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Selected Case

published: 29 Oct 2007

  • Topic: Marketing
  • Industry: Electric guitars
  • Region: North America

Abstract:
The electric guitar market is both enticing and daunting for a small company – a multi-billion $US sector that has grown almost constantly since the 1960s, but where competition is based as much on image as on substance. The market is naturally fragmented (similar to the market for many musical instruments), yet dominant players make entry and sustenance difficult. While Asian producers or branded imports dominate the low and mid-priced market, collectors and serious players seek high-end branded or handmade instruments that can be resold with only minor loss, if any. To augment collector value, high-end guitar manufacturers constantly modify components, making short-run series with unique features (often specified by “name” musicians and sold under their signature). For established brands, vintage instruments, and handmade instruments, used guitars may sell for their original purchase price or surprising multiples thereof; the value of some pieces increases after only ten years. From this standpoint, experienced buyers can make essentially risk-free purchases. The case tells the story of Joe Naylor, the owner-manager of Reverend Guitars, a small company that made a startling impact on the electric guitar market with a clever use of innovative products, innovative marketing and innovative use of the internet to a) leverage an existing community and b) build a new one.

Pedagogical Objectives:
To explore the following topics in case-based discussion: 1. The role of product innovation in an apparently mature market and the role of lifecycle as a basis for understanding consumer behaviour. 2. The role of the internet as a medium to disseminate information about product innovations. 3. The role of the internet as a basis for distribution and communication with customers. 4. Managing channel conflict on and offline. 5. The interaction of internet communities and online commerce.

Keywords:
Product Innovation, Electric Guitars, Music Industry, Internet Retailing, Online Communities, Internet Communities, Channel Conflict, Distributors

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