to do more—I want you to do less, and I want you to do it better, in a targeted way.’”

CME's recently expanded acoustic showroom doubles as a venue for live performances and other store events.

In fairness, says Yonke, it took a lot of experience to refine CME’s marketing approach beyond—as he puts it—“throwing stuff at the wall to see what sticks.” The same goes for online video, where the store once mastered an earlier style that was catchier and jokier, more like traditional TV commercials. Today, the company focuses more on substantive content and high production values, engaging a professional videographer to record product features, live performances, store tours, and mini-documentaries. It also turns them around fast, post-production and all. “If we shoot a video on a Monday morning,” Yonke says, “the world sees it by Wednesday at the latest.” The store’s reputation for vintage gear plays into the richness of its content, invoking the sounds and stories of classic dreadnoughts, Telecasters, Les Pauls, and whatever else finds its way through CME’s showroom. “I love those instruments with a story,” says Yonke. “There’s a ‘cool’ factor, a playability factor, that you don’t get with an out-of-the-box shiny instrument.”

Fundamentally, Yonke says, what Chicago Music Exchange wants is a base of Chicago Music Exchange customers. That doesn’t mean trying to “convert” consumers who are already loyal to another retailer—“Any minute I spend on that is wasted time,” he says. What it does mean is establishing an identity independent of the gear manufacturers, however iconic they might be, and building a brand for consumers to relate to in its own right. Although it’s best known for its high-end and vintage instruments, CME doesn’t lack for entry-level and mid-priced gear, and that’s essential to the strategy, says Yonke. It means, hopefully, that beginning players buy their first instruments at CME and never leave. “We want to grow with our customers,” Yonke says, “because our customers can be our best ambassadors. The more you work with your customers, the better brand ambassadors they are for your store—not Fender ambassadors, not Les Paul ambassadors, but ambassadors for Chicago Music Exchange.”

www.chicagomusicexchange.com